1
EXHIBIT 2.02
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
NIKU CORPORATION,
NIKU ACQUISITION CORPORATION
AND
PROAMICS CORPORATION
DATED AS OF NOVEMBER 16, 1999
2
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is made and
entered into as of November 16, 1999 among Niku Corporation, a Delaware
corporation ("PARENT"), Niku Acquisition Corporation, a Delaware corporation and
a wholly-owned subsidiary of Parent ("MERGER SUB"), and Proamics Corporation, a
Delaware corporation (the "COMPANY").
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.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986,
as amended (the "CODE").
C. 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
shareholders, (ii) approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (iii) determined to unanimously
recommend that the shareholders of the Company adopt and approve the principal
terms of this Agreement and approve the Merger.
D. The respective Boards of Directors of Parent and Merger Sub have
approved this Agreement and the Merger.
E. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, each of the
shareholders of the Company is entering into a Voting Agreement substantially in
the form attached hereto as Exhibit A (the "VOTING AGREEMENT").
F. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, each
Founder (as defined below) of the Company is entering into a Non-Competition
Agreement substantially in the form attached hereto as Exhibit B (the
"NON-COMPETITION AGREEMENT").
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:
3
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. Unless this Agreement is earlier terminated pursuant
to Section 9.1, the closing of the Merger (the "CLOSING") will take place as
promptly as practicable, but no later than three business days, following
satisfaction or waiver of the conditions set forth in Article VII, at the
offices of Fenwick & West LLP, Two Palo Alto Square, Palo Alto, California,
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 filing a Certificate of Merger, in substantially the form
attached hereto as Exhibit C (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 Delaware of
such filing being referred to herein as the "EFFECTIVE TIME"). The parties
currently intend that the Closing Date will occur on or prior to December 14,
1999.
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 Certificate 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 shall be the Certificate of Incorporation of Merger Sub
substantially in the form attached hereto as Exhibit D until thereafter amended
as provided by law and such Certificate of Incorporation.
(b) 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.
1.5 Directors and Officers. The director(s) of Merger Sub immediately
prior to the Effective Time shall be the initial director(s) of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, each to hold office in accordance with the Bylaws of the
Surviving Corporation.
2
4
1.6 Maximum Aggregate Merger Consideration; Effect on Capital Stock.
(a) The aggregate maximum number of shares of capital stock of
Parent ("PARENT CAPITAL STOCK") to be issued 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 and warrants to acquire
Company Capital Stock shall be 9,722,000, subject to adjustment as provided in
subsection (b) below (the "AGGREGATE SHARE NUMBER"). 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, the holder of any options, warrants or
other rights to acquire or receive shares of Company Capital Stock, the
following shall occur (which is intended to comply fully with the liquidation
preference provisions set forth in Article IV, Section 2 of the Certificate of
Incorporation of the Company, as amended through the date hereof).
(b) The Aggregate Share Number shall be subject to adjustment
following the Closing in the following manner: The Company, under the direction
and control of the Securityholder Agent (as defined in Section 8.2 (g)), shall
prepare and deliver to Parent, as promptly as practicable following the date
hereof ("AGREEMENT DATE"), a balance sheet of the Company as of the Agreement
Date (such balance sheet, the "EXECUTION BALANCE SHEET") that shall be prepared
in conformity with generally accepted accounting principles consistently applied
("GAAP") and in a manner consistent with the Company Financials (as defined in
Section 2.7). Based on the Execution Balance Sheet the net book value of the
Company as of the Agreement Date (the "EXECUTION NET BOOK VALUE") shall be
determined and set forth in explanatory footnotes describing the determination
of the Execution Net Book Value. Within twenty (20) days of the delivery of the
Execution Balance Sheet to Parent, Parent shall deliver to the Securityholder
Agent a notice stating either that it accepts the determination of the Execution
Net Book Value or that it disputes such determination. If Parent and the
Securityholder Agent dispute the determination of the Execution Net Book Value,
Parent and the Securityholder Agent shall engage a mutually acceptable
accounting firm at Parent's sole expense to conclusively determine the Execution
Net Book Value. If the Execution Net Book Value, as agreed or as determined as
described above, is below $1,079,866, Parent will make a claim against the
Escrow Amount in accordance with Article VIII below for the difference between
$1,079,866 and the Execution Net Book Value. If the Execution Net Book Value is
greater than $1,079,866, the Aggregate Share Number shall be increased by that
number of shares equal to the quotient computed by dividing (A) the amount by
which the Execution Net Book Value exceeds $1,079,866 by (B) five (5), which
shares shall be distributed (subject to Section 1.6(g) below) pro rata to the
stockholders of the Company as promptly as reasonably practicable. The parties
acknowledge and agree that the Company's Series A Preferred (as defined below)
shall be treated as equity and not as debt for purposes of determining Execution
Net Book Value.
(c) Conversion of Company Redeemable Preferred Stock.
(i) Series A Preferred Stock. Each share of Series A
Preferred Stock of the Company ("SERIES A PREFERRED") issued and outstanding
immediately prior to the Effective Time (other than any shares of Series A
Preferred to be canceled pursuant to Section 1.6(h) and any Dissenting Shares
(as defined and to the extent provided in Section 1.7(a))) will be canceled and
3
5
extinguished and be converted automatically into the right to receive that
number of shares of Series D Preferred Stock of Parent having the rights,
preferences, privileges and restrictions set forth in the Amended and Restated
Certificate of Incorporation of Parent attached as Exhibit E hereto ("PARENT
PREFERRED STOCK") equal to the quotient computed by dividing (A) the per share
Series A Liquidation Amount (as defined in the Company's Certificate of
Incorporation, as amended to date) as of the Closing Date by (B) five (5) (the
"SERIES A EXCHANGE RATIO") upon surrender of the certificate representing such
share of Series A Preferred in the manner provided in Section 1.8. The aggregate
number of shares of Parent Preferred Stock to be issued to holders of Series A
Preferred is hereinafter referred to as the "PARENT PREFERRED STOCK NUMBER
(SERIES A PREFERRED)."
(ii) Series C Preferred Stock. Each share of Series C
Preferred Stock of the Company ("SERIES C PREFERRED") issued and outstanding
immediately prior to the Effective Time (other than any shares of Series C
Preferred to be canceled pursuant to Section 1.6(h) 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 that
number of shares of Parent Preferred Stock equal to the quotient computed by
dividing (A) the per share Series C Liquidation Amount (as defined in the
Company's Certificate of Incorporation, as amended to date) by (B) five (5) (the
"SERIES C EXCHANGE RATIO") upon surrender of the certificate representing such
share of Series C Preferred in the manner provided in Section 1.8. The aggregate
number of shares of Parent Preferred Stock to be issued to holders of Series C
Preferred is hereinafter referred to as the "PARENT PREFERRED STOCK NUMBER
(SERIES C PREFERRED)." The sum of the Parent Preferred Stock Number (Series A
Preferred) and Parent Preferred Stock Number (Series C Preferred) is referred to
hereinafter as the "REDEEMABLE STOCK NUMBER." The difference between the
Aggregate Share Number and the Redeemable Stock Number is hereinafter referred
to as the "NONREDEEMABLE STOCK NUMBER."
(d) Conversion of Company Series B Preferred Stock. Each share of
Series B Preferred Stock of the Company ("SERIES B PREFERRED") issued and
outstanding immediately prior to the Effective Time (other than any shares of
Series B Preferred to be canceled pursuant to Section 1.6(h) 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 that number of shares of Parent Preferred Stock equal to the product of
(A) one share of Series B Preferred multiplied by (B) the Common Factor (as
defined in Section 1.6(f) below) (the "SERIES B EXCHANGE RATIO") upon surrender
of the certificate representing such share of Series B Preferred in the manner
provided in Section 1.8.
(e) Conversion of Company Common Stock. Each share of common
stock of the Company ("COMPANY COMMON STOCK") issued and outstanding immediately
prior to the Effective Time (other than any shares of Company Common Stock to be
canceled pursuant to Section 1.6(h) 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 that number of shares of
common stock of Parent ("PARENT COMMON STOCK") equal to the product of (i) one
share of Company Common Stock multiplied by (ii) the Common Factor (as defined
in Section 1.6(f) below) (the "COMMON EXCHANGE RATIO") upon surrender of the
certificate representing such share of Company Common Stock in the manner
provided in Section 1.8.
4
6
(f) 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
---
D
Where X = the Common Factor
N = the Nonredeemable Stock Number
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 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 any options to purchase Company Common Stock ("COMPANY OPTIONS")
outstanding at 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 options, warrants, calls, rights, exchangeable or
convertible securities (including Series B Preferred), 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.
(g) Escrow. Twenty percent (20%) of the number of shares of
Parent Capital Stock to be issued at the Effective Time pursuant to Section
1.6(c), (d) and (e) hereof and thereafter pursuant to Section 1.6(b) (none of
which shares of Parent Capital Stock shall be unvested, subject to any right of
repurchase, risk of forfeiture or other condition in favor of the Surviving
Corporation) shall be held in escrow (the "ESCROW AMOUNT") pursuant to Article
VIII of this Agreement to compensate Parent and its affiliates (including the
Surviving Corporation) for any "LOSSES" (as defined in Section 8.2 hereof)
incurred in connection with this Agreement and the transactions contemplated
hereby.
(h) 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 shall be canceled and extinguished
without any conversion thereof.
(i) Warrant. To the extent the Stock Purchase Warrant dated July 31, 1997 by and
between Proamics Corporation, an Illinois corporation that has merged with and
into the Company, and Finova Mezzanine Capital ("FINOVA"), as successor in
interest to Sirrom Capital Corporation, to purchase shares of Company Common
Stock (the "FINOVA WARRANT") remains exercisable immediately prior to the
Effective Time, the Finova Warrant shall, in connection with the
5
7
Merger, be terminated and shall not be assumed by Parent. After the Effective
Time, any unexercised portion of the Finova Warrant shall not represent any
right to purchase any Company Capital Stock or any Parent Capital Stock and
shall be terminated.
(j) Capital Stock of Merger Sub. Each stock certificate of Merger
Sub evidencing ownership of any such shares shall continue to evidence ownership
of such shares of common stock of the Surviving Corporation.
(k) Adjustments to Exchange Ratios. The exchange ratios set forth
above shall be adjusted to reflect fully the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Capital Stock or Company Capital Stock), reorganization,
recapitalization or other like change with respect to Parent Capital Stock or
Company Capital Stock occurring after the date hereof and prior to the Effective
Time.
(l) 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 Capital Stock (after aggregating all fractional shares of
Parent Capital 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) $5.00.
1.7 Appraisal 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 Capital Stock 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
shareholder of the Surviving Corporation.
(b) Notwithstanding the provisions of Sections 1.6(c), (d) and
(e) 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 Capital Stock and fractional shares as provided in Section
1.6(c), (d) or (e) as the case may be, 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 and (ii) the opportunity to participate
in all negotiations and proceedings with respect to demands for appraisal under
Delaware Law. The Company shall not, except with the prior written consent of
Parent, voluntarily
6
8
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) Parent to Provide Common Stock. Promptly after the Effective
Time, Parent shall make available to stockholders of the Company the shares of
Parent Common Stock and Parent Preferred Stock issuable pursuant to Section 1.6
in exchange for outstanding shares of Company Capital Stock; 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 Parent Preferred Stock equal to the Escrow Amount out of
the aggregate number of shares of Parent Common Stock and Parent Preferred Stock
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
twenty percent (20%) of the number of shares of Parent Common Stock and twenty
percent (20%) of the number of shares of Parent Preferred Stock which, in each
case, such holder would otherwise be entitled to receive under Section 1.6 by
virtue of ownership of outstanding shares of Company Capital Stock.
(b) Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "CERTIFICATES") which immediately prior to the
Effective Time represented outstanding shares of Company Capital Stock whose
shares were converted into the right to receive shares of Parent Common Stock
and Parent Preferred Stock pursuant to Section 1.6, (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 Parent
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 in exchange for certificates representing shares of Parent
Common Stock and Parent Preferred Stock. Upon surrender of a Certificate for
cancellation to Parent 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) and Parent Preferred Stock
(less the number of shares of Parent Preferred Stock, if any, to be deposited in
the Escrow Fund on such holder's behalf pursuant to Article VIII hereof), plus
cash in lieu of fractional shares 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 Parent Preferred Stock which in the aggregate equal the Escrow
Amount, which shall be registered in the name of the Escrow Agent. As set forth
in Section 8.2(c)(iii), such shares shall be beneficially owned by the holders
on whose behalf such shares were deposited in the Escrow Fund and such shares
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
7
9
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
Capital Stock 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.
(c) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Stock or Parent Preferred Stock with a record date
after the Effective Time will be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock or Parent
Preferred Stock represented thereby until the holder of record of such
Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the record
holder of the certificates representing whole shares of Parent Common Stock or
Parent Preferred Stock issued in exchange therefor, without interest, at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such whole
shares of Parent Common Stock or Parent Preferred Stock.
(d) Transfers of Ownership. If any certificate for shares of
Parent Common Stock or Parent Preferred 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 or Parent
Preferred 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.
(e) No Liability. Notwithstanding anything to the contrary in
this Section 1.8, none of Parent, the Surviving Corporation or any party hereto
shall be liable to a holder of shares of Parent Capital Stock or 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 Capital Stock issued upon the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof (including any cash paid in
respect thereof) 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 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, Parent 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 Parent Preferred Stock
and cash for fractional shares, if any, as may be required pursuant to Section
1.6; provided, however, that Parent
8
10
may, in its reasonable and good faith 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 customary sum as it may reasonably direct
as indemnity against any claim that may be made against Parent with respect to
the certificates alleged to have been lost, stolen or destroyed.
1.11 Tax and Accounting 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 (including its subsidiaries) hereby represents and warrants
to Parent and Merger Sub, subject to the exceptions specifically disclosed in
writing in the disclosure letter dated as of the date hereof (the "COMPANY
SCHEDULES"), as follows. Any item disclosed in any section of the Company
Schedules with respect to a specific section of the Agreement is deemed to be
disclosed on all other sections of the Company Schedules with respect to all
other sections of this Agreement to which such item relates:
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. The Company has the corporate 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 is duly qualified or licensed to do business and is in good standing as
a foreign corporation in each jurisdiction (each of which is listed on Schedule
2.1) 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, results of operations or sales prospects of the Company identified by
the Company on or prior to the date hereof in connection with Parent's
investigation of the Company (hereinafter referred to as a "MATERIAL ADVERSE
EFFECT"). The Company has delivered a true and correct copy of its Certificate
of Incorporation and Bylaws, each as amended to date, to Parent. Such
Certificate of Incorporation and Bylaws are in full force and effect. The
Company is not in violation of any of the provisions of its Certificate of
Incorporation or Bylaws.
9
11
2.2 Subsidiaries. Except as set forth in Schedule 2.2, 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. Each subsidiary listed on Schedule 2.2 is duly organized, validly
existing and in good standing under the laws of the state or country in which it
is domiciled. The Company has not agreed nor is the 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.
2.3 Company Capital Structure.
(a) The authorized capital stock of the Company consists of
40,000,000 shares of authorized Common Stock, of which 8,850,192.66 shares are
issued and outstanding, and 9,974,585 shares of authorized Preferred Stock (the
"PREFERRED STOCK"). The authorized Preferred Stock consists of 117,000 shares of
authorized Series A Preferred, all of which shares are issued and outstanding,
9,833,585 shares of authorized Series B Preferred, all of which shares are
issued and outstanding, and 24,000 shares of authorized Series C Preferred, all
of which shares are issued and outstanding. The aggregate of the Series A
Liquidation Amounts is $12,870,000 as of November 15, 1999. The aggregate of the
Series C Liquidation Amounts is $1,271,869 as of November 15, 1999. The Series B
Preferred is and will at the Closing Date be convertible into Company Common
Stock on a one-for-one basis. 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 in the amounts set forth on Schedule 2.3(a). No
shares of Company Capital Stock held by any shareholder are subject to a
repurchase right in favor of the Company. 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 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 preferential rights of the Preferred Stock
in connection with the sale of substantially all of the assets of the Company or
a merger involving the Company are set forth in the Certificate of Incorporation
of the Company. 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 6,353,522 shares of Common Stock for
issuance to employees and consultants pursuant to the Company's 1999 Stock
Option Plan (the "OPTION PLAN"). The Company has not issued any Company Options
under the Option Plan and will not have issued any Company Options under the
Option Plan or otherwise as of the Closing Date. The Finova Warrant is
exercisable for 554,765 shares of Company Common Stock. Schedule 2.3(b) sets
forth the name of the holder of the Finova Warrant and any other warrants issued
by the Company and exercise prices of such warrants (collectively, the
"WARRANTS"). The Warrants have been offered, issued and delivered in compliance
with applicable federal and state securities laws and all requirements set forth
in applicable contracts, agreements and instruments. The holders of the
10
12
Warrants have been or will be given, or shall have properly waived, any required
notice prior to the Merger. As a result of the Merger, Parent will be the record
and sole beneficial owner of all Company Capital Stock and rights to acquire or
receive Company Capital Stock.
(c) Except for the Warrants described in Schedule 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, all Warrants (including, without
limitation, the Finova Warrant) and the Proamics Corporation Phantom Stock Plan
(as amended, the "PHANTOM STOCK PLAN") and phantom shares and other rights
thereunder ("PHANTOM STOCK") shall have been validly terminated and the Company
shall have no further liabilities or obligations thereunder. The number of
shares of Phantom Stock awarded to each participant in the Phantom Stock Plan,
the number of shares of Phantom Stock in which each Participant will vest as of
the Closing, and the amount payable (if any) to each participant at or before
Closing is set forth in Schedule 2.3(d). As of the Closing Date, there will be
no outstanding options, rights or obligations of the Company pursuant to the
Phantom Stock Plan or any similar plan.
(e) As of the date of this Agreement, except as contemplated by
this Agreement and as described in Schedule 2.3(d), there are no registration
rights agreements, no voting trust, proxy or other similar agreement or
understanding to 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 shareholders, 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, subject only to the approval of the principal terms of this Agreement
and the Merger by the Company's shareholders. The Company's Board of Directors
has unanimously 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 (except for
the terms set forth in Section 1.6(i) above).
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 shareholders, 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
11
13
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 or (b) any material
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, 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") or any
third party (so as not to trigger any 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 audited balance sheets as of December 31, 1998
and as of December 31, 1997 and the related audited statement of income for the
respective twelve-month periods then ended (the "COMPANY YEAR-END FINANCIALS")
and the Company's unaudited balance sheet as of September 30, 1999 and the
related unaudited statement of income for the nine-month period then ended (the
"COMPANY INTERIM FINANCIALS," and collectively with the Company Year-End
Financials, the "COMPANY FINANCIALS"). The Company Year-End Financials and the
Company Interim Financials are complete and correct in all material respects and
have been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods indicated and
consistent with each other, except for the absence of footnotes and normal
year-end accruals in the case of the Company Interim Financials. The Company
Year-End Financials and Company Interim Financials 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 September 30, 1999 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, as of the date hereof, any material liability,
indebtedness or obligation of any type, whether accrued, absolute, contingent,
matured, unmatured or other (whether or not required to be reflected in
financial statements in accordance with GAAP), which individually or in the
aggregate, (a) has not been reflected in the Current Company Balance Sheet and
(b) has not arisen in the ordinary course of the Company's business since
September 30, 1999, consistent with past practices, or (c) has not been set
forth in the Company Schedules.
2.9 No Changes. Except as set forth in Schedule 2.9, since September 30,
1999 and through the date of this Agreement, there has not been, occurred or
arisen any:
12
14
(a) material transaction by the Company except in the ordinary
course of business as conducted on that date and consistent with past 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
$10,000 in any individual case or $25,000 in the aggregate (other than
commitments to pay expenses incurred in connection with this transaction);
(d) destruction of, 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, principals 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, other than dividends accruing under the terms of the Company's
Series A and Series C Preferred Stock;
(h) split, combination or reclassification of any Company Capital
Stock;
(i) 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 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 Schedule 2.16(a);
(j) 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;
(k) 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;
(l) waiver or release of any material right or claim of the
Company, including any write-off or other compromise of any material amount of
any account receivable of the Company;
13
15
(m) except as set forth in Schedule 2.14, (i) sale by the Company
of any "COMPANY INTELLECTUAL PROPERTY" (as defined in Section 2.14 below) or the
entering into of any license agreement (other than end-user license agreements
entered into by the Company in the ordinary course of business consistent with
past practice), distribution agreement, reseller agreement, 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 (as defined in Section 2.14
below) or the entering into of any license agreement, distribution agreement,
reseller 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;
(n) except as set forth on Schedule 2.3(b), 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; or
(o) agreement by the Company or any officer or employees thereof
to do any of the things described in the preceding clauses (a) through (n)
(other than negotiations with Parent and its representatives regarding the
transactions contemplated by this Agreement).
