Agreement and Plan of Merger - Taleo Corp. and Recruitforce.com Inc.
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TALEO CORPORATION,
BUTTERFLY ACQUISITION CORPORATION,
RECRUITFORCE.COM, INC.,
AND
WITH RESPECT TO ARTICLE VI ONLY,
MATTHEW ROBINSON
AS STOCKHOLDER AGENT
AND
U.S. BANK, NATIONAL ASSOCIATION AS ESCROW AGENT
DATED AS OF MARCH 10, 2005
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TABLE OF CONTENTS
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INDEX OF EXHIBITS .............................................................. iv
ARTICLE I THE MERGER............................................................ 2
1.1 The Merger........................................................ 2
1.2 Effective Time.................................................... 2
1.3 Effect of the Merger.............................................. 3
1.4 Article of Incorporation; Bylaws.................................. 4
1.5 Directors and Officers............................................ 4
1.6 Amounts to be Paid by Parent...................................... 4
1.7 Effect on Capital Stock........................................... 5
1.8 Dissenting Shares................................................. 7
1.9 Surrender of Certificates......................................... 7
1.10 No Further Ownership Rights in Company Capital Stock.............. 9
1.11 Lost, Stolen or Destroyed Certificates............................ 9
1.12 Tax and Accounting Consequences................................... 9
1.13 Withholding Rights................................................ 9
1.14 Taking of Necessary Action; Further Action........................ 9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................ 9
2.1 Organization of the Company....................................... 10
2.2 Company Capital Structure......................................... 10
2.3 Subsidiaries...................................................... 11
2.4 Authority......................................................... 11
2.5 Company Financial Statements...................................... 12
2.6 No Undisclosed Liabilities........................................ 12
2.7 No Changes........................................................ 12
2.8 Tax............................................................... 14
2.9 Restrictions on Business Activities............................... 16
2.10 Title to Properties; Absence of Liens and Encumbrances............ 16
2.11 Intellectual Property............................................. 17
2.12 Agreements, Contracts and Commitments............................. 24
2.13 Interested Party Transactions..................................... 26
2.14 Compliance with Laws.............................................. 26
2.15 Litigation........................................................ 26
2.16 Insurance......................................................... 26
2.17 Minute Books...................................................... 27
2.18 Environmental Matters............................................. 27
2.19 Brokers' and Finders' Fees; Third Party Expenses.................. 27
2.20 Employee Matters and Benefit Plans................................ 27
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TABLE OF CONTENTS
(CONTINUED)
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2.21 Employees......................................................... 30
2.22 Governmental Authorization........................................ 30
2.23 Representations Complete.......................................... 30
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB............................................................... 30
3.1 Organization and Standing......................................... 30
3.2 Authority......................................................... 31
3.3 Consents.......................................................... 31
3.4 Solvency.......................................................... 31
3.5 Parent Financial Statements....................................... 32
3.6 Merger Sub........................................................ 32
ARTICLE IV CLOSING CONDITIONS................................................... 32
4.1 Company Closing Conditions........................................ 32
4.2 Parent Closing Conditions......................................... 33
ARTICLE V ADDITIONAL AGREEMENTS................................................. 34
5.1 Stockholder Approval.............................................. 34
5.2 Confidentiality................................................... 34
5.3 Employee Benefit Matters.......................................... 34
5.4 401(k) Plan....................................................... 34
5.5 Expenses.......................................................... 34
5.6 Public Disclosure................................................. 35
5.7 FIRPTA Compliance................................................. 35
5.8 Reasonable Efforts................................................ 35
5.9 Additional Documents and Further Assurances....................... 35
5.10 Employees......................................................... 35
ARTICLE VI SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW................... 36
6.1 Survival of Representations and Warranties........................ 36
6.2 Escrow Arrangements............................................... 36
ARTICLE VII GENERAL PROVISIONS.................................................. 43
7.1 Notices........................................................... 43
7.2 Interpretation.................................................... 45
7.3 Counterparts...................................................... 46
7.4 Entire Agreement.................................................. 46
7.5 Severability...................................................... 46
7.6 Other Remedies.................................................... 46
7.7 Specific Performance.............................................. 46
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TABLE OF CONTENTS
(CONTINUED)
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7.8 Governing Law..................................................... 46
7.9 Rules of Construction............................................. 47
7.10 Assignment........................................................ 47
7.11 Absence of Third Party Beneficiary Rights......................... 47
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INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
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Exhibit A Form of Noncompetition Agreement
Exhibit B Form of Consideration Holdback Agreement
Exhibit C Form of Employment Agreement
Exhibit D Form of Employment Proprietary Information and Inventions Agreement
SCHEDULE DESCRIPTION
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1.2 Company Employees
2.2 Company Capitalization and Merger Consideration Proceeds Spreadsheet
6.2 Escrow Fund Contributions
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and entered
into as of March 10, 2005 by and among Taleo Corporation, a Delaware corporation
("PARENT"), Butterfly Acquisition Corporation, a California corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB"), Recruitforce.com, Inc., a
California corporation (the "COMPANY"), and with respect to ARTICLE VI hereof
only, Matthew Robinson as stockholder agent (the "STOCKHOLDER AGENT"), and U.S.
Bank, National Association as escrow agent (the "ESCROW AGENT").
RECITALS
A. The Boards of Directors of each of Parent, the Company and Merger Sub
believe it is in the best interests of each company and their respective
stockholders that Parent acquire the Company through the statutory merger of
Merger Sub with and into the Company (the "MERGER") and, in furtherance thereof,
have approved the Merger.
B. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, (i) all of the issued and outstanding shares
of capital stock of the Company (the "COMPANY CAPITAL STOCK") shall be
extinguished or converted into the right to receive the Merger Consideration (as
defined in Section 1.7(d)) on the terms and conditions set forth herein and (ii)
all outstanding options (whether vested or unvested) to acquire shares of
Company Common Stock shall expire.
C. The Escrow Amount (as defined in Section 1.7(d)) shall be placed in
escrow by Parent, the release of which shall be contingent upon certain events
and conditions, all as set forth in ARTICLE VI hereof.
D. The Company , on the one hand, and Parent and Merger Sub, on the other
hand, desire to make certain representations, warranties, covenants and other
agreements in connection with the Merger.
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 the
applicable provisions of the California General Corporation Law ("CALIFORNIA
LAW"), Merger Sub shall be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease and the Company shall continue as
the surviving corporation and as a wholly-owned subsidiary of Parent. The
Company 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 concurrently with the execution and delivery hereof at the offices of
Wilson Sonsini Goodrich & Rosati, 950 Page Mill Road, 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 an agreement or certificate of merger (or like instrument)
(the "MERGER AGREEMENT") with the Secretary of State of California, in
accordance with the relevant provisions of California Law (the time of
acceptance by the Secretary of State of California of such filing being referred
to herein as the "EFFECTIVE TIME").
(a) At the Closing, the Company shall deliver or cause to be
delivered to Parent the following:
(i) from each of the Company's stockholders an executed Form
W-8 or W-9, if applicable;
(ii) a certificate, dated as of the date of the Closing and
signed by the Secretary of the Company, certifying that attached thereto are:
(i) a true and complete copy of the resolutions adopted by the Company's Board
of Directors, (ii) a true and complete copy of the resolutions adopted by the
Company's stockholders, (iii) true and complete copies of the Company's Articles
of Incorporation and Bylaws and (iv) specimen signatures of certain officers of
the Company;
(iii) a good standing certificate for the Company from the
Secretary of State of the State of California, dated as of a date within three
days of the Closing;
(iv) with regard to the individuals listed on Schedule 1.2
(the "REQUIRED EMPLOYEES"), executed noncompetition agreements in the form
attached hereto as Exhibit A (each, a "NONCOMPETITION AGREEMENT"), executed
consideration holdback agreements in the form attached hereto as Exhibit B
(each, a "CONSIDERATION HOLDBACK AGREEMENT"), executed employment agreements in
the form attached hereto as Exhibit C (each, an "EMPLOYMENT AGREEMENT"), and
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executed employment proprietary information and inventions agreements in the
form attached hereto as Exhibit D (each, an "EMPLOYMENT PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT");
(v) those consents and waivers from third parties to the
Company's contracts and other instruments required to consummate the
transactions contemplated by this Agreement, as set forth in the Company
Schedules (as defined in ARTICLE II); and
(vi) all other documents, agreements, certificates,
instruments or writings required to be delivered by the Company on or prior to
the Closing Date pursuant to this Agreement or as may be reasonably requested by
any party in order to consummate the transactions contemplated by this
Agreement.
(b) At the Closing, Parent shall deliver or cause to be delivered to
the Company the following:
(i) with regard to the Required Employees, executed
Noncompetition Agreements, executed Consideration Holdback Agreements, and
executed Employment Agreements;
(ii) a certificate, dated as of the date of the Closing and
signed by the Secretary of Parent, certifying that attached thereto are: (i) a
true and complete copy of the resolutions adopted by Parent's Board of
Directors, (ii) true and complete copies of the Parent Certificate of
Incorporation and the Parent Bylaws and (iii) specimen signatures of certain
officers of Parent;
(iii) a good standing certificate for Parent from the
Secretary of State of the States of Delaware and California, dated as of a date
within three days of the Closing; and
(iv) all other documents, agreements, certificates or writings
required to be delivered by Parent on or prior to the Closing Date pursuant to
this Agreement or as may be reasonably requested by any party in order to
consummate the transactions contemplated by this Agreement.
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of California law. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of each of the
Company and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of each of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
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1.4 Articles of Incorporation; Bylaws. At the Effective Time, the Articles
of Incorporation of the Surviving Corporation shall be amended and restated to
be the same as the Articles of Incorporation of Merger Sub until thereafter
amended as provided by law and such Articles of Incorporation; provided,
however, that Article I of the Articles of Incorporation of the Surviving
Corporation shall be amended to read as follows: "The name of this corporation
is Butterfly, Inc."
(a) The Bylaws of the Surviving Corporation shall be amended and
restated to be the same as the Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, until thereafter amended, except that all
references to Merger Sub shall be changed to refer to the Company.
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 Articles 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.
1.6 Amounts to be Paid by Parent. The consideration payable by Parent in
exchange for all outstanding shares of Company Capital Stock pursuant to Section
1.7 shall equal the Initial Merger Consideration plus the Secondary Merger
Consideration (equal to an aggregate of $5,000,000), payable as follows:
(a) The Initial Merger Consideration ($1,000,000 in the aggregate
less any Excess Third Party Expenses to be paid pursuant to Section 5.5 below)
shall be paid in cash by Parent to the Company shareholders at the Effective
Time in the amounts set forth opposite each Company shareholder's name on
Schedule 1.6 attached hereto under the column titled "Payment Upon Effective
Time".
(b) On the ninetieth (90th) consecutive day immediately following
the date of the Closing (or June 8, 2005) (the "SECOND PAYMENT DATE"), Parent
shall pay the Company shareholders an amount in cash equal to the Secondary
Merger Consideration less (i) the Escrow Amount, (ii) the Holdback Consideration
and (iii) any Excess Third Party Expenses to be paid pursuant to Section 5.5
below not previously paid in connection with the payment of the Initial Merger
Consideration (the "90TH DAY PARENT OBLIGATION"). The 90th Day Parent Obligation
shall be paid in cash by Parent to the Company shareholders at the Second
Payment Date in the amounts set forth opposite each Company shareholder's name
on Schedule 1.6 attached hereto under the column titled "90th Day Payment".
