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EXHIBIT 2.02
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
NIKU CORPORATION
MONKEYS ACQUISITION CORP.
AND
600 MONKEYS, INC.
DATED AS OF MAY 17, 2000
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TABLE OF CONTENTS
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ARTICLE I THE MERGER...........................................................................1
1.1 The Merger.......................................................................1
1.2 Effective Time...................................................................1
1.3 Effect of the Merger.............................................................1
1.4 Articles of Incorporation; Bylaws................................................1
1.5 Directors and Officers...........................................................1
1.6 Maximum Aggregate Merger Consideration; Effect on Capital Stock..................2
1.7 Dissenters' Rights...............................................................4
1.8 Surrender of Certificates........................................................4
1.9 No Further Ownership Rights in Company Capital Stock.............................6
1.10 Lost, Stolen or Destroyed Certificates...........................................6
1.11 Tax Consequences.................................................................6
1.12 Taking of Necessary Action; Further Action.......................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................6
2.1 Organization and Qualification...................................................7
2.2 Subsidiaries.....................................................................7
2.3 Company Capital Structure........................................................7
2.4 Authority........................................................................8
2.5 No Conflict......................................................................8
2.6 Consents.........................................................................9
2.7 Company Financial Statements.....................................................9
2.8 No Undisclosed Liabilities.......................................................9
2.9 No Changes.......................................................................9
2.10 Tax and Other Returns and Reports...............................................11
2.11 Restrictions on Business Activities.............................................13
2.12 Title to Properties; Absence of Liens and Encumbrances..........................13
2.13 Governmental Authorization......................................................14
2.14 Intellectual Property...........................................................14
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2.15 Product Warranties; Defects; Liabilities........................................19
2.16 Agreements, Contracts and Commitments...........................................19
2.17 Change of Control Payments......................................................21
2.18 Interested Party Transactions...................................................21
2.19 Compliance with Laws............................................................21
2.20 Litigation......................................................................21
2.21 Insurance.......................................................................22
2.22 Minute Books....................................................................22
2.23 Environmental Matters...........................................................22
2.24 Brokers' and Finders' Fees......................................................23
2.25 Employee Matters and Benefit Plans..............................................23
2.26 Bank Accounts...................................................................27
2.27 Accounts Receivable.............................................................27
2.28 Indemnification Obligations.....................................................27
2.29 Dissolution of LLC..............................................................28
2.30 Representations Complete........................................................28
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...........................28
3.1 Organization, Good Standing and Qualifications of Parent and Merger Sub.........28
3.2 Authority.......................................................................28
3.3 No Conflict.....................................................................28
3.4 Consents........................................................................29
3.5 Parent Common Stock.............................................................29
3.6 SEC Filings; Parent Financial Statements........................................29
ARTICLE IV SECURITIES LAW COMPLIANCE..........................................................30
4.1 Securities Act Exemption........................................................30
4.2 Stock Restrictions..............................................................30
4.3 The Company Stockholders' Restrictions Regarding Securities Law Matters.........30
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ARTICLE V ADDITIONAL AGREEMENTS...............................................................31
5.1 Access to Information...........................................................31
5.2 Public Disclosure...............................................................31
5.3 Legal Conditions to the Merger..................................................31
5.4 Best Efforts; Additional Documents and Further Assurances.......................31
5.5 Notification of Certain Matters.................................................32
5.6 Reorganization..................................................................32
5.7 Nasdaq National Market..........................................................32
5.8 Blue Sky Laws...................................................................32
5.9 Benefit Arrangements............................................................32
5.10 Registration Rights.............................................................33
5.11 Tax Liabilities.................................................................33
ARTICLE VI CONDITIONS TO THE MERGER...........................................................33
6.1 Conditions to Obligations of Each Party to Effect the Merger....................33
6.2 Additional Conditions to Obligations of the Company.............................34
6.3 Additional Conditions to the Obligations of Parent and Merger Sub...............35
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW................................37
7.1 Survival of Representations and Warranties......................................37
7.2 Escrow Arrangements.............................................................37
ARTICLE VIII AMENDMENT AND WAIVER.............................................................47
8.1 Amendment.......................................................................47
8.2 Extension; Waiver...............................................................47
ARTICLE IX GENERAL PROVISIONS.................................................................47
9.1 Notices.........................................................................47
9.2 Expenses........................................................................49
9.3 Interpretation..................................................................49
9.4 Counterparts....................................................................49
9.5 Entire Agreement; Assignment....................................................49
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9.6 Severability....................................................................50
9.7 Other Remedies..................................................................50
9.8 Governing Law...................................................................50
9.9 Rules of Construction...........................................................50
9.10 Specific Performance............................................................50
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INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
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Exhibit A Form of Non-Competition Agreement
Exhibit B Form of Certificate of Merger
Exhibit C Form of Declaration of Registration Rights
Exhibit D Form of Legal Opinion of Counsel to Parent
Exhibit E Form of Legal Opinion of Counsel to the Company
Exhibit F Form of Xxx Xxxxxx Associates -- Parent Release Agreement
Exhibit G Escrow Agent Instructions
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INDEX OF SCHEDULES
SCHEDULE DESCRIPTION
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1 Non-Competition Agreements
2.3(a) Stockholder List
2.5 Conflicts
2.6 Governmental and Third Party Consents
2.7 Company Financials
2.8 Undisclosed Liabilities
2.9 No Changes
2.10 Tax Returns and Audits
2.12(a) Leased Real Property
2.12(b) Liens on Property
2.12(c) Equipment
2.13 Government Authorizations
2.14(b) Registered Intellectual Property Rights
2.14(c) IP Actions To Be Taken Within 120 Days of Closing Date;
Special Status
2.14(h) Intellectual Property In-Licenses
2.14(j) Form of Proprietary Information, Confidentiality and
Assignment Agreement
2.14(k) Third-Party Ownership Rights to Licensed Technology or
Intellectual Property
2.14(m) Form of "Shrink-Wrap" License; Outbound Licenses
2.14(n) Intellectual Property Obligations
2.14(t) Necessary Technology and Intellectual Property Rights
2.15 Product Warranties and Standard Forms of Agreements
2.16(a) Agreements, Contracts and Commitments 2.16(b) Breaches
2.17 Change of Control Payments
2.18 Interested Party Transactions
2.20 Litigation
2.24 Brokers/Finders Fees
2.25(b) Employee Benefit Plans and Employees
2.25(d) Employee Plan Compliance
2.25(g) Post-Employment Obligations
2.25(i)(i) Effect of Transaction
2.25(i)(ii) Excess Parachute Payments
2.25(j) Officers, Directors and Employees
2.25(k) Labor
2.26 Bank Accounts
2.27 Accounts Receivable
5.9 Continuing Employees; Compensation and Options
6.3(e) Indebtedness to be Repaid
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of May 17, 2000 among Niku Corporation, a Delaware corporation
("Parent"), Monkeys Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"), and 600 Monkeys, Inc., 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, and Merger Sub will
remain a wholly-owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
C. The Board of Directors of the Company has (i) determined that the Merger
is consistent with and in furtherance of the long-term strategy of the Company
and fair to, and in the best interests of, the Company and its stockholders,
(ii) approved this Agreement, the Merger and the other transactions contemplated
by this Agreement and (iii) unanimously recommended that the stockholders of the
Company adopt and approve the principal terms of this Agreement and approve the
Merger. The stockholders of the Company have unanimously approved this Agreement
and 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
employee of the Company listed on Schedule 1 hereto is entering into a
Non-Competition Agreement substantially in the form attached hereto as Exhibit A
(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:
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ARTICLE I
THE MERGER
1.1 The Merger At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and Delaware Law,
the Company shall be merged with and into Merger Sub, the separate corporate
existence of the Company shall cease and Merger Sub shall continue as the
surviving corporation and as a wholly-owned subsidiary of Parent. Merger Sub as
the surviving corporation after the Merger is hereinafter sometimes referred to
as the "Surviving Corporation."
1.2 Effective Time The closing of the Merger (the "Closing") will take
place as promptly as practicable following satisfaction or waiver of the
conditions set forth in Article VI, 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 B (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 the filing of the Certificate of Merger being
referred to herein as the "Effective Time").
1.3 Effect of the Merger At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of Delaware Law. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the rights and property of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts and liabilities of the Company and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Articles 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 until
thereafter amended as provided by law and such Certificate of Incorporation.
(b) Unless otherwise determined by Parent prior to the Effective Time,
the Bylaws of Merger Sub, as in effect immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Corporation until thereafter amended.
1.5 Directors and Officers The directors of Merger Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and 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.
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1.6 Maximum Aggregate Merger Consideration; Effect on Capital Stock The
aggregate maximum number of shares of common stock of Parent ("Parent Common
Stock") to be issued (including Parent Common Stock to be reserved for issuance
upon exercise of any options and warrants of the Company) and aggregate maximum
amount of cash payable, in exchange for the acquisition by Parent of all
outstanding capital stock of the Company ("Company Capital Stock") and all
outstanding unexpired and unexercised options, warrants and other rights to
acquire Company Capital Stock shall be 170,000 (the "Aggregate Share Number")
and $1,000,000 (the "Aggregate Cash Amount"), respectively. Subject to the terms
and conditions of this Agreement, as of the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holder of any shares of Company Capital Stock, or the holder of any options,
warrants or other rights to acquire or receive shares of Company Capital Stock,
the following shall occur:
(a) Conversion of Company Common Stock. Each share of common stock of
the Company, no par value per share ("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(d) and any
"Dissenting Shares" (as defined and to the extent provided in Section 1.7(a)))
will be canceled and extinguished and be converted automatically into the right
to receive (i) that number of shares of Parent Common Stock equal to the product
of (A) one share of Company Common Stock and (B) the Common Factor (as defined
in Section 1.6(b) below) (the "Exchange Ratio") and (ii) an amount equal to the
Cash Amount Per Share (as defined in Section 1.6(b) below) upon surrender of the
certificate representing such share of Company Common Stock in the manner
provided in Section 1.8.
(b) Definitions.
(i) Common Factor. The "Common Factor" shall be equal to the
number (rounded to the sixth decimal place) computed using the following
formula:
X = N
D
Where X = the Common Factor
N = the Aggregate Share Number
D = the Diluted Common Shares (as defined below)
(iii) 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 the
Company Options (as such term is defined in Section 1.6(e)) outstanding at the
Effective Time (regardless of whether such Company Options are vested); plus (C)
the number of shares of
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Company Common Stock issuable in connection with any other options, warrants,
calls, rights, exchangeable or convertible securities, 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.
(iv) Cash Amount Per Share. The "Cash Amount Per Share" shall be
the quotient obtained by dividing (A) the Aggregate Cash Amount by (B) the
Diluted Common Shares.
(c) Escrow. Twenty thousand five hundred thirty (20,530) shares of the
Parent Common Stock to be issued at the Effective Time pursuant to Section
1.6(a) hereof shall be held in escrow (collectively, the "Escrow Amount")
pursuant to Article VII of this Agreement to compensate Parent and its
affiliates (including the Surviving Corporation) for any "Losses" (as defined in
Section 7.2 hereof) for which Parent and Merger Sub are entitled to
indemnification pursuant to this Agreement and the transactions contemplated
hereby.
(d) Cancellation of Parent-Owned and Company-Owned Stock. Each share
of Company Capital Stock owned by Merger Sub, Parent, the Company or any direct
or indirect wholly-owned subsidiary of Parent or of the Company immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(e) Stock Options. At the Effective Time, all options to purchase
Company Common Stock (each a "Company Option") then outstanding (whether or not
exercisable at such time) under the Company's Stock Option Plan (the "Option
Plan"), or otherwise, shall terminate. At the Effective Time there shall be no
outstanding options to purchase Company Common Stock under the Option Plan, or
otherwise.
(f) Capital Stock of Merger Sub. Each stock certificate of Merger Sub
evidencing ownership of such shares shall continue to evidence ownership of such
shares of capital stock of the Surviving Corporation.
(g) Adjustments to Exchange Ratios. The Exchange Ratio 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 Common Stock or Company Capital Stock), reorganization, recapitalization
or other like change with respect to Parent Common Stock or Company Capital
Stock occurring after the date hereof and prior to the Effective Time.
(h) Fractional Shares. No fraction of a share of Parent Common Stock
will be issued at the Effective Time, but in lieu thereof, each holder of shares
of Company Capital Stock who would otherwise be entitled to a fraction of a
share of Parent Common Stock (after aggregating all fractional shares of Parent
Common Stock to be received by such holder) shall be entitled to receive from
Parent an amount of cash (rounded to the nearest whole cent) equal to the
product of (i) such fraction, multiplied by (ii) $27.8375.
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1.7 Dissenters' Rights
(a) Notwithstanding any provision of this Agreement to the contrary
(other than Section 1.7(b)), any shares of Company Capital Stock held by a
holder who has demanded and perfected appraisal rights for such shares in
accordance with Section 262 of Delaware Law and who, as of the Effective Time,
has not effectively withdrawn or lost such appraisal or dissenters' rights
("Dissenting Shares"), shall not be converted into or represent a right to
receive Parent Common Stock pursuant to Section 1.6, but the holder thereof
shall only be entitled to such rights as are granted by Delaware Law. From and
after the Effective Time, a holder of Dissenting Shares shall not be entitled to
exercise any of the voting rights or other rights of a stockholder of the
Surviving Corporation.
(b) Notwithstanding the provisions of Section 1.6(a) hereof, if any
holder of shares of Company Capital Stock who demands appraisal of such shares
under Delaware Law shall effectively withdraw or lose (through failure to
perfect or otherwise) the right to appraisal, then, as of the later of the
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Parent
Common Stock and fractional shares and cash as provided in Section 1.6(a)
without interest thereon, upon surrender of the certificate representing such
shares.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal of any shares of Company Capital Stock, withdrawals of
such demands, and any other instruments served pursuant to Delaware Law and
received by the Company 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 make any payment with respect to any demands for appraisal
of capital stock of the Company or offer to settle or settle any such demands.
1.8 Surrender of Certificates
(a) Exchange Agent. Prior to the Effective Time, Parent shall
designate Xxxxxx Trust and Savings Bank to act as exchange agent (the "Exchange
Agent") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the Effective Time,
Parent shall make available to the Exchange Agent for exchange in accordance
with this Article I, the aggregate number of shares of Parent Common Stock
issuable and cash payable 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 VII hereof, Parent
shall deposit into an escrow account a number of shares of Parent Common Stock
equal to the Escrow Amount out of the aggregate number of shares of Parent
Common 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 such holder's pro rata share of the Parent Common Stock issued
pursuant to Section 1.6(a).
(c) Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the
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"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 cash 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 the Exchange Agent and shall be in such form and
have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock and cash. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of Parent Common Stock (less the number of shares of Parent Common Stock,
if any, to be deposited in the Escrow Fund on such holder's behalf pursuant to
Article VII hereof), plus cash (including 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 VII hereof, Parent shall cause to be distributed
to the Escrow Agent (as defined in Article VII) a certificate or certificates
representing that number of shares of Parent Common Stock equal to the Escrow
Amount, which shares of Parent Common Stock shall be registered in the name of
the Escrow Agent. As set forth in Section 7.2(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 and cash shall be available to compensate Parent
as provided in Article VII. Until so surrendered, each outstanding Certificate
that, prior to the Effective Time, represented shares of Company Capital Stock
will be deemed from and after the Effective Time, for all corporate purposes,
other than the payment of dividends, to evidence the ownership of the number of
full shares of Parent Common Stock into which such shares of Company Capital
Stock shall have been so converted and the right to receive an amount in cash in
lieu of the issuance of any fractional shares in accordance with Section 1.6.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Parent Common 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 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 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.
(e) Transfers of Ownership. If any certificate for shares of Parent
Common Stock is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than
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that of the registered holder of the certificate surrendered, or established to
the satisfaction of Parent or any agent designated by it that such tax has been
paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
Section 1.8, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to a holder of shares of Parent Common 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 Common Stock issued and cash payable upon the surrender for exchange of
shares of Company Capital Stock in accordance with the terms hereof shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Capital Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Company
Capital Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
1.10 Lost, Stolen or Destroyed Certificates In the event any
certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed certificates, upon the making of an affidavit of that fact
by the holder thereof, such shares of Parent Common Stock and cash (including
for fractional shares), if any, as may be required pursuant to Section 1.6;
provided, however, that Parent may, in its reasonable discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against Parent
or the Exchange Agent with respect to the certificates alleged to have been
lost, stolen or destroyed.