2.10 Tax and Other Returns and Reports.
(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 required federal,
state, local and foreign returns, estimates, information statements 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 Tax nor is there any Tax deficiency outstanding, proposed or assessed
against the Company, nor has the
14
16
Company executed any waiver of any statute of limitations on or extended the
period for the assessment or collection of any Tax.
(iv) 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 liabilities for unpaid federal,
state, local and 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 January 1, 1997.
(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.
(ix) None of the Company's assets are treated as "tax-exempt
use property" within the meaning of Section 168(h) of the Code.
(x) 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.
(xi) 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.
(xii) 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.
(xiii) 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.
15
17
(xiv) 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.
(xv) The Company utilizes the accrual method of accounting
for U.S. federal income tax purposes.
(xvi) The Company has not distributed the stock of any
corporation in a transaction satisfying the requirements of Section 355 of the
Code. No Company stock has been distributed in a transaction satisfying 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 that 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 and the name of the lessor. The Company has
provided true and complete copies of all real property leases and amendments
thereto to Parent. All such current leases are in full force and effect, are
valid and effective in accordance with their respective terms, and there is not,
under any of such leases, any existing default or event of default, or to the
Company's knowledge, any event which with notice or lapse of time, or both,
would constitute a default. To the Company's knowledge, 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
16
18
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 proprietary customer
information relating to the Company's current and former customers (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. To the Company's knowledge, the Company is in
compliance in all material respects with the terms of the Company
Authorizations.
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
17
19
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 xxxx 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 any of its subsidiaries.
(vi) Section 2.14(b)-(n) are qualified in their entirety by
the items set forth on Schedule 2.14.
(b) Schedule 2.14 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 Registered Intellectual Property Rights. Except as set forth on Schedule
2.14, 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 Registered
Intellectual Property Rights. In each case in which the Company has acquired all
rights, title and interest in, as opposed to the right to use, any Technology or
Intellectual Property Right from any person, the Company or such Subsidiary has
obtained a valid
18
20
and enforceable assignment sufficient to irrevocably transfer all rights in such
Technology and the associated Intellectual Property Rights to the Company.
Except as set forth on Schedule 2.14, 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) The Company has no knowledge of any facts or circumstances
that would render any Company Intellectual Property invalid or unenforceable.
Except as set forth on Schedule 2.14, without limiting the foregoing, 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 granted to end-user customers in
the ordinary course of business. The Company is the exclusive owner or exclusive
licensee of all Company Intellectual Property subject only to non-exclusive
licenses granted to distributors, resellers and end-users. Without limiting the
foregoing: (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; and (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.
(f) Except as set forth in Schedule 2.14, 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) 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 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
19
21
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) All current and former software development personnel of the
Company and current and former consultants and contractors engaged in software
development for 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) Except as set forth on Schedule 2.14, 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.
(k) The Company has not transferred ownership of, or granted any
exclusive license of or 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.
(l) Other than inbound "shrink-wrap" and similar publicly
available commercial binary code end-user licenses and outbound "shrink-wrap"
licenses in the form set forth on Schedule 2.14, Schedule 2.14 lists all
contracts, licenses and agreements to which the Company is a party with respect
to any Technology or Intellectual Property Rights. 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 to
perform thereunder.
(m) Schedule 2.14 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.
(n) To the knowledge of the Company, 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.
(o) To the knowledge of the Company, the operation of the
business of the Company as it currently is conducted or is contemplated to be
conducted by the Company, including but not limited to the design, development,
use, import, branding, advertising, promotion, marketing,
20
22
manufacture and sale of the products, technology or services (including
products, technology or services currently under development) of the Company
does not and will not and 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).
(p) To the Company's knowledge, no person is infringing or
misappropriating any Company Intellectual Property Right.
(q) 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.
(r) No (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, otherwise
violates in any material respect any law or regulation.
(s) To the Company's knowledge, except as set forth on Schedule
2.14, 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, and, to the knowledge of
the Company, as it is currently planned or contemplated to be conducted by the
Company, 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).
(t) Except to the extent resulting from the continuation of
contracts and licenses of the Company following the Closing on the terms
applicable prior to the Closing, 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
obligated to pay any royalties or other amounts to any third party in excess of
those payable by the Company, Parent or Surviving Corporation, respectively,
prior to the Closing.
(u) The Company's products and services shall not fail to perform
any function specified in the product specifications therefor, or otherwise be
adversely affected in any material respect, solely as a result of the date
change from December 31, 1999 to January 1, 2000, including
21
23
without limitation, date data century recognition, calculations which
accommodate same century and multi-century formulas and date values, and date
data interface values which reflect the correct century. In addition, to the
best of the Company's knowledge, all of the products and services upon which the
Company is materially reliant, either individually or in the aggregate,
including, without limitation, information technology systems such as financial
and order entry systems, non-information technology systems such as phones and
facilities, third party licensed software and the products and services of the
Company's customers, vendors and suppliers are designed to be used prior to,
during, and after calendar year 2000 A.D., and such products and services will
operate during each such time period without error relating to date data,
including without limitation any error relating to, or the product of, date data
that represents or references different centuries or more than one century.
2.15 Product Warranties; Defects; Liabilities. Each Company Product has
been in all material respects in conformity with all applicable contractual
commitments and all applicable express and implied warranties. The Company does
not have any liability or obligation (and to the Company's knowledge, there is
no current reasonable basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand against the Company
giving rise to any liability or obligation) for replacement or repair thereof or
other damages in connection therewith except liabilities or obligations incurred
in the ordinary course of business consistent with past practice which do not
have a Material Adverse Effect on the Company. No Company Product is subject to
any guaranty, warranty or other indemnity beyond the applicable standard terms
and conditions of sale, license or lease or beyond that implied or imposed by
applicable law. The Company has provided to Parent a copy of the standard terms
and conditions of sale, license or lease for each of the Company Products and
copies of the Company's standard forms of merchant agreements, portal agreements
and professional services agreements.
2.16 Agreements, Contracts and Commitments. As of the date hereof,
except as set forth on 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;
22
24
(e) any fidelity or surety bond or completion bond;
(f) any lease of personal property having a value individually in
excess of $25,000;
(g) any agreement of indemnification or guaranty other than
standard indemnification terms contained in contracts with resellers and
distributors and licensees of the Company's products;
(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;
(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 (h)
hereof;
(l) any purchase order or contract involving $25,000 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 shareholder 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 entered into since January 1, 1996
that provides for continuing obligations of the Company; or
23
25
(s) any other agreement that involves $25,000 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) or Schedule 2.14 (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 [INTENTIONALLY OMITTED.]
2.18 Interested Party Transactions. Except as set forth on Schedule
2.18, to the Company's knowledge, no officer, director or 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 persons 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 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 2.16(a) or Schedule 2.14; 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 shareholders 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 with, or in
default or violation of any order, judgment or decree, or to its knowledge, any
law, rule, or regulation, 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 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. Except as set forth on Schedule 2.20, 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 (in their capacities as officers, directors or
24
26
employees, as the case may be), nor, to the knowledge of the Company, is there
any reasonable basis therefor. There is no investigation pending or, to the
Company's knowledge, threatened against the Company, its properties or any of
its officers, directors or employees (in their capacities as officers, directors
or employees, as the case may be) by or before any Governmental Entity. 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. With respect to the insurance policies and fidelity
bonds 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 committees thereof) and shareholders 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) to the Company's knowledge, 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. To the Company's knowledge, 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,
25
27
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' and Finders' Fees. 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.
2.25 Employee Matters and Benefit Plans.
(a) Definitions. With the exception of the definition of
"AFFILIATE" set forth in Section 2.25(a)(i) below (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) "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;
(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 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 Affiliate;
26
28
(vi) "EMPLOYEE AGREEMENT" shall refer to each management,
employment, indemnification, severance, termination, consulting, relocation,
repatriation, expatriation, visa, work permit or other agreement, contract or
understanding between the Company or any 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. 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
27
29
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 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 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 Affiliates,
threatened by the IRS or DOL with respect to any Company Employee Plan; and
(vii) neither the Company nor any 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 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 or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company or any
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
28
30
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 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 current or future payment (whether of severance or termination
pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, indemnification, increase in benefits or obligation to fund
benefits with respect to any Employee.
(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 as of the date hereof. The
Company (i) to its knowledge, 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). 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 to the Company's knowledge, 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
29
31
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. Neither the Company nor any of its subsidiaries has 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 shareholder, officer, employee or consultant of the Company is obligated
under any contract or agreement 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.
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 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 the 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.
2.28 Stock Redemption Agreements.
(a) The Stock Redemption Agreement dated March 9, 1999 by and
among the Company and the Stockholders was and is duly authorized, validly
executed and in compliance with all applicable laws, constitutes a legal, valid
and binding obligation of the parties thereto enforceable in accordance with its
terms, and the Company has no further liabilities or obligations in respect
thereto.
(b) The Stock Redemption Agreement dated March 9, 1999 by and
among the Company and Xxxxxx Xxxxxx, Xxxxx Xxxxxx, Xxxx Xxxxxxxxx, Xx., Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxxx and Xxxxxx Xxxxxxxxx Xxxxxx is duly authorized,
validly executed and in compliance with all applicable laws, constitutes a
legal, valid and binding obligation of the parties thereto enforceable
30
32
in accordance with its terms, and the Company has no further liabilities or
obligations in respect thereto.
2.29 Transaction with Lotzof & Associates, Inc. The Stock Purchase
Agreement dated March 5, 1999 by and between the Company and Lotzof & Associates
("LOTZOF") and all of the shareholders of Lotzof was and is duly authorized,
validly executed and in compliance with all applicable laws, constitutes a
legal, valid and binding obligation of the parties thereto enforceable in
accordance with its terms, and the Company has no further liabilities or
obligations in respect thereto.
2.30 Transaction with Isthmus Corporation. The Agreement and Plan of
Merger dated February 22, 1999 by and between the Company and Isthmus
Corporation ("ISTHMUS") is duly authorized, validly executed and in compliance
with all applicable laws, constitutes a legal, valid and binding obligation of
the parties thereto enforceable in accordance with its terms, and the Company
has no further liabilities or obligations in respect thereto. The merger
contemplated thereby was effected in compliance with all applicable laws.
2.31 Warrant Cancellation Agreement. The Warrant Cancellation Agreement
dated March 5, 1999 by and between Sirrom Capital Corporation and Isthmus was
and is duly authorized, validly executed and in compliance with all applicable
laws, constitutes a legal, valid and binding obligation of the parties thereto
enforceable in accordance with its terms, and the Company has no further
liabilities or obligations in respect thereto.
2.32 Merger between Proamics-Illinois and Proamics-Delaware. The merger
of Proamics Corporation, an Illinois corporation, with and into Proamics
Corporation, a Delaware corporation, as evidenced by that certain Certificate of
Merger dated March 5, 1999 was effected in compliance with all applicable laws
and the Company has no further liabilities or obligations in respect thereto.
2.33 No Royalty Obligations to Platinum. The Company has no royalty
obligations to Platinum Software Corporation ("PLATINUM"). The Payoff and
Termination Agreement dated March 5, 1999 by and between the Company, Proamics
Corporation, an Illinois corporation and Platinum was and is duly authorized,
validly executed and in compliance with all applicable laws, constitutes a
legal, valid and binding obligation of the parties therein enforceable in
accordance with its terms, and the Company has no further liabilities or
obligations in respect thereto.
2.34 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 documents mailed or delivered
to the shareholders 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. None of the
information supplied or to be supplied by or on behalf of the Company or the
Stockholders for
31
33
inclusion or incorporation by reference in the Information Statement or any
other any statement, recommendation, proposal or document provided to the
stockholders of the Company, at the time of any stockholders' meeting or as of
the Effective Time, contain any untrue statement of a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to the Company,
subject to the exceptions specifically disclosed in writing in the disclosure
letter dated as of the date hereof (the "PARENT SCHEDULES"), as follows. Any
item disclosed in any section of the Parent Schedules with respect to a specific
section of the Agreement is deemed to be disclosed on all other sections of the
Parent Schedules with respect to all other sections of this Agreement to which
such item relates:
3.1 Organization, Good Standing and Qualification. Parent has been duly
incorporated and organized, and is validly existing in good standing, under the
laws of the State of Delaware. Merger Sub has been duly incorporated and
organized, and is validly existing in good standing, under the laws of the State
of Delaware. Each of Parent and Merger Sub has the corporate power and authority
to own and operate its properties and assets and to carry on its business as
currently conducted. Parent is duly qualified to transact business and is in
good standing in the State of California.
3.2 Capitalization and Voting Rights.
(a) The authorized capital of Parent consists, or will consist
immediately prior to the Closing, of:
(i) Preferred Stock. 51,910,282 shares of Preferred Stock
(the "PREFERRED STOCK") will be authorized prior to the Closing, 10,000,000 of
which have been designated Series F Preferred Stock (the "SERIES F PREFERRED
STOCK"), all of which are outstanding prior to the Closing, 5,142,851 shares of
which have been designated Series A Preferred Stock (the "SERIES A PREFERRED
STOCK"), all of which are issued and outstanding prior to the Closing, 8,629,992
shares of which have been designated Series B Preferred Stock (the "SERIES B
PREFERRED STOCK"), 7,999,992 of which are issued and outstanding prior to the
Closing, 9,987,439 shares of which will be designated Series C Preferred Stock
(the "SERIES C PREFERRED STOCK"), 9,987,439 of which are issued and outstanding
prior to the Closing, and 18,150,000 shares of which will be designated Series D
Preferred Stock (the "SERIES D PREFERRED STOCK"), none of which are issued and
outstanding. The outstanding shares of Preferred Stock are all duly and validly
authorized and issued, fully paid and nonassessable and were issued in
compliance with applicable federal and state securities laws and have been
approved by all requisite corporate and shareholder action. The rights,
privileges and preferences of the Preferred Stock will be as stated in Exhibit
E.
32
34
(ii) Common Stock. 100,000,000 shares of Parent Common Stock
will be authorized prior to the Closing, of which 8,368,818 shares are issued
and outstanding. The outstanding shares of Parent Common Stock are all duly and
validly authorized, issued, fully paid and nonassessable and, were issued in
compliance with applicable federal and state securities laws and have been
approved by all requisite corporate and stockholder action.
(iii) Options, Warrants, Reserved Shares. Except for (i) the
conversion privileges of the Preferred Stock, (ii) the 8,000,000 shares of
Parent Common Stock reserved for issuance under Parent's 1998 Stock Plan under
which options to purchase 4,306,427 shares are outstanding, and (iii) warrants
to purchase 630,000 shares of Series B Preferred Stock, there is no outstanding
option, warrant, right (including conversion or preemptive rights) or agreement
for the purchase or acquisition from Parent of any shares of its capital stock
or any securities convertible into or ultimately exchangeable or exercisable for
any shares of Parent's capital stock. Apart from the exceptions noted in this
Section 3.2(a), and except for rights of first refusal held by Parent to
purchase shares of its stock issued under Parent's 1998 Stock Plan, no shares of
Parent's outstanding capital stock, or stock issuable upon exercise or exchange
of any outstanding options, warrants or rights, or other stock issuable by
Parent, are subject to any preemptive rights, rights of first refusal or other
rights to purchase such stock (whether in favor of Parent or any other person),
pursuant to any agreement or commitment of Parent.
(iv) Issuance of Parent Capital Stock. Upon the Closing and
the issuance and delivery of the certificates representing the Parent Capital
Stock to the shareholders of the Company, the Parent Capital Stock will be
validly issued, fully paid and non-assessable, and subject to no Liens.
3.3 Subsidiaries. Parent does not presently own or control, directly or
indirectly, any interest in any other corporation, partnership, trust, joint
venture, association, or other entity.
3.4 Authorization. Parent and Merger Sub have all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of Parent and
Merger Sub and their respective officers, directors and stockholders necessary
for the authorization, execution and delivery of this Agreement, the performance
of all obligations of Parent and Merger Sub hereunder, and the authorization,
issuance (or reservation for issuance), sale and delivery of the Parent Capital
Stock to be issued hereunder has been taken or will be taken prior to the
Closing, and the Agreement, when executed and delivered, will constitute valid
and legally binding obligations of Parent and Merger Sub, enforceable in
accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting or relating to the enforcement of creditors' rights generally and (ii)
as limited by laws relating to the availability of and/or other equitable
remedies. The Parent Capital Stock to be issued hereunder, when issued, paid for
and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, (when issued in accordance with Exhibit E), will
be duly authorized and validly issued, fully paid and nonassessable.
33
35
3.5 Consents and Agreements. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any third party not already a party to this Agreement or any
federal, state or local governmental authority on the part of Parent or Merger
Sub is required in order to enable Parent or Merger Sub to execute, deliver and
perform its obligations under this Agreement, except for such qualifications or
filings under applicable securities laws as may be required in connection with
the transactions contemplated by this Agreement. All such qualifications and
filings will, in the case of qualifications, be effective on the Closing and
will, in the case of filings, be made within the time prescribed by law.
3.6 Litigation. There is no action, suit or proceeding of any nature
pending or to Parent's knowledge threatened against Parent, its properties or
any of its officers, directors or employees (in their capacities as officers,
directors or employees, as the case may be), nor, to the knowledge of Parent, is
there any reasonable basis therefor. There is no investigation pending or, to
Parent's knowledge, threatened against Parent, its properties or any of its
officers, directors or employees (in their capacities as officers, directors or
employees, as the case may be) by or before any Governmental Entity. No
Governmental Entity has at any time challenged or questioned the legal right of
the Parent to conduct its operations as presently or previously conducted.
3.7 Proprietary Information and Inventions Agreements. Each present and
former employee, officer and consultant of Parent has executed a Confidential
Information and Inventions Assignment. Parent after reasonable investigation is
not aware that any of its employees, officers or consultants are in violation
thereof, and Parent will use its best efforts to prevent any such violation.
Parent is not aware that any officer or key employee intends to terminate
employment with Parent, nor does Parent have a present intention to terminate
the employment of any of the foregoing. Subject to general principles relating
to wrongful termination of employees, the employment of each officer and
employee of Parent is terminable at the will of Parent.
3.8 Title to Property and Assets. Parent owns its property and assets
free and clear of all mortgages, liens, loans and encumbrances, except such
encumbrances and liens that arise in the ordinary course of business and do not
materially impair Parent's ownership or use of such property or assets. With
respect to the property and assets it leases, Parent is in compliance with such
leases and, to its knowledge, holds a valid leasehold interest free of any
liens, claims or encumbrances.
3.9 Financial Statements. Prior to the Closing, Parent has made
available to the Company its unaudited balance sheet and income statement at and
for the year ended December 31, 1998 and the nine months ended September 30,
1999 (collectively, the "FINANCIAL STATEMENTS"). The Financial Statements have
been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods indicated, except
that the Financial Statements may not contain all footnotes required by GAAP.
The Financial Statements fairly present the financial condition and operating
results of Parent as of the dates, and for the periods, indicated therein,
subject to normal year-end audit adjustments which Parent does not expect to be
material. Except as set forth in the Financial Statements, Parent has no
material liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to the date of the
Financial Statements and (ii) obligations under contracts and
34
36
commitments incurred in the ordinary course of business, which, in both cases,
individually or in the aggregate are not material to the financial condition or
operating results of Parent. Except as disclosed in the Financial Statements,
Parent is not a guarantor or indemnitor of any indebtedness of any other person,
firm, corporation or other entity.
3.10 Books and Records. The minute books of Parent contain accurate
summary records of all meetings and written consents to action of Parent's
stockholders, Parent's Board of Directors and all committees, if any, appointed
by the Board of Directors. Parent's stock ledger is complete and reflects all
issuances, transfers, repurchases and cancellations of shares of capital stock
of Parent.
3.11 Rights of Registration. Except as contemplated in the Third Amended
and Restated Investor Rights Agreement, Parent has not granted or agreed to
grant any registration rights, including piggyback rights, to any person or
entity.
3.12 Proprietary Rights. Parent owns, has licensed or otherwise
possesses all trademarks, trade names, copyrights and other intellectual
property rights necessary to conduct its business as now being conducted without
any known conflict with or infringement upon any intellectual property rights of
others. Parent has not received any notice alleging that Parent has infringed
upon or is conflict with the asserted rights of others, nor is Parent aware of
any reasonable basis for any such allegation. Parent has certain trade secrets,
including know-how, computer software programs and other proprietary data (the
"PROPRIETARY INFORMATION") used, or proposed to be used, in the development,
manufacture and sale of its products. Parent has the right to use the
Proprietary Information, except that the possibility exists that other persons
may have independently developed trade secrets or technical information similar
or identical to those of Parent. Parent is not aware of any rights to any
patents, trademarks, service marks, tradenames, copyrights, trade secrets and
proprietary rights and processes held by third parties that it will be required
to obtain in order to conduct its business as proposed to be conducted that
cannot be obtained on commercially reasonable terms from such parties. There are
no outstanding options, licenses, or agreements of any kind relating to Parent's
patents or trademarks.