(i) For the avoidance of doubt, the 90th Day Parent Obligation
is an absolute and irrevocable binding obligation of Parent, without any right
of set-off, counterclaim, condition, contingency, withholding or deduction
whatsoever, due and payable in its entirety on the Second Payment Date, without
any further action of Parent, the Company or any Company shareholder.
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(ii) In the event of Parent's failure to pay the 90th Day
Parent Obligation on the Second Payment Date in accordance with the terms of the
Agreement, Parent shall be deemed in default of its obligations under this
Agreement and, in addition to all other obligations of Parent hereunder, Parent
shall (i) pay the Company shareholders the Default Penalty up to and including
the date of actual payment made by Parent of the 90th Day Parent Obligation and
(ii) reimburse Stockholder Agent for all reasonable fees and expenses (including
reasonable legal fees and expenses) in taking all reasonable actions in order to
collect the 90th Day Parent Obligation (and Default Penalty) from Parent on
behalf of the Company shareholders. The provision for the Default Penalty shall
in no way diminish Parent's absolute and irrevocable obligation to pay the 90th
Day Parent Obligation in full upon the Second Payment Date. In the event that
Parent breaches its obligation to timely pay the 90th Day Parent Obligation, the
Company and the Company shareholders shall be entitled to all rights and
remedies as may be available in addition to the Default Penalty, including,
without limitation, the right to sue for specific performance.
(iii) If prior to the payment of the 90th Day Payment
Obligation, there is (i) any voluntary or involuntary proceeding relating to
Parent, under the United States Bankruptcy Code, as amended, or any successor
law or laws thereto or (ii) any case, action or other proceeding relating to
Parent under any bankruptcy, insolvency, debt reorganization or similar law
(whether now or hereafter in effect) of any state, country or other jurisdiction
which seeks or provides for the relief of or reorganization or delay of debts
generally or the liquidation and distribution of Parent's assets in satisfaction
of its debts, then the 90th Day Payment Obligation shall be accelerated and
immediately become due and payable in full upon such time.
(iv) If prior to the payment of the 90th Day Payment
Obligation, a third party proposes to acquire Parent or substantially all of its
assets (whether by asset purchase, stock purchase, merger, consolidation or
otherwise), then as a condition to the closing of any such transaction, the 90th
Day Payment Obligation shall be accelerated and immediately become due and
payable in full prior to the closing of any such transaction.
(c) On the Second Payment Date, Parent shall deposit the Escrow
Amount in cash with the Escrow Agent in accordance with Section 1.9(b).
(d) On the Second Payment Date Parent shall deposit the Holdback
Amount in cash with U.S. Bank, National Association as escrow agent in
accordance with the terms of the Consideration Holdback Agreement, which shall
accrue interest and become payable to the shareholders of the Company set forth
in Schedule 1.2 in accordance with the terms of the Consideration Holdback
Agreement.
1.7 Effect on Capital Stock. In consideration of the payments to be made
pursuant to Section 1.6, and 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 the
Company Capital Stock, the following shall occur:
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(a) Conversion of Company Common Stock. Each share of Company Common
Stock (as defined in Section 1.7(d)(ii)) issued and outstanding immediately
prior to the Effective Time (other than any shares of Company Capital Stock to
be canceled pursuant to Section 1.7(b) and any Dissenting Shares (as defined and
to the extent provided in Section 1.8(a)) will be canceled and extinguished and
be converted automatically into the right to receive, upon surrender of the
certificate representing such share of Company Common Stock in the manner
provided in Section 1.9, the amount in cash set forth opposite Company
stockholder's name on Schedule 2.2 attached hereto, payable in accordance with
the terms of this Agreement.
(b) Cancellation of Company-Owned Stock. Each share of Company
Capital Stock owned by the Company or any direct or indirect wholly-owned
subsidiary of the Company immediately prior to the Effective Time shall be
canceled and extinguished and shall not be converted into the right to receive
any consideration whatsoever in the Merger.
(c) Company Options. At the Effective Time, all Company Options then
outstanding under the Company's 2002 Equity Incentive Plan (the "COMPANY STOCK
OPTION PLAN") or otherwise, whether vested or unvested, shall expire.
(d) Certain Definitions.
(i) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(ii) "COMPANY COMMON STOCK" shall mean shares of common stock,
no par value per share, of the Company.
(iii) "COMPANY OPTIONS" shall mean all issued and outstanding
options (including commitments to grant options) to purchase or otherwise
acquire Company Common Stock (whether or not vested) held by any person.
(iv) "COMPANY OPTIONHOLDERS" shall mean holders of Company
Options.
(v) "COMPANY STOCKHOLDERS" shall mean holders of shares of
Company Capital Stock.
(vi) "ESCROW AMOUNT" shall mean $500,000.
(vii) "HOLDBACK AMOUNT" shall equal $1,422,944, of which ten
percent (10%) shall be placed in the Escrow Fund on behalf of Matthew Robinson
and Pavel Vorobiev.
(viii) "INITIAL MERGER CONSIDERATION" shall mean $1,000,000,
less any Excess Third Party Expenses to be paid pursuant to Section 5.5 below.
(ix) "MERGER CONSIDERATION" shall mean the sum of the Initial
Merger Consideration plus the Secondary Merger Consideration.
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(x) "NINETY DAY INTEREST AMOUNT" shall mean $15,657.
(xi) "DEFAULT PENALTY" shall be an amount calculated at the
rate of fifteen percent (15%) per annum, compounded monthly (with pro rata
amounts calculated for any partial annual period) multiplied by the amount of
the 90th Day Parent Obligation.
(xii) "PERSON" shall mean an individual or entity, including a
partnership, a limited liability company, a corporation, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization, or a
Governmental Entity (as defined in Section 2.4 below).
(xiii) "SECONDARY MERGER CONSIDERATION" shall mean $4,000,000
plus the Ninety Day Interest Amount, less any Excess Third Party Expenses to be
paid pursuant to Section 5.5 below.
(xiv) "SECURITIES ACT" shall mean the Securities Act of 1933,
as amended.
1.8 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Capital Stock held by a holder who has demanded and
perfected appraisal or dissenters' rights for such shares in accordance with
California 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 Merger Consideration pursuant to
Section 1.6, but the holder thereof shall only be entitled to such rights as are
granted by California Law.
(b) Notwithstanding the provisions of subsection (a), if any holder
of shares of Company Capital Stock who is otherwise entitled to exercise
dissenters' rights under California Law shall effectively withdraw or lose
(through failure to perfect or otherwise) such dissenters' rights, 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 Merger Consideration, without interest thereon, in respect of such
shares of Company Capital Stock pursuant to this Agreement, without interest
thereon, upon surrender of the certificate representing such shares upon
surrender of the certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any written
demands for the exercise of dissenters' rights in respect of any shares of
Company Capital Stock, withdrawals of such demands, and any other instruments
served pursuant to California Law (including without limitation instruments
concerning appraisal or dissenters' rights) and received by the Company and (ii)
the opportunity to participate in all negotiations and proceedings with respect
to such demands. The Company shall not, except with the prior written consent of
Parent or as required by law, voluntarily make any payment with respect to any
demands for the exercise of dissenters' rights in respect of any shares of
Company Capital Stock or offer to settle or settle any such demands.
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1.9 Surrender of Certificates.
(a) Exchange Agent. U.S. Bank, National Association shall serve as
Exchange Agent in the Merger.
(b) Parent to Provide Merger Consideration. Parent shall make
available to the Exchange Agent for payment to the Company shareholders in
exchange for the outstanding shares of Company Capital Stock in accordance with
this ARTICLE I, an amount of cash equal to (i) at the Effective Time, the
Initial Merger Consideration and (ii) on the 90th day following the Effective
Time, the Secondary Merger Consideration; provided that, on behalf of the
holders of Company Capital Stock, Parent shall cause the Exchange Agent to
withhold the Escrow Amount from the Secondary Merger Consideration and deposit
such Escrow Amount into an escrow account; provided further that 50% of the
portion of the Escrow Amount to be funded by each of Matthew Robinson and Pavel
Vorobiev shall be funded out of the Holdback Amount. The pro rata portion of the
Escrow Amount to which each holder of Company Capital Stock shall be entitled
upon distribution of the remaining Escrow Amount, if any, at the termination of
the Escrow Period shall be as set forth on Schedule 6.2 hereof. Distributions of
any Merger Consideration from the Escrow Amount shall be governed by the terms
and conditions of ARTICLE VI below.
(c) Exchange Procedures. Prior to the distribution of any Merger
Consideration pursuant to Section 1.6, each holder of record of a certificate or
certificates (the "CERTIFICATES") which immediately prior to the Effective Time
represented outstanding shares of Company Capital Stock, and which shares were
converted into the right to receive Merger Consideration pursuant to Section
1.6, shall deliver to the Exchange Agent a letter of transmittal (which shall be
in customary form and 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 the Certificates being surrendered by
such holder. Upon surrender of a Certificate to the Exchange Agent, 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 the Merger Consideration payable to
such holder pursuant to Section 1.6 (less, in the case of the Secondary Merger
Consideration, the portion of the Secondary Merger Consideration to be deposited
in the Escrow Fund (as defined in Section 6.2(a)) on such holder's behalf
pursuant to ARTICLE VI hereof, and the Certificate so surrendered shall
forthwith be cancelled, provided, however, that the holder of such Certificate
shall not receive any distributions of the cash deposited with the Exchange
Agent as to the Secondary Merger Consideration until the 90th day following the
Effective Date. From the Closing and 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, to represent solely the Merger Consideration.
(d) No Liability. Notwithstanding anything to the contrary in this
Section 1.9, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to a holder of shares Company Capital Stock for any
amount properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
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1.10 No Further Ownership Rights in Company Capital Stock. Subject to
Parent's payment obligations under Section 1.6, all Merger Consideration issued
pursuant to the Merger 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 which
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.
1.11 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 receiving notice from the holder thereof and upon
the making of an affidavit of that fact by such holder, the Merger Consideration
payable to the holder thereof pursuant to Section 1.6; provided, however, that
Parent may, in its 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.
1.12 Tax and Accounting Consequences. It is intended by the parties hereto
that the Merger shall constitute a taxable purchase of the shares of the
Company.
1.13 Withholding Rights. Parent, the Company, the Exchange Agent or the
Escrow Agent shall be entitled to deduct and withhold from any amounts otherwise
payable pursuant to this Agreement such amounts as are required to be deducted
and withheld with respect to the making of such payments under the provisions of
any applicable Tax laws; provided that the applicable shareholders of the
Company shall be given written notice of any such withholding. Any such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the Person in respect of which such deduction and withholding was made.
1.14 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any such further action is necessary or reasonably 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, subject to such
exceptions as are disclosed in the disclosure schedule supplied by the Company
to Parent which identify the section
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and subsection of this Agreement to which such disclosure relates or is clearly
apparent on the face of such disclosure that it relates to any other section or
subsection of this Agreement (the "COMPANY SCHEDULES") and dated as of the date
hereof, as follows:
2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under California Law. The
Company has the corporate power and authority to own its properties and to carry
on its business as now being conducted. The Company is duly qualified to do
business and is in good standing as a foreign corporation in each state or other
jurisdiction in which the failure to be so qualified would have a material
adverse effect on the business, assets (including intangible assets), financial
condition, results of operations or prospects of the Company (hereinafter
referred to as a "MATERIAL ADVERSE EFFECT"). The Company has delivered a true
and correct copy of the Articles of Incorporation and Bylaws of the Company,
each as amended to date, to Parent.