1.11 Tax Consequences It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code (and this Agreement is intended to constitute a plan of reorganization
for purposes of Section 368 of the Code). Each party hereto has consulted with
and relied on its own tax counsel with respect to this Agreement, including,
without limitation, any tax consequences and treatment of the transactions
contemplated hereunder.
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 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 and
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referencing a specific representation supplied by the Company to Parent (the
"Company Schedules"), as follows:
2.1 Organization and Qualification The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. 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 (or other form of entity, as applicable) in each
jurisdiction in which the failure to be so qualified or licensed would have a
material adverse effect on the business, assets (including intangible assets),
financial condition, operations, results of operations or sales prospects of the
Company (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.
2.2 Subsidiaries The Company does not have any subsidiaries or
affiliated companies and does not otherwise own, directly or indirectly, any
shares of capital stock or any equity, debt or similar interest in or any
interest convertible, exchangeable or exercisable for any equity, debt or
similar interest in, or control, directly or indirectly, any other corporation,
partnership, association, joint venture or other business entity. The Company
has not agreed nor is Company obligated to make or be bound by any written, oral
or other agreement, contract, sub-contract, lease, binding understanding,
instrument, note, option, warranty, purchase order, license, sub-license,
insurance policy, benefit plan, commitment or undertaking of any nature, as of
the date hereof or as may hereafter be in effect under which it may become
obligated to make, any future investment in or capital contribution to any other
entity.
2.3 Company Capital Structure
(a) The authorized capital stock of the Company consists of 20,000
shares of authorized Common Stock, no par value per share, of which 14,805
shares are issued and outstanding. 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). Schedule 2.3(a) also indicates for each Company stockholder whether any
shares of Company Capital Stock held by such stockholder are subject to a
repurchase right in favor of the Company, the lapsing schedule for any such
restricted shares, including the extent to which any such repurchase right has
lapsed as of the date of this Agreement and whether (and to what extent) the
lapsing will be accelerated by the transactions contemplated by this Agreement.
All outstanding shares of Company Capital Stock are duly authorized, validly
issued, fully paid and non-assessable and not subject to preemptive rights
created by statute, the Certificate of Incorporation or Bylaws of the Company or
any agreement to which the Company is a party or by which it is bound. All
issued and outstanding shares of Company Capital Stock have been offered, sold
and delivered by the Company in compliance with applicable federal and state
securities laws.
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(b) The Company has reserved 1,000 shares of Common Stock for issuance
to employees and consultants pursuant to the Option Plan, of which 150 shares
were subject to an outstanding, unexercised option issued to Xxxxxxx Xxxxxxxx on
or about April 10, 2000 (the "Xxxxxxxx Option"). The Xxxxxxxx Option shall
terminate at the Effective Time. There have been no grants or issuances of
options under the Option Plan except for the Xxxxxxxx Option and as of the
Effective Time there shall be no outstanding options (whether or not
exercisable) under the Option Plan. Any and all option grants to Xxxxxxxxx.xxx
shall have also been exercised in full or terminated as of the Effective Time.
The Company has made available to Parent accurate and complete copies of all
stock option plans pursuant to which the Company has granted such Company
Options that are currently outstanding and the form of all stock option
agreements evidencing such Company Options. There are no commitments or
agreements of any character to which the Company is bound obligating the Company
to accelerate the vesting of any Company Option as a result of the Merger. As 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 or be issued, delivered
or sold, Company Capital Stock.
(c) Except for the Xxxxxxxx Option (to be terminated), 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 date of this Agreement, except as contemplated by this
Agreement, there are no registration rights agreements, or voting trust, proxy
or other 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 The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company. The Company's
Board of Directors and stockholders have each 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.
2.5 No Conflict Except as set forth on Schedule 2.5, the execution and
delivery of this Agreement by the Company does not, and, as of the Effective
Time, the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under (any
such event, a "Conflict") (a) any provision of the Certificate of Incorporation
or Bylaws of the Company, (b) any material indenture, mortgage, lease, contract
or other agreement or instrument, permit, concession, franchise, license,
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judgment, order or decree applicable to the Company or its properties or assets
or (c) any statute, law, ordinance, rule or regulation applicable to the Company
or its properties or assets.
2.6 Consents No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") 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 unaudited internal balance sheets as of December
31, 1999 and as of December 31, 1998 and the related unaudited internal
statement of income for the respective twelve-month periods then ended (the
"Company Year-End Financials") and the Company's unaudited internal balance
sheet as of March 31, 2000 and the related unaudited internal statement of
income for the three-month period then ended (the "Company Interim Financials,"
the Company Year End Financials and the Company Interim Financials shall be
collectively referred to as the "Company Financials"). The Company 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 subject to normal year-end
adjustments. The Company 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 March 31, 2000 shall be referred to herein as the "Current Company Balance
Sheet."
2.8 No Undisclosed Liabilities Except as set forth in Schedule 2.8, the
Company does not have any liability, indebtedness, obligation, expense, claim,
deficiency, guaranty or endorsement of any type (other than obligations of
continued performance expressly set forth in those executory Contracts listed in
the Company Schedules and not arising from any breach or default by the
Company), whether accrued, absolute, contingent, matured, unmatured, liquidated,
unliquidated or other (whether or not required to be reflected in financial
statements in accordance with GAAP), which individually or in the aggregate, has
not been reflected in the Current Company Balance Sheet (or the Company
Schedules in the case of such obligations under executory Contracts).
2.9 No Changes Except as set forth in Schedule 2.9, since March 31, 2000
and through the date of this Agreement, there has not been, occurred or arisen
any:
(a) 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;
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(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, principles or practices (including
any change in depreciation or amortization policies or rates) by the Company;
(f) revaluation by the Company of any of its material assets,
including, without limitation, writing down the value of capitalized inventory
or writing off material notes or material accounts receivable;
(g) declaration, setting aside or payment of a dividend or other
distribution with respect to any Company Capital Stock, or any direct or
indirect redemption, purchase or other acquisition by the Company of any Company
Capital Stock;
(h) split, combination or reclassification of any Company Capital
Stock;
(i) 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 account receivable
of the Company;
(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,
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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 for the Xxxxxxxx Option, 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 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.
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(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 its
incorporation.
(vii) There are (and as of immediately following the Closing there
will be) no liens, pledges, charges, claims, restrictions on transfer,
mortgages, security interests or other encumbrances of any sort (collectively,
"Liens") on the assets of the Company relating to or attributable to Taxes,
other than Liens for Taxes not yet due and payable as of such time.
(viii) To the Company's knowledge, there is no basis for the
assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company.
(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.
(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.
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(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 Capital Stock has been distributed in a transaction satisfying the
requirements of Section 355 of the Code.
2.11 Restrictions on Business Activities Except as set forth in Schedule
2.14(n), there is no agreement (noncompete or otherwise), judgment, injunction,
order or decree to which the Company is a party or otherwise binding upon the
Company which has or reasonably would be expected to have the effect of
prohibiting or impairing any business practice of the Company, any acquisition
of property (tangible or intangible) by the Company or the conduct of business
by the Company. Without limiting the foregoing, the Company has not entered into
any agreement under which the Company is restricted from selling, licensing or
otherwise distributing any of its products or services to any class of
customers, in any geographic area, during any period of time or in any segment
of the market.
2.12 Title to Properties; Absence of Liens and Encumbrances
(a) The Company does not own any real property, nor has it ever owned
any real property. Schedule 2.12(a) sets forth a list of all real property
currently leased by the Company, the name of the lessor and the date of the
lease and each amendment thereto and with respect to any current lease, the
aggregate annual rent. The Company has provided true and complete copies of all
real property leases and amendments thereto to Parent. All such current leases
are 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 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 in the aggregate have a Material Adverse Effect on the
Company.
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(d) The Company has not sold or otherwise released for distribution
any of its customer files and other customer information relating to the
Company's current and former customers (the "Company Customer Information"). No
person other than the Company possesses any claims or rights with respect to use
of the Company Customer Information.
2.13 Governmental Authorization Schedule 2.13 accurately lists each
material consent, license, permit, grant or other authorization issued to the
Company by a Governmental Entity (a) pursuant to which the Company currently
operates or holds any interest in any of its properties or (b) which is required
for the operation of its business or the holding of any such interest (herein
collectively called "Company Authorizations"). The Company Authorizations are in
full force and effect and constitute all Company Authorizations required to
permit the Company to operate or conduct its business or hold any interest in
its properties or assets. The Company is in compliance in all material respects
with the terms of each Company Authorization.
2.14 Intellectual Property
(a) Definitions. For all purposes of this Agreement, the following
terms shall have the following respective meanings:
(i) "Technology" shall mean any or all of the following: (A) works
of authorship including, without limitation, computer programs, source code and
executable code, whether embodied in software, firmware or otherwise,
documentation, designs, files, net lists, records, data and mask works; (B)
inventions (whether or not patentable), improvements and technology; (C)
proprietary and confidential information, including technical data and customer
and supplier lists, trade secrets and know how; (D) databases, data compilations
and collections and technical data; (E) logos, trade names, trade dress,
trademarks and service marks; (F) World Wide Web addresses, domain names and
sites; (G) tools, methods and processes; and (H) all instantiations of the
foregoing in any form and embodied in any media.
(ii) "Intellectual Property Rights" shall mean any or all of the
following and all rights in, arising out of, or associated therewith: (A) all
United States and foreign patents and utility models and applications therefor
and all reissues, divisions, re-examinations, renewals, extensions,
provisionals, continuations and continuations-in-part thereof and equivalent or
similar rights anywhere in the world in inventions and discoveries including
without limitation invention disclosures ("Patents"); (B) all trade secrets and
other rights in know-how and confidential or proprietary information; (C) all
copyrights, copyrights registrations and applications therefor and all other
rights corresponding thereto throughout the world ("Copyrights"); (D) all mask
works, mask work registrations and applications therefor, and any equivalent or
similar rights in semiconductor masks, layouts, architectures or topology
("Maskworks"); (E) all industrial designs and any registrations and applications
therefor throughout the world; (F) all rights in World Wide Web addresses and
domain names and applications and registrations therefor; (G) all trade names,
logos, common law trademarks and service marks, trademark and service 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.
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(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.
(b) Schedule 2.14(b) lists all Registered Intellectual Property Rights
owned by, filed in the name of, or applied for, by the Company (the "Company
Registered Intellectual Property Rights") and lists any proceedings or actions
before any court, tribunal (including the United States Patent and Trademark
Office (the "PTO") or equivalent authority anywhere in the world) related to any
of the Company Registered Intellectual Property Rights or Company Intellectual
Property.
(c) Except as set forth in Schedule 2.14(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(c), there are no actions that must be taken by the Company within one
hundred twenty (120) days of the Closing Date, including the payment of any
registration, maintenance or renewal fees or the filing of any responses to PTO
office actions, documents, applications or certificates for the purposes of
obtaining, maintaining, perfecting or preserving or renewing any Registered
Intellectual Property Rights. Except as set forth in Schedule 2.14(c), in each
case in which the Company has acquired any Technology or Intellectual Property
Right from any person, the Company has obtained a valid and enforceable
assignment sufficient to irrevocably transfer all rights in such Technology and
the associated Intellectual Property Rights (including the right to seek past
and future damages with respect thereto) to the Company. To the maximum extent
provided for by, and in accordance with, applicable laws and regulations, the
Company has recorded each such assignment of a Registered Intellectual Property
Right assigned to the Company with the relevant domestic Governmental Entity,
including the PTO and the U.S. Copyright Office. Except as set forth on Schedule
2.14(c), the Company has not claimed a particular status, including "Small
Business Status," in the application for any Intellectual Property Rights, which
claim of status was not at the time made, or which has since become, inaccurate
or false or that will no longer be true and accurate as a result of the Closing.
(d) The Company has no knowledge of any facts or circumstances that
would render any Company Intellectual Property invalid or unenforceable. Without
limiting the foregoing,
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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 affect 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 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; (ii) the
Company owns exclusively, and has good title to, all copyrighted works that are
products of the Company or which the Company otherwise purports to own; and
(iii) to the extent that any Patents would otherwise be infringed by any product
or services of the Company, such Patents constitute Company Intellectual
Property.
(f) Except as set forth in Schedule 2.14(f), all Company Intellectual
Property will be fully transferable, alienable or licensable by Surviving
Corporation and/or Parent without restriction (except that any such transfer,
alienation or license shall be subject to non-exclusive licenses granted to
end-users in the ordinary course of the Company's business prior to the Merger
and disclosed in the Company Schedules) 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(h) and with the exception of
"shrink-wrap" or similar widely-available commercial end-user licenses, all
Technology used in or necessary to the conduct of Company's business as
presently conducted or currently contemplated to be conducted by the Company was
written and created solely by either (i) employees of the Company acting within
the scope of their employment or (ii) by third parties who have validly and
irrevocably assigned all of their rights, including Intellectual Property Rights
therein, to the Company, and no third party owns or has any rights to any of the
Company Intellectual Property.
(i) Except as set forth in Schedule 2.14(i), all current and former
employees of the Company and current and former consultants and contractors
engaged by the Company have entered into a valid and binding written proprietary
information confidentiality and assignment
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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 in Schedules 2.14(j) and (i), the Company has
taken all steps that are reasonably required to protect the Company's rights in
confidential information and trade secrets of the Company or provided by any
other person to the Company.
(k) Except as set forth on Schedule 2.14(k) and except for
"shrink-wrap" or similarly widely available commercial end-user licenses, no
person who has licensed Technology or Intellectual Property Rights to the
Company has ownership rights or license rights to improvements made by the
Company in such Technology or Intellectual Property Rights.
(l) The Company has not transferred ownership of, or granted any
exclusive license of or right to use, or authorized the retention of any
exclusive rights to use or joint ownership of, any Technology or Intellectual
Property Right that is or was Company Intellectual Property, to any other
person.
(m) Other than inbound "shrink-wrap" and similar publicly available
commercial binary code end-user licenses and outbound "shrink-wrap" licenses in
the form set forth on Schedule 2.14(m), the contracts, licenses and agreements
listed on Schedule 2.14(m) list 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.
(n) Schedule 2.14(n) lists all material contracts, licenses and
agreements between the Company and any other person wherein or whereby the
Company has agreed to, or assumed, any obligation or duty to warrant, indemnify,
reimburse, hold harmless, guaranty or otherwise assume or incur any obligation
or liability or provide a right of rescission with respect to the infringement
or misappropriation by the Company or such other person of the Intellectual
Property Rights of any person other than the Company.
(o) To the knowledge of the Company, there are no contracts, licenses
or agreements between the Company and any other person with respect to Company
Intellectual Property under which there is any dispute regarding the scope of
such agreement, or performance under such agreement, including with respect to
any payments to be made or received by the Company thereunder.
(p) The operation of the business of the Company as it currently is
conducted by the Company, including but not limited to the design, development,
use, import, branding, advertising, promotion, marketing, manufacture and sale
of the products, technology or services (including products, technology or
services currently under development) of the Company does not and, to the
knowledge of the Company, will not and will not when conducted by Parent and/or
Surviving Corporation in substantially the same manner following the Closing,
infringe or
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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).
(q) To the Company's knowledge, no person is infringing or
misappropriating any Company Intellectual Property Right.
(r) No Company Intellectual Property or service of the Company is
subject to any proceeding or outstanding decree, order, judgment or settlement
agreement or stipulation that restricts in any manner the use, transfer or
licensing thereof by the Company or may affect the validity, use or
enforceability of such Company Intellectual Property.
(s) 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.
(t) Except for Technology or Intellectual Property subject to "shrink
wrap" or similar widely available commercial end user licenses and as set forth
on Schedule 2.14(t), the Company Intellectual Property constitutes all the
Technology and Intellectual Property Rights used in and/or necessary to the
conduct of the business of the Company as it currently is conducted, including,
without limitation, the design, development, manufacture, use, import and sale
of products, technology and performance of services.
(u) Except to the extent resulting from the continuation of Contracts
of the Company following the Closing on the terms applicable prior to the
Closing, and except as set forth on Schedule 2.14(u), neither this Agreement nor
the transactions contemplated by this Agreement, including the assignment to
Parent or Surviving Corporation, by operation of law or otherwise, of any
contracts or agreements to which the Company is a party, will result in (i)
either Parent's or the Surviving Corporation's granting to any third party any
right to or with respect to any Technology or Intellectual Property Right owned
by, or licensed to, either of them, (ii) either the Parent's or the Surviving
Corporation's being bound by, or subject to, any non-compete or other
restriction on the operation or scope of their respective businesses or (iii)
either the Parent's or the Surviving Corporation's being obligated to pay any
royalties or other amounts to any third party in excess of those payable by
Parent, the Company or Surviving Corporation, respectively, prior to the
Closing.