3.13 No Conflict of Interest. Parent is not indebted, directly or
indirectly, to any of its officers or directors or to their respective spouses
or children, in any amount whatsoever other than in connection with expenses or
advances of expenses incurred in the ordinary course of business or relocation
expenses of employees. To Parent's knowledge, none of Parent's officers or
directors, or any members of their immediate families, are, directly or
indirectly, indebted to Parent (other than in connection with purchases of
Parent's stock). To Parent's knowledge, none of Parent's officers or directors
or any members of their immediate families have, directly or indirectly, any
economic interest in any contract material to Parent other than with respect to
equity held in Parent.
3.14 Tax Returns. All tax returns, declarations, statements, reports,
schedules, forms and information returns ("RETURNS") required by all U.S.
federal, state and local and foreign jurisdictions (in each case, including all
political subdivisions thereof) relating to all U.S. federal, state, local and
foreign taxes and other assessments of a similar nature (whether imposed
directly or through withholding), including any interest, additions to tax, or
penalties applicable thereto
35
37
("TAXES"), if any, required to be filed by Parent prior to the Closing have been
(or will be) timely filed and such Returns are (or will be) true, complete and
correct in all material respects. All Taxes shown on any such Returns to be due
from Parent that are due and payable have been paid, other than those being
contested in good faith and for which an adequate reserve or accrual has been
established in accordance with GAAP. Parent does not know of any actual or
proposed material addition Tax assessments against Parent.
3.15 Compliance with Laws. Parent has obtained and maintained in good
standing all of its licenses, permits, consents and authorizations required to
be obtained by it or them under federal, state and local laws (collectively,
"LAWS"), except for those which, individually or in the aggregate, would not
have a material adverse effect on the assets, condition, affairs or prospects of
Parent, financially or otherwise, and all such licenses, permits, consents and
authorizations remain in full force and effect. Parent is in material compliance
with such Laws, and there is no pending or, to Parent's knowledge, threatened,
action or proceeding against Parent under any of such Laws, other than any such
actions or proceedings which, individually or in the aggregate, if adversely
determined, would not have a material adverse effect on the assets, condition,
affairs or prospects of Parent, financially or otherwise.
3.16 Year 2000 Compliance. Parent's products and services shall not fail
to perform any function specified in the product specifications therefor, or
otherwise be adversely affected in any material respect, solely as a result of
the date change from December 31, 1999 to January 1, 2000, including without
limitation, date data century recognition, calculations which accommodate same
century and multi-century formulas and date values, and date data interface
values which reflect the correct century. In addition, to the best of Parent's
knowledge, all of the products and services upon which Parent is materially
reliant, either individually or in the aggregate, including, without limitation,
information technology systems such as financial and order entry systems,
non-information technology systems such as phones and facilities, third party
licensed software and the products and services of Parent's customers, vendors
and suppliers are designed to be used prior to, during, and after calendar year
2000 A.D., and such products and services will operate during each such time
period without error relating to date data, including without limitation any
error relating to, or the product of, date data that represents or references
different centuries or more than one century.
3.17 No Contravention. Neither Parent nor Merger Sub is in violation or
default of any provision of its Certificate of Incorporation or Bylaws or of any
instrument, judgment, order, writ, decree, or contract to which it is a party or
by which it is bound or of any provision of federal or state statute, rule or
regulation applicable to Parent or Merger Sub. The execution, delivery and
performance by Parent and Merger Sub of this Agreement, including, without
limitation, the issuance of the Parent Capital Stock: (a) do not and will not
contravene the terms of the Certificate of Incorporation, as amended, or
By-Laws, as amended, of the Parent or Merger Sub or any law, rule, regulation or
similar requirement applicable to Parent or Merger Sub or its assets, business
or properties; (b) do not and will not (i) conflict with, contravene, result in
any violation or breach of or default under (with or without the giving of
notice or the lapse of time or both), (ii) create in any other person or entity
a right or claim of termination or amendment, or (iii) require modification,
acceleration or cancellation of any agreement, contract, or other instrument or
contractual obligation
36
38
of Parent or Merger Sub; and (c) do not and will not result in the creation of
any lien, charge or encumbrance (or obligation to create a lien, charge or
encumbrance) against any property, asset or business of Parent or Merger Sub.
3.18 Disclosure. Parent has fully provided the Company with all the
information which such party has reasonably requested for deciding whether to
enter into this Agreement. Neither this Agreement not any other statements,
exhibits or certificates made or delivered in connection herewith, when taken as
a whole, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements herein or therein not misleading
in light of the circumstances under which they were made.
ARTICLE IV
SECURITIES ACT COMPLIANCE; REGISTRATION
4.1 Securities Act Exemption. The Parent Common Stock and Parent
Preferred 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) thereof. Prior to the Closing Date, each of the Company's
shareholders shall have provided 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
and Parent Preferred 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 Shareholders' Restrictions Regarding Securities Law
Matters. Each shareholder of the Company, by virtue of the Merger and the
conversion into Parent Common Stock
37
39
and Parent Preferred Stock of the Company Capital Stock held by such
shareholder, shall be bound by the following provisions:
(a) Such shareholder will not offer, sell, or otherwise dispose
of any shares of Parent Common Stock or Parent Preferred Stock except in
compliance with the Securities Act and the rules and regulations thereunder.
(b) Such shareholder will not sell, transfer or otherwise dispose
of any shares of Parent Common Stock or Parent Preferred 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
Shareholder 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 Parent Preferred Stock or (iii) the offer and sale of
Parent Common Stock or Parent Preferred 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
(except to the extent that Parent shall otherwise consent in writing) to carry
on its business in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted. The Company shall promptly notify Parent of
any materially negative event involving or adversely affecting the Company or
its business.
In addition, except as permitted by the terms of this Agreement,
without the prior written consent of Parent, which consent shall not be
unnecessarily 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, the Company shall not do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend, or
change the period of exercisability of any outstanding Company Options or
Company Common Stock subject to vesting, or reprice Company Options granted
under the Option Plan (or otherwise) or authorize cash payments in exchange for
any such options;
(b) Make any payments or enter into any commitment or transaction
outside of the ordinary course of business in excess of $10,000 in any one case
or $25,000 in the aggregate;
(c) 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;
38
40
(d) Transfer or license to any person or entity or otherwise
extend, amend or modify any rights to the Company Intellectual Property Rights
(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;
(e) 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;
(f) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the Contracts;
(g) 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;
(h) 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 and the satisfaction of any obligations in connection with
termination of the Phantom Stock Plan and Phantom Stock;
(i) Issue, grant, deliver, sell, pledge or authorize, any Company
Capital Stock or securities convertible into, or subscriptions, rights, warrants
or options to acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities (except
for the issuance of any Company Capital Stock upon exercise or conversion of
presently outstanding Company Options, warrants or Preferred Stock, or the grant
of stock options to new employees pursuant to outstanding written offers of
employment);
(j) Cause or permit any amendments to its Certificate of
Incorporation or Bylaws;
(k) 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 $10,000 in the case
of a single transaction or in excess of $25,000 in the aggregate;
(l) 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 that are not
material, individually or in the aggregate, to the business of the Company;
39
41
(m) Incur individual liabilities in excess of $10,000 (in any one
case) or $25,000 (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;
(n) 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;
(o) Adopt or amend any employee benefit plan, or enter into any
employment contract, extend employment offers, pay or agree to pay any bonus or
special or extraordinary remuneration to any director or employee, or increase
the salaries or wage rates of its employees, except as consistent with the
ordinary course of the Company consistent with past practice with employees who
are terminable "at will," 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;
(p) Effect or agree to effect, including by way of hiring or
involuntary termination, any change in the Company's directors, officers or key
employees;
(q) 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;
(r) Pay, discharge or satisfy, in an amount in excess of $10,000
(in any one case) or $25,000 (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 September 30, 1999 or expenses consistent with the provisions of
this Agreement incurred in connection with any transaction contemplated hereby;
(s) 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;
(t) Enter into any strategic alliance, joint development or joint
marketing agreement;
(u) 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
40
42
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;
(v) Materially reduce the amount of any insurance coverage
provided by or fail to renew any existing insurance policies;
(w) Engage in any action with the intent and purpose to directly
or indirectly adversely impact any of the transactions contemplated by this
Agreement;
(x) Engage in any action that could reasonably be expected to (i)
cause the Merger to fail to qualify as a "reorganization" under Section 368(a)
of the Code or (ii) interfere with Parent's ability to account for the Merger as
a "pooling of interests," whether or not (in each case) otherwise permitted by
the provisions of this Article V; or
(y) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.1(a) through (x) 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 transaction provided for in this
Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Preparation of Information Statement. As soon as practicable after
the execution of this Agreement, the Company shall prepare, with the cooperation
of Parent, an Information Statement for the shareholders of the Company to
approve the principal terms of this Agreement and the Merger. The Information
Statement shall constitute a disclosure document for the offer and issuance of
the shares of Parent Common Stock and Parent Preferred Stock to be received by
the holders of Company Capital Stock in the Merger. Parent and the Company shall
each use its best efforts to cause the Information Statement to comply in all
material respects with applicable federal and state securities laws
requirements. Each of Parent and the Company agrees to provide promptly to the
other such information concerning its business and financial statements and
affairs as, in the reasonable judgment of the providing party or its counsel,
may be required or appropriate for inclusion in the Information Statement, or in
any amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and auditors in the preparation of the
Information Statement. The Company will promptly advise Parent and Parent will
promptly advise the Company, in writing if at any time prior to the Effective
Time either the Company or Parent shall obtain knowledge of any facts that might
make it necessary or appropriate to amend or supplement the Information
Statement in order to make the statements contained or incorporated by reference
41
43
therein not misleading or to comply with applicable law. The Information
Statement shall contain the unanimous recommendation of the Board of Directors
of the Company that the Company shareholders approve the principal terms of this
Agreement and the Merger and the conclusion of the Board of Directors that the
terms and conditions of the Merger are fair and reasonable to the shareholders
of the Company. Anything to the contrary contained herein notwithstanding, the
Company shall not include in the Information Statement any information with
respect to Parent or its affiliates or associates, the form and content of which
information shall not have been approved by Parent prior to such inclusion.
6.2 Shareholder Approval. The Company shall, promptly after the date
hereof and in accordance with Delaware Law and the Company's Certificate of
Incorporation and Bylaws, obtain the approval of the Company's shareholders of
the principal terms of this Agreement and the Merger. The Company shall ensure
that the shareholder approval is solicited in compliance with Delaware Law, the
Certificate of Incorporation and Bylaws of the Company and all other applicable
legal requirements. The Company agrees to use its reasonable best efforts to
secure the necessary votes required by Delaware Law to effect the Merger. Parent
will make a representative available to shareholders to answer any questions
Company shareholders may have regarding the Parent's business, management and
financial affairs.
6.3 Access to Information. Each of the Company and the Parent shall
afford the other and their respective accountants, legal counsel and other
representatives reasonable access during normal business hours during the period
prior to the Effective Time to (a) all of its properties, books, contracts,
commitments and records and (b) all other information concerning its business,
properties, and personnel as Parent or the Company may reasonably request. Each
of Parent and the Company agrees to provide the other 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 6.3 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.
6.4 Confidentiality. The parties acknowledge that the Company and Parent
have previously executed a Confidentiality Agreement, dated as of October 7,
1999 (the "CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement will
continue in full force and effect in accordance with its terms.
6.5 Public Disclosure. Unless otherwise required by law (including,
without limitation, securities laws), 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
shareholders pursuant to Section 6.2) unless approved by Parent and the Company
(which consent by the Company shall be binding on its shareholders) 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.
6.6 Consents. The Company shall promptly apply for or otherwise seek and
use its best efforts to obtain all consents and approvals required to be
obtained by it for the consummation of the
42
44
Merger, including all consents, waivers or approvals under any of the Contracts
in order to preserve the benefits thereunder for the Surviving Corporation and
otherwise in connection with the Merger. All of such consents and approvals are
set forth in Schedule 2.6.
6.7 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 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.
6.8 Best Efforts; Additional Documents and Further Assurances. Each of
the parties agrees to use its reasonable 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 reasonable 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, (b) the obtaining of all necessary actions or nonactions, waivers,
consents, approvals, orders and authorizations from Governmental Entities and
the making of all necessary registrations, declarations and filings (including
registrations, declarations and filings with Governmental Entities, if any) and
the taking of all reasonable steps as may be necessary to avoid any suit, claim,
action, investigation or proceeding by any Governmental Entity, (c) the
obtaining of all necessary consents, approvals or waivers from third parties,
(d) 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 (e) 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.
6.9 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 6.9 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.
43
45
6.10 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.
6.11 Voting Agreements. Concurrently with the execution of this
Agreement, the Company will cause each stockholder of the Company to execute a
Voting Agreement, agreeing, among other things, to vote in favor of the Merger
and against any competing proposals.
6.12 Non-Competition Agreements. On or before the Closing, the Company
will use its reasonable best efforts to cause each of the Founders (as defined
in Section 6.14(d)) to execute a Non-Competition Agreement.
6.13 Blue Sky Laws. Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Capital 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 which are
applicable in connection with the issuance of Parent Capital Stock pursuant
hereto.
6.14 Benefit Arrangements.
(a) Parent will consult with the Founders (as defined herein)
with respect to determining the Company employees to be retained by Parent
following the Closing; provided, however, that Parent shall make employment
offers only to those Company employees as Parent determines in its business
discretion and shall not have any obligation to make an offer to any particular
employee or employees of the Company. Such employees of the Company who have
continued as employees of Parent or the Surviving Corporation following the
Closing Date are referred to hereinafter as "CONTINUING EMPLOYEES." Terms of
employment offered to Continuing Employees will include compensation and options
to purchase Parent Common Stock commensurate with each person's education and
experience levels relative to Parent's current employees, and shall be
contingent upon the Closing. Employment of any Company employees by 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
its best efforts to cooperate with Parent to ensure that Company employees that
Parent wishes to retain become employees of Parent.
(b) Upon the Closing, certain Continuing Employees will be
eligible for grants of options to purchase an aggregate of 500,000 shares of
Parent Common Stock at a price per share of at least eighty-five percent (85%)
of the fair market value per share of Parent Common Stock as established by the
Board of Directors of Parent as of the Closing. As a condition to such a grant,
each Continuing Employee shall execute a release of any and all claims against
the Company, the Surviving Corporation and Parent arising out of such employee's
employment by the Company prior to the Effective Time. Subject to continuous
employment with Parent, thirty-three and one-third percent (33-1/3%) of such
options of a Continuing Employee will vest on each one-year anniversary of the
applicable grant date, so that all of such options of a Continuing Employee will
be vested on the third anniversary of the grant date (subject to continuous
employment). Such options will cease
44
46
vesting upon termination of a Continuing Employee's employment with Parent;
provided, however, that if a Continuing Employee is involuntarily terminated by
Parent without cause, thirty-three and one-third percent (33-1/3%) of such
options shall automatically vest as of the termination date, in addition to any
shares that may have already vested. Such options shall be allocated among the
Continuing Employees of the Company (other than the Founders) as Parent and the
Founders mutually determine prior to the Closing.
(c) Upon the Closing, certain Continuing Employees identified by
the Founders will be eligible for grants of options to purchase an aggregate of
278,000 shares of Parent Common Stock, which options shall be allocated among
such Continuing Employees as the Founders and Parent shall mutually determine
prior to the Closing. Such options shall be fully vested and immediately
exercisable and have an exercise price per share of at least eighty-five percent
(85%) of the fair market value per share of Parent Common Stock as established
by the Board of Directors of Parent as of the Closing, but shall not in any case
be exercisable by tender of a promissory note. As a condition to such a grant,
each Continuing Employee shall execute a release of any and all claims against
the Company, the Parent and the Surviving Corporation arising out of such
employee's employment by the Company prior to the Effective Time.
(d) Parent shall make a $500,000 bonus pool available to be
distributed among the Continuing Employees of the Company who remain employees
of Parent on the six-month anniversary of the Closing Date. The bonus amounts
shall be determined in the discretion of the Founders prior to the Closing Date.
The payments shall be made by Parent on the first regularly scheduled payroll
date after the six-month anniversary of the Closing, subject to Parent's
standard payroll practices.
(e) On or prior to the Closing Date, Parent and each of Xxxxxxx
Xxxxxx, Xxxxxxx Xxxxxxxxx and Xxxxxx Xxx Xxxxxx (the "FOUNDERS") shall negotiate
mutually acceptable employment agreements for each of the Founders contingent
upon the Closing, which agreements will contain the principal terms set forth on
Schedule 6.14.
(f) As soon as practicable after the execution of this Agreement,
Parent and the Company shall confer and work together in good faith to agree
upon mutually acceptable employee benefit and compensation arrangements (and
terminate Company Employee Plans if appropriate).
6.15 Termination of Company Investor Rights and Warrants. The Company
shall take such steps as may be necessary to provide for the termination as of
the Closing of (i) all Company investor rights granted by the Company to its
shareholders and in effect prior to the Closing, including but not limited to
dividend rights and rights of co-sale, first refusal, voting, registration,
redemption, conversion, board observation or information or operational
covenants and (ii) all warrants with respect to Company Capital Stock and
Phantom Stock.
6.16 No Solicitation. From and after the date of this Agreement until
the earlier to occur of the Effective Time or termination of this Agreement
pursuant to its terms, the Company and Stockholders will not, and the Company
will instruct its directors, officers, employees, representatives, investment
bankers, agents and affiliates not to, directly or indirectly (a) solicit,
45
47
initiate, entertain or encourage submission of any "ACQUISITION PROPOSAL" (as
defined herein) by any person, entity or group (other than Parent and its
affiliates, agents, and representatives) or (b) participate in any discussions
or negotiations with, or disclose any non-public information concerning the
Company to, or afford access to the properties, books or records of the Company,
or otherwise assist or facilitate, or enter into any agreement or understanding
with, any person, entity or group (other than Parent and its affiliates, agents,
and representatives) in connection with any Acquisition Proposal with respect to
the Company. For purposes of this Agreement, an "ACQUISITION PROPOSAL" means any
proposal or offer relating to (a) any merger, consolidation, sale or license of
substantial assets or similar transactions involving the Company (other than
sales or licenses of assets or inventory in the ordinary course of business or
as permitted by this Agreement), (b) dissolution of the Company, (c) sales by
the Company of any Company Capital Stock (including, without limitation, by way
of a tender offer or an exchange offer) or (d) sales or transfers by the
Founders of any Company Capital Stock or rights thereto or debt instruments of
the Company. The Company and Stockholders will immediately cease any and all
existing activities, discussion or negotiations with any parties conducted
heretofore with respect to any of the foregoing. The Company and Stockholders
will promptly (a) notify Parent if, after the date of this Agreement, it
receives any proposal or written inquiry or written request for information in
connection with an Acquisition Proposal or potential Acquisition Proposal and
(b) notify Parent of the significant terms and conditions of any such
Acquisition Proposal including the identity of the party making an Acquisition
Proposal. In addition, from and after the date of this Agreement, until the
earlier to occur of the Effective Time or termination of this Agreement pursuant
to its terms, the Company and Stockholders will not, and will instruct its
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, make or authorize any public
statement, recommendation or solicitation in support of any Acquisition Proposal
made by any person, entity or group (other than Parent).
6.17 Loan to the Company. Parent shall, in its business discretion, loan
funds to the Company prior to the Closing to assist the Company in satisfying
reasonable business expenses. Such loans shall be subject to the execution of
promissory notes, security agreements and other customary lending documentation
in form and substance, and on terms and conditions acceptable to Parent and the
Company.
6.18 Observer Seat. For the period from the Effective Time until the
earlier of (i) the Expiration Date (as defined herein) or (ii) the closing of an
initial public offering of common stock of Parent, the Securityholder Agent (as
defined herein) shall have the right to attend and observe (but not vote at)
each annual, regular and special meeting of the Parent's Board of Directors. The
Parent shall give the Securityholder Agent appropriate notice of each annual,
regular and special meeting of the Parent's Board of Directors and shall
reimburse Securityholder Agent for his expenses incurred in connection with his
attendance, in each case to the extent and in the manner the Parent gives such
notice and reimburses such expenses for its directors.