2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of thirty
million (30,000,000) shares of authorized Company Common Stock, of which
16,018,420 are issued and outstanding. Except as set forth in the immediately
preceding sentence, no shares of capital stock or other equity securities of the
Company are issued or reserved for issuance except as set forth in Section
2.2(c) below. All outstanding shares of Company Capital Stock are, and at the
Closing will be, duly authorized, validly issued, fully paid and non assessable
and not subject to preemptive rights created by statute, the Articles of
Incorporation or Bylaws of the Company or any agreement to which the Company is
a party or by which it is bound. None of the outstanding Company Capital Stock
or other securities of the Company were issued in violation of the Securities
Act, or any applicable state blue sky laws. Schedule 2.2 hereto is an accurate
and complete list, as of the Closing Date, of all Company Stockholders and
Company Optionholders and their respective addresses, the number and class or
series of shares of Company Capital Stock and Company Options held by such
Company Stockholders and Company Optionholders, the pro rata ownership of the
outstanding shares of Company Common Stock, the Merger Consideration to be
issued to each holder and the amount of cash to be deposited into the Escrow
Fund on behalf of each holder. An executive officer of the Company has certified
that such list is complete and accurate as of the Closing Date.
(b) Except for the Company Stock Option Plan or Restricted Stock
Purchase Agreements entered into with the Company's founders, neither the
Company nor any of its subsidiaries has ever adopted, sponsored or maintained
any stock option plan or any other plan or agreement providing for equity
compensation to any person. The Company has reserved a total of 2,000,000 shares
of Company Common Stock for issuance under the Company Stock Option Plan of
which options to purchase 200,000 shares of Company Common Stock are outstanding
and 1,340,000 shares are available to be granted as of the date hereof. True and
complete copies of all agreements and instruments relating to or issued under
the Company Stock Option Plan have been provided to Parent and such agreements
and instruments have not been amended, modified or
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supplemented, and there are no agreements to amend, modify or supplement such
agreements or instruments, from the forms thereof provided to Parent.
(c) Except for the outstanding options to purchase Company Common
Stock as set forth above, as of the Effective Time, there are no other options,
warrants, calls, rights, 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, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital stock of the
Company or obligating the Company to grant, extend, accelerate the vesting of,
change the price of, otherwise amend or enter into any such option, warrant,
call, right, commitment or agreement. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or other similar rights
with respect to the Company. There are no voting trusts, proxies, or other
agreements or understandings with respect to the capital stock of the Company.
2.3 Subsidiaries. The Company does not have and has never had any
subsidiaries or affiliated companies and does not otherwise own and has never
otherwise owned any shares of capital stock or any interest in, or control,
directly or indirectly, any other corporation, partnership, association, joint
venture or other business entity.
2.4 Authority. Subject only to the filing and recordation of appropriate
merger documents as required by California Law, the Company has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company, subject
only to the filing and recordation of appropriate merger documents as required
by California Law. This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies. Subject only to the approval of the Merger
and this Agreement by the Company's stockholders, the execution and delivery of
this Agreement by the Company does not, and, as of the Closing, 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") (i)
any provision of the Articles of Incorporation or Bylaws of the Company, or (ii)
any mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or its properties or
assets, where such Conflict would be reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on the Company. No consent, waiver,
approval, order or authorization of, or registration, declaration or filing
with, any court, tribunal, judicial or arbitral body, regulatory or
administrative agency or commission, or other national, federal, state, county,
municipal, local or foreign governmental authority, instrumentality, agency or
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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 (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws, (ii) such filings as are required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR ACT"),
if any, (iii) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as shall have been obtained prior to the
Closing, and (iv) such other consents, waivers, authorizations, filings,
approvals and registrations which are set forth on Schedule 2.4.
2.5 Company Financial Statements. Schedule 2.5 sets forth the Company's
(i) unaudited balance sheets as of March 31, 2004, and the related unaudited
statements of operations, cash flows and stockholders equity (deficit) for the
fiscal year then ended and (ii) the Company's unaudited balance sheet as of
February 28, 2005 (the "BALANCE SHEET") and the related unaudited statement of
operations, cash flow and stockholder's equity (deficit) for the eleven-month
period then ended (collectively, the "COMPANY FINANCIAL STATEMENTS"). The
Company Financial Statements are correct in all material respects. The Company
Financial Statements present fairly the financial condition and operating
results of the Company as of the dates and during the periods indicated therein
on a cash accounting basis.
2.6 No Undisclosed Liabilities. The Company does not have any liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
any type, whether accrued, absolute, contingent, matured, unmatured or other
(whether or not required to be reflected in financial statements in accordance
with GAAP), that in the aggregate exceeds $10,000, and which (i) has not been
reflected or reserved against in the Balance Sheet, or (ii) has arisen other
than in the ordinary course of the Company's business and consistent with past
practices since February 28, 2005. The Company does not have any outstanding
payables, whether reflected on the Company Financial Statements or not, which
(i) exceed $10,000 or (ii) are more than 60 days past due.
2.7 No Changes. Since February 28, 2005, there has not been, occurred or
arisen any transaction by the Company except in the ordinary course of business
as conducted on that date and consistent with past practices;
(a) amendments or changes to the Articles of Incorporation or Bylaws
of the Company;
(b) capital expenditure or commitment by the Company of $10,000 in
any individual case or $20,000 in the aggregate;
(c) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance);
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(d) labor disputes or grievances, work stoppages or slowdowns, or
claim of wrongful discharge or other unlawful labor practice or action;
(e) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by the Company;
(f) revaluation by the Company of any of its assets;
(g) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of its
capital stock or interests;
(h) increase of the salary or other compensation payable or to
become payable by the Company to any of its officers, directors, employees or
advisors, or the declaration, payment or commitment or obligation of any kind
for the payment of a severance payment, termination payment, bonus or other
additional salary or compensation to any such person except as otherwise
contemplated by this Agreement;
(i) sale, lease, license or other disposition of any of the assets
or properties of the Company, except in the ordinary course of business as
conducted on that date and consistent with past practices;
(j) amendment or termination of any material contract, agreement or
license to which the Company is a party or by which it is bound;
(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 of provisions for uncollectible accounts receivable of
the Company;
(m) commencement or notice or threat of commencement of any lawsuit
or proceeding against or investigation of the Company or its affairs;
(n) notice of any claim of ownership by a third party of any Company
Intellectual Property (as defined in Section 2.11(a)(iii)) or of infringement by
the Company of any third party's Intellectual Property Rights (as defined in
Section 2.11(a)(ii));
(o) issuance or sale by the Company of any shares of capital stock,
or securities exchangeable, convertible or exercisable therefor, or of any other
of its securities;
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(p) 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 the Company;
(q) event or condition of any character that has or could reasonably
be expected to have a Material Adverse Effect on the Company; or
(r) negotiation or agreement by the Company or any officer or
employees thereof to do any of the things described in the preceding clauses (a)
through (q) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement).
2.8 Tax.
(a) Definition of Taxes. For the purposes of this Agreement, "TAX"
or, collectively, "TAXES," means (i) 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, (ii) any liability for the payment of any amounts of
the type described in clause (i) of this Section 2.8 as a result of being a
member of an affiliated, consolidated, combined or unitary group for any period,
and (iii) any liability for the payment of any amounts of the type described in
clauses (i) or (ii) of this Section 2.8 as a result of any express or implied
obligation to indemnify any other person or as a result of 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 or transferor
entity. References to the Company are to the Company and each of its
subsidiaries.
(b) Tax Returns and Audits.
(i) The Company has prepared and filed on a timely basis, all
required federal, state, local and foreign returns, estimates, information
statements and reports ("RETURNS") due to be filed (taking into account any
extension of such due date) relating to any and all Taxes concerning or
attributable to the Company or its operations and such Returns are true, correct
and complete in all material respects and have been completed in accordance with
applicable law, in all material respects.
(ii) The Company: (a) has timely paid all Taxes it is required
to pay, and (b) has withheld and paid over to the appropriate Tax authorities
all federal and state income taxes, Taxes pursuant to the Federal Insurance
Contribution Act, Taxes pursuant to the Federal Unemployment Tax Act and other
Taxes required to be withheld.
(iii) The Company has not been delinquent in the payment of
any Tax claimed to be due and payable by any taxing authority nor is there any
Tax deficiency outstanding,
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proposed or assessed against the Company, nor has the Company executed any
waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax which waiver or extension is still in
effect.
(iv) No audit or other examination of any Return of the
Company is presently in progress, nor has the Company been notified of any
request for such an audit or other examination.
(v) As of the date of the Balance Sheet, the Company did not
have any liabilities for unpaid Taxes which had not been accrued or reserved
against on the Balance Sheet, whether asserted or unasserted contingent or
otherwise, and the Company has no knowledge of any basis for the assertion of
any such liability attributable to the Company, its assets or operations. Since
the date of the Balance Sheet, the Company has not incurred any liability for
Taxes other than in the ordinary course of business.
(vi) The Company has provided or made available to Parent
copies of all Tax Returns for all periods as requested by Parent.
(vii) There are (and as of immediately following the Closing
there will be) no liens, pledges, charges, claims, security interests or other
encumbrances of any sort ("LIENS") on the assets of the Company relating to or
attributable to Taxes, other than Liens for Taxes not yet due and payable. The
Company has no knowledge of any 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.
(viii) As of the Closing, there will not be any contract,
agreement, plan or arrangement, including but not limited to the provisions of
this Agreement, covering any employee or former employee of the Company or other
person that, individually or collectively, could give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G or 404 or 162(m)
of the Code.
(ix) 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.
(x) No adjustment relating to any Returns filed by the Company
has been proposed, formally or informally, by any Tax authority to the Company.
(xi) No claim has ever been made by an authority in a
jurisdiction where the Company does not file Returns that it is or may be
subject to taxation by that jurisdiction.
(xii) The Company has (a) never been a member of an affiliated
group (within the meaning of Code Section 1504(a)) filing a consolidated federal
income Tax Return (other than a group the common parent of which was the Company
), (b) never been a party to any Tax sharing, indemnification or allocation
agreement, nor does the Company owe any amount under any such
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agreement, (c) no liability for the Taxes of any person (other than the Company
or any of its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law and including any arrangement
for group or consortium relief within a jurisdiction (or similar arrangement)),
as a transferee or successor, by contract, or otherwise and (d) never been a
party to any joint venture, partnership or, to the knowledge of the Company,
other agreement that could be treated as a partnership for Tax purposes.
(xiii) The Company has not constituted either a "distributing
corporation" or a "controlled corporation" in a distribution of stock intended
to qualify for tax free treatment under Section 355 of the Code.
(xiv) The Company has not engaged in a "reportable
transaction" within the meaning of Treas. Reg. Section 1.6011-4 or a transaction
that is the same or substantially similar to one of the types of transactions
that the Internal Revenue Service has determined to be a tax avoidance
transaction and identified by notice, regulation, or other form of published
guidance as a "listed transaction", as set forth in Treas. Reg. Section
1.6011-4(b).
(xv) The Company uses the accrual method of accounting for
income Tax purposes. The Company will not be required to include any income or
gain or exclude any deduction or loss from Taxable income as a result of (a) any
change in method of accounting under Section 481(c) of the Code, closing
agreement under Section 7121 of the Code (or similar provision of applicable
law), (b) installment sale or open transaction disposition or (c) prepaid
amount.
2.9 Restrictions on Business Activities. There is no agreement (noncompete
or otherwise), commitment, 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 materially impairing any
business practice (including, without limitation, the licensing of any product)
material to 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 to any class of customers, in any geographic area, during any
period of time or in any segment of the market.