(v) All of the Company's products (including products currently under
development): (i) record, store, process, calculate and present calendar dates
falling on and after (and if applicable, spans of time including) January 1,
2000, and calculate any information dependent on or relating to such dates in
the same manner, and with the same functionality, data integrity and
performance, as the products recorded, stored, processed, calculated and
presented calendar dates on or before December 31, 1999, or calculate any
information dependent on or relating to such dates
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(collectively, "Year 2000 Compliant"); (ii) lose no functionality with respect
to the introduction of records containing dates falling on or after January 1,
2000; and (iii) will be interoperable with other products used and distributed
by Parent that may reasonably deliver records to the Company's products or
receive records from the Company's products, or interact with the Company's
products, including but not limited to back-up and archived data. All of the
Company's Information Technology (as defined below) is Year 2000 Compliant, and
will not cause an interruption in the ongoing operations of the Company's
business on or after January 1, 2000. For purposes of the foregoing, the term
"Information Technology" shall mean and include all software, hardware,
firmware, telecommunications systems, network systems, embedded systems and
other systems, components and/or services (other than general utility services
including gas, electric, telephone and postal) that are owned or used by the
Company in the conduct of its business, or purchased by the Company from third
party suppliers.
2.15 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. Except as disclosed in Schedule
2.15, 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. Schedule 2.15 includes 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 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;
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(e) any fidelity or surety bond or completion bond;
(f) any lease of personal property having a value individually in
excess of $10,000;
(g) any agreement of indemnification or guaranty;
(h) any agreement, contract or commitment containing any covenant
limiting in any respect the right of Company to engage in any line of business
or to compete with any person or granting any exclusive distribution rights;
(i) any agreement relating to capital expenditures and involving
future payments in excess of $10,000;
(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 (g) hereof;
(l) any purchase order or contract involving $10,000 or more;
(m) any construction contracts;
(n) any dealer, distribution, joint marketing (including any pilot
program), development, content provider, destination site or merchant agreement;
(o) any agreement pursuant to which the Company has granted or may be
obligated to grant in the future, to any party a source-code license or option
or other right to use or acquire source-code, including any agreements which
provide for source code escrow arrangements;
(p) any sales representative, original equipment manufacturer, value
added, remarketer or other agreement for distribution of the Company's products
or services or the products or services of any other person or entity;
(q) any agreement pursuant to which the Company has advanced or loaned
any amount to any stockholder of the Company or any director, officer, employee
or consultant other than business travel advances in the ordinary course of
business consistent with past practice;
(r) any settlement agreement that provides for continuing obligations
of the Company; or
(s) any other agreement that involves $10,000 or more or is not
cancelable without penalty within thirty (30) days.
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Except as set forth on Schedule 2.16(b), the Company has not breached,
violated or defaulted under, or received notice that it has breached, violated
or defaulted under, any of the terms or conditions of any agreement, contract or
commitment required to be set forth on Schedule 2.16(a), Schedule 2.14(m) or
Schedule 2.14(n) (any such agreement, contract or commitment, a "Contract").
Each Contract is in full force and effect and, except as otherwise disclosed in
Schedule 2.16(b), is not subject to any default thereunder of which the Company
has knowledge by any party obligated to the Company pursuant thereto.
2.17 Change of Control Payments Schedule 2.17 sets forth each plan or
agreement pursuant to which any amounts may become payable (whether currently or
in the future) to current or former officers, directors or employees of the
Company as a result of or in connection with the Merger.
2.18 Interested Party Transactions Except as set forth on Schedule 2.18,
to the Company's knowledge, no officer, director or Company Affiliate (as
defined under Regulation C under the Securities Act) of the Company (nor any
ancestor, sibling, descendant or spouse of any of such persons, or any trust,
partnership or corporation in which any of such persons has or has had an
economic interest), has or has had, directly or indirectly, (a) an economic
interest in any entity that is a competitor of the Company or (b) a beneficial
interest in any contract or agreement set forth in Schedule 2.16(a), Schedule
2.14(m) or Schedule 2.14(n); provided, that ownership of no more than one
percent of the outstanding voting stock of a publicly traded corporation shall
not be deemed an "economic interest in any entity" for purposes of this Section
2.18. Except as set forth on Schedule 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).
Except as set forth in Schedule 2.18, none of the Company stockholders has
agreed to, or assumed, any obligation or duty to guaranty or otherwise assume or
incur any obligation or liability of the Company.
2.19 Compliance with Laws The Company is not in conflict in any material
respect with, or in default or violation of any law, rule, regulation, order,
judgment or decree applicable to the Company or by which its properties are
bound or affected. To the knowledge of the Company, no investigation or review
by any governmental or regulatory body or authority is pending or threatened
against the Company, nor has any governmental or regulatory body or authority
indicated 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 in 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, nor, to the knowledge of the Company, is there any reasonable
basis therefor. To the Company's knowledge, there is no investigation pending or
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threatened against the Company, its properties or any of its officers, directors
or employees by or before any Governmental Entity. Schedule 2.20 sets forth,
with respect to any pending or threatened action, suit, proceeding or
investigation, the forum, the parties thereto, the subject matter thereof and
the amount of damages claimed or other remedy requested. No Governmental Entity
has at any time challenged or questioned the legal right of the Company to
conduct its operations as presently or previously conducted.
2.21 Insurance 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 stockholders or actions
by written consent since the time of incorporation of the Company through the
date hereof.
2.23 Environmental Matters The Company (a) has obtained all applicable
and material permits, licenses and other authorizations that are required under
Environmental Laws; (b) 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,
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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. Except as set forth on Schedule 2.24, the
Company has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby. Attached to Schedule 2.24 are copies of any written agreements and the
summary of terms for any oral agreements with respect to such fees.
2.25 Employee Matters and Benefit Plans
(a) Definitions. With the exception of the definition of "Company
Affiliate" set forth in Section 2.25(a)(i) 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) "Company Affiliate" shall mean any other person or entity
under common control with the Company within the meaning of Section 414(b), (c),
(m) or (o) of the Code and the regulations thereunder and include (without
limitation) the Subsidiaries;
(ii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iii) "Company Employee Plan" shall refer to any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written or otherwise, funded or
unfunded, including without limitation, each "employee benefit plan", within the
meaning of Section 3(3) of ERISA which is or has been maintained, contributed
to, or required to be contributed to, by the Company or any Company Affiliate
for the benefit of any Employee (as defined below), or with respect to whether
the Company has or may have any liability or obligation;
(iv) "DOL" shall mean the United States Department of Labor.
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(v) "Employee" shall mean any current, former, or retired
employee, officer, director or consultant of the Company or any Company
Affiliate;
(vi) "Employee Agreement" shall mean each management,
employment, indemnification, severance, termination, consulting, relocation,
repatriation, expatriation, visa, work permit or other agreement, contract or
understanding between the Company or any Company Affiliate and any Employee;
(vii) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993, as
amended;
(ix) "IRS" shall mean the Internal Revenue Service;
(x) "Multiemployer Plan" shall mean any "Pension Plan" (as
defined below) which is a "multiemployer plan", as defined in Section 3(37) of
ERISA; and
(xi) "Pension Plan" shall refer to each Company Employee Plan
which is an "employee pension benefit plan", within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Schedule 2.25(b) contains an accurate and complete list
of each Company Employee Plan and each Employee Agreement. 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
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insurance contracts; (viii) all communications material to any Employee or
Employees relating to any Company Employee Plan and any proposed Company
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to the Company; (ix) all correspondence to or from any governmental agency
relating to any Company Employee Plan; (x) all COBRA forms and related notices;
(xi) all policies pertaining to fiduciary liability insurance covering the
fiduciaries of for each Company Employee Plan; (xii) all discrimination tests
for each Company Employee Plan for the most recent plan year; and (xiii) all
registration statements, annual reports (Form 11-K and all attachments thereto)
and prospectuses prepared in connection with each Company Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule 2.25(d),
(i) the Company has performed in all material respects all obligations required
to be performed by it under, is not in default or violation of, and has no
knowledge of any default or violation of any other party to, each Company
Employee Plan, and each Company Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) each Company Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code has either received a favorable
determination, opinion, notification or advisory letter from the IRS with
respect to each such Company Employee Plan as to its qualified status under the
Code, including all amendments to the Code effected by the Tax Reform Act of
1986 and subsequent legislation, or has a period of time remaining under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a letter and make any amendments necessary to obtain a favorable determination
as to the qualified status of each such Company Employee Plan; (iii) no
"prohibited transaction", within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of
ERISA, has occurred with respect to any Company Employee Plan; (iv) there are no
actions, suits or claims pending, or, to the knowledge of the Company threatened
(other than routine claims for benefits) against any Company Employee Plan or
against the assets of any Company Employee Plan; and (v) each Company Employee
Plan can be amended, terminated or otherwise discontinued after the Effective
Time in accordance with its terms, without liability to the Company, Parent or
any of its Company Affiliates (other than ordinary administration expenses
typically incurred in a termination event); (vi) there are no audits, inquiries
or proceedings pending or, to the knowledge of the Company or any Company
Affiliates, threatened by the IRS or DOL with respect to any Company Employee
Plan; and (vii) neither the Company nor any Company Affiliate is subject to any
penalty or tax with respect to any Company Employee Plan under Section 501(i) of
ERISA or Section 4975 through 4980 of the Code.
(e) Pension Plans. Neither the Company nor any Company Affiliate has
ever maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company or any Company
Affiliate contributed to or been requested to contribute to any Multiemployer
Plan.
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(g) No Post-Employment Obligations. Except as set forth in Schedule
2.25(g), no Company Employee Plan provides, or reflects or represents any
liability to provide, life insurance, health or other employee benefits to any
person upon his or her retirement or termination of employment for any reason,
except as may be required by statute, and the Company has never represented,
promised or contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) that such Employee(s) or any other
person would be provided with life insurance, health or other employee welfare
benefits upon their retirement or termination of employment, except to the
extent required by statute.
(h) COBRA. Neither the Company nor any Company Affiliate has, prior to
the Effective Time, violated any of the health care continuation requirements of
COBRA, the requirements of FMLA, the requirements of the Women's Healthcare
Cancer Rights Act, the requirements of the Newborns' and Mothers' Health
Protection Act of 1996 or any similar provisions of state law applicable to its
Employees.
(i) Effect of Transaction.
(i) Except as provided in Section 1.6 of this Agreement or as set
forth on Schedule 2.25(i)(i), the execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Company Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, indemnification, increase in
benefits or obligation to fund benefits with respect to any Employee.
(ii) Except as set forth on Schedule 2.25(i)(ii), no payment or
benefit which will or may be made by the Company or Parent or any of their
respective affiliates with respect to any Employee resulting from the
transactions contemplated by this Agreement or otherwise will be characterized
as a "parachute payment", within the meaning of Section 280G(b)(2) of the Code.
(j) Employment Matters. Schedule 2.25(j) lists all current officers,
directors and employees of the Company. The Company (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees (including any immigration laws with respect to the same); (ii) is not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing; and (iii) is not liable for any payment to any
trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice). Each person who is
acting or has acted as a consultant to the Company is acting or acted as an
"independent contractor" and could not, based on the facts and circumstances of
his consultancy, reasonably be deemed to be or have been "employed" with the
Company. Schedule 2.25(j) also sets forth all outstanding offers of employment,
whether written or oral, made to any employee or prospective employee, which
offer has not been rejected by the offeree.
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(k) Labor. No work stoppage or labor strike against the Company is
pending or has been threatened. The Company does not know of any activities or
proceedings of any labor union to organize any Employees. Except as set forth in
Schedule 2.25(k), there are no actions, suits, claims, labor disputes or
grievances pending, or, to the knowledge of the Company, threatened relating to
any labor, safety or discrimination matters involving any Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in any material liability to the Company. The Company has not
engaged in any unfair labor practices within the meaning of the National Labor
Relations Act. Except as set forth in Schedule 2.25(k), the Company is not
presently, nor has it been in the past, a party to, or bound by, any collective
bargaining agreement or union contract with respect to Employees and no
collective bargaining agreement is being negotiated by the Company.
(l) No Interference or Conflict. To the knowledge of the Company, no
stockholder, officer, employee or consultant of the Company is obligated under
any contract or agreement 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 Accounts Receivable The receivables shown on the Current Company
Balance Sheet arose in the ordinary course of the Company's business and
represent bona fide business arrangements; no payor of any account receivable in
excess of $2,500 has given the Company written notice of any inability to pay
such account receivable in due course or any claim or defense against payment of
any such account receivable. The receivables of the Company arising after the
date of the Current Company Balance Sheet and prior to the Closing Date arose or
will arise in the ordinary course of the Company's business and represent bona
fide business arrangements; no payor of any account receivable in excess of
$2,500 has given the Company written notice of any inability to pay such account
receivable in due course or any claim or defense against payment of any such
account receivable. No person has any lien on any of such receivables, except as
set forth on Schedule 2.27, and no agreement for deduction or discount has been
made with respect to any of such receivables.
2.28 Indemnification Obligations The Company has no knowledge of any
action, proceeding or other event pending or threatened against any officer or
director of the Company that would give rise to any indemnification obligation
of Company to its officers and directors under its
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Certificate of Incorporation, Bylaws or any agreement between the Company and
any of its officers or directors.
2.29 Dissolution of LLC 600 Monkeys, L.L.C. (the "LLC") has been dissolved
in accordance with applicable law. All right, title and interest in and to the
assets and properties (including the intellectual property) formerly held by the
LLC were assigned, transferred and conveyed by the LLC and its members to the
Company.
2.30 Representations Complete None of the representations or warranties
made by the Company (as modified by the Company Schedules), nor any statement
made in any Schedule or certificate furnished by the Company pursuant to this
Agreement, or furnished in or in connection with the Information Statement or
other documents mailed or delivered to the stockholders of the Company in
connection with soliciting their consent to the principal terms of this
Agreement and the Merger (to the extent that such documents were prepared by or
include information provided by the Company), contains or will contain at the
Effective Time, any untrue statement of a material fact, or omits or will omit
at the Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 Organization, Good Standing and Qualifications of Parent and Merger Sub
Parent is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of Parent and Merger Sub has the corporate power to own its
properties and to carry on its business as now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified would have a material adverse effect on Parent or
Merger Sub or the ability of either to consummate the transactions contemplated
hereby.
3.2 Authority Parent and Merger Sub have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub. This
Agreement has been duly executed and delivered by Parent and Merger Sub and
constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable in accordance with its terms.
3.3 No Conflict The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a benefit under (a) any provision
of the Certificate of Incorporation or Bylaws of Parent or Merger Sub or (b) any
indenture,
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mortgage, lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
representation applicable to Parent or on which Parent's business, financial
condition, operations or prospects is substantially dependent, the breach,
violation, default, termination or forfeiture of which would result in a
material adverse effect upon the ability of Parent or Merger Sub to consummate
the Merger, or a material adverse effect on Parent or Merger Sub.
3.4 Consents No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Parent or Merger Sub in connection with the execution and
delivery of this Agreement by Parent and Merger Sub or the consummation by
Parent and Merger Sub of the transactions contemplated hereby except for (a) the
filing of the Certificate of Merger with the Delaware Secretary of State, and
(b) such consents, approvals, order, authorizations, registrations, declarations
and filings as may be required under applicable state and federal securities
laws.
3.5 Parent Common Stock The shares of Parent Common Stock to be issued
pursuant to the Merger and upon exercise of any Company Options assumed by
Parent hereunder will, when issued and delivered in accordance with this
Agreement, be duly authorized, validly issued, fully paid and non-assessable;
provided, however, that the Parent Common Stock to be issued hereunder will be
subject to restrictions on transfer under applicable federal and state
securities laws.
3.6 SEC Filings; Parent Financial Statements
(a) Parent has filed all forms, reports, and documents required to be
filed by Parent with the SEC and has made available to the Company such forms,
reports, and documents in the form filed with the SEC. All such required forms,
reports and documents (including those that Parent may file subsequent to the
date hereof until the Closing) are referred to herein as the "Parent SEC
Reports." As of their respective filing dates, the Parent SEC Reports complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Parent SEC Reports. The Parent SEC Reports, this
Agreement, the exhibits and schedules hereto, and any certificates or documents
to be delivered to the Company pursuant to this Agreement, when taken together,
do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the consolidated financial statements of Parent (including,
in each case, the notes thereto), included in the Parent SEC Reports (the
"Parent Financial Statements"), including each Parent SEC Report filed after the
date hereof until the Closing, (i) complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto; (ii)
was prepared in accordance with GAAP applied on a consistent basis throughout
the periods indicated (except as may be indicated in the notes thereto or, in
the case of unaudited statements, as may be permitted by the SEC on Form 10-Q
under the Exchange Act); and (iii) fairly presented the consolidated financial
position of Parent and its subsidiaries at the respective dates thereof and the
consolidated results of Parent's operations and cash flows for the periods
indicated (subject, in the
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case of unaudited financial statements, to normal audit adjustments). There has
been no change in Parent's accounting policies except as described in the notes
to the Parent Financial Statements.