46
48
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) Shareholder Approval. The principal terms of this Agreement,
the Merger and the transactions contemplated hereby shall have been approved and
adopted by the shareholders 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 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/or Parent Preferred Stock payable to such
holder in the Merger, the number of such shares payable promptly after the
Effective Time (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) Restated Certificate. An Amended and Restated Certificate of
Incorporation of Parent in substantially the form attached as Exhibit E shall
have been filed with the Delaware Secretary of State authorizing the issuance of
the Parent Capital Stock contemplated by Section 1.6.
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 Merger Sub contained in this Agreement shall be true
and correct in all material respects on and as of the Closing Date, except for
changes contemplated by this Agreement and except for those representations and
warranties that 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 (which performance or compliance shall be subject to
Parent's or Merger Sub's ability to
47
49
cure as provided in Section 9.1(e) below) 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 F.
(d) Parent Preferred Stock. Parent Preferred Stock having the
rights, preferences, privileges and restrictions set forth in Exhibit E shall be
authorized and issuable to holders of Preferred Stock of the Company as provided
in Article I.
(e) Founders' Employment. Each Founder and Parent shall have
entered into an employment agreement providing for Parent's continued employment
of such Founder after the Effective Time.
(f) Investor Rights. The Proamics Preferred Holders (as defined
below) shall have been added as parties to the Fourth Amended and Restated
Investor Rights Agreement and such other agreements identified in the Series D
Preferred Stock Purchase Agreement as are entered into by other investors in
Series D Preferred Stock of Parent.
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:
(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 Effective Time, 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 except where the failure of such
representations and warranties to be true and correct would not have a Material
Adverse Effect; 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 (which performance or compliance shall be subject to the Company's
ability to cure as provided in Section 9.1(d) below) 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) No Material Adverse Change. There shall not have occurred
since the date hereof any material adverse change in the business, assets
(including intangible assets) financial
48
50
condition, results of operations or sales prospects of the Company identified by
the Company on or prior to the date hereof in connection with Parent's
investigation 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.
(d) Third Party Consents. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Schedule 2.6.
(e) Legal Opinion. Parent shall have received a legal opinion
from legal counsel to the Company, in substantially the form attached hereto as
Exhibit G.
(f) Appraisal Rights. Holders of not more than 9% of the
outstanding shares of Company Capital Stock shall have exercised, nor shall they
have any rights or continued right to exercise, appraisal rights under Delaware
Law with respect to the transactions contemplated by this Agreement.
(g) Termination of Company Investor Rights and Warrants. Parent
shall have been furnished evidence satisfactory to it that (i) all investor
rights granted by the Company to its shareholders and in effect prior to the
Closing, including but not limited to dividend rights and rights of co-sale,
first refusal, voting, registration, redemption, conversion, board observation
or information or operational covenants and (ii) all warrants (including,
without limitation, the Finova Warrant) with respect to Company Capital Stock
and the Phantom Stock, shall have terminated as of the Closing.
(h) Escrow Schedule. The Company shall have executed and
delivered to Parent the Escrow Schedule (as defined in Section 8.2 hereof).
(i) Non-Competition Agreements. The Non-Competition Agreements as
required by Section 6.14 hereof shall have been duly executed and delivered to
Parent.
(j) Founder's Employment. Each Founder and Parent shall have
entered into an employment agreement providing for Parent's continued employment
of such Founder after the Effective Time.
(k) Release Agreements. Each employee of the Company not offered
employment by Parent following the Closing shall have executed a release
agreement on terms and conditions acceptable to Parent.
(l) Investor Representations. Each of the Company's shareholders
shall have executed and delivered an Investment Representation Letter in the
form provided by Parent and have otherwise fully complied with Section 4.1
above. The availability of exemptions from registration as described in Section
4.1 shall have been ensured to the satisfaction of Parent and its counsel.
(m) Vector's Right to Purchase. Vector Capital II, L.P., a
Delaware limited partnership, shall have fully exercised or waived its one-time
right to cause the Company to sell to
49
51
Vector and/or entities designated by Vector shares of the Company's Preferred
Stock pursuant to Section 2.4 of that certain Series A and Series B Preferred
Stock Purchase Agreement dated March 9, 1999 by and among the Company and the
purchasers listed therein.
(n) Liquidation Amounts. The Chief Financial Officer of the
Company shall have executed and delivered to Parent a certificate setting forth
the Series A Liquidation Amount and Series C Liquidation Amount as of the
Closing Date.
(o) Series D Voting Agreement. All holders of the Company's
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
(the "PROAMICS PREFERRED HOLDERS") shall have entered into a voting agreement
providing that they shall vote their Parent Preferred Stock in the same
proportion as the votes cast by other holders of Series D Preferred Stock of
Parent, with respect to matters as to which holders of Series D Preferred Stock
of Parent are required or permitted to vote as a series; provided, however, the
Proamics Preferred Holders shall not be subject to the foregoing voting
requirement with respect to any vote by the holders of Series D Preferred Stock
that would result in the rights, preferences or privileges of the Series D
Preferred Stock held by the Proamics Preferred Holders being affected in a
manner different from all other holders of Series D Preferred Stock of Parent.
(p) Termination of Investor Rights for Finova. Finova shall have
duly and validly terminated all investor rights, including but not limited to
any and all dividend rights and rights of co-sale, first refusal, voting,
registration, redemption, conversion, board observation or information or
operational covenants in the Company or with respect to the Company's equity
securities.
(q) Approval Regarding Investor Rights. The holders of a majority
of the Registerable Securities (as defined in the Fourth Amended and Restated
Investor Rights Agreement) shall have approved the addition of the Proamics
Preferred Holders as parties to the Fourth Amended and Restated Investor Rights
Agreement and any other agreements identified in the Series D Preferred Stock
Purchase Agreement entered into by the Proamics Preferred Holders as holders of
Series D Preferred Stock of Parent.
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 the date
which is eighteen (18) months following the Closing Date (the "EXPIRATION
DATE").
50
52
8.2 Escrow Arrangements.
(a) Escrow Fund. At the Effective Time the Company's shareholders
will be deemed to have received and deposited with the Escrow Agent (as defined
below) the Escrow Amount (plus any additional shares as may be issued upon any
stock split, stock dividend or recapitalization effected by Parent after the
Effective Time) without any act of any shareholder. As soon as practicable after
the Effective Time, the Escrow Amount, without any act of any Company
shareholder, will be deposited with Chase Manhattan Bank and Trust Company, N.A.
(or other institution acceptable to Parent and the Securityholder Agent (as
defined in Section 8.2(h) below)) 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 shareholder of the Company shall be in proportion to the aggregate
Parent Common Stock and Parent Preferred Stock to which such holder would
otherwise be entitled under Sections 1.6(c), (d) and (e) and shall be in the
respective share amounts and percentages listed opposite each Company's
shareholder's names listed in a schedule to be executed by the Company and
delivered to Parent at Closing (the "ESCROW SCHEDULE"). All shares of Parent
Common Stock and Parent Preferred Stock contributed to the Escrow Fund shall be
vested and not subject to any right of repurchase, risk of forfeiture or other
condition in favor of the Surviving Corporation. 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, as well as adjustments relating to Execution Net Book
Value pursuant to Section 1.6(b) (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 inaccuracy or 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; 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 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 $500,000 (except
in the case of Losses arising from any breach or inaccuracy of Section 2.3, as
to 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 $500,000 threshold) for which there is no objection or any objection
had been resolved in accordance with the provisions of this Article VIII;
provided, however, that to the extent third-party expenses, including, without
limitation, legal and accounting fees incurred by the Company in connection with
this Agreement and the Merger exceed $50,000 in the aggregate, such excess shall
be deemed a Loss for purposes of Article VIII and shall be immediately
reimbursable to Parent in accordance with this Article VIII (without regard to
the $500,000 minimum threshold for Losses and without counting toward the
$500,000 threshold). For purposes of this Article VIII, the phrases "Company
shareholders" and "shareholders of the Company" shall refer to the shareholders
of the Company immediately prior to the Effective Time.
51
53
(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 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
shareholders 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 shareholders 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 shareholders of the Company pursuant
to this Section 8.2(b) shall be made in proportion to their respective original
contributions to the Escrow Fund (as set forth on the Escrow Schedule). At all
times during the Escrow Period, the Company shareholders shall be deemed to be
the record holders of their respective amounts of the Parent Common Stock and
Parent Preferred Stock comprising the Escrow Amount. Securityholder Agent (as
defined below) shall provide to the Escrow Agent a current schedule of Company
shareholders' names and addresses and pro rata share of the Escrow Amount prior
to the date of distribution of the Escrow Amount.
(c) Protection of Escrow Fund.
(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, Parent Preferred
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 or Parent Preferred 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 or
Parent Preferred 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 or Parent Preferred Stock shall
not be added to the Escrow Fund but shall be distributed to the recordholders
thereof.
(iii) Each Company shareholder 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 or Parent Preferred Stock
contributed to the Escrow Fund by such shareholder (and on any voting securities
and other equity securities added to the Escrow Fund in respect of such shares
of Parent Common Stock).
52
54
(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
(in accordance with GAAP) 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, obligation or claim 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 Parent Preferred Stock held in the Escrow Fund in an
amount equal to such Losses.
(ii) For the purposes of determining the number of shares of
Parent Common Stock and Parent Preferred 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 and Parent Preferred Stock shall be valued at $5.00 per share,
regardless of class. Notwithstanding the foregoing, the Securityholder Agent
shall have the right to pay any indemnifiable Losses owed to Parent hereunder in
cash, in lieu of having the Escrow Agent release the number of Shares of Parent
Capital Stock in satisfaction of such claim, and upon the Escrow Agent receiving
cash in an amount of the indemnifiable Losses, the Escrow Agent shall release to
the shareholders that number of shares as it would have released to Parent
hereunder in satisfaction of such claim.
(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 H 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) Tax Identification Number. Each party hereto and
Company shareholder, except the Escrow Agent, shall provide the Escrow Agent
with their 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.
53
55
(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 and Parent Preferred 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 Parent Preferred
Stock 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.
54
56
(iii) Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such arbitration shall be
held in Chicago, Illinois 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 (1/2) or less of the disputed amount plus any amounts not in dispute;
otherwise, the shareholders 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 Shareholders; Power of Attorney.
(i) In the event that the Merger is approved, effective upon
such vote, and without further act of any shareholder, Xxxxxxx Xxxxxx shall be
appointed as agent and attorney-in-fact (the "SECURITYHOLDER AGENT") for each
shareholder of the Company (except such shareholders, if any, as shall have
perfected their appraisal rights under Delaware Law), for and on behalf of
shareholders of the Company, to give and receive notices and communications, to
authorize delivery to Parent of shares of Parent Common Stock and Parent
Preferred Stock 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 shareholders
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 shareholders
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 shareholders 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 shareholders for whom a portion of the Escrow Amount otherwise issuable to
them are deposited in the Escrow Fund and shall be final,
55
57
binding and conclusive upon each of such shareholders, 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 shareholder of the Company. The Escrow Agent 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
hereto 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
shareholders from any obligation hereunder unless the Securityholder Agent and
the Company shareholders are thereby materially prejudiced (and then solely to
the extent of such prejudice). The Securityholder Agent and the Company
shareholders 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) hereinabove, the Securityholder Agent and the
Company shareholders 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
shareholders 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 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.
56
58
If the Securityholder Agent and the Company shareholders so assume any
such defense, the Securityholder Agent and the Company shareholders shall
conduct the defense of the Third Party Claim actively and diligently. The
Securityholder Agent and the Company shareholders 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.
(iii) In the event that the Securityholder Agent assumes the
defense of the Third Party Claim in accordance with Section 8.2(j)(ii) above,
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) above, 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) above, 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 shareholders 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
57
59
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 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 Parent Preferred
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 and Parent Preferred Stock
held in escrow, except all cost, expenses, charges and
58
60
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 shareholder or
Company shareholders, then such Company shareholder or Company shareholders
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 my 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
59
61
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 and willful
misconduct and Losses arising from any breach or inaccuracy of Section 2.3, 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 or agreement made by the Company under this Agreement
and no former shareholder, 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.
8.3 Indemnification by Parent. Parent shall indemnify and hold the
Company shareholders, free and harmless from and against any and all Losses
(excluding any adjustments to Execution Net Book Value) incurred by the Company
shareholders as a result of (i) any inaccuracy or breach of a representation or
warranty of Parent contained herein (or in any certificate, instrument, schedule
or document attached to this Agreement and delivered by Parent in connection
with the Merger) or (ii) any failure by Parent to perform or comply with any
covenant or obligation contained herein; provided that such claim must be
asserted on or before 5:00 p.m. (California time) on the Expiration Date.
Notwithstanding the foregoing, (i) except for Losses arising from any breach or
inaccuracy of Section 3.2, Parent shall have no obligation to indemnify a
Company shareholder (if at all) until such shareholder has incurred aggregate
Losses in excess of that portion of $500,000 that the aggregate number of shares
received by such shareholder under Section 1.6 bears to 9,722,000 (in which case
such shareholder may seek indemnity for all Losses subject to (ii) below) and
(ii) the maximum aggregate liability of Parent under this Section 8.3 for Losses
(except for Losses arising from any inaccuracy or breach of Section 3.2)
incurred by Company shareholders is $10,000,000. Any and all claims by Company
shareholders against Parent shall be resolved in a manner consistent with
Section 8.2(g). Any amounts paid by Parent under this Section 8.3 may, in the
discretion of Parent, be paid wholly or partially in publicly traded and listed
common stock of Parent, based on the market price of such stock at the time of
payment.
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 Closing
Date:
(a) by mutual written consent duly authorized by the Board of
Directors of the Company and Parent;
60
62
(b) by either Parent or the Company if: (i) the Closing Date has
not occurred by December 31, 1999 (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 Company's ownership or operation of any portion of the business of the
Company or (ii) compel Parent or the Company to dispose of or hold separate, as
a result of the Merger, any portion of the business or assets of the Company or
Parent;
(d) by Parent if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Company and as a result of such breach the conditions set forth in Section
7.3(a) or 7.3(b), as the case may be, would not then be satisfied; provided,
however, that if such breach is curable by the Company prior to December 31,
1999 through the exercise of its reasonable best efforts, then for so long as
the Company continues to exercise such reasonable best efforts Parent may not
terminate this Agreement under this Section 9.1(d) unless such breach is not
cured prior to December 31, 1999 (but no cure period shall be required for a
breach which by its nature cannot be cured);
(e) by the Company if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Parent or Merger Sub and as a result of such breach the conditions
set forth in Section 7.2(a) or 7.2(b), as the case may be, would not then be
satisfied; provided, however, that if such breach is curable by Parent or Merger
Sub prior to December 31, 1999 through the exercise of its reasonable best
efforts, then for so long as Parent or Merger Sub continues to exercise such
reasonable best efforts the Company may not terminate this Agreement under this
Section 9.1(e) unless such breach is not cured prior to December 31, 1999 (but
no cure period shall be required for a breach which by its nature cannot be
cured).
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. Except as set forth in Section 10.2, 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 parties 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
61
63
survive the termination of this Agreement, and (b) nothing herein shall relieve
any party from liability for any breach of this Agreement. Notwithstanding the
foregoing, upon termination of this Agreement, neither Parent nor the Company
shall be liable for the breach or inaccuracy of any representation or warranty
resulting from the occurrence of any event after the date hereof. 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, prior
to 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 the Company.
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 shareholders who receive
more than 50% of the Parent Capital Stock issued or to be issued pursuant to
Section 1.6, or by all of the Company shareholders in the case of an amendment
to Articles VIII.
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
000 Xxxx Xxxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention:
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
62
64
with a copy to:
Fenwick & West LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. XxXxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to the Company, to:
Proamics Corporation
000 Xxx Xxxxx Xxxxxxxxxxxxx, Xx. 000
Xxxxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxx & Xxxxxxxx Ltd.
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(c) if to the Securityholder Agent:
Xxxxxxx Xxxxxx
000 Xxx-Xxxxx Xxxxxxxxxxxxx, Xx. 000
Xxxxxxxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(d) if to the Escrow Agent:
Chase Manhattan Bank and Trust Company, N.A.
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
63
65
10.2 Expenses.
(a) 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.
(b) Subject to the provisions of Section 8.2, in the event the
Merger is consummated, the Surviving Corporation shall be responsible for the
payment of all Third Party Expenses, including Third Party Expenses incurred by
the Company.
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.
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.
64
66
10.7 Other Remedies. Except as otherwise provided herein (including as
set forth in Section 8.2(l)), any and all remedies herein expressly conferred
upon a party will be deemed exclusive, and no party hereto shall have any other
remedy conferred by law or equity upon such party, where a remedy or remedies
have been expressly conferred upon such party herein. No party shall be able to
avoid the limitations expressly set forth in Article VIII.
10.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, 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 or Illinois, as
applicable, 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.
10.9 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.
10.10 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]
65
67
IN WITNESS WHEREOF, Parent, Merger Sub, the Company, the Securityholder
Agent (as to Article VIII only) and the Escrow Agent (as to matters set forth in
Article VIII only) have caused this Agreement to be signed by their duly
authorized respective officers, all as of the date first written above.
PROAMICS CORPORATION NIKU CORPORATION
a Delaware corporation a Delaware corporation
By: By:
----------------------------- ----------------------------------
Xxxxxxx Xxxxxx Xxxxxx Xxxxxxx
Chief Executive Officer Chief Executive Officer
NIKU ACQUISITION CORPORATION
a Delaware corporation
By:
----------------------------------
Xxxxxx Xxxxxxx
President
SECURITYHOLDER AGENT:
--------------------------------
Name: Xxxxxxx Xxxxxx
ESCROW AGENT
CHASE MANHATTAN BANK AND TRUST COMPANY, N.A.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
68
TABLE OF CONTENTS
PAGE
----
ARTICLE I THE MERGER........................................................................2
1.1 The Merger..........................................................................2
1.2 Effective Time......................................................................2
1.3 Effect of the Merger................................................................2
1.4 Certificate of Incorporation; Bylaws................................................2
1.5 Directors and Officers..............................................................2
1.6 Maximum Aggregate Merger Consideration; Effect on Capital Stock.....................3
1.7 Appraisal Rights....................................................................6
1.8 Surrender of Certificates...........................................................7
1.9 No Further Ownership Rights in Company Capital Stock................................8
1.10 Lost, Stolen or Destroyed Certificates..............................................8
1.11 Tax and Accounting Consequences.....................................................9
1.12 Taking of Necessary Action; Further Action..........................................9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................................9
2.1 Organization and Qualification......................................................9
2.2 Subsidiaries.......................................................................10
2.3 Company Capital Structure..........................................................10
2.4 Authority..........................................................................11
2.5 No Conflict........................................................................11
2.6 Consents...........................................................................12
2.7 Company Financial Statements.......................................................12
2.8 No Undisclosed Liabilities.........................................................12
2.9 No Changes.........................................................................12
2.10 Tax and Other Returns and Reports..................................................14
2.11 Restrictions on Business Activities................................................16
2.12 Title to Properties; Absence of Liens and Encumbrances.............................16
2.13 Governmental Authorization.........................................................17
2.14 Intellectual Property..............................................................17
2.15 Product Warranties; Defects; Liabilities...........................................22
2.16 Agreements, Contracts and Commitments..............................................22
2.17 [INTENTIONALLY OMITTED.]...........................................................24
2.18 Interested Party Transactions......................................................24
2.19 Compliance with Laws...............................................................24
2.20 Litigation.........................................................................24
2.21 Insurance..........................................................................25
2.22 Minute Books.......................................................................25
2.23 Environmental Matters..............................................................25
2.24 Brokers' and Finders' Fees.........................................................26
2.25 Employee Matters and Benefit Plans.................................................26
2.26 Bank Accounts......................................................................30
69
2.27 Indemnification Obligations........................................................30
2.28 Stock Redemption Agreements........................................................30
2.29 Transaction with Lotzof & Associates, Inc..........................................31
2.30 Transaction with Isthmus Corporation...............................................31
2.31 Warrant Cancellation Agreement.....................................................31
2.32 Merger between Proamics-Illinois and Proamics-Delaware.............................31
2.33 No Royalty Obligations to Platinum.................................................31
2.34 Representations Complete...........................................................31
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..........................32
3.1 Organization, Good Standing and Qualification......................................32
3.2 Capitalization and Voting Rights...................................................32
3.3 Subsidiaries.......................................................................33
3.4 Authorization......................................................................33
3.5 Consents and Agreements............................................................34
3.6 Litigation.........................................................................34
3.7 Proprietary Information and Inventions Agreements..................................34
3.8 Title to Property and Assets.......................................................34
3.9 Financial Statements...............................................................34
3.10 Books and Records..................................................................35
3.11 Rights of Registration.............................................................35
3.12 Proprietary Rights.................................................................35
3.13 No Conflict of Interest............................................................35
3.14 Tax Returns........................................................................35
3.15 Compliance with Laws...............................................................36
3.16 Year 2000 Compliance...............................................................36
3.17 No Contravention...................................................................36
3.18 Disclosure.........................................................................37
ARTICLE IV SECURITIES ACT COMPLIANCE; REGISTRATION..........................................37
4.1 Securities Act Exemption...........................................................37
4.2 Stock Restrictions.................................................................37
4.3 The Company Shareholders' Restrictions Regarding Securities Law Matters............37
ARTICLE V CONDUCT PRIOR TO THE EFFECTIVE TIME..............................................38
5.1 Conduct of Business of the Company.................................................38
5.2 Notices............................................................................41
ARTICLE VI ADDITIONAL AGREEMENTS............................................................41
6.1 Preparation of Information Statement...............................................41
70
6.2 Shareholder Approval...............................................................42
6.3 Access to Information..............................................................42
6.4 Confidentiality....................................................................42
6.5 Public Disclosure..................................................................42
6.6 Consents...........................................................................42
6.7 Legal Conditions to the Merger.....................................................43
6.8 Best Efforts; Additional Documents and Further Assurances..........................43
6.9 Notification of Certain Matters....................................................43
6.10 Reorganization.....................................................................44
6.11 Voting Agreements..................................................................44
6.12 Non-Competition Agreements.........................................................44
6.13 Blue Sky Laws......................................................................44
6.14 Benefit Arrangements...............................................................44
6.15 Termination of Company Investor Rights and Warrants................................45
6.16 No Solicitation....................................................................45
6.17 Loan to the Company................................................................46
6.18 Observer Seat......................................................................46
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................................47
ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW...............................50
8.1 Survival of Representations and Warranties.........................................50
8.2 Escrow Arrangements................................................................51
8.3 Indemnification by Parent..........................................................60
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER................................................60
9.1 Termination........................................................................60
9.2 Effect of Termination..............................................................61
9.3 Amendment..........................................................................62
9.4 Extension; Waiver..................................................................62
ARTICLE X GENERAL PROVISIONS...............................................................62
10.1 Notices............................................................................62
10.2 Expenses...........................................................................64
10.3 Interpretation.....................................................................64
10.4 Counterparts.......................................................................64
10.5 Entire Agreement; Assignment.......................................................64
10.6 Severability.......................................................................64
71
10.7 Other Remedies.....................................................................64
10.8 Governing Law......................................................................65
10.9 Rules of Construction..............................................................65
10.10 Specific Performance..............................................................65
72
EXHIBIT A
VOTING AGREEMENT
This VOTING AGREEMENT (this "AGREEMENT") is entered into as of November
16, 1999 (the "AGREEMENT DATE") by and between Niku Corporation, a Delaware
corporation ("PARENT") and [Proamics Stockholder] ("STOCKHOLDER").