2.10 Title to Properties; Absence of Liens and Encumbrances.
(a) The Company owns no real property, nor has it ever owned any
real property. Schedule 2.10(a) of the Company Schedules 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. 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 event which with notice or lapse of time, or
both, would constitute a default) by the Company or, to the knowledge of the
Company, any other party.
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(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets used or held for use in its business, free and clear of
any Liens, except as reflected in the Company Financial Statements or in
Schedule 2.10(b) of the Company Schedules 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.
2.11 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: (1)
works of authorship including, without limitation, (a) computer programs,
algorithms, routines, source code and executable code, whether embodied in
software or otherwise (collectively, "SOFTWARE"), and (b) documentation provided
for use therewith; (2) inventions (whether or not patentable) and improvements;
(3) proprietary and confidential information, including, without limitation,
technical data and customer and supplier lists, trade secrets, know how and
techniques; (4) databases, data compilations and collections; (5) processes,
software tools, devices, methods, prototypes, test methodologies and software
development tools; and (6) 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: (1)
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 registered or applied for anywhere in the world in inventions and
discoveries ("PATENTS"); (2) all trade secrets and other rights in know-how and
confidential information, including, without limitation, confidential invention
disclosures ("TRADE SECRETS"); (3) all copyrights, copyrights registrations and
applications therefor throughout the world ("COPYRIGHTS"); (4) all industrial
designs and any registrations and applications therefor throughout the world;
(5) all rights in World Wide Web addresses ("WWW") and domain names and
applications and registrations therefor ("INTERNET PROPERTIES"); (6) all rights
in trade names, trade dress, logos, common law trademarks and service marks,
trademark and service mark registrations and applications therefor and all
goodwill associated therewith throughout the world ("TRADEMARKS"); and (7) any
similar corresponding or equivalent foreign rights to any of the foregoing
anywhere in the world.
(iii) "COMPANY INTELLECTUAL PROPERTY" shall mean any
Intellectual Property Rights including, without limitation, Company Registered
Intellectual Property Rights (as defined in Section 2.11(c)) that are owned
exclusively by the Company and used by the Company in its business as currently
conducted on the date of this Agreement or, with respect to Company Products, as
currently planned or contemplated to be conducted by the Company.
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(iv) "COMPANY TECHNOLOGY" shall mean any Technology that is
owned exclusively by the Company and used by the Company in its business as
currently conducted on the date of this Agreement or, with respect to Company
Products, as currently planned or contemplated to be conducted by the Company.
(v) "REGISTERED INTELLECTUAL PROPERTY RIGHTS" shall mean all
United States, international and foreign: (1) Patents; (2) registered
Trademarks, applications to register Trademarks, including intent-to-use
applications, or other registrations or applications related to Trademarks; (3)
Copyrights registrations and applications to register Copyrights; and (4) any
other Intellectual Property Right that is the subject of an application,
certificate, filing, registration or other document issued by, filed with, or
recorded by, any state, government or Governmental Entity at any time.
(b) Schedule 2.11(b) of the Company Schedules contains a complete
and accurate list (by name and version number) of all products, Software and/or
service offerings (including without limitation the data model, data
architecture, database design, logical database model and all elements for the
hosting infrastructure underlying all products, Software and/or service
offerings listed in Schedule 2.11(b)) of the Company or any of its subsidiaries
(i) that have been sold, distributed or otherwise disposed of in the three (3)
year period preceding the date hereof or (ii) for which the Company or any of
its subsidiaries currently allocate resources with the intent to sell,
distribute or otherwise dispose of in the twelve (12) month period after the
date hereof (collectively, the "COMPANY PRODUCTS"), including without
limitation, Company Products currently under development.
(c) Schedule 2.11(c) of the Company Schedules lists all Registered
Intellectual Property Rights owned by, filed in the name of, or applied for in
the name of or applied for by, the Company or any of its subsidiaries as of the
date of this Agreement (the "COMPANY REGISTERED INTELLECTUAL PROPERTY RIGHTS")
and lists any pending 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
Intellectual Property. Each item of Company Registered Intellectual Property
Rights is currently in compliance with all formal legal requirements (including,
without limitation, payment of filing, examination and maintenance fees and
proofs of use), except where such non-compliance would not materially prejudice,
impair or result in the abandonment of the Company Registered Intellectual
Property Rights, and is subsisting (or applied for in the case of applications).
All necessary documents and certificates in connection with such Company
Registered Intellectual Property Rights required to be filed on or prior to the
date of this Agreement without possibility of extension have been filed with the
PTO, the United States Copyright Office or the relevant patent, copyright,
trademark or other authorities in foreign jurisdictions, as the case may be, for
the purposes of perfecting, prosecuting and maintaining the Company Registered
Intellectual Property Rights. Except as set forth on Schedule 2.11(c) of the
Company Schedules, as of the date of this Agreement, there are no actions that
must be taken by the Company or its subsidiaries within one hundred and twenty
(120) days of the date of this Agreement in order to perfect, preserve, renew or
maintain the Company Registered Intellectual Property Rights,
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including, without limitation, the unextendible payment of any registration,
maintenance or renewal fees or the unextendible filing of any responses to PTO
office actions, documents, applications or certificates.
(d) In each case in which the Company or any of its subsidiaries
have acquired or purported to acquire ownership of any of the Company
Intellectual Property from any person (other than employees, consultants and
contractors of the Company or any subsidiary, with respect to which see Section
2.11(f) below) or other entity, the Company or such subsidiary has obtained a
valid and enforceable assignment sufficient to irrevocably transfer all
Intellectual Property Rights in and to such Company Intellectual Property
(including the right to seek past and future damages with respect thereto, if
applicable) to the Company or such subsidiary. To the maximum extent provided
for, by, and in accordance with and as required by, applicable laws and
regulations, the Company or each such subsidiary has recorded each such
assignment of a Registered Intellectual Property Right assigned to the Company
or each such subsidiary with the PTO the United States Copyright Office or
equivalent authorities outside the United States.
(e) Neither the Company nor any of its subsidiaries has pending any
suit, action or proceeding or received any written notice from any person or
other entity claiming that any Company Intellectual Property is invalid or
unenforceable. To the Company's knowledge, no person or other entity is
infringing or misappropriating any Company Intellectual Property. The Company
has not received written notice from any person or other entity claiming that
the 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.
(f) The Company and each of its subsidiaries have taken commercially
reasonable steps to protect the Company's and its subsidiaries' rights in Trade
Secrets of the Company that the Company desires to maintain as confidential. All
use, disclosure or appropriation of confidential information owned by the
Company or any of its subsidiaries by or to a third party has been pursuant to
the terms of a written agreement or other legally binding arrangement between
the Company or its subsidiary and such third party. Without limiting the
foregoing, the Company and each of its subsidiaries have and enforce, a policy
requiring each employee, consultant and contractor to execute proprietary
information, confidentiality and assignment agreements materially similar to the
form set forth in Schedule 2.11(f) of the Company Schedules, and all current and
former employees, consultants and contractors of the Company and each of its
subsidiaries who have created or modified any Company Technology or Company
Intellectual Property have executed such an agreement assigning all of such
employees', consultants' and contractors' rights in and to Company Technology
and Company Intellectual Property to the Company or such subsidiary.
(g) All Company Intellectual Property and Company Technology is
fully transferable, alienable or licensable by Parent without restriction and
without payment of any kind to any third party. No prior employer of any current
or former employee of the Company has any right, title or claim to any
technology used by the Company in connection with the operation or conduct of
the
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business of the Company or incorporated in any Company Product. Any work
performed on any such technology by anyone employed by another entity (i) was
completed without using any equipment, supplies, facility, or trade secret
information of the employer and (ii) was developed entirely on the employee's
own time as relates to such other entity and (iii) does not relate to the
employer's business or to the employer's actual or demonstrably anticipated
research or development or does not result from any work performed by the
employee for the employer.
(h) Each item of Company Intellectual Property is free and clear of
any Liens and encumbrances, except for non-exclusive licenses granted to
end-user customers in the ordinary course of business. The Company is the
exclusive owner of all Company Technology and Company Intellectual Property.
Without limiting the generality of the foregoing, (i) the Company is the
exclusive owner of all registrations for Internet Properties used by the Company
in the conduct of the business of the Company, including, without limitation,
the sale, distribution or provision of any Company Products and the operation of
any WWW sites by the Company; and (ii) other than Copyrighted works licensed
from third parties and listed on Schedule 2.11(n), the Company owns exclusively
all Copyrighted works that are included or incorporated into Company Products.
(i) Neither the Company nor any of its subsidiaries has transferred
ownership of, or granted any exclusive license of or any exclusive right to use,
or authorized the retention of any exclusive rights to use or joint ownership
of, any Technology or Intellectual Property Right that is or was Company
Technology or Company Intellectual Property, to any other person or entity, or
permitted the Company's or its subsidiary's rights in such Company Technology
and Company Intellectual Property to lapse or enter the public domain except for
Trade Secrets of the Company that the Company does not desire to maintain as
confidential, which shall in no event include:
(i) the Company Source Code (as defined in Section 2.11(w));
(ii) product or functional requirement documents or plans to
be used by Company's software architects or software coders as a blueprint for
future modifications or enhancements to the Company Source Code;
(iii) descriptions of the architecture of the Company
Products, excluding high level, general descriptions of the nature that might be
provided in a sales context (i.e., web services architecture); and
(iv) descriptions of the Company's data model, data
architecture, database design or logical database model underlying the Company
Products, excluding high level, general descriptions of the nature that might be
provided in a sales context.
(j) Other than Technology licensed from third parties that is either
(a) listed on Schedule 2.11(n) or (b) licensed under "shrink wrap," "click
wrap," and similar publicly available commercial binary code end user licenses
pursuant to which the Company is not obligated to pay more than one thousand
dollars ($1,000.00), all Technology used in or necessary to the conduct of
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the Company's business as currently conducted on the date of this Agreement or,
with respect to the Company Products, as currently planned or contemplated to be
conducted by the Company over the next twelve (12) months, including, without
limitation, the operation, design, license, development, manufacture, use,
import, distribution and sale of Company Products, is Company Technology and 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, without limitation,
Intellectual Property Rights therein, to the Company, and no person or other
entity (including any former employers of current or former Company employees)
owns or has any rights to any of the Company Technology or Company Intellectual
Property.
(k) Other than Technology licensed from third parties that is either
(a) listed on Schedule 2.11(n) or (b) licensed under "shrink wrap," "click
wrap," and similar publicly available commercial binary code end user licenses
pursuant to which the Company is not obligated to pay more than one thousand
dollars ($1,000.00), Company Technology and Company Intellectual Property
constitutes all the Technology, Intellectual Property Rights and Company
Registered Intellectual Property Rights used in and/or necessary to the conduct
of the business of the Company as it currently is conducted on the date of this
Agreement, and, with respect to the Company Products, as it is currently planned
or contemplated to be conducted by the Company over the next twelve (12) months,
including, without limitation, the operation, design, license, development,
manufacture, use, import, distribution and sale of Company Products. This
Section 2.11(k) is not a representation or warranty of non-infringement of third
party patent rights.
(l) The operation of the business of the Company and each subsidiary
of the Company as it is currently conducted on the date of this Agreement, or,
with respect to the Company Products, as is planned or contemplated to be
conducted, by the Company and each such subsidiary over the next twelve (12)
months, including but not limited to the design, development, use, import,
branding, advertising, promotion, marketing, manufacture and sale of Company
Products does not and will not when conducted by Parent (including following any
merger of the Company into Parent) in substantially the same manner following
the Closing, infringe or misappropriate any Intellectual Property Right of any
person, violate any right (including any statutory right to privacy or
publicity) of any person or other entity, or constitute unfair competition or
trade practices under the laws of any jurisdiction. To clarify, "in
substantially the same manner" excludes the addition to the Company Products of
non-Company materials not previously used by the Company or mentioned in Company
information relating to the Company Products.