ARTICLE IV
SECURITIES LAW COMPLIANCE
4.1 Securities Act Exemption. The Parent Common Stock to be issued
pursuant to this Agreement initially will not be registered under the Securities
Act in reliance on the exemptions from the registration requirements of Section
5 of the Securities Act set forth in Section 4(2) or Rule 506 thereof. Prior to
the Closing Date, each of the Company's stockholders shall have provided Parent
such representations, warranties, certifications and additional information as
Parent may reasonably request to ensure the availability of such exemptions from
the registration requirements of the Securities Act.
4.2 Stock Restrictions. In addition to any legend imposed by applicable
state securities laws or by any contract that continues in effect after the
Effective Time, the certificates representing the shares of Parent Common Stock
issued pursuant to this Agreement shall bear a restrictive legend (and stop
transfer orders shall be placed against the transfer thereof with Parent's
transfer agent), stating substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"). THEY MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OR
HYPOTHECATED EXCEPT IN COMPLIANCE WITH RULE 144 IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, OR AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT, OR A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION.
4.3 The Company Stockholders' Restrictions Regarding Securities Law
Matters. Each stockholder of the Company, by virtue of the Merger and the
conversion into Parent Common Stock of the Company Capital Stock held by such
stockholder, shall be bound by the following provisions:
(a) Such stockholder will not offer, sell, or otherwise dispose of any
shares of Parent Common Stock except in compliance with the Securities Act and
the rules and regulations thereunder.
(b) Such stockholder will not sell, transfer or otherwise dispose of
any shares of Parent Common Stock unless (i) such sale, transfer or other
disposition is within the limitations of and in compliance with Rule 144
promulgated by the SEC under the Securities Act and the stockholder furnishes
Parent with reasonable proof of compliance with such Rule, (ii) in the opinion
of counsel, reasonably satisfactory to Parent and its counsel, some other
exemption from registration
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under the Securities Act is available with respect to any such proposed sale,
transfer, or other disposition of Parent Common Stock or (iii) the offer and
sale of Parent Common Stock is registered under the Securities Act.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Access to Information The Company shall afford Parent and its
accountants, legal counsel and other representatives reasonable access during
normal business hours during the period prior to the Effective Time to (a) all
of the properties, books, contracts, commitments and records of the Company and
(b) all other information concerning the business, properties and personnel of
the Company as Parent may reasonably request. The Company agrees to provide
Parent and its accountants, legal counsel and other representatives copies of
internal financial statements promptly upon request. No information or knowledge
obtained in any investigation pursuant to this Section 5.1 shall affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger.
5.2 Public Disclosure Unless otherwise required by law (including,
without limitation, securities laws) or, as to Parent, by the rules and
regulations of the Nasdaq National Market, prior to the Effective Time, no
disclosure (whether or not in response to an inquiry) of the subject matter of
this Agreement shall be made by any party hereto (other than disclosures to
Company stockholders pursuant to Section 5.2) unless approved by Parent and the
Company prior to release, provided that such approval shall not be unreasonably
withheld. Parent has not filed a Form 8-K relating to this Agreement as of the
Closing. The parties have agreed to the text of the joint press release
announcing the signing of this Agreement.
5.3 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.
5.4 Best Efforts; Additional Documents and Further Assurances Each of
the parties agrees to use its best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Merger and
the other transactions contemplated by this Agreement, including using best
efforts to accomplish the following: (a) the taking of all acts necessary to
cause the conditions precedent set forth in Article VI to be satisfied, (b) the
defending of any suits, claims, actions, investigations or proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by
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any court or other Governmental Entity vacated or reversed and (c) the execution
or delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement.
5.5 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 5.5 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.
5.6 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.
5.7 Nasdaq National Market Parent shall authorize for listing on the
Nasdaq National Market the shares of Parent Common Stock issuable in connection
with the Merger, upon official notice of issuance and shall take all other acts
as necessary or appropriate to cause such shares to become and remain so listed.
5.8 Blue Sky Laws Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions that are
applicable to the issuance of the Parent Common Stock pursuant hereto. The
Company shall use its best efforts to assist Parent as may be necessary to
comply with the securities and blue sky laws of all jurisdictions that are
applicable in connection with the issuance of Parent Common Stock pursuant
hereto.
5.9 Benefit Arrangements
(a) Parent will consult with the Founders (as defined below) 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 other than the Founders. Such employees of the Company
who have accepted Parent's offer of employment and will continue immediately
following the Closing as employees of Parent or the Surviving Corporation
following the Closing Date are listed on Schedule 5.9 and are referred to
hereinafter as "Continuing Employees." Terms of employment offered to Continuing
Employees will include compensation and options to purchase Parent Common Stock
as set forth on Schedule 5.9, and the ability to participate in Parent employee
benefit plans, 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
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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, Continuing Employees will be eligible for grants
of options to purchase shares of Parent Common Stock as set forth in Schedule
5.9. Twenty-five percent (25%) of the options granted to each Continuing
Employee shall vest on the one-year anniversary of the Closing Date, with 1/48th
of such options to vest each month following the Closing Date. The exercise
price of such options shall be based on the closing market price of Parent
Common Stock as of the Closing Date.
(c) At the Effective Time Parent shall pay $100,000 to each of Xxxxx
Xxxxxx, Xxxxx Xxxxxxx and Xxxx Xxxxxxx (the "Founders") in full satisfaction of
the Company's obligations to each Founder under that certain Deferred
Compensation Plan effective January 1, 1999 between the Company and each Founder
(the "Deferred Compensation Plan").
(d) On or prior to the Closing Date, Parent and each Continuing
Employee shall negotiate and enter into mutually acceptable employment
arrangements, which shall include the applicable option and bonus provisions
described in this Section 5.9 and which shall be memorialized in an offer letter
binding upon Parent and each Continuing Employee in accordance with applicable
law.
5.10 Registration Rights Parent agrees that the stockholders of the
Company receiving Parent Common Stock in the Merger pursuant to Section 1.6(a)
hereto shall be entitled to the registration rights set forth in the Declaration
of Registration Rights attached as Exhibit C.
5.11 Tax Liabilities The Company acknowledges and agrees that neither
Parent nor the Surviving Corporation shall have any liability or obligation for
any Taxes payable by the Company or its stockholders or the LLC or its members
arising out of or related to the dissolution of the LLC and formation of the
Company.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 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) Founders' Employment. Each of the Founders shall have entered into
mutually acceptable employment arrangements with Parent effective as of the
Effective Time, which arrangements shall be memorialized in offer letters
binding upon Parent and each Founder in accordance with applicable law.
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(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 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 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 7.2(a)),
and the amount of cash payable to such holder (including for any fractional
shares).
6.2 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
on and as of the Closing Date, except for changes contemplated by this Agreement
and except for those representations and warranties which address matters only
as of a particular date (which shall remain true and correct as of such date),
with the same force and effect as if made on and as of the Closing Date, and the
Company shall have received a certificate to such effect signed on behalf of
Parent by a duly authorized officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all covenants, obligations
and conditions of this Agreement required to be performed or complied with by
them on or prior to the Closing Date, and the Company shall have received a
certificate to such effect signed by a duly authorized officer of Parent.
(c) Legal Opinion. The Company shall have received a legal opinion
from Fenwick & West LLP, counsel to Parent, in substantially the form attached
hereto as Exhibit D.
(d) Declaration of Registration Rights. Parent shall have executed and
delivered to Parent the Declaration of Registration Rights.
(e) Repayment of Loans. Parent shall have repaid, in full in cash, the
indebtedness set forth in Schedule 6.3(e) (together with accrued interest
thereon to the date of repayment), provided that the Company shall have
satisfied the conditions set forth in Section 6.3(e) and Parent shall have
received any consents to such payment, or waivers permitting such repayment, as
may be required under any agreement in effect as of the Closing Date to which
the Company is a party or by which it is bound. Parent shall not be required to
pay any amounts, or incur any obligation, to such parties or to any other party,
in connection with any such consents or waivers.
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6.3 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 Parent and Merger Sub shall have
received a certificate to such effect signed on behalf of the Company by the
President and Chief Financial Officer of the Company;
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date, and Parent and Merger Sub shall have received a certificate to such effect
signed by the President and Chief Financial Officer of the Company;
(c) 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.
(d) Legal Opinion. Parent shall have received a legal opinion from
Kahn, Kleinman, Xxxxxxxx & Xxxxxx Co., L.P.A., special counsel to the Company,
in substantially the form attached hereto as Exhibit E-1, and shall have
received a legal opinion from Xxxxxxxxxx, Xxxxx & Xxxxxxxx, Ltd., general
counsel to the Company, in substantially the form attached hereto as Exhibit
E-2.
(e) Satisfaction of Debt. Parent shall have received a letter from
each creditor listed on Schedule 6.3(e) stating the amount payable as of the
Closing Date (including principal, interest and other fees or charges) and
instructions for the payment thereof, and confirming that upon Parent's payment
of such amount such indebtedness will be fully satisfied and cancelled and that
all security interests, mortgages and liens securing such indebtedness will be
promptly released.
(f) Xxxxxxxx Xxxx Release. Parent shall have received from Xxxxxxxx
Xxxx ("Xxxxxxxx") a release of all of the Company's obligations to Xxxxxxxx
under that certain 600M License Agreement Phase Two, including the Royalty
Addendum thereto, each dated September 28, 1999, between Xxxxxxxx and the
Company.
(g) Founders' Release. Parent shall have received from each Founder a
release of any and all obligations of the Company under or in respect of the
Deferred Compensation Plan.
(h) Termination of Company Investor Rights. Parent shall have been
furnished evidence satisfactory to it that all investor rights granted by the
Company to its stockholders (and by one or more stockholders to one or more
other stockholders) and in effect prior to the Closing,
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including but not limited to rights of co-sale, voting, registration, first
refusal, board observation or information or operational covenants, shall have
terminated as of the Closing.
(i) Escrow Schedule. The Company shall have executed and delivered to
Parent the Escrow Schedule (as defined in Section 8.2 hereof).
(j) Non-Competition Agreements. The Non-Competition Agreements shall
have been duly executed and delivered to Parent.
(k) Resignations. The directors and officers of the Company in office
immediately prior to the Effective Time of the Merger shall have resigned as
directors and officers of the Company effective as of the Effective Time of the
Merger.
(l) 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. Each employment
agreement between the Company and an officer or other employee of the Company
shall have been terminated.
(m) Investor Representations. Each of the Company's stockholders shall
have executed and delivered an Investment Representation Letter in the form
provided by Parent and have otherwise fully complied with Section 4.1 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.
(n) Mowheeler Option. The option to purchase Company Common Stock
granted to Xxxxxxxxx.xxx reflected in the letter agreement dated January 27,
2000 between the Company and Mowheeler shall have been terminated in writing.
(o) Consulting Agreement. Parent and Carlton Associates, Inc.
("Carlton") shall have entered into an agreement or a modification of Carlton's
existing Service Agreement and Covenant Not to Compete with the Company dated
June 20, 1999, providing for Xxxxxxx Xxxxxxx'x provision of certain consulting
services to Parent following the Effective Time on terms acceptable to Parent
and Carlton.
(p) Xxx Xxxxxx Release. Xxx Xxxxxx Associates, Inc. ("ITA") shall have
executed a release of any and all claims and actions against (i) Parent and its
affiliates (including but not limited to Niku Acquisition Corporation as
successor to Proamics Corporation) and (ii) the Company relating to the
Agreement dated as of June 28, 1999, which agreement shall be terminated. In
connection therewith, Parent shall provide a release to ITA. Such releases shall
be in the form attached hereto as Exhibit F.
(q) Amendment of Licensing Agreements. The Company shall have entered
into amendments to its agreements with each of Access Communications and Xxxxxxx
Xxxxxx Xxxxxx XxXxxxx Xxxxxxxxxxx/EURO RSCG, in forms acceptable to Parent.
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(r) Employee Assignments of Inventions. The Company shall have caused
ITA and all current and former employees and consultants of the Company to
execute a form of assignment of intellectual property rights to the Company that
is acceptable to Parent.
(s) Assignment of Intellectual Property. The Company shall have
executed all documents requested by Parent to assign all Company Registered
Intellectual Property Rights to Parent or the Surviving Corporation.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
7.1 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 one year following the Closing Date (the "Expiration Date").
7.2 Escrow Arrangements
(a) Escrow Fund. At the Effective Time the Company's stockholders will
be deemed to have received and deposited with the Escrow Agent (as defined
below) the Escrow Amount (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 stockholder. As soon as practicable after
the Effective Time, the Escrow Amount, without any act of any Company
stockholder, will be deposited with Chase Manhattan Bank and Trust Company, N.A.
(or other institution acceptable to Parent and the Securityholder Agent (as
defined in Section 7.2(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 stockholder of the Company shall be in proportion to the aggregate
Parent Common Stock which such holder would otherwise be entitled under Section
1.6(a) and shall be in the respective share amounts and percentages listed
opposite each Company's stockholder's names listed in a schedule to be executed
by the Company and delivered to Parent at Closing (the "Escrow Schedule"). The
Escrow Fund shall be available to indemnify 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 (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 pursuant to
this Agreement), (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, (iii)
any Tax obligations of the Company arising from the dissolution of the LLC and
formation of the Company, including related asset transfers and transactions,
(iv) any actions or failure to act by the Company with respect to Clients and
Profits, Inc. and the Clients and Profits trademark, including but not limited
to claims that the Company engaged in trademark infringement or unfair
competition and (v) any state sales and use Taxes incurred but
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not paid by the Company prior to the Closing (regardless, with respect to items
(iii), (iv) and (v), of any disclosure of such matters in the Company
Schedules). 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 7.2(d) below) identifying Losses, the aggregate amount of which
exceed $50,000 (except in the case of Losses arising from intentional fraud,
willful misconduct or 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 VII 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 $50,000
threshold) for which there is no objection or any objection had been resolved in
accordance with the provisions of this Article VII; 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 VII and shall be immediately reimbursable to Parent in
accordance with this Article VII (without regard to the $50,000 minimum
threshold for Losses and without counting toward the $50,000 threshold). For
purposes of this Article VII, the phrases "Company stockholders" and
"stockholders of the Company" shall refer to the stockholders of the Company
immediately prior to the Effective Time.
(b) Escrow Period; Distribution upon Termination of Escrow Periods.
Subject to the following requirements, the Escrow Fund shall be in existence
immediately following the Effective Time and shall terminate at 5:00 p.m.,
California time, on the Expiration Date (the "Escrow Period"); provided,
however, that the Escrow Period shall not terminate with respect to such amount
(or some portion thereof), that together with the aggregate amount remaining in
the 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 7.2(g) hereof, to satisfy any
unsatisfied claims concerning facts and circumstances existing prior to the
termination of such Escrow Period specified in any Officer's Certificate
delivered to the Escrow Agent prior to termination of such Escrow Period. As
soon as all such claims have been resolved, as evidenced by written memorandum
of the Securityholder Agent and Parent, the Escrow Agent shall deliver to the
stockholders of the Company the remaining portion of the Escrow Fund not
required to satisfy such claims; provided, however, the Escrow Agent shall
release to the stockholders of the Company on the Expiration Date such portion
of the Escrow Fund that is in excess of the amount in dispute of any unsatisfied
claims. Deliveries of Escrow Amounts to the stockholders of the Company pursuant
to this Section 7.2(b) shall be made in proportion to their respective original
contributions of Parent Common Stock to the Escrow Fund (as set forth on the
Escrow Schedule). At all times during the Escrow Period, the Company
stockholders shall be deemed to be the record holders of their respective
amounts of the Parent Common Stock comprising the Escrow Amount. Securityholder
Agent (as defined below) shall provide to the Escrow Agent a current schedule of
Company stockholders' names and addresses and pro rata shares of the Escrow
Amount prior to the date of distribution of the Escrow Amount.