RECITALS
A. Parent, Niku Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB") and Proamics Corporation, a
Delaware corporation (the "COMPANY") are entering into an Agreement and Plan of
Reorganization dated as of November 16, 1999, as such may be hereafter amended
from time to time (the "PLAN") that provides (subject to the conditions set
forth therein) for the merger of the Company with and into Merger Sub (the
"MERGER") with the Merger Sub to survive the Merger. Upon the effectiveness of
the Merger, the outstanding shares of the Company's Capital Stock will be
converted into shares of Parent Capital Stock, all as more particularly set
forth in the Plan. Capitalized terms used but not otherwise defined in this
Agreement will have the same meanings ascribed to such terms in the Plan.
B. As of the Agreement Date, Stockholder owns in the aggregate
(including shares held both beneficially and of record and other shares held
either beneficially or of record) the number of shares of Company Capital Stock
set forth below Stockholder's name on the signature page of this Agreement (all
such shares, together with any shares of Company Capital Stock or any other
shares of capital stock of the Company that may hereafter be acquired by
Stockholder, being collectively referred to herein as the "SUBJECT SHARES"). If,
between the Agreement Date and the Expiration Date (as defined herein), the
outstanding shares of Company Capital Stock are changed into a different number
or class of shares by reason of any stock split, stock dividend, reverse stock
split, reclassification, recapitalization or other similar transaction, then the
shares constituting the Subject Shares shall be appropriately adjusted, and
shall include any shares or other securities of the Company issued on, or with
respect to, the Subject Shares in such a transaction.
C. As a condition to the willingness of Parent and Merger Sub to enter
into the Plan, Parent and Merger Sub have required that Stockholder agree, and
in order to induce Parent and Merger Sub to enter into the Plan, Stockholder has
agreed to enter into this Agreement.
The parties to this Agreement, intending to be legally bound by this
Agreement, hereby agree as follows:
73
SECTION 1. TRANSFER OF SUBJECT SHARES
1.1 NO DISPOSITION OR ENCUMBRANCE OF SUBJECT SHARES.
(a) Stockholder hereby covenants and agrees with Parent and
Merger Sub that, prior to the Expiration Date (as defined below), Stockholder
will not, directly or indirectly, (i) offer, sell, offer to sell, or contract or
agree to sell any of the Subject Shares, (ii) grant any option to purchase or
otherwise dispose of any Subject Shares, (iii) pledge, encumber or transfer any
Subject Shares or (iv) announce any offer, sale, offer of sale, contract of sale
or grant of any option to purchase or otherwise dispose of, or any pledge,
encumbrance or transfer of, any of the Subject Shares, to any person or entity
other than Parent.
(b) As used in this Agreement, the term "EXPIRATION DATE" shall
mean the earlier of (i) the date upon which the Plan is validly terminated in
accordance with its terms or (ii) the Effective Time of the Merger.
1.2 TRANSFER OF VOTING RIGHTS. Stockholder covenants and agrees that,
prior to the Expiration Date, Stockholder will not deposit any of the Subject
Shares into a voting trust or grant a proxy or enter into an agreement of any
kind with respect to any of the Subject Shares, except for the Proxy called for
by Section 2.2 of this Agreement.
SECTION 2. VOTING OF SUBJECT SHARES
2.1 AGREEMENT. Stockholder hereby agrees that, prior to the Expiration
Date, at any meeting of the stockholders of the Company, however called, and in
any action taken by the written consent of stockholders of the Company without a
meeting, unless otherwise directed in writing by Parent, Stockholder shall vote
the Subject Shares:
(i) in favor of the Merger, the execution and delivery by the
Company of the Plan and the adoption and approval of the terms thereof
and in favor of each of the other actions contemplated by the Plan and
any action required in furtherance hereof and thereof;
(ii) against any action or agreement that would result in a
breach of any representation, warranty, covenant or obligation of the
Company in the Plan or that would preclude fulfillment of a condition
precedent under the Plan to the Company's, Parent's or Merger Sub's
obligation to consummate the Merger; and
(iii) in favor of the termination (by amendment of any such
agreement or otherwise), effective immediately prior to the
effectiveness of the Merger, of any rights of first refusal, rights of
notice, rights of co-sale, information rights, registration rights,
preemptive rights or similar rights of Stockholder under any agreement,
arrangement or understanding applicable to the Subject Shares.
74
Prior to the Expiration Date, Stockholder shall not enter into any agreement or
understanding with any Person to vote or give instructions in any manner
inconsistent with clause "(i)", "(ii)" or "(iii)" of this Section 2.1.
2.2 PROXY. Contemporaneously with the execution of this Agreement,
Stockholder shall deliver to Parent a proxy with respect to the Subject Shares
in the form attached hereto as Exhibit 1, which proxy shall be irrevocable to
the fullest extent permitted by law (the "PROXY").
SECTION 3. WAIVERS
3.1 APPRAISAL RIGHTS. Stockholder hereby agrees not to exercise any
rights of appraisal and any dissenters' rights that Stockholder may have
(whether under applicable law or otherwise) or could potentially have or acquire
in connection with the Merger.
3.2 RIGHTS OF FIRST REFUSAL, ETC. Stockholder hereby waives any rights
of first refusal, rights of co-sale, registration rights, preemptive rights,
rights of redemption or repurchase, rights to notice and similar rights of
Stockholder under any agreement, arrangement of understanding applicable to the
Subject Shares or any other shares of Company Capital Stock, in each case as the
same may apply to the execution and delivery of the Plan and the consummation of
the Merger and the other transactions contemplated by the Plan. Effective
immediately prior to the effectiveness of the Merger, Stockholder hereby agrees
and consents to the termination of any such rights and agreements. Stockholder
agrees to take such actions, and execute and deliver such agreements and
documents, as may reasonably be requested by Parent in order to effect, confirm
or evidence the foregoing waivers and terminations.
SECTION 4. NO SOLICITATION
Stockholder covenants and agrees that, during the period commencing on
the date of this Agreement and ending on the Expiration Date, Stockholder shall
not, directly or indirectly, and shall not authorize or permit any agent or
representative of Stockholder, directly or indirectly, to: (i) solicit,
initiate, cooperate with, facilitate, encourage or induce the making, submission
or announcement of, any offer, or any effort or attempt concerning any
Acquisition Proposal (as defined in the Plan) or take any action that could
reasonably be expected to lead to an Acquisition Proposal; (ii) furnish any
information regarding the Company to any person or entity in connection with or
in response to any Acquisition Proposal or potential Acquisition Proposal or any
proposal for an Acquisition Proposal; (iii) consider any inquiries or proposals
received from any party concerning any Acquisition Proposal; (iv) participate or
engage in any discussions or negotiations with any person or entity with respect
to any Acquisition Proposal; (v) approve, endorse or recommend any Acquisition
Proposal; or (vi) enter into any letter of intent or other similar document or
any written, oral or other agreement, contract or legally binding commitment
contemplating or otherwise relating to any Acquisition Proposal. Stockholder
shall immediately cease any existing discussions with any person or entity that
relate to any potential Acquisition Proposal, provided, however, that the
foregoing agreements and covenants are made by Stockholder solely in such
Stockholder's capacity as a stockholder of the Company and not as a director of
the Company, it being understood and agreed that nothing in
75
this Section 4 shall prevent any Stockholder from discharging any fiduciary
obligations that such Stockholder may have as a director of the Company.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
Stockholder hereby represents and warrants to Parent as follows:
5.1 DUE ORGANIZATION, AUTHORIZATION, ETC. Stockholder has all requisite
power and capacity to execute and deliver this Agreement and to perform
Stockholder's obligations hereunder. This Agreement has been duly executed and
delivered by Stockholder and constitutes a legal, valid and binding obligation
of Stockholder, enforceable against Stockholder in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
5.2 NO CONFLICTS OR CONSENTS.
(a) The execution and delivery of this Agreement by Stockholder
do not, and the performance of this Agreement by Stockholder will not: (i)
conflict with or violate any Order applicable to Stockholder or by which
Stockholder or any of Stockholder's properties or Subject Shares is bound or
affected; or (ii) result in any breach of or constitute a default (with notice
or lapse of time, or both) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of any
lien, restriction, adverse claim, encumbrance or security interest in or to any
of the Subject Shares pursuant to, any written, oral or other agreement,
contract or legally binding commitment to which Stockholder is a party or by
which Stockholder or any of Stockholder's properties (including but not limited
to the Subject Shares) is bound or affected.
(b) The execution and delivery of this Agreement by Stockholder
do not, and the performance of this Agreement by Stockholder will not, require
any written, oral or other agreement, contract or legally binding commitment of
any third party.
5.3 TITLE TO SUBJECT SHARES. As of the Agreement Date, Stockholder owns
of record and beneficially the Subject Shares set forth under Stockholder's name
on the signature page hereof free and clear of any restrictions (other than
restrictions under applicable federal and state securities laws), liens,
encumbrances, security interests or adverse claims, and does not directly or
indirectly own, either beneficially or of record, any shares of capital stock of
the Company, or rights to acquire any shares of capital stock of the Company,
other than the Subject Shares set forth below Stockholder's name on the
signature page hereof.
5.4 ACCURACY OF REPRESENTATIONS. The representations and warranties
contained in this Agreement are accurate in all respects as of the date of this
Agreement, will be accurate in all respects at all times through the Expiration
Date and will be accurate in all respects as of the date of the consummation of
the Merger as if made on that date.
76
SECTION 6. COVENANTS OF STOCKHOLDER
6.1 FURTHER ASSURANCES. From time to time and without additional
consideration, Stockholder will execute and deliver, or cause to be executed and
delivered, such additional or further transfers, assignments, endorsements,
proxies, consents and other instruments, and perform such further acts, as
Parent may reasonably request for the purpose of effectively carrying out and
furthering the intent of this Agreement and the Proxy.
6.2 LEGEND. Upon the request of Parent, Stockholder shall instruct the
Company to cause each certificate of Stockholder evidencing the Subject Shares
to bear a legend in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE AND THE RIGHT TO VOTE THESE
SHARES ARE SUBJECT TO THE TERMS OF A VOTING AGREEMENT, DATED NOVEMBER
16, 1999 (THE "VOTING AGREEMENT"), BETWEEN PARENT AND THE REGISTERED
HOLDER OF THIS CERTIFICATE. THESE SHARES MAY NOT BE VOTED, SOLD,
EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE
WITH THE TERMS AND CONDITIONS OF THE VOTING AGREEMENT, AS IT MAY BE
AMENDED. A COPY OF THE VOTING AGREEMENT IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE ISSUER. SUCH AGREEMENT IS BINDING ON ALL
TRANSFEREES OF THESE SHARES.
SECTION 7. MISCELLANEOUS
7.1 EXPENSES. All costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid as provided in the
Plan.
7.2 GOVERNING LAW. The internal laws of the State of Delaware
(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.
7.3 ASSIGNMENT, BINDING EFFECT, THIRD PARTIES. Except as provided
herein, neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by either of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
party, except that Parent may assign all or any of its rights hereunder to any
wholly-owned subsidiary of Parent. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of (i)
Stockholder and Stockholder's heirs, successors and assigns and (ii) Parent and
its successors and assigns. Notwithstanding anything contained in this Agreement
to the contrary, nothing in this Agreement, expressed or implied, is intended to
confer on any person or entity other than the parties hereto or their respective
heirs, successors and assigns, any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
7.4 SEVERABILITY. If any provision of this Agreement, or the application
thereof, will for any reason and to any extent be invalid or unenforceable, then
the remainder of this Agreement and application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto.
77
7.5 COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument.
7.6 AMENDMENT; WAIVER. This Agreement may be amended by the written
agreement of the parties hereto. 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.
7.7 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:
if to Stockholder:
at the address set forth below Stockholder's signature on
the signature page hereto;
if to Parent:
Niku Corporation
000 Xxxx Xxxxxx
Xxxxxxx Xxxx, XX 00000
Attn: Chief Financial Officer
Facsimile: (000) 000-0000
or to such other address as a party designates in a writing delivered to each of
the other parties hereto.
7.8 ENTIRE AGREEMENT. This Agreement and any documents delivered by the
parties in connection herewith constitute the entire agreement and understanding
between the parties with respect to the subject matter hereof and thereof and
supersede all prior agreements and understandings between the parties with
respect thereto. No addition to or modification of any provision of this
Agreement shall be binding upon either party hereto unless made in writing and
signed by both parties hereto. The parties hereto waive trial by jury in any
action at law or suit in equity based upon, or arising out of, this Agreement or
the subject matter hereof.
7.9 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that, in addition to
78
any other remedy to which Parent is entitled at law or in equity, Parent shall
be entitled to injunctive relief to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any California court or
in any other court of competent jurisdiction.
7.10 OTHER AGREEMENTS. Nothing in this Agreement shall limit any of the
rights or remedies of Parent or any of the obligations of Stockholder under any
other agreement.
7.11 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.
[THE REMAINDER OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK.]
79
IN WITNESS WHEREOF, Parent and Stockholder have caused this Agreement to
be executed as of the Agreement Date first written above.
NIKU CORPORATION STOCKHOLDER
By:_______________________________ Name:_______________________________
(Please Print)
Title:____________________________ By:_________________________________
(Signature)
Title:______________________________
Address:____________________________
Facsimile: ( )___________________
Number of Shares of Company Common
Stock owned by Stockholder as of the
Agreement Date: ________________
Number of Shares of Company Capital
Stock owned by Stockholder as of the
Agreement Date:
Series A: ________________
Series B: ________________
Series C: ________________
[SIGNATURE PAGE TO VOTING AGREEMENT]
80
EXHIBIT 1
IRREVOCABLE PROXY
The undersigned stockholder of Proamics Corporation, a Delaware
corporation (the "COMPANY"), hereby irrevocably (to the fullest extent permitted
by law) appoints and constitutes the members of the Board of Directors of Niku
Corporation, a Delaware corporation ("PARENT"), and each of them, the attorneys
and proxies of the undersigned, with full power of substitution and
resubstitution, to the fullest extent of the undersigned's rights with respect
to (i) the shares of capital stock of the Company owned by the undersigned as of
the date of this proxy, which shares are specified on the final page of this
proxy and (ii) any and all other shares of capital stock of the Company which
the undersigned may acquire after the date hereof. (The shares of the capital
stock of the Company referred to in clauses (i) and (ii) of the immediately
preceding sentence are collectively referred to as the "SHARES.") Upon the
execution hereof, all prior proxies given by the undersigned with respect to any
of the Shares are hereby revoked, and no subsequent proxies will be given with
respect to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is granted in
connection with that certain Voting Agreement, dated as of the date hereof,
between Parent and the undersigned (the "VOTING AGREEMENT"), and is granted in
consideration of Parent entering into the Agreement and Plan of Reorganization,
dated as of November 16, 1999, among Parent, Niku Acquisition Corporation, a
Delaware corporation and wholly-owned subsidiary of Parent ("MERGER SUB") and
the Company (the "PLAN"). Capitalized terms used but not otherwise defined in
this proxy have the meanings ascribed to such terms in the Plan.
The attorneys and proxies named above will be empowered, and may
exercise this proxy, to vote the Shares at any time until the Expiration Date
(as defined in the Plan) at any meeting of the stockholders of the Company,
however called, or in any action by written consent of stockholders of the
Company:
(i) in favor of the Merger, the execution and delivery by the
Company of the Plan, the adoption and approval of the terms thereof and
in favor of each of the other actions contemplated by the Plan, and any
action required in furtherance hereof and thereof;
(ii) against any action or agreement that would result in a
breach of any representation, warranty, covenant or obligation of the
Company in the Plan or that would preclude fulfillment of a condition
precedent under the Plan to the Company's, Parent's or Merger Sub's
obligation to consummate the Merger; and
(iii) in favor of the termination (by amendment of any such
agreement or otherwise), effective immediately prior to the
effectiveness of the Merger, of any rights of first refusal, rights of
co-sale, information rights, registration rights, preemptive rights or
similar rights of Stockholder under any agreement, arrangement or
understanding applicable to the Subject Shares.
81
Prior to the Expiration Date (as such term is defined in the Voting
Agreement), at any meeting of the stockholders of the Company without a meeting,
however called, and in any action by written consent of stockholders of the
Company, the attorneys and proxies named above may, in their sole discretion,
elect to abstain from voting on any matter covered by the foregoing
subparagraphs (i) through (iv) above.
The undersigned stockholder may vote the Shares on all other matters.
This proxy shall be binding upon the heirs, successors and assigns of
the undersigned (including any transferee of any of the Shares).
Any obligation of the undersigned hereunder shall be binding upon the
heirs, successors and assigns of the undersigned (including any transferee of
any of the Shares).
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
82
This proxy shall terminate upon the Expiration Date.
Dated: November __, 1999
Stockholder Name:___________________
Signature:__________________________
Title (If Applicable):______________
Number of Shares of Company Common
Stock Owned: ______________
Number of Shares of Company Capital
Stock Owned:
Series A: ________________
Series B: ________________
Series C: ________________
83
EXHIBIT B
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "AGREEMENT") is made and entered
into as of November 16, 1999 (the "EXECUTION DATE") by and among Niku
Corporation, a Delaware corporation ("PARENT") and Proamics Corporation, a
Delaware corporation (the "COMPANY"), on the one hand, and [Employee]
("EMPLOYEE"), on the other hand.
R E C I T A L S
A. Concurrently with the execution of this Agreement, Parent, Niku
Acquisition Corporation, a Delaware corporation that is a wholly-owned
subsidiary of Parent ("MERGER Sub") and the Company have entered into an
Agreement and Plan of Reorganization dated as of November 16, 1999 (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 Capital 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 Capital Stock and is an officer and key
employee of the Company, and upon the effectiveness of the Merger, will receive
shares of Parent Capital Stock having substantial value by virtue of the
conversion of Employee's Company Capital 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").