(m) No Company Technology, Company Intellectual Property or Company
Product is subject to any outstanding decree, order, judgment or settlement
agreement or stipulation that restricts in any manner the use, transfer or
licensing thereof by the Company or any of its subsidiaries or that adversely
affects the validity, use or enforceability of such Company Intellectual
Property.
(n) Schedule 2.11(n)(i) of the Company Schedules lists, as of the
date of this Agreement, all contracts, licenses and agreements to which the
Company is a party and pursuant to which the Company obtains a license to use
any third party Technology or Intellectual Property
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Rights, other than "shrink wrap," "click wrap," and similar publicly available
commercial binary code end user licenses pursuant to which the Company is not
obligated to pay more than one thousand dollars ($1,000.00) and Schedule
2.11(n)(ii) of the Company Schedules lists, as of the date of this Agreement,
all contracts, licenses and agreements to which the Company is a party and
pursuant to which the Company grants to a third party a license to use any
Company Technology or Company Intellectual Property, (the contracts, licenses
and agreements listed in Schedule 2.11(n)(i) and Schedule 2.11(n)(ii)
collectively referred to as "IP CONTRACTS"). All IP Contracts are in full force
and effect. Neither the Company nor any of its subsidiaries is in material
breach or default of nor has the Company nor its subsidiaries materially failed
to perform under any of the IP Contracts and, to the Company's knowledge: (i) no
other party to any such IP Contract is in material breach thereof or has
materially failed to perform thereunder; and (ii) there are no disputes
regarding the scope of or performance under such IP Contracts, including with
respect to any payments to be made or received by the Company thereunder. The
consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, cancellation, termination or
suspension of any IP Contracts or entitle the other party or parties to such IP
Contracts to terminate such IP Contracts. The consummation of the transactions
contemplated by this Agreement will not result in the IP Contracts restricting
Parent from exercising all of the Company's and each of its subsidiaries' rights
under the IP Contracts to the same extent the Company and each of its
subsidiaries would have been able to had the transactions contemplated by this
Agreement not occurred and without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments which the Company
or such subsidiary would otherwise be required to pay had it exercised such
rights to the same extent as the Parent.
(o) Schedule 2.11(o) of the Company Schedules lists all IP Contracts
in which the Company or any of its subsidiaries have agreed in writing to, or
have 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 or entity of the
Intellectual Property Rights of any person or entity other than the Company.
(p) Neither this Agreement nor the transactions contemplated by this
Agreement, including the assignment to Parent of any contracts or agreements to
which the Company is a party, by operation of law or otherwise, will result in
(i) Parent's granting, pursuant to an Agreement to which the Company is a party,
to any person or entity any right or license to any Technology or Intellectual
Property Right owned by, or licensed to, either the Company or Parent
(excluding, with respect only to out-licensed Technology or Intellectual
Property Rights, the agreements listed in Schedule 2.11(n)(ii) of the Company
Schedules); or (ii) Parent's being bound by, or subject to, pursuant to an
Agreement to which the Company is a party, any non-compete or other restriction
on the operation or scope of the Company's or Parent's respective businesses; or
(iii) Parent's being obligated, pursuant to an Agreement to which the Company is
a party, to pay any royalties or other amounts to any person or entity in excess
of those payable by the Company prior to the Closing.
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(q) The Company and each of its subsidiaries have the right to use,
pursuant to valid licenses, all data (including, without limitation, personal
data of third parties), all software development tools, library functions,
operating systems, data bases, compilers and all other third-party Software that
are used in the business of the Company and each of its subsidiaries as of the
date of this Agreement or that are required, as of the date of this Agreement,
to create, modify, compile, operate or support any software that is Company
Technology or is incorporated into any Company Product.
(r) Schedule 2.11(r) of the Company Schedules lists as of the date
of this Agreement all software that is distributed as "free software", "open
source software" or under a similar licensing or distribution model (including
but not limited to the GNU General Public License (GPL), GNU Lesser General
Public License (LGPL), Mozilla Public License (MPL), BSD licenses, the Artistic
License, the Netscape Public License, the Sun Community Source License (SCSL)
the Sun Industry Standards License (SISL) and the Apache License) (collectively,
"OPEN SOURCE MATERIALS") used by the Company in any way, and describes the
manner in which such Open Source Materials were used (such description shall
include, without limitation, whether (and, if so, how) the Open Source Materials
were modified and/or distributed by the Company or any subsidiary). The Company
has not (i) incorporated Open Source Materials into, or combined Open Source
Materials with, any Company Product or used Open Source Materials to provide any
Company Product; (ii) distributed Open Source Materials in conjunction with or
for use with any Company Product; or (iii) used Open Source Materials, each of
(i), (ii) or (iii) in a manner that creates, or purports to create, obligations
for the Company with respect to any Company Intellectual Property or that
grants, or purports to grant, to any third party, any rights or immunities in or
to any Company Intellectual Property (including, but not limited to, using any
Open Source Materials in a manner that requires any Company Technology to be (x)
disclosed or distributed in source code form, (y) licensed for the purpose of
making derivative works, or (z) redistributable at no charge or with any
restriction on the consideration charged therefor).
(s) No person who has licensed any Technology to the Company or any
of its subsidiaries has ownership rights or license rights to improvements made
by or for the Company or any such subsidiary in such Technology.
(t) No government funding, facilities of a university, college,
other educational institution or research center or funding from third parties
was used in the development of any Company Technology, Company Products or
Company Intellectual Property. No current or former employee, consultant or
independent contractor of the Company or any subsidiary of the Company, who was
involved in, or contributed to, the creation or development of any Company
Technology, Company Products or Company Intellectual Property, has performed
services for the government, university, college, or other educational
institution or research center during a period of time during which such
employee, consultant or independent contractor was also performing services for
the Company or such subsidiary.
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(u) Neither the Company nor any of its subsidiaries has received any
opinion of counsel that any third party patent applies to any Company Product.
(v) Neither the Company nor any subsidiary has collected any
personally identifiable information from any third parties except as described
on Schedule 2.11(v) of the Company Schedules. The Company and each subsidiary
have complied with all applicable laws and their respective internal privacy
policies relating to (i) the privacy of users of the Company Products and all
Internet Properties owned, maintained or operated by the Company or any of its
subsidiaries as part of the business of the Company as currently conducted on
the date of this Agreement or currently planned or contemplated to be conducted
by the Company; and (ii) the collection, storage and transfer of any personally
identifiable information collected by the Company or any of its subsidiaries or
by third parties having authorized access to the records of the Company or any
of its subsidiaries. The execution, delivery and performance of this Agreement
comply with all applicable laws relating to privacy and with the Company's and
each subsidiary's privacy policies. Copies of all current and prior privacy
policies of the Company and each subsidiary, including the privacy policies
included in the Company's Internet website, are attached as Schedule 2.11(v) of
the Company Schedules. Each such privacy policy and all materials distributed or
marketed by the Company or any of its subsidiaries have at all times made all
disclosures to users or customers required by applicable laws and none of such
disclosures made or contained in any such privacy policy or in any such
materials have been in violation of any applicable laws.
(w) Neither the Company, any subsidiary nor any other person or
entity acting on their behalf has disclosed, delivered or licensed to any person
or other entity, agreed to disclose, deliver or license to any person or other
entity, or permitted the disclosure or delivery to any escrow agent or other
person or entity of, any Company Source Code. No event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time,
or both) would reasonably be expected to, result in the disclosure or delivery
by the Company or any subsidiary or any person or other entity acting on their
behalf to any person or other entity of any Company Source Code. 2.11(w) of the
Company Schedules identifies each contract pursuant to which the Company or any
subsidiary has deposited, or is or may be required to deposit, with an escrow
agent or any other person or entity, any Company Source Code, and describes
whether the execution of this Agreement or the consummation of the Merger or any
of the other transactions contemplated by this Agreement, in and of itself,
would reasonably be expected to result in the release from escrow of any Company
Source Code. As used in this Section 2.11(w) "COMPANY SOURCE CODE" means,
collectively, any software source code, any material portion or aspect of
software source code, or any material proprietary information or algorithm
contained in or relating to any software source code, of any Company Technology
contained in the Company Products.
2.12 Agreements, Contracts and Commitments. Except as set forth on
Schedule 2.12 of the Company Schedules, the Company does not have, is not a
party to nor is it bound by:
(i) Any employment, consulting or severance agreement,
contract or commitment;
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(ii) any collective bargaining agreements;
(iii) 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 (either alone or in connection with additional or
subsequent events) 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 (either alone or in connection with additional or subsequent events);
(iv) any fidelity or surety bond or completion bond;
(v) any lease of personal property having aggregate payment
obligations or receivables individually in excess of $10,000;
(vi) any agreement of indemnification or guaranty;
(vii) any agreement, contract or commitment containing any
covenant limiting the freedom of the Company to engage in any line of business
or to compete with any person;
(viii) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of $10,000
individually or $20,000 in the aggregate;
(ix) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business enterprise
outside the ordinary course of the Company's business;
(x) 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
(viii) hereof;
(xi) any purchase order or contract for the purchase of raw
materials involving $10,000 or more;
(xii) any construction contract;
(xiii) any distribution, joint marketing or development
agreement;
(xiv) any agreement, contract or commitment pursuant to which
the Company has granted or may grant in the future, to any party a source-code
license or option or other right to use or acquire source-code; or
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(xv) any other agreement, contract or commitment that involves
$25,000 or more and is not cancelable without penalty within thirty (30) days.
(b) Except for such alleged breaches, violations and defaults, and
events that would constitute a breach, violation or default with the lapse of
time, giving of notice, or both, all of which are noted in Schedule 2.12(b) of
the Company Schedules, 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 2.12, Schedule 2.11(n)(i) or Schedule 2.11(n)(ii) of
the Company Schedules (any such agreement, contract or commitment, a
"CONTRACT"). Each Contract is in full force and effect and, except as otherwise
disclosed in Schedule 2.12(b) of the Company Schedules, is not subject to any
default thereunder of which the Company has knowledge by any party obligated to
the Company pursuant thereto.
2.13 Interested Party Transactions. No officer, director, affiliate (as
defined under Regulation C under the Securities Act) or, to the knowledge of the
Company, stockholder of the Company (nor, to the knowledge of the Company, 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, (i) any material
economic interest in any entity which furnished or sold, or furnishes or sells,
services or products that the Company furnishes or sells, or proposes to furnish
or sell, or (ii) any material economic interest in any entity that purchases
from or sells or furnishes to, the Company, any goods or services or (iii) a
material beneficial interest in any contract or agreement set forth in Schedule
2.12, Schedule 2.11(n)(i) or Schedule 2.11(n)(ii) of the Company Schedules;
provided that ownership of less than five percent (5%) 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 2.13.
2.14 Compliance with Laws. The Company has complied in all material
respects with, is not in material violation of, and has not received any notices
of violation with respect to, any foreign, federal, state or local statute, law
or regulation, except where any such violations or failures to comply would not,
individually or in the aggregate, have a Material Adverse Effect.
2.15 Litigation. There is no action, suit or proceeding of any nature
pending or, to the knowledge of the Company , threatened against the Company,
its properties or any of its officers or directors, in their respective
capacities as such. There is no investigation pending or, to the knowledge of
the Company , threatened against the Company, its properties or any of its
officers or directors in their respective capacities as such by or before any
Governmental Entity. Schedule 2.15 of the Company Schedules sets forth, with
respect to any such 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
manufacture, offer or sell any of the Company Products in the present manner or
style thereof.