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(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 or other equity securities
issued or distributed by Parent (including shares issued upon a stock split or
stock dividend) ("New Shares") in respect of Parent Common Stock in the Escrow
Fund which have not been released from the Escrow Fund shall be added to the
Escrow Fund and become a part thereof. New Shares issued in respect of shares of
Parent Common Stock which have been released from the Escrow Fund shall not be
added to the Escrow Fund but shall be distributed to the recordholders thereof.
Cash dividends on Parent Common Stock shall not be added to the Escrow Fund but
shall be distributed to the recordholders thereof.
(iii) Each Company stockholder shall be deemed the record holder
of, and shall have voting, dividend, distribution and all other rights with
respect to the shares of Parent Common Stock contributed to the Escrow Fund by
such stockholder (and on any voting securities and other equity securities added
to the Escrow Fund in respect of such shares of Parent Common Stock).
(d) Claims Upon Escrow Fund.
(i) Upon receipt by the Escrow Agent at any time on or before
the Expiration Date of a certificate signed by any officer of Parent (an
"Officer's Certificate"): (A) stating that Parent has paid or properly accrued
Losses, and (B) specifying in reasonable detail the individual items of Losses
included in the amount so stated, the date each such item was paid or properly
accrued, and the nature of the misrepresentation, breach of warranty, covenant
or obligation to which such item is related, the Escrow Agent shall, subject to
the provisions of Section 7.2(f) hereof, deliver to Parent out of the Escrow
Fund, as promptly as practicable, shares of Parent Common Stock and cash held in
the Escrow Fund in an amount equal to such Losses.
(ii) For the purposes of determining the number of shares of
Parent Common Stock to be delivered to Parent out of the Escrow Fund pursuant to
Section 7.2(d)(i) hereof, the shares of Parent Common Stock shall be valued at
$50.00 per share. Parent and the Securityholder Agent shall certify such
determined value in a certificate signed by both Parent and the Securityholder
Agent, and shall deliver such certificate to the Escrow Agent. 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 Common 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 stockholders that
number of shares as it would have released to Parent hereunder in satisfaction
of such claim.
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(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 G hereto, and the Escrow Agent may rely upon the confirmations of
anyone purporting to be the person or persons so designated. The persons and
telephone numbers for call backs may be changed only in a writing actually
received and acknowledged by the Escrow Agent. The parties to this Agreement
acknowledge that such security procedure is commercially reasonable.
(ii) It is understood that the Escrow Agent and the beneficiary's
bank in any funds transfer may rely solely upon any account numbers or similar
identifying number provided by either of the other parties hereto to identify
(i) the beneficiary, (ii) the beneficiary's bank, or (iii) an order it executes
using any such identifying number, even where its use may result in a person
other than the beneficiary being paid, or the transfer of funds to a bank other
than the beneficiary's bank, or an intermediary bank designated.
(iii) Each party hereto and Company stockholder, except the Escrow
Agent, shall provide the Escrow Agent with its Tax Identification Number (TIN)
as assigned by the Internal Revenue Service. All interest or other income earned
under the Escrow Agreement shall be allocated and paid as provided herein and
reported by the recipient to the Internal Revenue Service as having been so
allocated and paid.
(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 7.2(d) hereof unless the Escrow Agent shall have
received written authorization from the Securityholder Agent to make such
delivery. After the expiration of such thirty (30) day period, the Escrow Agent
shall make delivery of shares of Parent Common Stock from the Escrow Fund in
accordance with Section 7.2(d) hereof, provided that no such payment or delivery
may be made if the Securityholder Agent shall object in a written statement to
the claim made in the Officer's Certificate, and such statement shall have been
delivered to the Escrow Agent prior to the expiration of such thirty (30) day
period.
(g) Resolution of Conflicts; Arbitration.
(i) In case the Securityholder Agent shall so object in writing
to any claim or claims made in any Officer's Certificate, the Securityholder
Agent and Parent shall attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims. If the Securityholder
Agent and Parent should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties and shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum
and distribute shares of Parent Common Stock and cash from the Escrow Fund in
accordance with the terms thereof.
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(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 7.2(f) hereof, the
Escrow Agent shall be entitled to act in accordance with such decision and make
or withhold payments out of the Escrow Fund in accordance therewith. Such
decision shall be written and shall be supported by written findings of fact and
conclusions which shall set forth the award, judgment, decree or order awarded
by the arbitrators.
(iii) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration shall be held in
San Francisco, California under the rules then in effect of the Judicial
Arbitration and Mediation Services, Inc. For purposes of this Section 7.2(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 stockholders of the Company as represented by the Securityholder
Agent shall be deemed to be the non-prevailing party. The non-prevailing party
to an arbitration shall pay its own expenses, the fees of each arbitrator, the
administrative costs of the arbitration, and the expenses, including without
limitation, reasonable attorneys' fees and costs, incurred by the other party to
the arbitration, independent of the escrow fund.
(h) Securityholder Agent of the Stockholders; Power of Attorney.
(i) Xxxxx X. Xxxxxx and Xxxxxx X. Xxxxx, acting jointly, have
been be appointed as agent and attorney-in-fact (collectively and individually,
the "Securityholder Agent") for each stockholder of the Company (except such
stockholders, if any, as shall have perfected their dissenters' rights under
Delaware Law), for and on behalf of stockholders of the Company, to give and
receive notices and communications, to authorize delivery to Parent of shares of
Parent Common Stock 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
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necessary or appropriate in the judgment of Securityholder Agent for the
accomplishment of the foregoing. Such agency may be changed by the stockholders
of the Company from time to time upon not less than thirty (30) days prior
written notice to Parent; provided that the Securityholder Agent may not be
removed unless holders of a two-thirds interest of the Escrow Fund agree to such
removal and to the identity of the substituted agent. Any vacancy in the
position of Securityholder Agent may be filled by approval of the holders of a
majority in interest of the Escrow Fund. No bond shall be required of the
Securityholder Agent, and the Securityholder Agent shall not receive
compensation for his or her services. Notices or communications to or from the
Securityholder Agent shall constitute notice to or from each of the stockholders
of the Company.
(ii) The Securityholder Agent shall not be liable for any act
done or omitted hereunder as Securityholder Agent while acting in good faith and
in the exercise of reasonable judgment. The stockholders of the Company on whose
behalf the Escrow Amount was contributed to the Escrow Fund shall jointly and
severally indemnify the Securityholder Agent and hold the Securityholder Agent
harmless against any loss, liability or expense incurred without negligence or
bad faith on the part of the Securityholder Agent and arising out of or in
connection with the acceptance or administration of the Securityholder Agent's
duties hereunder, including the reasonable fees and expenses of any legal
counsel retained by the Securityholder Agent.
(i) Actions of the Securityholder Agent. A decision, act, consent or
instruction of the Securityholder Agent shall constitute a decision of all the
stockholders for whom a portion of the Escrow Amount otherwise issuable to them
are deposited in the Escrow Fund and shall be final, binding and conclusive upon
each of such stockholders, and the Escrow Agent and Parent may rely upon any
such written decision, consent or instruction of the Securityholder Agent as
being the decision, consent or instruction of each every such stockholder of the
Company. The Escrow Agent and Parent are hereby relieved from any liability to
any person for any acts done by them in accordance with such decision, consent
or instruction of the Securityholder Agent.
(j) Third-Party Claims.
(i) If any third party shall notify Parent or its affiliates
with respect to any matter (hereinafter referred to as a "Third Party Claim"),
which may give rise to a claim by Parent against the Escrow Fund, then Parent
shall give notice to the Securityholder Agent within 30 days of Parent becoming
aware of any such Third Party Claim or of facts upon which any such Third Party
Claim will be based setting forth such material information with respect to the
Third party Claim as is reasonably available to Parent; provided, however, that
no delay or failure on the part of Parent in notifying the Securityholder Agent
shall relieve the Securityholder Agent and the Company stockholders from any
obligation hereunder unless the Securityholder Agent and the Company
stockholders are thereby materially prejudiced (and then solely to the extent of
such prejudice). The Securityholder Agent and the Company stockholders shall not
be liable for any attorneys fees and expenses incurred by Parent prior to
Parent's giving notice to the Securityholder Agent of a Third Party Claim. The
notice from Parent to the Securityholder Agent shall set forth such material
information with respect to the Third Party Claim as is then reasonably
available to Parent.
(ii) In case any Third Party Claim is asserted against Parent or
its affiliates, and Parent notifies the Securityholder Agent thereof pursuant to
Section 7.2(j)(a) hereinabove, the
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Securityholder Agent and the Company stockholders will be entitled, if the
Securityholder Agent so elects by written notice delivered to Parent within 30
days after receiving Parent's notice, to assume the defense thereof, at the
expense of the Company stockholders independent of the Escrow Fund, with counsel
reasonably satisfactory to Parent so long as:
(A) Parent has reasonably determined that Losses which may
be incurred as a result of the Third Party Claim do not exceed either
individually, or when aggregated with all other Third Party Claims, the total
dollar value of the Escrow Fund determined in accordance with Section 7.2(d)(ii)
hereof;
(B) the Third Party Claim involves only money damages and
does not seek an injunction or other equitable relief;
(C) settlement of, or an adverse judgment with respect to,
the Third Party Claim is not, in the good faith judgment of Parent, likely to
establish a precedential custom or practice materially adverse to the continuing
business interests of Parent; and
(D) counsel selected by the Securityholder Agent is
reasonably acceptable to Parent.
If the Securityholder Agent and the Company stockholders so assume any such
defense, the Securityholder Agent and the Company stockholders shall conduct the
defense of the Third Party Claim actively and diligently. The Securityholder
Agent and the Company stockholders shall not compromise or settle such Third
Party Claim or consent to entry of any judgment in respect thereof without the
prior written consent of Parent and/or its affiliates, as applicable, which
shall not be unreasonably withheld, delayed or conditioned.
(iii) In the event that the Securityholder Agent assumes the
defense of the Third Party Claim in accordance with Section 7.2(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
7.2(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 7.2(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
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settlement with respect to the Third Party Claim in any manner it may deem
appropriate (and Parent or its affiliates need not consult with, or obtain any
consent from, the Securityholder Agent in connection therewith); provided,
however, that except with the written consent of the Securityholder Agent, no
settlement of any such claim or consent to the entry of any judgment with
respect to such Third Party Claim shall alone be determinative of the validity
of the claim against the Escrow Fund. In each case, Parent or its affiliates
shall conduct the defense of the Third Party Claim actively and diligently, and
the Securityholder Agent and the Company stockholders will cooperate with Parent
or its affiliates in the defense of that claim and will provide full access to
documents, assets, properties, books and records reasonably requested by Parent
and material to the claim and will make available all individuals reasonably
requested by Parent for investigation, depositions and trial.
(k) Escrow Agent's Duties.
(i) The Escrow Agent shall be obligated only for the performance
of such duties as are specifically set forth herein, and as set forth in any
additional written escrow instructions which the Escrow Agent may receive after
the date of this Agreement which are signed by an officer of Parent and the
Securityholder Agent and agreed to and signed by the Escrow Agent, and may rely
and shall be protected in relying or refraining from acting on any instrument
reasonably believed to be genuine and to have been signed or presented by the
proper party or parties. The Escrow Agent shall not be liable for any act done
or omitted hereunder as Escrow Agent while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted pursuant to the
advice of counsel shall be conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to disregard
any and all warnings given by any of the parties hereto or by any other person,
excepting only orders or process of courts of law, and is hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case the Escrow Agent obeys or complies with any such order, judgment or decree
of any court, the Escrow Agent shall not be liable to any of the parties hereto
or to any other person by reason of such compliance, notwithstanding any such
order, judgment or 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
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Agent be liable or responsible for forgeries, fraud, impersonations, or
determining the scope of any representative authority. In addition, the Escrow
Agent may consult with the legal counsel in connection with Escrow Agent's
duties under this Agreement and shall be fully protected in any act taken,
suffered, or permitted by him/her in good faith in accordance with the advice of
counsel. The Escrow Agent is not responsible for determining and verifying the
authority of any person acting or purporting to act on behalf of any party to
this Agreement.
(vi) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and shares of Parent Common Stock and may wait for
settlement of any such controversy by final appropriate legal proceedings or
other means as, in the Escrow Agent's discretion, the Escrow Agent may be
required, despite what may be set forth elsewhere in this Agreement. In such
event, the Escrow Agent will not be liable for damage. Furthermore, the Escrow
Agent may at its option, file an action of interpleader requiring the parties to
answer and litigate any claims and rights among themselves. The Escrow Agent is
authorized to deposit with the clerk of the court all documents and shares of
Parent Common Stock held in escrow, except all cost, expenses, charges and
reasonable attorney fees incurred by the Escrow Agent due to the interpleader
action and which the parties jointly and severally agree to pay. Upon initiating
such action, the Escrow Agent shall be fully released and discharged of and from
all obligations and liability imposed by the terms of this Agreement.
(vii) Parent and the Surviving Corporation agree jointly and
severally to indemnify and hold Escrow Agent harmless against any and all
losses, claims, damages, liabilities, and expenses, including reasonable costs
of investigation, counsel fees, and disbursements that may be imposed on Escrow
Agent or incurred by Escrow Agent in connection with the performance of his/her
duties under this Agreement, including but not limited to any litigation arising
from this Agreement or involving its subject matter; provided, however, that in
the event the Securityholder Agent shall be the non-prevailing party in
connection with any claim or action initiated by a Company stockholder or
Company stockholders, then such Company stockholder or Company stockholders
shall be responsible for the indemnification of the Escrow Agent to the full
extent provided by this paragraph.
(viii) The Escrow Agent may resign at any time upon giving at
least thirty (30) days written notice to the parties; provided, however, that no
such resignation shall become effective until the appointment of a successor
escrow agent which shall be accomplished as follows: the parties shall use their
best efforts to mutually agree on a successor escrow agent within thirty (30)
days after receiving such notice. If the parties fail to agree upon a successor
escrow agent within such time, the Escrow Agent shall have the right to appoint
a successor escrow agent authorized to do business in the state of California.
The successor escrow agent shall execute and deliver an instrument accepting
such appointment and it shall, without further acts, be vested with all the
estates, properties, rights, powers, and duties of the predecessor escrow agent
as if originally named as escrow agent. The Escrow Agent shall be discharged
from any further duties and liability under this Agreement.
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(ix) Anything in this Agreement to the contrary notwithstanding,
in no event shall the Escrow Agent be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited
to lost profits), even if the Escrow Agent has been advised of the likelihood of
such loss or damage and regardless of the form of action.
(x) It is further understood that any corporation into which the
Escrow Agent is its individual capacity may be merged or converted or with which
it may be consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Escrow Agent in its individual capacity shall be a
party, or any corporation to which substantially all the corporate trust
business of the Escrow Agent in its individual capacity may be transferred,
shall be the Escrow Agent under this Escrow Agreement without further act.
(l) Fees. All fees of the Escrow Agent for performance of its duties
hereunder shall be paid by Parent. It is understood that the fees and usual
charges agreed upon for services of the Escrow Agent shall be considered
compensation for ordinary services as contemplated by this Agreement. In the
event that the conditions of this Agreement are not promptly fulfilled, or if
the Escrow Agent renders any service not provided for in this Agreement, or if
the parties request a substantial modification of its terms, or if any
controversy arises, or if the Escrow Agent is made a party to, or intervenes in,
any litigation pertaining to this escrow or its subject matter, the Escrow Agent
shall be reasonably compensated for such extraordinary services and reimbursed
for all costs, attorneys' fees, and expenses occasioned by such default, delay,
controversy or litigation. Parent promises to pay these sums upon demand.
(m) Maximum Liability and Remedies. Except for intentional fraud or
the failure of any representation or warranty set forth in Section 2.3 of this
Agreement to be true and accurate, (i) the rights of Parent to make claims upon
the Escrow Fund in accordance with this Article VII shall be the sole and
exclusive remedy of Parent and the Surviving Corporation after the Closing with
respect to any representation, warranty, covenant or obligation made by the
Company under this Agreement and (ii) no current or former stockholder, option
holder, warrant holder, director, officer, employee or agent of the Company
shall have any personal liability to Parent or the Surviving Corporation after
the Closing in connection with the Merger.
(n) Insurance. Any proceeds obtained by Parent or the Surviving
Corporation under any insurance policy, prior to the date of release of shares
of Parent Common Stock from the Escrow Fund with respect to a Loss, shall be
credited to the Company stockholders and reduce the indemnity obligations of the
Company shareholders with respect to such Loss dollar for dollar.