84
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 (i) the business of developing, marketing, licensing, or
distributing any PSA Products (as defined below), including any product, suite
of products, subset of products, or module used therein, and (ii) the business
of providing training, support and consulting services to users of PSA Products
with respect to such users' installation, implementation or use of such PSA
Products, provided, however, that the Employee may provide such consulting
services to any third party upon Parent's prior written consent. As used herein
"PSA Products" means software applications for managing professional services
organizations and/or professional services departments, including, without
limitation, applications for managing employee records and resources, client
projects, expenses, billing and accounts management.
(c) Covenant Period. As used herein, the term "COVENANT PERIOD"
means that period of time commencing on the Effective Time and ending on the
second (2nd) anniversary of 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, carry on, work with, be
employed by, consult for, invest in, solicit customers for, own stock or any
other equity or ownership interest in, advise, lend money to, guarantee the
debts or obligations of, contribute, sell or license intellectual property to,
or permit one's name or any part thereof to be used in connection with, 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, whether as principal, agent,
stockholder, lender, partner, joint venturer, member, director, officer,
employee or consultant. However, nothing contained in this Agreement shall
prohibit Employee from: (i) being employed by or serving as a consultant to
Parent (or any other Affiliate of Parent); (ii) acquiring or holding at any one
time less than five percent (5%) of the outstanding securities of any publicly
traded company (other than any publicly traded company with respect to which
Employee is engaged in any business (as defined in this Section) in violation of
Employee's covenants in Section 3 hereof); (iii) holding stock of Parent; or
(iv) acquiring or holding an interest in a mutual fund, limited partnership,
venture capital fund or similar investment entity of which Employee is not an
employee, officer or general partner and has no power to make, participate in or
directly influence the investment decisions of such mutual fund, limited
partnership, venture capital fund or investment entity.
(e) Surviving Corporation. As used herein, the term "SURVIVING
Corporation" means Merger Sub, the surviving corporation of the Merger.
85
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 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 countries of the United Kingdom and
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, or
attempt to market, sell, distribute, license or otherwise provide PSA Products
to, or attempt to market or provide training, support, consulting and other
services with respect to the installation, implementation or use of PSA Products
to, any customer of the Company, Parent or any of their respective Affiliates.
(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)
86
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 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 Illinois
(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 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.
87
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:
If to Parent or the Company: With a copy to:
Niku Corporation Fenwick & West LLP
000 Xxxx Xxxxxx Two Palo Alto Square, Suite 800
Redwood City, CA Xxxx Xxxx, XX 00000
Attention: President Attention: Xxxxxx X. XxXxxxxx, Esq.
Fax Number: (000) 000-0000 Fax Number: (000) 000-0000
If to Employee: With a copy to:
[Name] Xxxxxxx & Xxxxxxxx Ltd.
[Address] 000 Xxxxx Xxxxxxxx Xxxxxx
[Address] Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxxxxxx,
Esq.
Fax Number: (000) 000-0000
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, 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
88
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.
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: ___________________________
PROAMICS CORPORATION
By: ______________________________
Title: ___________________________
[SIGNATURE PAGE TO NON-COMPETITION AGREEMENT]
89
EXHIBIT C
CERTIFICATE OF MERGER
OF
PROAMICS CORPORATION
WITH AND INTO
NIKU ACQUISITION CORPORATION
---------------------------------------------------------------
PURSUANT TO SECTION 251 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
---------------------------------------------------------------
Niku Acquisition Corporation, a Delaware corporation ("Niku"), does
hereby certify to the following facts relating to the merger (the "Merger") of
Proamics Corporation, a Delaware corporation ("Proamics"), with and into Niku,
with Niku remaining as the surviving corporation of the Merger (the "Surviving
Corporation"):
FIRST: Niku is incorporated pursuant to the General Corporation Law of the
State of Delaware ("DGCL"). Proamics is incorporated pursuant to the
DGCL. Niku and Proamics are the constituent corporations in the Merger.
SECOND: An Agreement and Plan of Reorganization has been approved, adopted,
certified, executed and acknowledged by Niku and by Proamics in
accordance with the provisions of subsection (c) of Section 251 of the
DGCL.
THIRD: The surviving corporation of the Merger shall be Niku.
FOURTH: The Certificate of Incorporation of Niku 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 Niku, the Surviving Corporation, at 000
Xxxx Xxxxxx, Xxxxxxx Xxxx, Xxxxxxxxxx 00000.
SIXTH: A copy of the executed Agreement and Plan of Reorganization will be
furnished by Niku, the Surviving Corporation, on request and without
cost, to any stockholder of any constituent corporation of the Merger.
90
This Certificate of Merger shall become effective on December 8, 1999.
IN WITNESS WHEREOF, Niku Acquisition Corporation has caused this
Certificate of Merger to be executed by its duly authorized Chief Executive
Officer as of December 8, 1999.
NIKU ACQUISITION CORPORATION
By:_________________________________
Xxxxxx Xxxxxxx, Chief Executive
Officer
91
EXHIBIT D
CERTIFICATE OF INCORPORATION
OF
NIKU ACQUISITION CORPORATION
ARTICLE I
The name of the corporation is Niku Acquisition Corporation.
ARTICLE II
The address of the registered office of the corporation in the State of
Delaware is 0000 Xxxxxx Xxxx, Xxxx xx Xxxxxxxxxx, Xxxxxx of Xxx Xxxxxx, Xxxxxxxx
00000. The name of its registered agent at that address is Corporation Service
Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
The total number of shares of stock which the corporation has authority
to issue is One Thousand (1,000) shares, all of which shall be Common Stock,
$0.001 par value per share.
ARTICLE V
The Board of Directors of the corporation shall have the power to adopt,
amend or repeal Bylaws of the corporation.
ARTICLE VI
Election of directors need not be by written ballot unless the Bylaws of
the corporation shall so provide.
ARTICLE VII
To the fullest extent permitted by law, no director of the corporation
shall be personally liable for monetary damages for breach of fiduciary duty as
a director. Without limiting the effect of the preceding sentence, if the
Delaware General Corporation Law is hereafter amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
92
a director of the corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
Neither any amendment nor repeal of this Article VII, nor the adoption
of any provision of this Certificate of Incorporation inconsistent with this
Article VII, shall eliminate, reduce or otherwise adversely affect any
limitation on the personal liability of a director of the corporation existing
at the time of such amendment, repeal or adoption of such an inconsistent
provision.
ARTICLE VIII
The name and mailing address of the incorporator is Xxxxx X. Xxxx, c/o
Fenwick & West LLP, Xxx Xxxx Xxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000.
The undersigned incorporator hereby acknowledges that the foregoing
certificate is his act and deed and that the facts stated herein are true.
Dated: November 12, 1999
---------------------------------
Xxxxx X. Xxxx, Incorporator
93
EXHIBIT E
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF NIKU CORPORATION
a Delaware corporation
(Originally incorporated on January 8, 1998 as Niku Corporation)
ARTICLE I
The name of this corporation is Niku Corporation (the "Corporation").
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is the Corporation Service
Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
A. Classes of Stock. This Corporation is authorized to issue two classes
of stock, to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the corporation is authorized to issue is One
Hundred Fifty-One Million Nine Hundred Ten Thousand Two Hundred Eighty-Two
(151,910,282) shares. One Hundred Million (100,000,000) shares shall be Common
Stock, par value $0.0001 per share, and Fifty-One Million Nine Hundred Ten
Thousand Two Hundred Eighty-Two (51,910,282) shares shall be Preferred Stock,
par value $0.0001 per share. Ten Million (10,000,000) shares of Preferred Stock
shall be designated "Series F Preferred Stock," Five Million One Hundred
Forty-Two Thousand Eight Hundred Fifty-One (5,142,851) shares of Preferred Stock
shall be designated "Series A Preferred Stock", Eight Million Six Hundred
Twenty-Nine Thousand Nine Hundred Ninety-Two (8,629,992) shares of Preferred
Stock shall be designated "Series B Preferred Stock", Nine Million Nine Hundred
Eighty-Seven Thousand Four Hundred and Thirty-Nine (9,987,439) shares shall be
designated "Series C Preferred Stock" and Eighteen Million One Hundred Fifty
Thousand (18,150,000) shares shall be designated "Series D Preferred Stock."
B. Rights, Preferences, Privileges and Restrictions of Preferred Stock.
The rights, preferences, privileges and restrictions granted to and imposed on
the Series F Preferred Stock,
94
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock (collectively, the "Preferred Stock") are as set forth
below in this Article IV(B).
1. Dividend Provisions. The holders of shares of Preferred Stock shall
be entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock) on the Common Stock of this Corporation, at the rate
of (a) $0.0025 per share per annum in the case of Series F Preferred Stock (as
adjusted for any stock dividends, combinations or splits with respect to such
shares), (b) $0.0175 per share per annum in the case of Series A Preferred Stock
(as adjusted for any stock dividends, combinations or splits with respect to
such shares (c) $0.0375 per share per annum in the case of Series B Preferred
Stock (as adjusted for any stock dividends, combinations or splits with respect
to such shares), (d) $0.10 per share per annum in the case of Series C Preferred
Stock (as adjusted for any stock dividends, combinations or splits with respect
to such shares) and $0.25 per share per annum in the case of Series D Preferred
Stock (as adjusted for any stock dividends, combinations or splits with respect
to such shares), when, as and if declared by the Board of Directors of the
Corporation. Such dividends shall not be cumulative. No dividend shall be paid
on shares of Common Stock in any fiscal year unless the aforementioned
preferential dividends of the Preferred Stock shall have been paid in full and
the aggregate dividends paid on each share of Preferred Stock during such fiscal
year equals or exceeds the dividends per share (computed on an as-converted
basis) paid during such fiscal year on the Common Stock.
2. Liquidation Preference.
a. Primary Distribution. In the event of any liquidation,
dissolution or winding up of this Corporation, either voluntary or involuntary
(a "Liquidation"),
(i) each holder of Series C Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the
assets of this Corporation to the holders of other series of Series A
Preferred Stock, Series B Preferred Stock, and Series F Preferred Stock
or Common Stock by reason of their ownership thereof an amount equal to:
(A) if the effective date of the Liquidation occurs within one year of
the Series C Original Issue Date (as defined below), the sum of (x)
$2.50 per share (as adjusted for any stock dividends, combinations or
splits with respect to such shares) and (y) all declared but unpaid
dividends on such shares, for each share of Series C Preferred Stock
held by such holder; (B) if the effective date of the Liquidation occurs
after one year from the Series C Original Issue Date but within two
years of the Series C Original Issue Date, the sum of (x) $3.125 per
share (as adjusted for any stock dividends, combinations or splits with
respect to such shares) and (y) all declared but unpaid dividends on
such shares, for each share of Series C Preferred Stock held by such
holder; and (C) if the effective date of the Liquidation occurs at any
time after two years of the Series C Original Issue Date, the sum of (x)
$3.91 per share (as adjusted for any stock dividends, combinations or
splits with respect to such shares) and (y) all declared but unpaid
dividends on such shares, for each share of Series C Preferred Stock
held by such holder;
95
(ii) each holder of Series D Preferred Stock shall be entitled
to receive, prior and in preference to any distribution of any of the
assets of this Corporation to the holders of the Series A Preferred
Stock, Series B Preferred Stock and Series F Preferred Stock, or Common
Stock by reason of their ownership thereof an amount equal to: (A) if
the effective date of the Liquidation occurs within one year of the
Series D Original Issue Date (as defined below), the sum of (x) $6.25
per share (as adjusted for any stock dividends, combinations or splits
with respect to such shares) and (y) all declared but unpaid dividends
on such shares, for each share of Series D Preferred Stock held by such
holder; (B) if the effective date of the Liquidation occurs after one
year from the Series D Original Issue Date but within two years of the
Series D Original Issue Date, the sum of (x) $7.8125 per share (as
adjusted for any stock dividends, combinations or splits with respect to
such shares) and (y) all declared but unpaid dividends on such shares,
for each share of Series D Preferred Stock held by such holder; and (C)
if the effective date of the Liquidation occurs at any time after two
years of the Series D Original Issue Date, the sum of (x) $9.80 per
share (as adjusted for any stock dividends, combinations or splits with
respect to such shares) and (y) all declared but unpaid dividends on
such shares, for each share of Series D Preferred Stock held by such
holder;
(iii) each holder of the Series F Preferred Stock shall be
entitled to receive an amount equal to the sum of (x) five cents ($0.05)
(the "Original Series F Issue Price") for each share of Series F
Preferred Stock held of record by such holder (as adjusted for any stock
dividends, combinations or splits with respect to such shares) and (y)
all declared but unpaid dividends on such shares;
(iv) each holder of the Series A Preferred Stock shall be
entitled to receive an amount equal to the sum of (x) thirty-five cents
($0.35) (the "Original Series A Issue Price") for each share of Series A
Preferred Stock held of record by such holder (as adjusted for any stock
dividends, combinations or splits with respect to such shares) and (y)
all declared but unpaid dividends on such shares; and
(v) each holder of the Series B Preferred Stock shall be
entitled to receive an amount equal to the sum of (x) seventy-five cents
($0.75) ("Original Series B Issue Price") for each share of Series B
Preferred Stock held of record by such holder (as adjusted for any stock
dividends, combinations or splits with respect to such shares) and (y)
all declared but unpaid dividends on such shares.
If upon the occurrence of such event, the assets and funds of the Corporation
legally available for distribution shall be insufficient to permit the payment
to such holders of the full aforesaid preferential amounts, then the entire
assets and funds of the Corporation legally available for distribution shall be
distributed ratably first among the holders of the Series C Preferred Stock and
Series D Preferred Stock in proportion to the preferential amount each such
holder is otherwise entitled to receive and then among the holders of the Series
F, Series A, and Series B Preferred Stock in proportion to the preferential
amount each such holder is otherwise entitled to receive.
96
b. Secondary Distribution. Upon the completion of the
distribution required by Section 2(a), the remaining assets of the Corporation
available for distribution to stockholders shall be distributed of record among
the holders of Common Stock pro rata in proportion to the number of shares of
Common Stock held of record by each.
c. Definition of Liquidation Event; Notice.
(i) For purposes of this Section 2, a "Liquidation" of
this Corporation shall be deemed to be occasioned by, and to include, without
limitation, (A) the acquisition of the Corporation by another entity by means of
any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation); or (B) a sale of all
or substantially all of the assets of the Corporation (including, for purposes
of this section, intellectual property rights which, in the aggregate,
constitute substantially all of the Corporation's material assets); unless in
each case, the Corporation's stockholders of record as constituted immediately
prior to such acquisition or sale will, immediately after such acquisition or
sale (by virtue of securities issued as consideration for the Corporation's
acquisition or sale or otherwise) hold at least fifty percent (50%) of the
voting power of the surviving or acquiring entity.
(ii) In any of such events, if the consideration
received by the Corporation is other than cash, its value will be deemed its
fair market value as determined in good faith by the Board of Directors. Any
securities received as consideration shall be valued as follows:
(A) Securities not subject to investment letter
or other similar restrictions on free marketability shall be valued as follows:
(1) if traded on a securities exchange or through The Nasdaq National Market,
the value shall be deemed to be the average of the closing prices of the
securities on such exchange over the thirty day period ending three days prior
to the closing; (2) if actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid or sale prices (whichever is
applicable) over the thirty day period ending three days prior to the closing;
and (3) if there is no active public market, the value shall be the fair market
value thereof, as determined in good faith by the Board of Directors of the
Corporation.
(B) Securities subject to investment letter or
other restrictions on free marketability (other than restrictions arising solely
by virtue of a stockholder's status as an affiliate or former affiliate) shall
be valued in such a manner as to make an appropriate discount from the market
value determined as above in (A) (1), (2) or (3) to reflect the approximate fair
market value thereof, as determined in good faith by the Board of Directors of
the Corporation.
(iii) The Corporation shall give each holder of record
of Preferred Stock written notice of any such impending transaction not later
than ten (10) days prior to the stockholder meeting called to approve such
transaction, or twenty (20) days prior to
97
the closing of such transaction whichever notice date is earlier, and shall also
notify such holders in writing of the final approval of such transaction. The
first of such notices shall describe the material terms and conditions of the
impending transaction, the provisions of this Section 2, and the amounts
anticipated to be distributed to holders of each outstanding class of capital
stock of the Corporation pursuant to this Section 2, and the Corporation shall
thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than twenty (20) days after the
Corporation has given the first notice provided for herein or sooner than ten
(10) days after the Corporation has given notice of any material changes
provided for herein; provided, however, that such periods may be shortened upon
the written consent of the holders of Preferred Stock that are entitled to such
notice rights or similar notice rights and that represent at least a majority of
the voting power of the then outstanding shares of Preferred Stock (computed on
an as-converted basis).
(iv) In the event the requirements of subsection
2(c)(iii) are not complied with, this Corporation shall forthwith either:
(A) cause such closing to be postponed until
such time as the requirements of subsection 2(c)(iii) have been complied with;
or
(B) cancel such transaction, in which event the
rights, preferences and privileges of the holders of the Preferred Stock shall
continue to be the same as such rights, preferences and privileges existing
immediately prior to the date of the first notice referred to in subsection
2(c)(iii).
3. Conversion. The holders of Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
a. Right to Convert. Each share of Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share at the office of this Corporation or any transfer agent
for such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing the applicable Original Issue Price of
such share by the Conversion Price applicable to such share in effect for such
Preferred Stock on the date the certificate is surrendered for conversion. The
Original Issue Price for the Series D Preferred Stock (the "Original Series D
Issue Price") is $5.00 per share. The Original Issue Price for the Series C
Preferred Stock (the "Original Series C Issue Price") is $1.99 per share. The
initial Conversion Price per share for shares of Preferred Stock shall be the
Original Series F Issue Price for the Series F Preferred Stock, the Original
Series A Issue Price for the Series A Preferred Stock, the Original Series B
Issue Price for the Series B Preferred Stock, the Original Series C Issue Price
for the Series C Preferred Stock and the Original Series D Issue Price for the
Series D Preferred Stock; provided, however, that such Conversion Prices shall
be subject to adjustment as set forth in subsection 3(d).
b. Automatic Conversion. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock by dividing the
applicable Original Issue Price of such share by the Conversion Price applicable
to such share at the time in effect for
98
such Preferred Stock immediately upon the earlier of (i) except as provided
below in subsection 3(c), the Corporation's sale of its Common Stock in an
underwritten public offering on form S-1 or SB-2 under the Securities Act of
1933, as amended (the "Securities Act"), yielding gross proceeds (before
deduction of underwriter's discounts, commissions, or other costs and fees
associated with the offering) to the Corporation in excess of Twenty Million
Dollars ($20,000,000) if the Valuation (computed in accordance with Section
3(d)(i)(A)(IV)(7) herein) of the Corporation is greater than or equal to Three
Hundred Fifty Million Dollars ($350,000,000) immediately before such offering,
and (ii) the date specified by written consent or agreement of the holders of at
least a majority of the voting power of the then outstanding shares of Preferred
Stock (computed on an as-converted basis) which majority must include at least
two-thirds (66 2/3%) of the voting power of each of the then outstanding shares
of Series C Preferred Stock and Series D Preferred Stock (computed on an
as-converted basis).
c. Mechanics of Conversion. Before any holder of Preferred Stock
shall be entitled to convert the same into shares of Common Stock, such holder
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of this Corporation or of any transfer agent for the Preferred Stock, and
shall give written notice to this Corporation at its principal corporate office,
of the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. This Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date. If the
conversion is in connection with an underwritten offering of securities
registered pursuant to the Securities Act, the conversion, unless otherwise
designated by the holder, will be conditioned upon the closing with the
underwriters of the sale of securities pursuant to such offering, in which event
the person(s) entitled to receive the Common Stock upon conversion of the
Preferred Stock shall not be deemed to have converted such Preferred Stock until
immediately prior to the closing of such sale of securities.
d. Conversion Price Adjustments of Preferred Stock for Certain
Dilutive Issuances, Splits, Dividends and Combinations. The Conversion Prices of
the Preferred Stock shall be subject to adjustment from time to time as follows:
(i)(A)(I) Adjustment Formula for Series F, Series A and
Series B Preferred Stock. If at any time or from time to time after the Series D
Original Issue Date the Corporation issues or sells Additional Stock (as
hereinafter defined), for an Effective Price (as hereinafter defined) that is
less than the applicable Conversion Price for a series of Preferred Stock (other
than the Series C Preferred Stock and Series D Preferred Stock) in effect
immediately prior to such issue or sale (or deemed issue or sale), then, and in
each such case, the applicable Conversion Price for such series of Preferred
Stock (other than the Series C Preferred
99
Stock and Series D Preferred Stock) shall be reduced, as of the close of
business on the date of such issue or sale, to the price obtained by multiplying
such Conversion Price by a fraction:
(x) The numerator of which shall be the sum
of (A) the number of shares of Common Stock issued and outstanding immediately
prior to such issue or sale of Additional Stock plus (B) the quotient obtained
by dividing the aggregate consideration received by the Corporation for the
total number of Additional Stock so issued or sold (or deemed so issued and
sold) by the Conversion Price for such series of Preferred Stock in effect
immediately prior to such issue or sale; and
(y) The denominator of which shall be the
sum of (A) the number of shares of Common Stock issued and outstanding
immediately prior to such issue or sale plus (B) the number of Additional Stock
so issued or sold (or deemed so issued and sold). The foregoing calculation of
Common Stock outstanding shall take into account shares deemed issued pursuant
to Section 3(d)(i)(D) on account of options, rights, convertible or,
exchangeable securities (or actual or deemed consideration therefor).