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2.16 Insurance. The insurance policies and fidelity bonds covering the
assets, business, equipment, properties, operations, employees, officers and
directors of the Company contain provisions which to the knowledge of the
Company are reasonable and customary in the Company's industry, and there is no
claim by the Company pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds. All premiums due and payable under all such policies and
bonds for their present terms 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.
2.17 Minute Books. The minute books of the Company made available to
Parent are the only minute books of the Company and contain a reasonably
accurate summary of all meetings of directors (including committees thereof) and
stockholders or actions by written consent since the time of incorporation of
the Company.
2.18 Environmental Matters. The Company is not in material violation of
any applicable statute, law or regulation relating to the environment or
occupational health and safety, and no material expenditures are or will be
required in order to comply with any such existing statute, law or regulation.
2.19 Brokers' and Finders' Fees; Third Party Expenses. The Company has not
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
2.20 Employee Matters and Benefit Plans.
(a) Definitions.
(i) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended and as codified in Section 4980B of the
Code and Section 601 et. seq. of ERISA;
(ii) "COMPANY EMPLOYEE PLAN" shall mean 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 unwritten, 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 for the benefit of any
Employee, or with respect to which the Company has or may have any liability or
obligation;
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(iii) "DOL" shall mean the Department of Labor;
(iv) "EMPLOYEE" shall mean any current or former or retired
employee, consultant or director of the Company;
(v) "EMPLOYEE AGREEMENT" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation, visa,
work permit or other agreement, contract or understanding between the Company
and any Employee;
(vi) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(vii) "IRS" shall mean the Internal Revenue Service;
(b) Schedule. Schedule 2.20(b) of the Company Schedules contains an
accurate and complete list of each Company Employee Plan and, to the extent
currently in effect or containing outstanding or potential obligations or
liabilities, each Employee Agreement. The Company does not have any plan or
commitment to establish any new Company Employee Plan or Employee Agreements, to
modify any Company Employee Plan or Employee Agreements, or to adopt or enter in
any Company Employee Plan or Employee Agreement.
(c) Documents. The Company has provided to Parent correct and
complete copies of: (i) all documents embodying each Company Employee Plan and,
to the extent currently in effect or containing outstanding or potential
obligations or liabilities, each Employee Agreement including (without
limitation) all amendments thereto and all related trust documents,
administrative service agreements, group annuity contracts, and group insurance
contracts; (ii) the most recent annual actuarial valuations, if any, prepared
for each Company Employee Plan; (iii) the most recent summary plan description
together with the summary(is) of material modifications thereto, if any,
required under ERISA with respect to each Company Employee Plan; (iv) all IRS
determination, opinion, notification and advisory letters, and all applications
and correspondence to or from the IRS or the DOL with respect to any such
application or letter; (v) all communications material to any Employee or
Employees relating to any Company Employee Plan; and (vi) all written
correspondence to or from any governmental agency relating to any Company
Employee Plan; and (vii) all COBRA forms and related notices (or such forms and
notices as required under comparable law).
(d) Employee Plan Compliance. The Company has performed in all
material respects all obligations required to be performed by them under, are
not in default or violation of, and have no knowledge of any default or
violation by 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.
There are no audits, inquiries or proceedings pending or, to the knowledge of
the Company, threatened by the IRS or DOL, or any other
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Governmental Entity with respect to any Company Employee Plan. The Company is
not subject to any penalty or tax with respect to any Company Employee Plan
under Section 502(i) of ERISA or Sections 4975 through 4980 of the Code. The
Company has timely made all contributions and other payments required by and due
under the terms of each Company Employee Plan.
(e) No Post-Employment Obligations. No Company Employee Plan or
Employee Agreement provides, or reflects or represents any liability to provide,
retiree life insurance, retiree health or other retiree employee welfare
benefits to any person for any reason, except as may be required by COBRA or
other applicable statute, and neither of the Company nor Subsidiary has ever
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) or any other person
that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefits, except to
the extent required by statute.
(f) Effect of Transaction. 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, increase in benefits or
obligation to fund benefits with respect to any Employee.
(g) Employment Matters. The Company: (i) is in compliance in all
material respects with all applicable 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; (ii)
has withheld and reported all amounts required by law or by agreement to be
withheld and reported with respect to wages, salaries and other payments to
Employees; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not liable
for any payment to any trust or other fund governed by or maintained by or on
behalf of any governmental 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). There are no pending or, to the Company's knowledge,
threatened claims or actions against the Company under any worker's compensation
policy or long-term disability policy. The Company has no direct or indirect
material liability with respect to any misclassification of any person as an
independent contractor rather than as an employee.
(h) Labor. No work stoppage or labor strike against the Company is
pending or to the Company's knowledge, threatened. The Company does not know of
any activities or proceedings of any labor union to organize any Employees.
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 is not presently, nor has it
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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 with respect to Employees.
2.21 Employees. To the knowledge of the Company , no employee of the
Company (i) is in violation of any term of any employment contract, patent
disclosure agreement, non-competition agreement, or any restrictive covenant to
a former employer relating to the right of any such employee to be employed by
the Company because of the nature of the business conducted or presently
proposed to be conducted by the Company or to the use of trade secrets or
proprietary information of others and (ii) has given notice to the Company, nor
is the Company otherwise aware, that any employee intends to terminate his or
her employment with the Company.
2.22 Governmental Authorization. The Company possesses all material
consents, licenses, permits, grants or other authorizations issued to the
Company by a governmental entity (i) pursuant to which the Company currently
operates or holds any interest in any of its properties or (ii) which are
required for the operation of its business or the holding of any such interest,
other than such consents, licenses, permits, grants or authorizations the
failure to obtain which would not, either individually or in the aggregate, have
a Material Adverse Effect (herein collectively called "COMPANY AUTHORIZATIONS"),
which 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.
2.23 Representations Complete. None of the representations or warranties
made by the Company (as modified by the Company Schedules), nor any statement
made in the Company Schedules or certificate furnished by the Company pursuant
to this Agreement, or furnished in or in connection with documents mailed or
delivered to the stockholders of the Company (to the extent such information was
supplied by the Company) in connection with soliciting their consent to this
Agreement and the Merger, contains or will contain at the Closing, any untrue
statement of a material fact, or omits or will omit at the Closing 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
Each of Parent and Merger Sub hereby represents and warrants to the
Company that on the date hereof and as of the Effective Time, as though made at
the Effective Time, as follows:
3.1 Organization and Standing. 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 California. Each of Parent and Merger Sub is duly
qualified to do business and is in good standing as a foreign corporation in
each
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state or other jurisdiction in which the failure to be so qualified would have a
material adverse effect on the business, assets, financial condition, results of
operations of Parent and its subsidiaries taken as a whole.
3.2 Authority. Each of Parent and Merger Sub has all requisite corporate
power and authority to enter into this Agreement and any Related Agreements to
which it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by each of Parent and Merger Sub of this
Agreement and any related agreements to which it is a party and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Parent and Merger Sub. This
Agreement and any Related Agreements to which Parent and Merger Sub are parties
have been duly executed and delivered by Parent and Merger Sub and constitute
the valid and binding obligations of Parent and Merger Sub, enforceable against
each of Parent and Merger Sub in accordance with their terms. The execution and
delivery of this Agreement and any Related Agreement to which it is a party by
Parent and Merger Sub does not, and, as of the Closing, 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") (i)
any provision of the Certificate of Incorporation or Bylaws of Parent or Merger
Sub, or (ii) any mortgage, indenture, lease, contract or other agreement or
instrument, permit, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to either Parent or Merger Sub or its properties
or assets, where such Conflict would be reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Parent and its subsidiaries
taken as a whole.
3.3 Consents. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, or any third
party is required by or with respect to Parent or Merger Sub in connection with
the execution and delivery of this Agreement and any Related Agreements to which
Parent or Merger Sub is a party or the consummation of the transactions
contemplated hereby and thereby, except for (i) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings
which, if not obtained or made, would not have a material adverse effect on the
business, assets (including intangible assets), condition (financial or
otherwise), results of operations or capitalization of Parent or otherwise
materially affect its ability to consummate the Merger or perform its
obligations under this Agreement and (ii) the filing of the Merger Agreement
with the Secretary of State of the State of California.
3.4 Solvency. Parent and each of its subsidiaries is currently solvent.
Parent is not entering into this Agreement, with the intent to defraud, delay or
hinder any of its present or future creditors. After the Closing, each of Parent
and its subsidiaries shall be solvent and capable of paying its debts as they
become due. Neither Parent nor any of its subsidiaries nor any of their
respective assets or properties is subject to, or the subject of, any insolvency
proceeding. Neither Parent nor its subsidiaries has initiated, taken or
attempted to initiate or take, or been the subject of, any insolvency action or
proceeding, and no assets or properties of Parent or any of its subsidiaries are
subject to any proceeding or action relating to insolvency. No writ of
attachment, execution or similar process has
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been ordered, executed or filed against Parent or any of its subsidiaries or any
of their respective assets or properties. Neither Parent nor any of its
subsidiaries has any intention to file a voluntary petition for relief under the
United States Bankruptcy Code, as amended, or to seek relief on its debts under
or the protection of any other bankruptcy or insolvency law or insolvency
proceeding. No creditor of Parent or any its subsidiaries has threatened to file
an involuntary petition for relief under the United States Bankruptcy Code, as
amended, or to institute any other insolvency proceeding or action against
Parent or any of its subsidiaries.
3.5 Parent Financial Statements. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Registration Statement on Form S-1 filed by Parent on March 31, 2004 and the
amendments thereto has been prepared in accordance with GAAP applied on a
consistent basis throughout the period involved (except as may be indicated in
the notes thereto) and each fairly presents in all material respects the
consolidated financial position of Parent and its subsidiaries as of the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which will not be material in significance.
3.6 Merger Sub. Merger Sub is wholly-owned by Parent. Merger Sub was
formed by Parent solely for the purpose of completing the transactions hereunder
and has no business activities other than the operations as contemplated by this
Agreement.
ARTICLE IV
CLOSING CONDITIONS
4.1 Company Closing Conditions.
(a) Stockholder Approval. Prior to the execution of the Agreement,
the stockholders of the Company shall have approved and adopted this Agreement
and the transactions contemplated hereby as provided by California Law and the
Company's Articles of Incorporation and Bylaws.
(b) Performance. Parent shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
(c) Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Company, and the Company shall have received
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all such counterparts and certified or other copies of such documents as the
Company may reasonably request.
(d) No Legal Proceedings. No proceeding challenging this Agreement
or the transactions contemplated hereby or seeking to prohibit, alter, prevent
or materially delay the Closing or seeking damages in connection therewith shall
have been instituted or threatened by any person or entity.
(e) Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with this Agreement or the execution,
delivery and performance by the Company of this Agreement shall be duly obtained
and effective as of the Closing.
4.2 Parent Closing Conditions.
(a) Performance. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
(b) Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Parent, and Parent shall have received all such counterparts and
certified or other copies of such documents as Parent may reasonably request.
(c) No Legal Proceedings. No proceeding challenging this Agreement
or the transactions contemplated hereby or seeking to prohibit, alter, prevent
or materially delay the Closing or seeking damages in connection therewith shall
have been instituted or threatened by any person or entity.
(d) Qualifications. All authorizations, approvals, or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with this Agreement or the execution,
delivery and performance by the Company of this Agreement shall be duly obtained
and effective as of the Closing.