(o) Offer of Settlement. Notwithstanding anything contained in this
Article VII to the contrary, if a full and unconditional settlement offer solely
for money damages is made by Clients and Profits, Inc. in connection with any
claims it has asserted or may assert against the Company (or its successor),
which offer the Securityholder Agent notifies Parent in writing of the
Securityholder Agent's willingness to accept, and Parent reasonably declines to
accept such settlement offer, Parent may continue to contest such claim, free of
any participation by the Securityholder Agent, at Parent's sole expense, and the
amount of any ultimate liability with respect to which the Company's
stockholders have any obligations to compensate Parent out of the Escrow Fund
shall be equal to the lesser of: (i) the amount of the settlement offer that
Parent declined to
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accept; or (ii) the ultimate losses incurred by Parent or the Surviving
Corporation; but subject to the limitation of the Company's liability set forth
in Section 7.2(m).
ARTICLE VIII
AMENDMENT AND WAIVER
8.1 Amendment Except as is otherwise required by applicable law, after the
Closing, this Agreement may be amended by the parties hereto at any time by
execution of an instrument in writing signed by Parent and by Company
stockholders who receive more than 50% of the Parent Common Stock issued or to
be issued pursuant to Section 1.6, or by all of the Company stockholders in the
case of an amendment to Article VII.
8.2 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 IX
GENERAL PROVISIONS
9.1 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: Xxxxxx Xxxxxx, President, Vertical Markets
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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with a copy to:
Fenwick & West LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx XxXxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to the Company, to:
600 Monkeys, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Chief Executive Officer
Xxxxxxx X. Xxxxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Kahn, Kleinman, Xxxxxxxx & Xxxxxx Co., L.P.A.
2600 Tower at Erieview
0000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Xxxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and to:
Xxxxxxxxxx, Xxxxx & Xxxxxxxx, Ltd.
0000 Xxxxxxxx Xxxx Xxxxxxxx
Xxxxxxxxxx, Xxxx 00000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(c) if to the Securityholder Agent:
Xxxxx X. Xxxxxx
c/o 600 Monkeys, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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and to:
Xxxxxx X. Xxxxx
c/o Xxx Xxxxxx Associates, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Telephone: (330)
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
9.2 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 7.2, 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.
9.3 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.
9.4 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.
9.5 Entire Agreement; Assignment 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
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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.
9.6 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.
9.7 Other Remedies Except as otherwise provided herein (including as set
forth in Section 7.2(m)), any and all remedies herein expressly conferred upon a
party will be deemed cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such party, and the exercise by a
party of any one remedy will not preclude the exercise of any other remedy.
9.8 Governing Law This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto agrees that process may be served upon them in any
manner authorized by the laws of the State of California for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
9.9 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.
9.10 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]
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59
IN WITNESS WHEREOF, Parent, Merger Sub, the Company, the Securityholder
Agent (as to Article VII only) and the Escrow Agent (as to matters set forth in
Article VII only) have caused this Agreement to be signed by their duly
authorized respective officers, all as of the date first written above.
NIKU CORPORATION MONKEYS ACQUISITION CORP.
A DELAWARE CORPORATION A DELAWARE CORPORATION
By: /s/ Xxxxxx Xxxxxx By: /s/ Xxxxxx Xxxxxx
---------------------------------- ------------------------------
Xxxxxx Xxxxxx Xxxxxx Xxxxxx
President, Vertical Markets President and Chief
Executive Officer
SECURITYHOLDER AGENT: 600 MONKEYS, INC.
A DELAWARE CORPORATION
/s/ Xxxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxxx
---------------------------------- ------------------------------
Xxxxx X. Xxxxxx
Title: Chief Executive Officer
/s/ Xxxxxx X. Xxxxx
----------------------------------
Xxxxxx X. Xxxxx
ESCROW AGENT
CHASE MANHATTAN BANK AND TRUST COMPANY, N.A.
By: /s/ Xxxxx Xxxxxxx
----------------------------------
Xxxxx Xxxxxxx
Title:
--------------------------------
[SIGNATURE PAGE FOR AGREEMENT AND PLAN OF REORGANIZATION]
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EXHIBIT A
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "AGREEMENT") is made and entered into
as of May 17, 2000 (the "EXECUTION DATE") by and among Niku Corporation, a
Delaware corporation ("PARENT") and 600 Monkeys, Inc., a Delaware corporation
(the "COMPANY"), on the one hand, and _______________ ("EMPLOYEE"), on the other
hand.
RECITALS
A. Concurrently with the execution of this Agreement, Parent, the Company,
and Monkeys Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent ("MERGER SUB"), have entered into an Agreement and Plan of
Reorganization dated as of May 17, 2000 (the "PLAN"), which provides for the
merger (the "MERGER") of the Company with and into Merger Sub, with Merger Sub
to be the surviving corporation of the Merger. Upon the effectiveness of the
Merger, the outstanding capital stock of the Company will be converted into
shares of Parent Common Stock in the manner and on the basis set forth in the
Plan. Capitalized terms that are used in this Agreement and that are not defined
herein shall have the same respective meanings that are given to such terms in
the Plan.
B. Employee owns Company Common Stock and is an officer and key employee
of the Company, and upon the effectiveness of the Merger, will receive shares of
Parent Common Stock having substantial value by virtue of the conversion of
Employee's Company Common Stock in the Merger. Employee's talents and abilities
are critical to the Company's ability to continue to successfully carry on its
business.
C. One of the material conditions precedent to the obligation of Parent to
consummate the Merger under the Plan is that Employee has executed, entered into
and is bound by this Agreement with Parent and the Company. Employee is
therefore entering into this Agreement as a material inducement and
consideration to Parent to enter into the Plan, to issue the consideration
payable to Employee and the other Company shareholders in the Merger and to
consummate the Merger, and to ensure that Parent effectively acquires the
goodwill of the Company through the Merger.
NOW, THEREFORE, in consideration of the facts stated in the foregoing
recitals and the promises made herein, Parent, the Company and Employee hereby
agree as follows:
1. EFFECTIVENESS OF OBLIGATIONS. This Agreement shall become effective if
and only if the Merger is consummated, and shall become effective upon the date
and time that the Merger is consummated and becomes legally effective (such date
and time being hereinafter referred to as the "EFFECTIVE TIME").
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2. CERTAIN DEFINITIONS.
(a) Affiliate. As used herein, the term "AFFILIATE" will have the
meaning given to such term in Rule 405 of Regulation C promulgated under the
Securities Act of 1933, as amended, and refers both to a present and future
Affiliate.
(b) Competing Business. As used herein, the term "COMPETING
BUSINESS" means the business of (i) developing, marketing, licensing, or
distributing any software for use in the advertising or public relations
industry and (ii) developing, marketing or operating any web site directed at
persons in such industry.
(c) Covenant Period. As used herein, the term "COVENANT PERIOD"
means that period of time commencing on the Effective Time and ending eighteen
months after the Effective Time.
(d) Engaging in Business. As used in Section 3 of this Agreement,
each of the following activities, without limitation, shall be deemed to
constitute "ENGAGING IN A BUSINESS": to engage in, 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 and
successor to the rights of the Company.
3. NON-COMPETITION AND NON-SOLICITATION COVENANTS.
(a) Non-Competition. Employee hereby covenants and agrees with
Parent and the Company that, at all times during the Covenant Period, Employee
shall not, either directly or indirectly, engage in any Competing Business (i)
in any state of the United States of America or (ii) in any country in which the
Company has conducted business on or before the Effective Time (including,
without limitation, any county, state, territory, possession or country in which
any customer of the Company who utilizes the Company's products or services is
located or in which
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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 country of Canada.
(b) Non-Solicitation of Customers. In addition to, and not in
limitation of, the non-competition covenants of Employee in Section 3(a) above,
Employee agrees with Parent and the Company that, at all times during the
Covenant Period, Employee will not, either for Employee or for any other person
or entity, directly or indirectly (other than for Parent and any of its
Affiliates), solicit business relating to the Competing Business from any
customer of the Company, Parent, the Surviving Corporation or any of their
respective Affiliates, or attempt to market, sell, distribute, license or
otherwise provide software for use in the advertising or public relations
industry, or attempt to market or provide training, support, consulting and
other services with respect to the installation, implementation or use of
software for use in the advertising or public relations industry, or develop,
market, or operate or attempt to develop, market or operate any web site
directed at persons in the advertising or public relations industry.
(c) Non-Solicitation of Employees or Consultants. In addition to,
and not in limitation of, the non-competition covenants of Employee in Section
3(a) above, Employee agrees with Parent and the Company that, at all times
during the Covenant Period, Employee will not, either for Employee or for any
other person or entity, directly or indirectly, solicit, induce or attempt to
induce any director, employee, consultant or contractor of Parent, the Surviving
Corporation or any of their Affiliates to terminate his or her employment or
his, her or its services with, Parent, the Surviving Corporation or any of their
respective Affiliates or to take employment with any other party.
4. SEVERABILITY. Should a court or other body of competent jurisdiction
determine that any term or provision of this Agreement is excessive in scope or
duration or is unenforceable, then the parties agree that such term or provision
shall not be voided or made unenforceable, but rather shall be modified to the
extent necessary to be enforceable, in accordance with the purposes stated in
this Agreement and with applicable law, and all other terms and provisions of
this Agreement shall remain valid and fully enforceable.
5. SPECIFIC PERFORMANCE. Employee agrees that, in the event of any breach
or threatened breach by Employee of any covenant or obligation contained in this
Agreement, each of Parent and the Company shall be entitled (in addition to any
other remedy that may be available to it, including monetary damages) to seek
and obtain (a) a decree or order of specific performance to enforce the
observance and performance of such covenant or obligation, and (b) an injunction
restraining such breach or threatened breach. Employee further agrees that
neither Parent nor the Company shall be required to obtain, furnish or post any
bond or similar instrument in connection with or as a condition to obtaining any
remedy referred to in this Section 5, and employee irrevocably waives any right
he may have to require Parent or the Company to obtain, furnish or post any such
bond or similarly instrument.
6. NON-EXCLUSIVITY. The rights and remedies of Parent and the Company
under this Agreement are not exclusive of or limited by any other rights or
remedies which they may have, whether at law, in equity, by contract or
otherwise, all of which shall be cumulative (and not
63
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 California
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto.
8. SUCCESSORS AND ASSIGNS. This Agreement and the rights and obligations
of Employee hereunder are personal to Employee and shall not be assignable,
delegable or transferable by Employee in any respect. This Agreement shall inure
to the benefit of the permitted successors and assigns of Parent and the
Company, including any successor to or assignee of all or substantially all of
the business and assets of Parent or the Company (including the Surviving
Corporation) or any other part of the business or assets of Parent and/or the
Company.
9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, bear the signatures of all
parties reflected hereon as signatories.
10. AMENDMENT; WAIVER. This Agreement may be amended only by the written
agreement of Parent and Employee. No waiver by any party hereto of any condition
or of any breach of any provision of this Agreement will be effective unless
such waiver is set forth in a writing signed by such party. No waiver by any
party of any such condition or breach, in any one instance, will be deemed to be
a further or continuing waiver of any such condition or breach or a waiver of
any other condition or breach of any other provision contained herein.
11. NOTICES. All notices and other communications required or permitted
under this Agreement will be in writing and will be either hand delivered in
person, sent by telecopier, sent by certified or registered first class mail,
postage pre-paid, or sent by nationally recognized express courier service. Such
notices and other communications will be effective upon receipt if hand
delivered or sent by telecopier, four (4) days after mailing if sent by mail,
and one (l) business day after dispatch if sent by express courier, to the
following addresses, or such other addresses as any party may notify the other
parties in accordance with this Section:
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If to Parent or the Company: With a copy to:
Niku Corporation Fenwick & West LLP
000 Xxxx Xxxxxx Two Palo Alto Square, Suite 800
Redwood City, CA Attention: President, Vertical Markets
Xxxx Xxxx, XX 00000
Fax Number: (000) 000-0000 Attention: Xxxxxx X. XxXxxxxx, Esq.
Fax Number: (000) 000-0000
If to Employee: With a copy to:
Attention:
Fax Number:
or to such other address as Parent, the Company or the Employee, as the
case may be, designates in a writing delivered to the other parties hereto.
12. COSTS OF ENFORCEMENT. If any party to this Agreement seeks to enforce
its rights under this Agreement by legal proceedings or otherwise, the
non-prevailing party shall pay all costs and expenses incurred by the prevailing
party, including, without limitation, all reasonable attorneys' and experts'
fees.
13. ENTIRE AGREEMENT. This Agreement contains all of the terms and
conditions agreed upon by the parties relating to the subject matter of this
Agreement and, effective upon the Effective Time of the Merger, shall supersede
any and all prior and contemporaneous agreements, negotiations, correspondence,
understandings and communications of the parties, whether oral or written, with
respect to such subject matter; provided, however, that notwithstanding the
foregoing, any non-competition, non-solicitation or other covenants of the type
set forth in Section 3 of this Agreement that are contained in (a) any agreement
entered into between the Company and Employee prior to the date of this
Agreement that has not been terminated, or (b) any employment agreement or in
any employee invention assignment and/or confidentiality agreement executed by
Employee with Parent or the Surviving Corporation that is in effect at any time
during the Covenant Period, shall each be construed to be a separate,
independent and concurrent covenant and obligation of Employee that is
cumulative and in addition to, and not in lieu of or in conflict with, any of
the covenants in Section 3 of this Agreement, and the existence of any such
separate, independent and concurrent covenant or covenants shall have no effect
on the covenants contained in Section 3 of this Agreement.
14. RULES OF CONSTRUCTION. This Agreement has been negotiated by the
respective parties hereto and their attorneys and the language hereof will not
be construed for or against
65
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:
-----------------------------
600 MONKEYS, INC.
By:
--------------------------------------
Title:
-----------------------------
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EXHIBIT B
CERTIFICATE OF MERGER
OF
600 MONKEYS, INC.
WITH AND INTO
MONKEYS ACQUISITION CORP.
---------------------------------------------------------------
PURSUANT TO SECTION 251 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
---------------------------------------------------------------
Monkeys Acquisition Corp., a Delaware corporation ("Monkeys Acquisition"),
does hereby certify to the following facts relating to the merger (the "Merger")
of 600 Monkeys, Inc., a Delaware corporation ("600 Monkeys"), with and into
Monkeys Acquisition, with Monkeys Acquisition remaining as the surviving
corporation of the Merger (the "Surviving Corporation"):
FIRST: Monkeys Acquisition is incorporated pursuant to the General
Corporation Law of the State of Delaware ("DGCL"). 600 Monkeys is
incorporated pursuant to the DGCL. Monkey Acquisition and 600
Monkeys are the constituent corporations in the Merger.
SECOND: An Agreement and Plan of Reorganization has been approved, adopted,
certified, executed and acknowledged by Monkeys Acquisition and by 600
Monkeys in accordance with the provisions of subsection (c) of Section
251 of the DGCL.
THIRD: The surviving corporation of the Merger shall be Monkeys Acquisition.
FOURTH: The Certificate of Incorporation of Monkeys Acquisition shall be the
Certificate of Incorporation of the Surviving Corporation.
FIFTH: The executed Agreement and Plan of Reorganization is on file at the
principal place of business of Monkeys Acquisition, the Surviving
Corporation, at 000 Xxxx Xxxxxx, Xxxxxxx Xxxx, Xxxxxxxxxx 00000.
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SIXTH: A copy of the executed Agreement and Plan of Reorganization will be
furnished by Monkeys Acquisition, the Surviving Corporation, on
request and without cost, to any stockholder of any constituent
corporation of the Merger.
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This Certificate of Merger shall become effective on May 17, 2000.
IN WITNESS WHEREOF, Monkeys Acquisition has caused this Certificate of
Merger to be executed by its duly authorized Chief Executive Officer as of May
17, 2000.
MONKEYS ACQUISITION CORP.
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
Xxxxxx Xxxxxx, Chief Executive Officer
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EXHIBIT C
NIKU CORPORATION
DECLARATION OF REGISTRATION RIGHTS
This Declaration of Registration Rights ("Declaration") is made as of May
17, 2000, by Niku Corporation, a Delaware corporation ("Parent"), for the
benefit of stockholders of 600 Monkeys, Inc., a Delaware corporation (the
"Company"), acquiring shares of Parent Common Stock pursuant to that Agreement
and Plan of Reorganization dated as of May 17, 2000 (the "Reorganization
Agreement"), among the Company, Parent and Monkeys Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of Parent ("Merger Sub"), and in
consideration of such stockholders approving the principal terms of the
Reorganization Agreement and the transactions contemplated thereby.
1. Definitions. As used in this Declaration:
(a) "Effective Date" means March 1, 2001.