(II) Adjustment Formula for Series C Preferred Stock. If
at any time or from time to time after the Series D Original Issue Date the
Corporation issues or sells Additional Stock for an Effective Price that is less
than the Conversion Price for Series C Preferred Stock in effect immediately
prior to such issue or sale (or deemed issue or sale), then, and in each such
case, the Conversion Price for the Series C Preferred Stock shall be adjusted as
follows:
(1) If the Valuation (as hereinafter defined),
is greater than or equal to Fifty Million Dollars ($50,000,000) immediately
prior to the issuance of Additional Stock, then the Conversion Price for the
Series C Preferred Stock shall be reduced, as of the close of business on the
date of such issuance or sale, to the Effective Price at which such Additional
Stock are so issued or sold (or deemed issued or sold).
(2) If the Valuation is less than Fifty Million
Dollars ($50,000,000) immediately prior to the issuance of Additional Stock,
then the Conversion Price for the Series C Preferred Stock shall be reduced,
first, to a price per share that would yield a Valuation, computed in accordance
with Section 3(d)(i)(A)(IV)(7) herein, of Fifty Million Dollars ($50,000,000)
immediately prior to the issuance of the Additional Stock (the "Adjusted
Conversion Price"), and then, the Adjusted Conversion Price for Series C
Preferred Stock shall be further reduced, as of the close of business on the
date of such issue or sale, to the price obtained by multiplying such Adjusted
Conversion Price by a fraction:
(x) The numerator of which shall be the sum
of (1) the number of shares of Common Stock issued and outstanding immediately
prior to such issue or sale of Additional Stock plus (2) the quotient obtained
by dividing the aggregate consideration received by the Corporation for the
total number of Additional Stock so issued or sold (or deemed so issued and
sold) by the Conversion Price for such series of Preferred Stock in effect
immediately prior to such issue or sale; and
100
(y) The denominator of which shall be the
sum of (1) the number of shares of Common Stock issued and outstanding
immediately prior to such issue or sale plus (2) the number of Additional Stock
so issued or sold (or deemed so issued and sold). The foregoing calculation of
Common Stock outstanding shall take into account shares deemed issued pursuant
to Section 3(d)(i)(D) on account of options, rights, or convertible or
exchangeable securities (or actual or deemed consideration therefor).
(III) Adjustment Formula for Series D Preferred Stock.
If at any time or from time to time after the Series D Original Issue Date the
Corporation issues or sells Additional Stock for an Effective Price that is less
than the Conversion Price for Series D Preferred Stock in effect immediately
prior to such issue or sale (or deemed issue or sale), then, and in each such
case, the Conversion Price for the Series D Preferred Stock shall be adjusted as
follows:
(1) If the Valuation (as hereinafter defined),
is greater than or equal to One Hundred Twenty Million Dollars ($120,000,000)
immediately prior to the issuance of Additional Stock, then the Conversion Price
for the Series D Preferred Stock shall be reduced, as of the close of business
on the date of such issuance or sale, to the Effective Price at which such
Additional Stock are so issued or sold (or deemed issued or sold).
(2) If the Valuation is less than One Hundred
Twenty Million Dollars ($120,000,000) immediately prior to the issuance of
Additional Stock, then the Conversion Price for the Series D Preferred Stock
shall be reduced, first, to a price per share that would yield a Valuation,
computed in accordance with Section 3(d)(i)(A)(IV)(7) herein, of One Hundred
Twenty Million Dollars ($120,000,000) immediately prior to the issuance of the
Additional Stock (the "Adjusted Conversion Price"), and then, the Adjusted
Conversion Price for Series D Preferred Stock shall be further reduced, as of
the close of business on the date of such issue or sale, to the price obtained
by multiplying such Adjusted Conversion Price by a fraction:
(x) The numerator of which shall be the sum
of (1) the number of shares of Common Stock issued and outstanding immediately
prior to such issue or sale of Additional Stock plus (2) the quotient obtained
by dividing the aggregate consideration received by the Corporation for the
total number of Additional Stock so issued or sold (or deemed so issued and
sold) by the Conversion Price for such series of Preferred Stock in effect
immediately prior to such issue or sale; and
(y) The denominator of which shall be the
sum of (1) the number of shares of Common Stock issued and outstanding
immediately prior to such issue or sale plus (2) the number of Additional Stock
so issued or sold (or deemed so issued and sold). The foregoing calculation of
Common Stock outstanding shall take into account shares deemed issued pursuant
to Section 3(d)(i)(D) on account of options, rights, or convertible or
exchangeable securities (or actual or deemed consideration therefor).
(IV) Certain Definitions. For the purpose of this
Section 3(d) the following terms have the following meanings:
101
(1) The "AGGREGATE CONSIDERATION RECEIVED" by
the Corporation for any issue or sale (or deemed issue or sale) of securities
shall (a) to the extent it consists of cash, be computed at the gross amount of
cash received by the Corporation before deduction of any underwriting or similar
commissions, compensation or concessions paid or allowed by the Corporation in
connection with such issue or sale and without deduction of any expenses payable
by the Corporation; (b) to the extent it consists of property other than cash,
be computed at the fair value of that property as determined in good faith by
the Board; and (c) if Additional Stock, Convertible Securities or Options or
Rights to purchase either Additional Stock or Convertible Securities are issued
or sold together with other stock or securities or other assets of the
Corporation for a consideration which covers both, be computed as the portion of
the consideration so received that may be reasonably determined in good faith by
the Board to be allocable to such Additional Stock, Convertible Securities or
Options or Rights.
(2) The "EFFECTIVE PRICE" of Additional Stock
shall mean the quotient determined by dividing the total number of Additional
Stock issued or sold, or deemed to have been issued or sold, by the Corporation
under this subsection 3(d), into the Aggregate Consideration Received, or deemed
to have been received, by the Corporation under this subsection 3(d), for the
issuance (or deemed issuance) of such Additional Stock.
(3) "SERIES C ORIGINAL ISSUE DATE" shall mean
the date on which the first share of Series C Preferred Stock is issued by the
Corporation.
(4) "SERIES D ORIGINAL ISSUE DATE" shall mean
the date on which the first share of Series D Preferred Stock is issued by the
Corporation.
(5) The "OPTIONS OR RIGHTS" shall mean warrants,
options or other rights to purchase or acquire shares of Common Stock or
Convertible Securities.
(6) The "CONVERTIBLE SECURITIES" shall mean
securities convertible into or exchangeable into Additional Stock.
(7) The "VALUATION" of the Company prior to an
issuance of Additional Stock shall mean the Effective Price of the Additional
Stock multiplied by the sum of (x) the total number of shares of Common Stock of
the Corporation outstanding immediately prior to the issuance of Additional
Stock plus (y) the total number of shares of Common Stock of the Corporation
into which all then outstanding shares of Convertible Securities and Options or
Rights of the Corporation are then convertible or exercisable immediately prior
to the issuance of such Additional Stock.
(V) No adjustment of the Conversion Price for a series
of Preferred Stock shall be made in an amount less than one cent per share,
provided that any adjustments which are not required to be made by reason of
this sentence shall be carried forward and shall be either taken into account in
any subsequent adjustment made prior to three years from the date of the event
giving rise to the adjustment being carried forward, or shall be made at the end
of three years from the date of the event giving rise to the adjustment being
carried forward. Except to the limited extent provided for in Sections
3(d)(i)(D)(3) and 3(d)(i)(D)(4), no adjustment of such
102
Conversion Price pursuant to this Section 3(d)(i) shall have the effect of
increasing the Conversion Price for a series of Preferred Stock above the
Conversion Price for such shares in effect immediately prior to such adjustment.
(B) In the case of the issuance of Common Stock
for cash, the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or other
expenses allowed, paid or incurred by the Corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
(C) In the case of the issuance of the Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as determined by
the Corporation's Board of Directors irrespective of any accounting treatment.
(D) In the case of the issuance (whether before,
on or after the Series D Original Issue Date) of Options or Rights or
Convertible Securities, the following provisions shall apply for all purposes of
this Section 3(d)(i) and Section 3(d)(ii):
(1) The aggregate maximum number of shares
of Common Stock deliverable upon exercise (assuming the satisfaction of any
conditions to exercisability, including without limitation, the passage of time,
but without taking into account potential antidilution adjustments) of such
Options or Rights shall be deemed to have been issued at the time such Options
or Rights were issued and for a consideration equal to the consideration
(determined in the manner provided in Sections 3(d)(i)(B) and 3(d)(i)(C)), if
any, received by the Corporation upon the issuance of such Options or Rights
plus the minimum exercise price provided for such Options or Rights (without
taking into account potential antidilution adjustments) for the Common Stock
covered thereby.
(2) The aggregate maximum number of shares
of Common Stock deliverable upon conversion of or in exchange (assuming the
satisfaction of any conditions to convertibility or exchangeability, including,
without limitation, the passage of time, but without taking into account
potential antidilution adjustments) for any such Convertible Securities or upon
the exercise of Options or Rights to subscribe for Convertible Securities and
subsequent conversion or exchange thereof shall be deemed to have been issued at
the time such Convertible Securities were issued or such Options or Rights were
issued and for a consideration equal to the consideration, if any, received by
the Corporation for any such Convertible Securities and related Convertible
Options or Rights (excluding any cash received on account of accrued interest or
accrued dividends), plus the minimum additional consideration, if any, to be
received by the Corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities or the exercise
of any related Options or Rights (the consideration in each case to be
determined in the manner provided in Sections 3(d)(i)(B) and 3(d)(i)(C)).
(3) In the event of any change in the number
of shares of Common Stock deliverable or in the consideration payable to the
Corporation upon
103
exercise of such Options or Rights or upon conversion of or in exchange for such
Convertible Securities, including, but not limited to, a change resulting from
the antidilution provisions thereof, the applicable Conversion Price of the
affected series of Preferred Stock, to the extent in any way affected by or
computed using such Convertible Options or Rights or Convertible Securities,
shall be recomputed to reflect such change, but no further adjustment shall be
made for the actual issuance of Common Stock or any payment of such
consideration upon the exercise of any such Options or Rights or the conversion
or exchange of such Convertible Securities.
(4) Upon the expiration of any such Options or
Rights, the termination of any such rights to convert or exchange or the
expiration of any Options or Rights related to such Convertible Securities, the
Conversion Price of the affected series of Preferred Stock, to the extent in any
way affected by or computed using such Options, Rights or Convertible Securities
or Options or Rights related to such Convertible Securities, shall be recomputed
to reflect the issuance of only the number of shares of Common Stock (and
Convertible Securities which remain in effect) actually issued upon the exercise
of such Options or Rights, upon the conversion or exchange of such Convertible
Securities or upon the exercise of the Options or Rights related to such
Convertible Securities. Notwithstanding the foregoing sentence, in the event
that the issuance of such Options or Rights or Convertible Securities caused an
adjustment to the Conversion Price for Series C Preferred Stock or Series D
Preferred Stock pursuant to Section 3(d)(i)(A)(II)(1) or Section
3(d)(i)(A)(III)(1), respectively, (i.e., a "full-ratchet" adjustment), then upon
the expiration of any such Options or Rights or Convertible Securities or the
termination of any such rights to convert or exchange or the expiration of any
Options or Rights related to such Convertible Securities, without any of such
Rights, Options or Convertible Securities, as the case may be, having been
exercised and no shares of Common Stock issued pursuant thereto, then the
Conversion Price for the Series C Preferred Stock and Series D Preferred stock,
as appropriate, shall be adjusted, to the Conversion Price for the Series C
Preferred Stock or Series D Preferred Stock, as appropriate, that was in effect
immediately prior to such issuance (the "Prior Series C Conversion Price" or
"Prior Series D Conversion Price", as appropriate), subject, however, to such
other adjustments as may have been made or which would have been made pursuant
to this Section 3(d)(i) had the Prior Series C Conversion Price or Prior Series
D Conversion Price, as appropriate, been in effect immediately prior to such
sale or issuance of such Options, Rights or Convertible Securities.
(5) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to Sections
3(d)(i)(D)(1) and (2) shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either Section 3(d)(i)(D)(3)
or (4).
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to Section 3(d)(i)(D)) by
the Corporation after the Series D Original Issue Date other than:
(A) Common Stock issued pursuant to a
transaction described in Section 3(d)(iii) hereof,
104
(B) Up to an aggregate of 10,000,000 shares
(such number of shares of Common Stock to be calculated net of any repurchases
of such shares by the Corporation and net of any expired or terminated options,
warrants or rights and to be proportionately adjusted for subsequent events
described in Section 3(d)(iii) and (iv) herein) issued as:
(i) Common Stock issuable or issued to
employees, consultants or directors of the Corporation
following the Series D Original Issue Date directly or
pursuant to a stock option plan or agreement or
restricted stock plan or agreement approved by the Board
of Directors of the Corporation,
(ii) Capital stock, or options or warrants to
purchase capital stock, issued to financial
institutions, equipment lessors or landlords in
connection with commercial credit arrangements,
equipment financing, real estate leases or similar
transactions approved by the Board of Directors of the
Corporation,
(iii) Capital stock or options or warrants to
purchase capital stock, issued to providers of products
or technologies (or rights thereto) to the Corporation,
if such issuance is approved by the Board of Directors
of the Corporation, or
(iv) Capital stock or options or warrants to
purchase capital stock, issued in connection with bona
fide acquisitions, mergers or similar transactions, the
terms of which are approved by the Board of Directors of
the Corporation,
(C) Common Stock issued or issuable upon
conversion of the Preferred Stock,
(D) Capital stock issued or issuable upon
exercise of any outstanding options or warrants to purchase Series A Preferred
Stock, Series F Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock which are outstanding as of the Series D Original Issue Date, or
(E) Common Stock issued or issuable in a public
offering in connection with which all outstanding shares of Preferred Stock will
be converted to Common Stock.
(iii) In the event the Corporation should at any time or
from time to time after the Series D Original Issue Date fix a record date for
the effectuation of a split or subdivision of the outstanding shares of Common
Stock or for the determination of the outstanding shares of Common Stock
entitled to receive a dividend or other distribution payable in additional
shares of Common Stock without payment of any consideration by such holder for
the additional shares of Common Stock, then, as of such record date (or the date
of such
105
dividend, distribution, split or subdivision if no record date is fixed), the
Conversion Price of each applicable series of Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be increased in proportion to such
increase of the aggregate of shares of Common Stock outstanding.
(iv) If the number of shares of Common Stock outstanding
at any time after the Series D Original Issue Date is decreased by a combination
of the outstanding shares of Common Stock or reverse stock split, then,
following the record date of such combination or reverse stock split, the
Conversion Price for each applicable series of Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be decreased in proportion to such
decrease in outstanding shares.
e. Other Distributions. In the event the Corporation at any time
after the Series D Original Issue Date shall declare a distribution payable in
securities of other persons, evidences of indebtedness issued by this
Corporation or other persons, assets (excluding cash dividends) or Options or
Rights not referred to in Section 3(d)(i), then, in each such case for the
purpose of this Section 3(e), the holders of the Preferred Stock shall be
entitled to a proportionate share of any such distribution as though they were
the holders of the number of shares of Common Stock of the Corporation into
which their shares of Preferred Stock are convertible as of the record date
fixed for the determination of the holders of Common Stock of the Corporation
entitled to receive such distribution.
f. Recapitalizations. If at any time or from time to time after
the Series D Original Issue Date there shall be a recapitalization of the Common
Stock (other than a subdivision, combination or merger or sale of assets
transaction provided for elsewhere in this Section 3 or Section 2) provision
shall be made so that the holders of the Preferred Stock shall thereafter be
entitled to receive upon conversion of the Preferred Stock the number of shares
of stock or other securities or property of the Corporation or otherwise, which
a holder of Common Stock deliverable upon conversion of such series of Preferred
Stock immediately prior to such recapitalization would have been entitled to
receive on such recapitalization. In any such case, appropriate adjustment shall
be made in the application of the provisions of this Section 3 with respect to
the rights of the holders of the Preferred Stock after the recapitalization to
the extent that the provisions of this Section 3 (including adjustment of the
Conversion Prices then in effect and the number of shares purchasable upon
conversion of the Preferred Stock) shall be applicable after that event as
nearly equivalently as may be practicable.
g. No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 3 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Preferred Stock against impairment.
106
h. No Fractional Shares and Certificate as to Adjustment.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Preferred Stock, and the number of
shares of Common Stock to be issued shall be rounded to the nearest whole share
(with one-half being rounded downward). Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the total
number of shares of Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of a series of Preferred Stock pursuant to
this Section 3, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of such series of Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon the
reasonable written request at any time of any holder of Preferred Stock, furnish
or cause to be furnished to such holder a like certificate setting forth (A)
such adjustment and readjustment, (B) the Conversion Price for each series of
Preferred Stock at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of a share of each series of Preferred Stock held
by such holder.
i. Notices of Record Date. In the event of any taking by the
Corporation of a record date for determining the holders of any class of
securities who are entitled to receive any dividend (other than a cash dividend)
or other distribution, any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to
receive any other right, this Corporation shall mail to each holder of Preferred
Stock, at least ten (10) days prior to the record date specified therein, a
notice specifying the record date for the purpose of such dividend, distribution
or right, and the amount and character of such dividend, distribution or right.
j. Reservation of Stock Issuable Upon Conversion. This
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the then outstanding shares of the Preferred Stock, such number of
its shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of the Preferred Stock; and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the
Preferred Stock, in addition to such other remedies as shall be available to the
holder of such Preferred Stock, the Corporation will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purposes, including, without limitation, engaging in best
efforts to obtain the requisite Board of Directors and stockholder approval of
any necessary amendment to its Certificate of Incorporation.
107
k. Notices. Any notice required by the provisions of this
Section 3 to be given to the holders of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation.