(e) Employees. Parent and each of the Required Employees shall have
entered into an Employment Agreement, with effect as of the Closing Date, and
each Required Employee shall have executed and delivered an Employment
Proprietary Information and Inventions Agreement, and none of the Required
Employees shall have taken any action to rescind, revoke or otherwise repudiate
his or her Employment Agreement or Employment Proprietary Information and
Inventions Agreements.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Stockholder Approval. Prior to the execution of the Agreement, the
stockholders of the Company have approved and adopted this Agreement and the
transactions contemplated hereby as provided by California Law and the Company's
Articles of Incorporation and Bylaws.
5.2 Confidentiality. Each of the parties hereto hereby agrees to maintain
the confidentiality of the information obtained pursuant to the negotiation and
execution of this Agreement, in accordance with the provisions of the
Confidentiality and Nondisclosure Agreement between Parent and the Company dated
as of December 10, 2004 (the "CONFIDENTIALITY AGREEMENT").
5.3 Employee Benefit Matters. As of the Effective Time, each employee of
the Company who is employed by Parent after the Effective Time (each a
"CONTINUING EMPLOYEE"), shall be eligible to either: (i) participate in Parent
benefit plans, (ii) participate in the Company benefit plans that are continued
by Parent, or (iii) a combination of (i) and (ii), in each case to the extent
eligible under the terms of the applicable benefit plan, so that each Continuing
Employee is eligible to receive benefits that are substantially similar in the
aggregate to those of similarly situated employees of Parent (it being
understood that equity incentives may vary). Each Continuing Employee shall, to
the extent permitted by law and applicable tax qualification requirements, and
subject to any generally applicable break in service or similar rule, receive
credit for purposes of vacation, eligibility to participate and vesting under
Parent's benefit program for years of service with the Company prior to the
Effective Time.
5.4 401(k) Plan. Effective no later than the day immediately preceding the
Closing Date, the Company shall have terminated any and all group severance,
separation or salary continuation plans, programs or arrangements and any and
all plans intended to include a Code Section 401(k) arrangement (collectively,
the "COMPANY PLANS") (unless Parent has provided written notice to the Company
that such Company Plans shall not be terminated). Unless Parent has provided
such written notice to the Company, the Company has provided Parent with
evidence, to the reasonable satisfaction of Parent, that the Company Plans have
been terminated (effective as of no later than the day immediately preceding the
Closing Date) pursuant to resolutions of the Company's Board of Directors.
5.5 Expenses. In the event that the Merger is consummated, up to $37,500
of the reasonable legal, accounting, financial advisory, consulting and all
other fees and expenses of third parties ("THIRD PARTY EXPENSES") incurred by
the Company in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby shall be
borne and paid by Parent. All Third Party Expenses of the Company in excess of
$37,500 (the "EXCESS THIRD PARTY EXPENSES") shall be paid by the holders of
Company Common Stock on a pro rata basis, based on the aggregate Merger
Consideration to which such stockholders are entitled
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hereunder, by means of a reduction in the Merger Consideration deliverable to
such holders of Company Common Stock.
5.6 Public Disclosure. No disclosure (whether or not in response to an
inquiry) of the existence or nature of this Agreement shall be made by any party
hereto (other than to their respective agents including, without limitation, to
accountants, tax advisors, legal advisors) unless approved by duly authorized
officers of both Parent and the Company prior to release, provided that such
approval shall not be unreasonably withheld and subject in any event to Parent's
obligation to comply with applicable securities law.
5.7 FIRPTA Compliance. On the Closing Date, the Company shall deliver to
Parent a properly executed statement in a form reasonably acceptable to Parent
for purposes of satisfying Parent's obligations under Treasury Regulation
Section 1.1445-2(c)(3).
5.8 Reasonable Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use its reasonable efforts to
take promptly, or cause to be taken, all actions, and to do promptly, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby, to obtain all necessary waivers, consents and approvals (including, but
not limited to, those required under the Contracts and specifically including
the licenses set forth on Section 2.11(n)(i) of the Disclosure Schedule) in a
manner that does not materially alter the underlying obligations of the parties
and to effect all necessary registrations and filings, and to remove any
injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement; provided that Parent shall not be required to agree to any
divestiture by Parent or the Company or any of Parent's subsidiaries or
Affiliates of shares of capital stock or of any business, assets or property of
Parent or its subsidiaries or Affiliates or the Company or its Affiliates, or
the imposition of any material limitation on the ability of any of them to
conduct their businesses or to own or exercise control of such assets,
properties and stock.
5.9 Additional Documents and Further Assurances. Each party hereto, at the
request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
reasonably desirable for effecting completely and promptly the consummation of
this Agreement and the transactions contemplated hereby, including, without
limitation, transfer of the domain names relating to the operation of the
business of the Company which are under the name of Matthew Robinson to Parent.
5.10 Employees. Parent and each of the Required Employees shall enter into
an Employment Agreement, with effect as of the Closing Date, and each Required
Employee shall execute and deliver an Employment Proprietary Information and
Inventions Agreement. None of the Required Employees shall have taken any action
to rescind, revoke or otherwise repudiate his or her Employment Agreement or
Employment Proprietary Information and Inventions Agreement.
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ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
6.1 Survival of Representations and Warranties. The representations and
warranties made by the Company 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 the one year anniversary of the Closing
Date (the "EXPIRATION DATE").
6.2 Escrow Arrangements.
(a) Escrow Fund. At the Effective Time, the Company's stockholders
will be deemed to have consented to the deposit of the Escrow Amount with the
Escrow Agent upon payment of the 90th Day Parent Obligation on the Second
Payment Date without any act required on the part of such stockholders. Upon
payment of the 90th Day Parent Obligation on the Second Payment Date, the Escrow
Amount, without any act required on the part of any stockholder, will be
deposited with the Escrow Agent, such deposit to constitute an escrow fund (the
"ESCROW FUND") to be governed by the terms set forth herein and at Parent's cost
and expense. The pro rata portion of the Escrow Amount to which each stockholder
of the Company shall be entitled upon distribution of the remaining Escrow
Amount, if any, at the termination of the Escrow Period shall be in proportion
to the Merger Consideration to which such holder would otherwise be entitled
under Section 1.6 as set forth on Schedule 2.2. The Escrow Amount shall be
contributed entirely out a portion of the Secondary Merger Consideration
issuable upon the Merger in respect of the Company Capital Stock; provided,
however that in the case of Matthew Robinson and Pavel Vorobiev, 50% of each
individual's contribution to the Escrow Amount shall be contributed from such
holder's portion of the Holdback Amount and all references herein to deposits to
or withdrawals from the Escrow Fund or relating to the Escrow Amount for such
individuals shall include such amounts. The Escrow Fund is available to
compensate Parent and its affiliates for any claims, losses, liabilities,
damages, deficiencies, costs and expenses, including reasonable attorneys' fees
and expenses, and expenses of investigation and defenses (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 any inaccuracy or breach of a
representation or warranty of the Company contained in this Agreement or in any
certificate or instrument delivered pursuant to this Agreement , or any failure
by the Company to perform or comply with any covenant contained herein.
The Escrow Fund shall be the sole and exclusive remedy to compensate
Parent, its officers, directors, or affiliates (including the Surviving
Corporation) for any Losses, except in the case of fraud or intentional
misrepresentation. The maximum amount of Losses for which each stockholder of
the Company shall be liable is such stockholder's proportionate amount of the
Escrow Fund based on the percentage of Merger Consideration received by such
stockholder. In the event any payment pursuant to the indemnity obligations of
the stockholders of the Company set forth in this Agreement is required to be
made, each stockholder will satisfy such payment by forfeiture of its
proportionate
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share of the Escrow Fund. Parent shall not be entitled to receive any amounts
from the Escrow Fund unless and until Parent shall have delivered an Officer's
Certificate (as defined in Section 6.2(d)) identifying the Losses.
Notwithstanding anything to the contrary, neither Parent or any of its
affiliates shall have any right to compensation from the Escrow Fund unless and
until the aggregate Losses exceed an aggregate of Five Thousand Dollars ($5,000)
(the "DEDUCTIBLE"), in which event Parent shall be entitled to compensation from
the Escrow Fund only to the extent to which the amount of Losses exceed $5,000
(and not the initial $5,000 of Losses), provided, however, that any Losses
incurred in connection with the Company's use of commercial software in a
production environment that has not been appropriately licensed shall not be
subject to the Deductible and Parent shall be entitled to recovery of any and
all such Losses up to the amount of the Escrow Fund without regard to the
Deductible.
(b) Escrow Period; Distribution upon Termination of Escrow Periods.
Subject to the following requirements, the Escrow Fund shall be deemed to be in
existence immediately following the payment of the 90th Day Parent Obligation on
the Second Payment Date and shall terminate at 5:00 p.m. Pacific Time on the
Expiration Date (the "ESCROW PERIOD"); provided 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 reduction as may be determined by
arbitration of the matter as provided in Section 6.2(f) hereof in the event of
the objection of the Stockholder Agent in the manner provided in Section 6.2(e)
hereof) to satisfy any unsatisfied claims concerning facts and circumstances
existing prior to the termination of such Escrow Period and to the extent
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, the Escrow Agent shall transfer to the stockholders of the Company,
pursuant to written instructions by Parent, the remaining portion of the Escrow
Fund not required to satisfy such claims, such remaining portion to be
transferred no later than ten (10) days after the resolution of such claims. If
no claims exist as of the Expiration Date, the Escrow Agent shall release the
full amount of the Escrow Fund within five (5) days of the Expiration Date.
Deliveries of Escrow Amounts to the stockholders of the Company pursuant to this
Section 6.2(b) shall be made in proportion to their respective original
contributions to the Escrow Fund.
(c) Protection of Escrow Fund. 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 or pursuant to joint written instructions from
Parent and the Stockholder Agent. The Escrow Fund shall be invested in U.S.
Treasury bills with maturities of not more than thirty (30) days and any
interest paid on the cash contained in the Escrow Fund shall be added to the
Escrow Fund and become a part thereof. For any period of time before such U.S.
Treasury bills can be purchased by the Escrow Agent or after such bills mature,
the Escrow Fund shall be invested in a business money market account of the
Escrow Agent (or another nationally recognized banking institution) and any
interest paid on the cash contained in the Escrow
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Fund shall be added to the Escrow Fund and become a part thereof and available
for satisfaction of claims. The parties hereto agree that Parent is the owner of
any cash in the Escrow Fund, and that all interest on or other taxable income,
if any, earned from the investment of such cash pursuant to this Agreement shall
be treated for tax purposes as earned by Parent. At the end of Parent's taxable
year, an amount equal to the income earned from the investment of cash contained
in the Escrow Fund shall be deemed distributed to the Company stockholders in
accordance with the pro rata portion of the Escrow Fund to which each such
stockholder would be entitled upon distribution of the Escrow Fund at the
termination of the Escrow Period, and then recontributed by such stockholders to
the Escrow Fund. The deemed distribution represents interest for the deferral of
payment of a portion of the Merger Consideration resulting from the escrow
arrangement. The Company stockholders shall be responsible for any Taxes dues
with respect to the deemed distribution.
(d) Claims Upon Escrow Fund. Upon receipt by the Escrow Agent at any
time on or before the last day of the Escrow Period of a certificate signed by
any officer of Parent (an "OFFICER'S CERTIFICATE"): (A) stating that Parent has
paid or properly accrued or reasonably anticipates that it will have to pay or
accrue 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 in accordance with GAAP, or the basis for such reasonably
anticipated Loss, and the nature of the misrepresentation, breach of warranty or
covenant to which such item is related, the Escrow Agent shall, subject to the
provisions of Section 6.2(e) hereof, transfer to Parent out of the Escrow Fund,
as promptly as practicable, cash held in the Escrow Fund in an amount equal to
such Losses; provided, however, that to the extent an Officer's Certificate
alleges only the basis for an anticipated Loss, no amount shall be distributed
until such Loss is actually paid or accrued under GAAP. Payments of cash from
the Escrow Fund will be made pro rata in proportion to each stockholder's
original contributions to the Escrow Fund as set forth on Schedule 6.2.