(b) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(c) "Form S-3" means such form under the Securities Act as is in
effect on the date hereof or any registration form under the Securities Act
subsequently adopted by the SEC which similarly permits inclusion or
incorporation of substantial information by reference to other documents filed
by Parent with the SEC.
(d) "Holder" means a stockholder of the Company to whom shares of
Parent Common Stock are issued pursuant to the Reorganization Agreement or a
transferee to whom registration rights granted under this Declaration are
assigned pursuant to Section 6 of this Declaration.
(e) "Registrable Securities" means for each Holder: (i) the number
of shares of Parent Common Stock issued to such Holder pursuant to the
Reorganization Agreement and (ii) any other shares of Parent Common Stock issued
as (or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of such shares of Parent Common Stock
referred to (i) above, and for all Holders the sum of the Registrable Securities
held by them; provided, however, that such shares of Parent Common Stock held by
a particular Holder shall cease to be Registrable Securities (a) after Parent
has satisfied its obligations to register for resale and maintain the
effectiveness of a registration statement relation to such shares on the terms
and conditions set forth in Section 2 hereof or (b) at such time as such Holder
is able to sell such
70
shares (including all Registrable Securities held by Affiliates of such Holder,
as defined pursuant to Rule 144 of the Securities Act) in their entirety within
a single 90 day period under Rule 144 of the Securities Act; provided further,
however, any shares of Parent Common Stock subject to the escrow provisions of
Article VII of the Reorganization Agreement shall not be deemed Registrable
Securities for purposes of this Declaration.
(f) "Securities Act" means the Securities Act of 1933, as amended.
(g) "SEC" means the United States Securities and Exchange
Commission.
Terms not otherwise defined herein have the meanings given to them in the
Reorganization Agreement.
2. Registration on Form S-3.
(a) Parent shall use its best efforts to prepare and file with the
SEC within 30 days after the Effective Date, a registration statement on Form
S-3, if available (or any successor form) covering all Registrable Securities;
provided, that each Holder shall provide all such information and materials
regarding such Holder and take all such action as may be required by a Holder
under applicable laws and regulations in order to permit Parent to comply with
all applicable requirements of the Securities Act and the Exchange Act and to
obtain any desired acceleration of the effective date of such registration
statement, such provision of information and materials to be a condition
precedent to the obligations of Parent pursuant to this Declaration to register
the Registrable Securities held by each such Holder. The offerings made pursuant
to such registration shall not be underwritten.
(b) Parent shall (i) use its best efforts to prepare and file with
the SEC the registration statement in accordance with Section 2 (a) hereof with
respect to the Registrable Securities and shall use its best efforts to cause
such registration statement to become effective as promptly as practicable after
filing and to keep such registration statement effective until the sooner to
occur of (A) the date on which all Registrable Securities included within such
registration statement have been sold or (B) the one-year anniversary of the
date of filing; (ii) prepare and file with the SEC such amendments to such
registration statement and amendments or supplements to the prospectus used in
connection therewith as may be necessary to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all securities
registered by such registration statement; (iii) furnish to each Holder such
number of copies of any prospectus (including any preliminary prospectus and any
amended or supplemented prospectus) in conformity with the requirements of the
Securities Act, and such other documents, as each Holder may reasonably request
in order to effect the offering and sale of the Registrable Securities to be
offered and sold, but only while Parent shall be required under the provisions
hereof to cause the registration statement to remain effective; (iv) use its
best efforts to register or qualify the Registrable Securities covered by such
registration statement under the securities or blue sky laws of such
jurisdictions as each Holder shall reasonably request, and do any and all other
acts or things which may be necessary or advisable to enable each Holder to
consummate the public sale or other disposition of such Registrable Securities
in such jurisdictions; and (v) notify each Holder, promptly after it shall
receive notice thereof, of the
2
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date and time the registration statement and each post-effective amendment
thereto has become effective or a supplement to any prospectus forming a part of
such registration statement has been filed; (vi) notify each Holder at any time
when a prospectus is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing; (vii) cause all Registrable Securities registered
pursuant hereto to be listed on each securities exchange on which similar
securities issued by Parent are then listed; and (viii) provide a transfer agent
and registrar for all Registrable Securities registered pursuant hereunder to a
CUSIP number for all such Registrable Securities, in each case not later than
the effective date of such registration.
3. Suspension of Prospectus. Prior to any proposed disposition by Holder
of any Registrable Securities under any registration statement filed pursuant to
Section 2 hereof, Holder shall notify Parent in writing of such proposed
disposition. Parent may restrict disposition of Registrable Securities, and a
Holder will not be able to dispose of such Registrable Securities, if Parent
shall have delivered within two (2) business days thereof a notice in writing to
such Holder stating that a delay in the disposition of such Registrable
Securities is necessary because Parent, in its reasonable judgment, has
determined in good faith that such sales would require public disclosure by
Parent of material nonpublic information that is not included in such
registration statement. In the event of the delivery of the notice described
above by Parent, Parent shall use its reasonable best efforts to amend such
registration statement and/or amend or supplement the related prospectus if
necessary and to take all other actions necessary to allow the proposed sale to
take place as promptly as possible, subject, however, to the right of Parent to
delay further sales of Registrable Securities until the conditions or
circumstances referred to in the notice have ceased to exist or have been
disclosed. Such right to delay sales of Registrable Securities shall not exceed
90 days in the aggregate and no longer than 30 days as to any single delay.
4. Expenses. All of the out-of-pocket expenses incurred in connection with
any registration of Registrable Securities pursuant to this Declaration,
including, without limitation, all SEC, Nasdaq National Market and blue sky
registration and filing fees, printing expenses, transfer agents' and
registrars' fees and the reasonable fees and disbursements of Parent's outside
counsel and independent accountants shall be paid by Parent. Parent shall not be
responsible to pay any legal fees for any Holder or any selling expenses of any
Holder (including, without limitation, any broker's fees or commissions).
5. Indemnification. In the event of any offering registered pursuant to
this Declaration:
(a) Parent will indemnify each Holder, each of its officers,
directors and partners and such Holder's legal counsel, and each person
controlling such Holder within the meaning of Section 15 of the Securities Act
(each, a "Seller Indemnified Party"), with respect to which registration,
qualification or compliance has been effected pursuant to this Declaration,
against all expenses, claims, losses, damages and liabilities (joint or several)
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation,
3
72
commenced or threatened, arising out of or based on any of the following
statements, omissions or violations (collectively, a "Violation"): any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus including any preliminary prospectus or final
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they are made, not misleading, or any
violation or alleged violation by Parent of the Securities Act, the Exchange
Act, any rule or regulation promulgated under the Securities Act, Exchange Act,
or state securities laws, or common law, applicable to Parent in connection with
any such registration, qualification or compliance, and will reimburse each
Seller Indemnified Party for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action; provided, however, that Parent will
not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based in any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to Parent in an instrument duly
executed by such Seller Indemnified Party and stated to be specifically for use
therein; and provided further, however, that the foregoing indemnity agreement
with respect to any preliminary prospectus shall not inure to the benefit of of
any Seller Indemnified Party, or any person controlling such Seller Indemnified
Party, from whom the person asserting any such claims, losses, liabilities,
damages or actions purchased shares, if a copy of the prospectus (as then
amended or supplemented if Parent shall have furnished any amendments of
supplements thereto) was not sent or given by or on behalf of such Seller
Indemnified Person to such person, if required by law so to have been delivered,
at or prior to the written confirmation of the sale of the shares to such person
and if the prospectus (as so amended or supplemented) would have cured the
defect giving rise to such claim, loss, liabilities, damages or actions.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify Parent,
each of its directors and officers and its legal counsel and independent
accountants, and each other such Holder whose Securities are included in such
Registration, each of its officers and directors and each person controlling
such Holder within the meaning of Section 15 of the Securities Act (each a
"Parent Indemnified Party"), against all claims, losses, damages and liabilities
(joint or several) (or actions in respect thereof) arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any such registration statement, prospectus (preliminary or final), offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Parent Indemnified
Party for any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to Parent by
an instrument duly executed by such Holder and furnished expressly for use in
and stated to be specifically for use therein; provided, however, that the
obligations of such Holders hereunder shall be limited to an amount equal to the
gross proceeds (after deducting
4
73
reasonable commissions) received by each such Holder of Registrable Securities
sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has written notice of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Declaration, except to the extent, but only to the
extent, that the Indemnifying Party's ability to defend against such claim or
litigation is compromised as a result of such failure to give notice. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to the Indemnified Party of a
release from all liability in respect to such claim or litigation.
(d) The obligations of Parent and each Holder under this Section 5
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Declaration and otherwise.
(e) Notwithstanding the foregoing, to the extent the provisions of
this Section 5 are inconsistent with or conflict with the terms of any
indemnification, selling or similar agreement entered into by a Holder in
connection with the offer and sale of Registrable Securities pursuant to a
registration effected pursuant to this Declaration, the terms of such agreement
shall govern and shall supersede the provisions of this Declaration.
(f) If the indemnification provided for in this Section 5 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid of payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations;
provided, that in no event shall any contribution by a Holder under this
Subsection 5(f) exceed the net proceeds from the offering received by such
Holder. The relative fault of the indemnifying party and of the indemnified
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party of by
the indemnified party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or omission.
6. Limitation on Assignment of Registration Rights. The rights to cause
Parent to register
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Registrable Securities pursuant to this Declaration may not be assigned by a
Holder unless such a transfer is to stockholders, partners or retired partners,
or members or retired members of a Holder (including spouses and ancestors,
lineal descendants, and siblings of such stockholders, partners, members or
spouses who acquire Registrable Securities by right, will or intestate
succession) and all such transferees or assignees agree in writing to appoint a
single representative as their attorney-in-fact for the purpose of receiving any
notices and exercising their rights under this Declaration. Prior to a permitted
transfer of registration rights under this Declaration, Holder must furnish
Parent with written notice of the name and address of such transferee and the
Registrable Securities with respect to which such registration rights are being
assigned and a copy of a duly executed written instrument in form reasonably
satisfactory to Parent by which such transferee assumes all of the obligations
and liabilities of its transferor hereunder and agrees itself to be bound
hereby. No transfer of registration rights under this Declaration shall be
permitted if immediately following such transfer the disposition of such
Registrable Securities by the transferee is not restricted under the Securities
Act.
7. Reports Under Exchange Act. Parent agrees to:
(a) use its commercially reasonable efforts to file with the SEC in
a timely manner all reports and other documents required of Parent under the
Securities Act and the Exchange Act;
(b) furnish to each Holder, forthwith upon request (i) a written
statement by Parent that it has complied with the reporting requirements of SEC
Rule 144, the Securities Act and the Exchange Act, or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), and (ii) a copy of the most recent annual or quarterly
report of Parent; and
(c) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public so long as the
Company remains subject to the periodic reporting requirements under Sections 13
or 15(d) of the Exchange Act.
8. Amendment of Registration Rights. Holders of a majority of the
Registrable Securities from time to time outstanding may, with the consent of
Parent, amend the registration rights granted hereunder.
9. Governing Law. This Declaration shall be governed in all respects by
and construed in accordance with the laws of the State of California.
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IN WITNESS WHEREOF, this Declaration of Registration Rights is executed as
of the date first above written.
NIKU CORPORATION
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Xxxxxx Xxxxxx
President, Vertical Markets
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EXHIBIT D
LEGAL OPINION OF COUNSEL TO PARENT
May 17, 2000
600 Monkeys, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxx 00000
Ladies and Gentlemen:
We have acted as counsel to Niku Corporation, a Delaware corporation (the
"Company") and Monkeys Acquisition Corp., a Delaware corporation ("Merger Sub",
and collectively with the Company, "Niku") in connection with (i) the Company's
acquisition of 600 Monkeys, Inc. ("600 Monkeys"), (ii) the merger of 600 Monkeys
with and into Merger Sub (the "Merger"), with Merger Sub to be the surviving
corporation of the Merger, and (iii) the issuance by the Company of shares of
its common stock (the "Merger Shares") to the stockholders of 600 Monkeys (the
"600M Stockholders"), all pursuant to the Agreement and Plan of Reorganization
dated as of May 17, 2000, among the Company, Merger Sub and 600 Monkeys (the
"Agreement"). This opinion is furnished to you pursuant to Section 6.2(c) of the
Agreement. Unless otherwise indicated in this letter, which includes Attachment
A hereto, all capitalized terms used herein have the meanings given to those
terms in the Agreement.
In order to render this opinion we have examined such questions of law as
we deem advisable under the circumstances. As to questions of fact, we have
relied solely upon our examination of the documents referred to on Attachment A
(collectively the "Reviewed Documents") and our actual knowledge. We have not
examined any documents other than the Reviewed Documents or made any independent
factual investigation. Bring-down certificates, telegrams or telephonic advice
of the public officials referred to on Attachment A were not obtained as of the
date hereof. Nor, except as described on Attachment A, have we caused the search
of any docket of any court, tribunal, agency or similar authority or any other
record of any governmental agency or third party.
In our examination of documents, we have assumed the current accuracy and
completeness of (a) the information obtained from public officials and records
included in the
77
documents referred to on Attachment A, and (b) the representations and
warranties made by representatives of Niku to us, including without limitation,
those set forth in the Management Certificate. We have also assumed that all the
representations and warranties made by Niku, 600 Monkeys and the 600M
Stockholders in, or pursuant to, any of the Closing Agreements to which Niku,
600 Monkeys or any 600M Stockholder is a party or any Closing Documents provided
by any such person or entity are, true and complete in all material respects. We
have made no attempt to verify the accuracy of any of such information,
representations or warranties or to determine the existence or non-existence of
any factual matters other than those described above; however, we are not aware
of any facts that would cause us to believe that any of the opinions expressed
herein are not accurate.
In our examination of documents for purposes of this opinion, we have
assumed, and express no opinion as to, (a) the genuineness of all signatures on
original documents, (b) the authenticity and completeness of all documents
submitted to us as originals, (c) the conformity to originals and completeness
of all documents submitted to us as copies, (d) the lack of any undisclosed
termination, modification, waiver or amendment to any document reviewed by us,
(e) the legal competence or capacity of all natural persons executing the same
and (f) (except with respect to due authorization, execution and delivery of the
Closing Agreements by Niku) the due authorization, execution and delivery of all
documents where due authorization, execution and delivery are prerequisites to
the effectiveness thereof.
For the purposes of this opinion, we have also assumed that: (a) 600
Monkeys and the 600M Stockholders have fully paid and provided all required
consideration to the Company for the Merger Shares as provided in the Agreement
and have fully performed all the other obligations that they are to perform at
or before the Closing; and (b) each of the Closing Agreements is duly
enforceable in accordance with its respective terms against, and constitutes the
legal, valid and binding obligations of, each of the parties thereto other than
Niku.
We have represented Niku in connection with the Agreement, the Merger and
the issuance of the Merger Shares. As used in this opinion, the phrases "our
actual knowledge," "to our knowledge," "we are not aware," "known to us," or
words of similar import refer only to the actual knowledge of the attorneys
currently in this firm who have rendered legal services to Niku in connection
with the Agreement, the Merger and the issuance of the Merger Shares and mean
that, while such attorneys have not been informed by Niku that the matters
stated are factually incorrect, we have made no investigation of such matters
other than our examination of the Reviewed Documents. No inference as to our
knowledge of any matters bearing on the accuracy of any such statement should be
drawn from the fact of our representation of Niku.
Where statements in this opinion regarding an effect on, or matters
relating to, Niku are qualified by the term "material," those statements involve
judgments and opinions as to the materiality or lack of materiality of any
matter to Niku or its business, assets or financial condition, which are
entirely those of Niku and its officers, after having been advised by us as to
the legal effect and consequences of such matters; however, such opinions and
judgments are not known to us to be incorrect.
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This opinion is qualified by, and is subject to, and we render no opinion
with respect to, general limitations and exceptions applicable to all contracts,
including, without limitation:
(a) the effect of bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent conveyance and other similar laws relating to
or affecting the rights of creditors generally;
(b) the effect of general principles of equity and similar principles,
including, without limitation, concepts of materiality,
reasonableness, public policy and unconscionability and the possible
unavailability of specific performance, injunctive relief or other
equitable remedies, regardless of whether considered in a proceeding
in equity or at law;
(c) the effect of Section 1670.5 of the California Civil Code regarding
unconscionability and of California court decisions indicating that
certain covenants and provisions of agreements are unenforceable
where (i) the breach of such covenants or provisions imposes
restrictions or burdens upon the other party and it cannot be
demonstrated that the enforcement of such restrictions or burdens is
reasonably necessary for the protection of the party seeking to
enforce such provisions or (ii) the enforcement of such covenants or
provisions under the circumstances would violate the implied
covenant of good faith and fair dealing;
(d) the effect of California Civil Code Section 1698 and similar
statutes and federal laws and judicial decisions that provide, among
other things, (i) that oral modifications to a contract or waivers
of contractual provisions may be enforceable, if the modification
was performed, notwithstanding any express provision in the
agreement that the agreement may only be modified or an obligation
thereunder waived in writing, or (ii) that an implied agreement may
be created from trade practices or course of conduct; and
(e) the effect of California Civil Code Section 1717 and other
applicable statutes and judicial decisions that provide, among other
things, that a court may limit the granting of attorneys' fees to
those attorneys' fees that are determined by the court to be
reasonable and that attorneys' fees may be granted only to a
prevailing party and that a contractual provision for attorneys'
fees is deemed to extend to both parties (notwithstanding that such
provision by its express terms benefits only one party).