4. Redemption.
a. If requested in writing at any time after the seventh
anniversary of the Series C Original Issue Date by the holders of at least
two-thirds (66 2/3%) of the outstanding Series C Preferred Stock and Series D
Preferred Stock (determined together on an as converted basis), the Corporation
shall redeem, on the terms and conditions stated herein, out of funds legally
available therefor, all of the outstanding Preferred Stock in four equal annual
installments beginning on the first anniversary of the date redemption is
requested by the requisite number of holders (the "Initial Redemption Date") and
continuing thereafter on the first, second and third anniversaries of the
Initial Redemption Date (each a "Preferred Stock Redemption Date"), by paying in
cash therefor (i) in the case of the Series F Preferred Stock, an amount equal
to the sum of (x) the Original Series F Issue Price for each share of Series F
Preferred Stock held of record by such holder (as adjusted for any stock
dividends, combinations or splits with respect to such shares) and (y) all
declared but unpaid dividends thereon, (ii) in the case of the Series A
Preferred Stock, an amount equal to the sum of (x) the Original Series A Issue
Price for each share of Series A Preferred Stock held of record by such holder
(as adjusted for any stock dividends, combinations, splits, recapitalizations
and the like with respect to such shares) and (y) all declared but unpaid
dividends thereon, (iii) in the case of the Series B Preferred Stock, an amount
equal to the sum of (x) the Original Series B Issue Price for each share of
Series B Preferred Stock held of record by such holder (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like with
respect to such shares) and (y) all declared but unpaid dividends thereon, (iv)
in the case of the Series C Preferred Stock, an amount equal to the sum of (x)
the Original Series C Issue Price for each share of Series C Preferred Stock,
held of record by such holder (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares) and (y) all declared but unpaid dividends thereon and (v) in the case of
the Series D Preferred Stock, an amount equal to the sum of (x) the Original
Series D Issue Price for each share of Series D Preferred Stock held of record
by such holder (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) and (y) all declared
but unpaid dividends thereon (the "Series F Redemption Price," "Series A
Redemption Price," "Series B Redemption Price," "Series C Redemption Price," and
"Series D Redemption Price," respectively). The number of shares of Preferred
Stock that the Corporation shall be required to redeem under this subsection (a)
on any one Preferred Stock Redemption Date shall be equal to the amount
determined by dividing (x) the aggregate number of shares of shares of Preferred
Stock outstanding immediately prior to that Preferred Stock Redemption Date by
(y) the number of remaining Preferred Stock Redemption Dates (including the
Preferred Stock Redemption Date to which such calculation applies). In the event
that the Corporation is unable to redeem the full number of shares of Preferred
Stock to be redeemed on any Preferred Stock Redemption Date, the shares not
redeemed shall be redeemed by this Corporation as provided in this Section 4 as
soon as practicable after funds are legally available therefor. Any redemption
effected pursuant to this subsection 4 (a) shall be made ratably among
108
the holders of the Preferred Stock in proportion to the redemption payment
amount each such holder is otherwise entitled to receive on such Preferred Stock
Redemption Date.
b. At least thirty (30) but no more than sixty (60) days prior
to each Preferred Stock Redemption Date, the Corporation shall give written
notice by certified or registered mail, postage prepaid, to all holders of
outstanding Preferred Stock, at the address last shown on the records of the
Corporation for such holder, stating such Preferred Stock Redemption Date, the
Series F, the Series A, Series B, Series C Redemption Price and Series D
Redemption Price, as the case may be, and shall call upon such holder to
surrender to the Corporation on such Preferred Stock Redemption Date at the
place designated in the notice such holder's certificate or certificates
representing the shares to be redeemed. On or after the Preferred Stock
Redemption Date stated in such notice, the holder of each share of Preferred
Stock called for redemption shall surrender the certificate or certificates
evidencing such shares to the Corporation at the place designated in such notice
and shall thereupon be entitled to receive payment of the Series F, Series A,
Series B, Series C Redemption Price or Series D Redemption Price, as the case
may be, for the shares surrendered. If less than all the shares represented by
any such surrendered certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares. If such notice of redemption shall have been
duly given, and if on such Preferred Stock Redemption Date funds necessary for
the redemption shall be available therefor, then, as to any certificates
evidencing any Preferred Stock so called for redemption and not surrendered, all
rights of the holders of such shares shall cease as the close of business on the
day immediately preceding the Preferred Stock Redemption Date with respect to
such shares, except only the right of the holders to receive the Series F,
Series A, Series B, Series C Redemption Price or Series D Redemption Price, as
the case may be, for the Preferred Stock which they hold, without interest, upon
surrender of their certificate or certificates therefor.
5. Voting Rights. Each holder of shares of Preferred Stock shall be
entitled to a number of votes equal to the number of shares of Common Stock into
which the shares of Preferred Stock held by such holder could be converted,
shall have voting rights and powers equal to the voting rights and powers of the
holders of Common Stock (except as required by law), shall be entitled to notice
of any stockholder meeting in accordance with the Bylaws of the Corporation, and
shall vote together as a single class with holders of Common Stock and all
series of Preferred Stock on all matters except as required by law or as
otherwise specifically provided herein. Fractional votes shall not be permitted
and any fractional voting rights resulting from the above formula (after
aggregating all shares into which shares of Preferred Stock held by each holder
could be converted) shall be rounded to the nearest whole number (with one-half
being rounded upward).
6. Status of Converted Preferred Stock. In the event any shares of
Preferred Stock shall be converted pursuant to Section 3, the shares so
converted shall be canceled and shall not thereafter be issuable by the
Corporation. The Certificate of Incorporation of the Corporation shall be
appropriately amended to effect the corresponding reduction in the Corporation's
authorized capital stock.
109
7. Protective Provisions.
a. Class Vote. The Corporation shall not, without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at least (1) a majority of the then outstanding shares of Preferred
Stock, voting together as a single class, (2) two-thirds (66 2/3%) of the then
outstanding Series C Preferred Stock, voting as a separate series, and (3)
two-thirds (66 2/3%) of the then outstanding Series D Preferred Stock, voting as
a separate series, authorize or effect the winding up or cessation of business
of the Corporation.
b. Series Vote. The Corporation shall not, without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at least a majority of each series of Preferred Stock so affected,
amend, alter, or change in any adverse manner the rights of such series of
Preferred Stock.
c. Series C Vote. The Corporation shall not, without the
approval, by vote or written consent, of the holders of at least two-thirds (66
2/3%) of the then outstanding shares of Series C Preferred Stock, voting as a
separate series:
(1) amend its Certificate of Incorporation or Bylaws in
any manner that would alter or change the rights, preferences, privileges or
restrictions of the Series C Preferred Stock so as to materially adversely
affect such Series C Preferred Stock;
(2) reclassify any outstanding shares of securities of
the Corporation into shares having rights, preferences or privileges senior to
or on a parity with the Series C Preferred Stock; or
(3) authorize any other equity security, including any
other security convertible into or exercisable for any equity security, having
rights or preferences senior to or on a parity with the Series C Preferred Stock
as to dividend rights, liquidation, redemption or voting preferences, including
without limitation, shares of Series C Preferred Stock.
d. Series D Vote. The Corporation shall not, without the
approval, by vote or written consent, of the holders of at least two-thirds
(66 2/3%) of the then outstanding shares of Series D Preferred Stock, voting as
a separate series:
(1) amend its Certificate of Incorporation or Bylaws in
any manner that would alter or change the rights, preferences, privileges or
restrictions of the Series D Preferred Stock so as to materially adversely
affect such Series D Preferred Stock;
(2) reclassify any outstanding shares of securities of
the Corporation into shares having rights, preferences or privileges senior to
or on a parity with the Series D Preferred Stock; or
(3) authorize any other equity security, including any
other security convertible into or exercisable for any equity security, having
rights or preferences senior to or
110
on a parity with the Series D Preferred Stock as to dividend rights,
liquidation, redemption or voting preferences, including without limitation,
shares of Series D Preferred Stock.
e. Series C and D Vote. The Corporation shall not, without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at least two-thirds (66 2/3%) of each of the then outstanding shares
of Series C Preferred Stock and Series D Preferred Stock, each voting as a
separate series:
(1) reorganize, consolidate or merge with or into any
corporation or effect any transaction or series of related transactions if such
transaction or series of related transactions would result in the stockholders
of the Corporation immediately prior to such transaction or series of related
transactions holding less than a majority of the voting power of the surviving
corporation (or its parent corporation if the surviving corporation is wholly
owned by the parent corporation);
(2) sell, convey or otherwise dispose of all or
substantially all the Corporation's assets in a single transaction or series of
related transactions;
(3) declare or pay any dividends (other than dividends
payable solely in shares of its own Common Stock) on or declare or make any
other distribution, purchase, redemption or acquisition, directly or indirectly,
on account of any shares of Preferred Stock junior to the Series C Preferred
Stock or Series D Preferred Stock as to dividend rights, liquidation, redemption
or voting privileges or any shares of Common Stock now or hereafter outstanding
other than those distributions, purchases, redemptions, or acquisitions
expressly permitted in this Certificate; or
(4) incur any indebtedness to a bank, financial
institution or lender in excess of ten million dollars ($10,000,000) unless
otherwise approved by the Board of Directors.
C. Common Stock.
1. Dividend Rights. Subject to the prior rights of holders of
all classes of stock at the time outstanding having prior rights as to
dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the Corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation shall be
distributed as provided in Section 2 of Article IV(B) hereof.
3. Redemption. The Common Stock is not redeemable.
4. Voting Rights. Each holder of Common Stock shall be entitled
to one (1) vote for each share of Common Stock held, shall be entitled to notice
of any stockholder meeting
111
in accordance with the Bylaws of the Corporation, and shall be entitled to vote
upon such matters and in such manner as is otherwise provided herein or as may
be provided by law.
ARTICLE V
Except as otherwise provided in this Amended and Restated Certificate of
Incorporation, in furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, repeal, alter,
amend and rescind any or all of the Bylaws of the Corporation.
ARTICLE VI
The number of directors of the Corporation shall be fixed from time to
time by, or in the manner provided in, the Bylaws or amendment thereof duly
adopted by the Board of Directors or by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE IX
To the fullest extent permitted by the General Corporation Law of
Delaware, as the same may be amended from time to time, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director. If
the General Corporation Law of Delaware is hereafter amended to authorize, with
or without the approval of a corporation's stockholders, further reductions in
the liability of the corporation's directors for breach of fiduciary duty, then
a director of the Corporation shall not be liable for any such breach to the
fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
Any repeal or modification of the foregoing provisions of this Article
IX, by amendment of this Article IX or by operation of law, shall not adversely
affect any right or protection of a director of the Corporation with respect to
any acts or omissions of such director occurring prior, to such repeal or
modification.
ARTICLE X
112
To the fullest extent permitted by applicable law, the Corporation is
authorized to provide indemnification of (and advancement of expenses to)
directors, officers, employees and other agents of the Corporation (and any
other persons to which Delaware law permits the Corporation to provide
indemnification) through Bylaw provisions, agreements with any such person, vote
of stockholders or disinterested directors or otherwise, in excess of the
indemnification and advancement otherwise permitted by Section 145 of the
Delaware General Corporation Law, subject only to limits created by applicable
Delaware law (statutory or nonstatutory), with respect to actions for breach of
duty to a corporation, its stockholders, and others.
Any repeal or modification of any of the foregoing provisions of this
Article X, by amendment of this Article X or by operation of law, shall not
adversely affect any right or protection of a director, officer, employee or
agent or other person existing at the time of, or increase the liability of any.
director of the Corporation with respect to any acts or omissions of such
director, officer or agent occurring prior to, such repeal or modification.
ARTICLE XI
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
ARTICLE XII
The Corporation shall have perpetual existence.
* * *
The foregoing Amended and Restated Certificate of Incorporation has been
adopted by the Corporation's directors and stockholders in accordance with the
applicable provisions of Sections 228, 242 and 245 of the General Corporation
Law of the State of Delaware.
113
IN WITNESS WHEREOF, the undersigned has executed this certificate on
November ___, 1999.
NIKU CORPORATION
By:
---------------------------------
Xxxxxx Xxxxxxx
President and Chief Executive
Officer
114
EXHIBIT F
MATTERS TO BE COVERED IN THE OPINION
OF FENWICK & WEST LLP, COUNSEL TO NIKU CORPORATION AND
NIKU ACQUISITION CORPORATION
NOTE: Except as otherwise defined below, all capitalized terms used
below shall have the same meanings given to such terms in this Agreement and
Plan or Reorganization.
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 Plan and each agreement to be
entered into by Parent in connection therewith (the "PARENT ANCILLARY
AGREEMENTS"), to own and operate 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 Plan and each agreement to be entered into by Merger Sub in
connection therewith (the "MERGER SUB ANCILLARY AGREEMENTS"), to own and operate
its properties and to carry on its business as currently conducted. To our
knowledge, neither Parent nor Merger Sub is in violation of any of the
provisions of its Certificate of Incorporation or Bylaws.
2. Parent is qualified to do business as a foreign corporation in good
standing in the State of California.
3. The capitalization of Parent immediately prior to the Closing
consists of the following:
(a) Preferred Stock: A total of 51,910,282 authorized shares of
Preferred Stock, of which 10,000,000 shares have been designated Series
F Preferred Stock, 5,142,851 shares have been designated Series A
Preferred Stock, 8,629,992 shares have been designated Series B
Preferred Stock, 9,987,439 shares have been designated Series C
Preferred Stock and 18,150,000 shares have been designated Series D
Preferred Stock. To our knowledge, there are issued and outstanding
10,000,000 shares of Series F Preferred Stock, 5,142,851 shares of
Series A Preferred Stock, 7,999,992 shares of Series B Preferred Stock,
9,987,439 Shares of Series C Preferred Stock and _______ shares of
Series D Preferred Stock. All of such issued and outstanding shares are
duly authorized, validly issued, fully paid and nonassessable. The
Common Stock issuable upon the conversion of the Series F Preferred
Stock, Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock has been duly and validly reserved for issuance and,
assuming no change in the Restated Certificate or applicable law, when
issued upon such conversion in accordance with the Restated Certificate,
will be validly issued, fully paid and nonassessable.
(b) Common Stock. A total of 100,000,000 authorized shares of
Common Stock. To our knowledge, 8,368,618 shares of such Common Stock
are issued and
115
outstanding as of the Agreement Date. All of such issued and outstanding
shares are duly authorized, validly issued, fully paid and
nonassessable.
(c) Options, Etc. To our knowledge, there, there are no
preemptive rights or any options, warrants, conversion privileges or
other rights (or agreements for any such rights) outstanding to acquire
any of Parent's securities from the Parent, except for (i) the
conversion privileges of the Preferred Stock of Parent, (ii) outstanding
warrants to purchase 630,000 shares of Series B Preferred Stock, (iii)
options to purchase an aggregate of 8,000,000 shares of Common Stock as
of the Agreement Date reserved for issuance pursuant to Parent's 1998
Stock Plan of which options to purchase 4,306,427 shares are outstanding
as of the Agreement Date, and (iv) rights of first refusal pursuant to
the Rights Agreement.
4. The authorized capital stock of Merger Sub consists entirely of 1,000
shares of Merger Sub Common Stock, $.001 per value, all of which are validly
issued and outstanding and, non-assessable, owned of record by Parent and, to
such counsel's knowledge, fully paid.
5. The Restated Certificate, the Plan and the Parent Ancillary
Agreements have been duly adopted and authorized, respectively, by all necessary
corporate action on the part of Parent's Board of Directors. Each of the Plan
and the Parent Ancillary Agreements constitutes the valid and binding obligation
of Parent enforceable against Parent in accordance with its terms [THIS OPINION
MAY BE GIVEN SUBJECT TO LEGAL OPINION EXCEPTIONS AS TO ENFORCEABILITY THAT ARE
MUTUALLY AGREEABLE TO COUNSEL TO PARENT AND COUNSEL TO THE COMPANY].
6. The Plan and the Merger Sub Ancillary Agreements have been duly
authorized by all necessary corporate action on the part of Merger Sub's Board
of Directors and sole stockholder. Each of the Plan and the Merger Sub Ancillary
Agreements constitutes the valid and binding obligation of Merger Sub
enforceable against Merger Sub in accordance with its terms [THIS OPINION MAY BE
GIVEN SUBJECT TO LEGAL OPINION EXCEPTIONS AS TO ENFORCEABILITY THAT ARE MUTUALLY
AGREEABLE TO COUNSEL TO MERGER SUB AND COUNSEL TO THE COMPANY].
7. The execution and delivery of the Plan by Parent and Merger Sub and
the performance by Parent and Merger Sub of their respective obligations under
the Plan do not conflict with, or result in a violation of: (a) the Certificate
or Bylaws of Parent and Merger Sub, as amended and currently in effect; (b) to
such counsel's knowledge, any statute, law, ordinance, rule, regulation, or any
judgment, order or decree of any Court or arbitration to which Parent or Merger
Sub is a party or subject, as to which any assets or properties of Parent or
Merger Sub are bound or subject; (c) to such counsel's knowledge, the material
contracts identified in the appendix attached hereto.
8. The Parent Common Stock and Parent Preferred Stock, when issued and
paid for as provided in the Plan, will be duly authorized and validly issued,
fully paid and nonassessable. The shares of common stock into which the Parent
Preferred Stock are convertible (the "CONVERSION SHARES") have been duly and
validly reserved for issuance upon conversion of the Parent Preferred Stock and,
when issued upon such conversion in accordance with the Restated
116
Certificate (assuming no change in applicable law or the Restated Certificate),
the Conversion Shares will be duly authorized and validly issued, fully paid and
nonassessable.
9. The offer and sale of the Parent Common Stock and Parent Preferred
Stock to the Company stockholders in accordance with the Plan, and (assuming no
change in currently applicable law or the Restated Certificate and assuming no
unlawful resale of Parent Common Stock and Parent Preferred Stock by any holder
thereof) the issuance of the Conversion Shares solely to Company stockholders
pursuant to the Restated Certificate for no additional consideration other than
the surrender of the Parent Preferred Stock, are, and in the case of such
issuance of Conversion Shares will be, 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.
10. To our knowledge, all approvals, consents or authorizations of, and
filings with, any U.S. Federal, California State or Delaware State governmental
authority required on the part of Parent in order to enable Parent to execute,
deliver and perform its obligations under the Agreements have been made, except
for (a) such as may be required under applicable federal securities laws and (b)
the filing of the Certificate of Merger with the Delaware Secretary of State.
11. To our knowledge, Parent 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. To our knowledge, Parent is
not subject to any currently effective order, writ, judgment, or decree or
injunction.
117
EXHIBIT G
MATTERS TO BE COVERED IN THE OPINION OF COUNSEL FOR PROAMICS CORPORATION
NOTE: Except as otherwise defined below, all capitalized terms used
below shall have the same meanings give to such terms in this Agreement and Plan
of Reorganization.
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware. The Company is duly
qualified or licensed to do business as a foreign corporation and is in good
standing as a foreign corporation in the States of Illinois and Georgia. [If
requested, to be provided by foreign counsel: Each subsidiary listed on Schedule
2.2 is duly organized, validly existing and in good standing under the laws of
the country in which it is domiciled.]
2. The Company has the requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as presently
conducted, and to execute and enter into the Agreement and Plan of
Reorganization dated as of November 16, 1999 among the Company, Parent and
Merger Sub (the "PLAN") and each agreement to be entered into by the Company in
connection therewith (the "COMPANY ANCILLARY AGREEMENTS"), and to perform its
obligations under the Plan and under each Company Ancillary Agreement. To our
knowledge, the Company is not in violation of any of the provisions of its
Certificate of Incorporation or Bylaws.
3. To our knowledge, all consents, approvals or authorizations of and
filings with any U.S. Federal, Illinois State or Delaware State governmental
authority required on the part of the Company for, or in connection with, the
execution, delivery or performance by the Company of the Plan or any of the
Company Ancillary 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.
4. The Plan and each of the Company Ancillary Agreements have each been
duly authorized, executed and delivered by the Company, and are valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms [THIS OPINION MAY BE GIVEN SUBJECT TO
LEGAL OPINION EXCEPTIONS AS TO ENFORCEABILITY THAT ARE MUTUALLY AGREEABLE TO
COUNSEL TO THE COMPANY AND COUNSEL TO PARENT AND WITH AN EXCEPTION FOR SECTION
1.6(i)].
5. The authorized capital stock of the Company consists entirely of: (i)
40,000,000 shares of Common Stock, of which, to our knowledge, a total of
8,850,192.66 shares are issued and outstanding and (ii) 9,974,585 shares of
Preferred Stock, of which (a) 117,000 shares have been designated Series A
Preferred Stock, all of which, to our knowledge, are issued and outstanding, (b)
9,833,585 shares have been designated Series B Preferred Stock, all of which, to
our knowledge, are issued and outstanding, and (c) 24,000 shares have been
designated Series C Preferred Stock, all of which, to our knowledge, are issued
and outstanding; and, no other shares of any capital stock of the Company are
authorized, issued or outstanding.
118
6. 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 to any agreements to which the Company is a party or
by which it is bound.
7. To our knowledge, none of the outstanding shares of the Company's
capital stock has been issued under the Company's 1999 Option Plan.
8. To such counsel's knowledge, 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.
9. Neither the execution and delivery of the Plan or any Company
Ancillary Agreement, nor the consummation of any of the Merger or any of the
other transactions provided for therein or contemplated thereby, are in conflict
with any provision of: (a) the Certificate of Incorporation or the Bylaws of the
Company, both as amended and currently in effect; (b) to such counsel's
knowledge, any statute, law, ordinance, rule or regulation or, any judgment,
order, or decree of any court or arbitrator to which the Company or any Company
stockholder is a party or subject, or to which any assets or properties of the
Company are bound or subject; or (c) to such counsel's knowledge, the Contracts
listed on Schedule 2.16(a).
10. To such counsel's 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. To such
counsel's knowledge, the Company is not subject to any currently effective
order, writ, judgment, decree or injunction.
119
EXHIBIT H
Telephone Number(s) for Call-Backs and
Person(s) Designated to Confirm Stock or Funds
Transfer and Investment Instructions
If to Company/Securityholder Agent:
Name Telephone Number
1. __________________________________ __________________________________
2. __________________________________ __________________________________
3. __________________________________ __________________________________
If to Parent:
Name Telephone Number
1. __________________________________ __________________________________
2. __________________________________ __________________________________
3. __________________________________ __________________________________
Telephone call-backs shall be made to each of the Company or Securityholder
Agent and Parent if joint instructions are required pursuant to the Agreement.