(e) Objections to Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such certificate shall be
delivered to the Stockholder Agent and for a period of thirty (30) days after
confirmed receipt of such delivery, the Escrow Agent shall make no transfer to
Parent of any Escrow Amounts pursuant to Section 6.2(d) hereof unless the Escrow
Agent shall have received written authorization from the Stockholder Agent to
make such transfer. After the expiration of such thirty (30)-day period, the
Escrow Agent shall transfer cash from the Escrow Fund in accordance with Section
6.2(d) hereof, provided that no such transfer may be made if the Stockholder
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.
(f) Resolution of Conflicts; Arbitration.
(i) In case the Stockholder Agent shall object in writing to
any claim or claims made in any Officer's Certificate as provided in Section
6.2(e) hereof, the Stockholder 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 Stockholder Agent and Parent should so agree, a memorandum
setting
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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 cash from the Escrow Fund in accordance with the
terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation, either Parent or the Stockholder 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 in accordance with the Commercial Arbitration Rules then in effect
of the American Arbitration Association (the "AAA"). Parent and the Stockholder
Agent shall each select one arbitrator, and the two arbitrators so selected
shall select a third arbitrator; provided, however, that (i) failing such
agreement within ninety (90) days of delivery of the Officer's Certificate (or
failure to select a mutually agreed upon arbitrator), the third arbitrator shall
be appointed in accordance with the AAA Rules and (ii) if either the
Stockholder's Agent or Parent fails to timely designate an arbiter, the claim
shall be resolved with the participation of the one arbitrator timely
designated. 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 6.2(e) 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 American
Arbitration Association. For purposes of this Section 6.2(f), in any arbitration
hereunder in which any claim or the amount thereof stated in the Officer's
Certificate is at issue, the Company shall be deemed to be the prevailing party
in the event that the arbitrators award the Company at least $10,000; otherwise,
the stockholders of the Company as represented by the Stockholder Agent shall be
deemed to be the 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.
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(g) Stockholder Agent; Power of Attorney.
(i) In the event that the Merger is approved, effective upon
such vote, and without further act of any stockholder, Matthew Robinson shall be
appointed as Stockholder Agent and attorney-in-fact for each stockholder of the
Company (except such stockholders, if any, as shall have perfected their
appraisal or dissenters' rights under California Law), for and on behalf of
stockholders of the Company, to give and receive notices and communications, to
authorize delivery to Parent of cash from the Escrow Fund in satisfaction of
claims by Parent, to object to such deliveries, to agree to, negotiate, enter
into settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such claims, and to
take all actions necessary or appropriate in the judgment of Stockholder 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 Stockholder 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 Stockholder 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
Stockholder Agent, and the Stockholder Agent shall not receive compensation for
its services. Notices or communications to or from the Stockholder Agent shall
constitute notice to or from each of the stockholders of the Company.
(ii) The Stockholder Agent shall not be liable for any act
done or omitted hereunder as Stockholder 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 severally on a
pro rata basis (based on the Merger Consideration to which such stockholders are
entitled) indemnify the Stockholder Agent and hold the Stockholder Agent
harmless against any loss, liability or expense incurred without gross
negligence or willful misconduct on the part of the Stockholder Agent and
arising out of or in connection with the acceptance or administration of the
Stockholder Agent's duties hereunder, including the reasonable fees and expenses
of any legal counsel retained by the Stockholder Agent.
(h) Actions of the Stockholder Agent. A decision, act, consent or
instruction of the Stockholder 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 decision, act, consent or instruction of the Stockholder Agent as being the
decision, act, 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, act,
consent or instruction of the Stockholder Agent.
(i) Third-Party Claims. In the event Parent becomes aware of a
third-party claim which Parent reasonably believes may result in a demand
against the Escrow Fund, Parent shall notify the Stockholder Agent of such claim
in accordance with Section 6.2(e), and the Stockholder Agent, as representative
for the stockholders of the Company, shall be entitled, at his expense, to
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participate in any defense of such claim. Parent shall have the right in its
sole discretion to control the defense of all such claims and to settle any such
claim; provided, however, that no settlement of any such claim with third-party
claimants in excess of $25,000 in a single matter shall permit any claim against
the Escrow Fund, except with the consent of the Stockholder Agent, which consent
shall not be unreasonably withheld. Except with the written consent of the
Stockholder Agent, Parent will not, in the defense of a third party claim,
consent to the entry of any judgment or enter into any settlement (i) which does
not include as a term thereof the giving to the indemnifying party by the third
party of a release from all liability with respect to such suit, claim, action,
or proceeding; and (ii) unless there is no finding or admission of (A) any
violation of applicable laws by the indemnifying party, (B) any liability on the
part of the indemnifying party or (C) any violation of the rights of any person
and no effect on any other claims of a similar nature that may be made by the
same third party against the indemnifying party. Except with the consent of the
Stockholder Agent, no settlement of any such claim with third-party claimants
shall alone be determinative of the amount of any claim against the Escrow Fund.
In the event that the Stockholder Agent has consented to any such settlement and
acknowledged that the claim is a valid claim against the Escrow Fund, the
Stockholder Agent shall be deemed to have agreed to the claim by Parent against
the Escrow Fund in an amount equal to such settlement.
(j) 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 authorized
officer of Parent and the Stockholder Agent, and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed in
good faith 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, provided that the
Escrow Agent has exercised reasonable care in the selection of such counsel.
(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
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this Agreement or any documents or papers deposited or called for hereunder
absent gross negligence, bad faith or willful misconduct.
(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 absent gross negligence, bad faith
or willful misconduct.
(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, bad faith 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 instrument, including any written statement of affidavit
provided for in this Agreement that the Escrow Agent shall in good faith believe
to be genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations, or determining the scope of any representative authority.
In addition, the Escrow Agent may consult with the legal counsel in connection
with Escrow Agent's duties under this Agreement and shall be fully protected in
any act taken, suffered, or permitted by him/her in good faith in accordance
with the advice of counsel provided that the Escrow Agent has exercised
reasonable care in the selection of such 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 cash in the Escrow Fund and may wait for settlement
of any such controversy by final appropriate legal proceedings. 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 cash held in escrow, except all costs, 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) The Escrow Agent shall be indemnified and held harmless
by the Company Stockholders (only out of the Escrow Fund) and Parent jointly and
severally, 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.
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(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.
(k) 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 by Parent for such extraordinary services and
reimbursed for all costs, attorneys' fees, and expenses occasioned by such
default, delay, controversy or litigation.
ARTICLE VII
GENERAL PROVISIONS
7.1 Notices. All notices and other communications hereunder shall be in
writing, shall be effective when received, and shall in any event be deemed to
have been received (i) when delivered, if delivered personally or by commercial
delivery service, (ii) three (3) business days after deposit with U.S. Mail, if
mailed by registered or certified mail (return receipt requested), (iii) one (1)
business day after the business day of deposit with Federal Express or similar
overnight courier for next day delivery (or, two (2) business days after such
deposit if deposited for second business day delivery), if delivered by such
means, or (iv) one (1) business day after delivery by facsimile transmission
with copy by U.S. Mail, if sent via facsimile plus mail copy (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):
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(a) if to Parent or Merger Sub, to:
Taleo Corporation
182 Second Street
5th Floor
San Francisco, CA 94105
Attention: Chief Executive Officer
Telephone No. (415) 538-9068
Facsimile No.: (415) 538-9069
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
950 Page Mill Road
Palo Alto, California 94304
Attention: Mark A. Bertelsen, Esq.
Facsimile No.: (650) 493-6811
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(b) if to the Company, to:
Recruitforce.com, Inc.
444 Castro Street
Suite 302
Mountain View, CA 94041
Attention: Chief Executive Officer
Telephone No.: (650) 938 - 0121
Facsimile No.: (650) 938-0122
with a copy to:
Fenwick & West LLP
Silicon Valley Center
801 California Street
Mountain View, CA 94041
Attention: Michael Patrick
Telephone No.: (650) 988 - 8500
Facsimile No.: (650) 938-5200
(c) if to the Escrow Agent:
U.S. Bank, National Association
One California Street, Suite 2550
San Francisco, CA 94111
Attention: Sheila K. Soares
Telephone No.: (415) 273 - 4532
Facsimile No.: (415) 273-4591
(d) if to the Stockholder Agent:
444 Castro Street
Suite 302
Mountain View, CA 94041
Attention: Matthew Robinson
Telephone No.: (650) 938 - 0121
Facsimile No.: (650) 938-0122
7.2 Interpretation. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. 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. When
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reference is made herein to "THE BUSINESS OF" an entity, such reference shall be
deemed to include the business of all direct and indirect subsidiaries of such
entity. Reference to the subsidiaries of an entity shall be deemed to include
all direct and indirect subsidiaries of such entity.
7.3 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.
7.4 Entire Agreement. This Agreement, the Company Schedules, and the
documents and instruments and other agreements among the parties hereto
referenced herein: (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, it being understood that the Confidentiality Agreement
shall continue in full force and effect until the Closing and shall survive any
termination of this Agreement; and (b) are not intended to confer upon any other
person any rights or remedies hereunder.
7.5 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.
7.6 Other Remedies. Except as otherwise provided herein (including,
without limitation, the limitations on remedies of Parent set forth in Article 6
of this Agreement), 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.
7.7 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.
7.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof;
provided that issues involving the corporate governance of any of the parties
hereto shall be governed by their respective jurisdictions of incorporation.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
any
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state or federal court within the State of California, in connection with any
matter based upon or arising out of this Agreement or the matters contemplated
herein, other than issues involving the corporate governance of any of the
parties hereto, agrees that process may be served upon them in any manner
authorized by the laws of the State of Delaware 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.
7.9 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.
7.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without prior written approval of
the other party; provided, however, that except as otherwise provided herein,
Parent may assign this Agreement to a successor entity or successor in interest
of Parent without written consent provided that if such assignment occurs on or
before the termination of Parent's obligations pursuant to this Agreement, such
successor shall agree in writing to undertake Parent's obligations as set forth
in this Agreement. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
7.11 Absence of Third Party Beneficiary Rights. No provisions of this
Agreement are intended, nor shall be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, partner of any party hereto or any other person or entity
unless specifically provided otherwise herein.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized respective officers as of the date first written
above
TALEO CORPORATION
By: /s/ Louis Tetu
-------------------------------
Name: Louis Tetu_______________
Title: CEO_____________________
BUTTERFLY ACQUISITION CORPORATION
By: /s/ Louis Tetu
-------------------------------
Name: Louis Tetu_______________
Title: President______________
RECRUITFORCE.COM, INC.
By: /s/ Pavel Vorobiev
-------------------------------
Name: Pavel Vorobiev___________
Title:_________________________
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized respective officers as of the date first written
above.
SOLELY AS TO ARTICLE VI:
U.S. BANK, NATIONAL ASSOCIATION
By: /s/ Sheila Soares
-------------------------------
Name: Sheila K. Soares_________
Title: Vice President_________
STOCKHOLDER AGENT
By: /s/ Matthew Robinson
Name: Matthew Robinson_____________
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
<PAGE>
SCHEDULE 1.2
Matthew Robinson
Pavel Vorobiev