Furthermore, we render no opinion to you with respect to:
(a) the enforceability of the indemnification and contribution
provisions of the Closing Agreements;
(b) compliance or noncompliance with antifraud provisions of applicable
state and federal statutes, rules and regulations concerning the
issuance and sale of
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securities;
(c) the enforceability of the Non-Competition Agreements;
(d) the tax consequences of the Merger under applicable federal, state
and local income tax laws and regulations or the accounting
treatment of the Merger;
(e) the enforceability of any right to arbitrate, or any consent to
service, jurisdiction or forum for any claim, suit, demand, action
or cause of action arising under or with respect to the Closing
Agreements, or any provision providing for the exclusive
jurisdiction of a particular court; and
(f) the effect upon the legality, validity, binding effect or
enforceability of the Closing Agreements with respect to any
statute, regulation or case law relating to anti-trust (including
but not limited to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended), collusive or unfair trade practices or
designed to promote competition or any similar law of any
jurisdiction.
In rendering the opinions expressed in paragraphs 1 and 2 below regarding
the good standing of the Company and Merger Sub, we have relied solely on the
certifications of the Company's and Merger Sub's good standing set forth in the
Certificates of Good Standing described on Attachment A.
In rendering the opinions expressed in paragraphs 7 and 8 below, we have
assumed: (a) that the offer and sale of the Merger Shares will not be integrated
with any securities offering of the Company; and (b) the accuracy and
completeness of the information provided by the Company to 600 Monkeys and the
600M Stockholders in connection with such offer and sale. We have also relied
upon the 600M Stockholders' representations in the Closing Agreements and the
Closing Documents, and the Company's representations to us in the Management
Certificate, including, without limitation, that the Company has made no offer
to sell the Merger Shares by means of any "general solicitation" (as defined in
Regulation D under the Securities Act of 1933, as amended) or the "publication
of any advertisement" (as defined under the California Corporate Securities Act
of 1968, as amended, and the regulations thereunder) and that no offer or sale
of the Merger Shares has been made or will be made in any state other than the
States of California and Ohio. However, no opinion is rendered herein regarding
the blue sky laws of Ohio.
We are admitted to practice law in the State of California, and we
express no opinion herein with respect to the application or effect of the laws
of any jurisdiction other than the existing laws of the State of California, the
existing Delaware General Corporation Law ("DGCL") without reference to case law
or secondary sources, and the existing federal laws of the United States of
America. Our opinion is limited to such California State and United States
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federal statutes, laws, rules or regulations and provisions of the DGCL as in
our experience are of general application to transactions of the sort provided
for in the Closing Agreements.
We express no opinion as to whether the laws of any particular
jurisdiction apply to the Closing Agreements, and we express no opinion to the
extent that the laws of any jurisdiction other than those identified above are
applicable to the subject matter hereof. We disclaim any opinion as to any
statute, rule, regulation, ordinance, order or other promulgation of any
regional or local governmental body. Our opinions assume, with your permission
and without expression of any opinion thereon, that the internal laws of the
State of California as applied to contracts made between California residents
present in California when such a contract is entered into (without regard to
laws regarding choice of law or conflict of laws) exclusively apply to and
govern the Closing Agreements, regardless of the respective choice of law
provisions thereof. We render no opinion as to the enforceability of any of such
agreements under any law other than the above-mentioned laws of the State of
California.
To the extent that any of the Reviewed Documents (other than the Closing
Agreements) are governed by the laws of any jurisdiction other than the State of
California, our opinion relating to those documents is based solely upon the
apparent meaning of the language, without regard to interpretation or
construction that might be indicated by the laws governing those agreements and
instruments.
In preparing the opinions set forth herein, we have relied on the
interpretations that are contained in the 1989 Report of the Committee on
Corporations of the Business Law Section of the State Bar of California
Regarding Legal Opinions in Business Transactions (August 1989) (the "1989
Report"), and such interpretations govern the opinions set forth herein. We also
call your attention to the fact that under the 1989 Report, certain assumptions,
qualifications and exceptions are implicit in opinions of lawyers. Although we
have expressly set forth some assumptions, qualifications and exceptions herein,
we are not limiting or omitting any others set forth in the various reports or
otherwise deemed standard by practice for lawyers in California.
Based upon the foregoing, subject to the assumptions and qualifications
referred to herein and except as may be otherwise set forth in any disclosure
schedules of Niku provided to 600 Monkeys concurrently with the execution of the
Agreement, it is our opinion that as of immediately prior to the Closing:
l. The Company 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. The Company has the
corporate power and authority to enter into and perform the Closing Agreements
to which it is a party, to own its properties, and to carry on its business as
currently conducted. Merger Sub has the corporate power and authority to enter
into and perform the Closing Agreements to which it is a party, to own its
properties, and to carry on its business as currently conducted.
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2. The Company is qualified to do business as a foreign corporation and is
in good standing in the State of California.
3. The execution and delivery of the Closing Agreements by the Company
have been duly authorized by all necessary corporate action on the part of the
Transaction Committee of the Company's Board of Directors. The Closing
Agreements have been duly executed and delivered by the Company and the
Agreement and the Declaration of Registration Rights constitute the valid and
binding obligations of the Company enforceable against the Company in accordance
with their respective terms.
4. The Agreement and the Certificate of Merger have been duly authorized
by all necessary corporate action on the part of Merger Sub's Board of Directors
and the sole stockholder of Merger Sub. The Agreement has been duly executed and
delivered by Merger Sub and constitutes the valid and binding obligation of
Merger Sub enforceable against Merger Sub in accordance with its terms.
5. The execution and delivery of the Closing Agreements by the Company and
Merger Sub, as applicable, and the performance by the Company and Merger Sub of
their respective obligations under the Closing Agreements to be performed as of
the date hereof do not conflict with, or result in a violation of: (a) the
Certificate of Incorporation or Bylaws of either the Company or Merger Sub, each
as amended and currently in effect; (b) to our knowledge, any U. S. federal,
California State or DGCL statute, law, ordinance, rule or regulation; or (c) to
our knowledge, any judgment, order or decree of any court or arbitrator to which
the Company is a party or is subject, which violation would result in a material
adverse effect on the ability of the Company or Merger Sub to perform its
obligations under the Agreement.
6. The Merger Shares, when issued and paid for as provided in the
Agreement, will be duly authorized and validly issued, fully paid and
nonassessable.
7. The offer and sale of the Merger Shares to the 600M Stockholders in
accordance with the Agreement, are exempt from the registration and prospectus
delivery requirements of Section 5 of the Securities Act and the qualification
requirements of the California Corporate Securities Law of 1968, as amended.
8. To our knowledge, all approvals, consents or authorizations of, and
registrations, declarations and filings with, any U.S. federal or California
State governmental authority, or, pursuant to the DGCL, to any Delaware State
governmental authority, required on the part of the Company in order to enable
the Company to execute, deliver and (as of the date hereof) perform its
obligations under the Closing Agreements have been made, except for (a) such as
may be required under applicable securities laws and (b) the filing of the
Certificate of Merger with the Delaware Secretary of State.
In rendering the opinions above, we are opining only as to the specific
legal issues expressly set forth herein, and no opinion shall be inferred as to
other matters. This opinion is intended solely for 600 Monkeys' use for the
purpose of the above transaction, and is not to be made available to or relied
upon for any other purpose or by any other person or entity, without
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our prior written consent. We assume no obligation to advise you of any fact,
circumstance, event or change in the law or the facts that may hereafter be
brought to our attention whether or not they would affect or modify the opinions
expressed herein.
Very truly yours,
FENWICK & WEST LLP
/s/ FENWICK & WEST LLP
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ATTACHMENT A
REVIEWED DOCUMENTS
(1) The Agreement and the exhibits thereto and disclosure schedules
provided in connection therewith, the Non-Competition Agreements
dated as of May 17, 2000 among the Company, 600 Monkeys and each of
the Founders (the "Non-Competition Agreements") and the Declaration
of Registration Rights executed by the Company in favor of the 600M
Stockholders dated May 17, 2000 (the "Declaration of Registration
Rights") (such agreements are collectively referred to as the
"Closing Agreements");
(2) A copy of the Company's Amended and Restated Certificate of
Incorporation, certified by the Delaware Secretary of State on May
12, 2000 (the "Restated Certificate");
(3) A copy of Merger Sub's Certificate of Incorporation, certified by
the Delaware Secretary of State on May 12, 2000;
(4) A copy of the Company's Amended and Restated Bylaws, certified by
the Company's Secretary on May 17, 2000 (the "Bylaws");
(5) A copy of Merger Sub's Bylaws certified by the Secretary of Merger
Sub on May 17, 2000 (the "Merger Sub Bylaws");
(6) (i) The minutes of meetings and actions by written consent of the
Company's Stockholders, Board of Directors and committees of the
Board of Directors that are contained in the Company's minute books
in our possession that have been furnished to us by the Company in
connection with the rendering of this opinion (the "Minute Book
Contents"), including the minutes of the meeting on May 16, 2000 of
the Transaction Committee of the Board of Directors of the Company
approving the Agreement and the Merger, provided to us by the
Company and certified by the Company's Secretary on May 17, 2000,
and (ii) similar minutes and actions with respect to Merger Sub that
are contained in Merger Sub's minute books in our possession,
including the Unanimous Written Consent of the Board of Directors
and the Written Consent of the Sole Stockholder, each dated May 16,
2000, of Merger Sub approving the Agreement, the Merger and the
Certificate of Merger;
(7) The certificates and documents delivered at the Closing in
accordance with the Agreement, including (without limitation)
certificates and documents delivered pursuant to Article VI thereof
(the "Closing Documents");
(8) A Management Certificate addressed to us and dated of even date
herewith executed by the Company and Merger Sub (the "Management
Certificate");
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(9) A Certificate of Status regarding the Company issued by the Delaware
Secretary of State, dated May 15, 2000, indicating that the Company
is in good standing, and is qualified to do business, as a domestic
corporation in the State of Delaware (together with the letters
referred to in item (10) below and the certificates referred to in
items (11) and (12) below, the "Certificates of Good Standing");
(10) A letter from the California Franchise Tax Board dated May 15, 2000
to the effect that the Company is in good standing with respect to
its California franchise tax filings and has no known unpaid
franchise tax liability;
(11) A Certificate of Good Standing from the California Secretary of
State, dated May 15, 2000 indicating that the Company is in good
standing and is qualified to do business as a foreign corporation in
that state;
(12) A Certificate of Status regarding Merger Sub issued by the Delaware
Secretary of State, dated May 15, 2000, indicating that Merger Sub
is in good standing, and is qualified to do business, as a domestic
corporation in the State of Delaware;
(13) Investor suitability questionnaires and investment representation
letters provided to us by 600M Stockholders with respect to the
issuance or transfer of such securities;
(14) The Certificate of Merger; and
(15) Facsimile of report from Xxxxxx Trust of California, Transfer Agent
of Parent, dated May 17, 2000, as supplemented and annotated by
Parent, regarding outstanding capital stock of Parent.
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EXHIBIT E
FORM OF LEGAL OPINION OF COUNSEL TO THE COMPANY
86
EXHIBIT F
RELEASE OF CLAIMS
This Release of Claims ("RELEASE") is entered into as of the date set
forth below between Xxx Xxxxxx Associates ("ITA"), ITA Investments, LLC ("ITA
INVESTMENTS"), Niku Corporation, a Delaware corporation ("NIKU"), Niku
Acquisition Corporation, a Delaware corporation and wholly owned subsidiary of
Niku ("NAC") and a successor to Proamics Corporation ("PROAMICS"), and 600
Monkeys, Inc. ("600 MONKEYS").
ITA Investments, a successor stockholder of stock formerly held by ITA in
600 Monkeys, is a present stockholder of 600 Monkeys. As a stockholder of 600
Monkeys, ITA Investments' shares in 600 Monkeys will be converted into the right
to receive valuable common stock of Niku and cash under that certain Agreement
and Plan of Reorganization dated May 17, 2000 (the "PLAN") between Niku, Monkeys
Acquisition Corp. and 600 Monkeys. In addition, certain indebtedness owing by
600 Monkeys to ITA, and other indebtedness of 600 Monkeys guaranteed by ITA,
will be paid in full and discharged in connection with the Plan. In order to
induce Niku to consummate the transactions contemplated by the Plan, and for
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by ITA, ITA Investments, Niku, NAC, and 600 Monkeys, the
undersigned parties hereby agree as follows:
1. ITA and ITA Investments release and discharge Niku, NAC and Proamics
and their respective agents, successors, assigns, subsidiaries, employees,
officers, directors, stockholders, customers and distributors, of and from any
and all manner of action, claim or cause of action, in law or in equity, debts,
obligations, promises, liabilities, demands, losses, damages, costs or expenses,
whether known or unknown, fixed or contingent, asserted or unasserted, which ITA
and ITA Investments has or may have against Niku, NAC and Proamics and their
respective agents, successors, assigns, subsidiaries, employees, officers,
directors, stockholders, customers and distributors arising or existing on or
before the date hereof.
2. ITA releases and discharges Niku and 600 Monkeys and their respective
agents, successors, assigns, subsidiaries, employees, officers, directors,
stockholders, customers and distributors, of and from any and all manner of
action, claim or cause of action, in law or in equity, debts, obligations,
promises, liabilities, demands, losses, damages, costs or expenses, whether
known or unknown, fixed or contingent, arising out of or in any way related to
that certain Agreement dated as of June 28, 1999 between 600 Monkeys and ITA
with respect to the provision by 600 Monkeys to ITA of certain products at no
charge (the "PRODUCT AGREEMENT"). The Product Agreement is hereby terminated and
no party thereto shall have any rights or obligations thereunder.
3. Niku, NAC and Proamics release and discharge ITA and ITA Investments
and their respective agents, successors, assigns, subsidiaries, employees,
officers, directors, stockholders, customers and distributors, of and from any
and all manner of action, claim or
87
cause of action, in law or in equity, debts, obligations, promises, liabilities,
demands, losses, damages, costs or expenses, whether known or unknown, fixed or
contingent, asserted or unasserted, which Niku, NAC and Proamics has or may have
against ITA and ITA Investments and their respective agents, successors,
assigns, subsidiaries, employees, officers, directors, stockholders, customers
and distributors arising or existing on or before the date hereof.
4. In signing this Release, all parties represent and acknowledge that
they do so with full knowledge of any and all rights which they may have, and
they do not rely on and have not relied upon any representations or statements
of any other party or any of their respective officers, directors, stockholders,
agents or representatives with regard to any of the parties' rights or asserted
rights, and each party hereby assumes the risk of any mistake of fact in
connection with the true facts involved or with regard to any facts which are
now unknown to them. All parties further represent and warrant that they have
been given an adequate opportunity to consult with counsel of their choosing and
secure independent legal advice in connection with this Release and any rights
that it may be relinquishing hereby.
5. This Release sets forth the entire understanding of the parties and
supersedes any and all prior agreements or understandings between the parties
and all corporate policies, practices or procedures pertaining to the subject
matter hereof. In any action arising out of or relating to this Release, the
prevailing party shall be entitled to recover reasonable costs and attorneys'
fees incurred therein.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties hereto has executed and entered
into this Release, intending to be legally bound thereby, as of this 17th day of
May, 2000.
XXX XXXXXX ASSOCIATES NIKU CORPORATION
By: By:
------------------------------------ ---------------------------------
Title: Title:
--------------------------------- ------------------------------
NIKU ACQUISITION CORPORATION
By:
---------------------------------
Title:
------------------------------
600 MONKEYS, INC. ITA INVESTMENTS, LLC
By: By:
------------------------------------ ---------------------------------
Title: Title:
--------------------------------- ------------------------------
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EXHIBIT G
ESCROW AGENT INSTRUCTIONS
