EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
INKTOMI CORPORATION
IC MERGER CORP.
AND
C2B TECHNOLOGIES INCORPORATED
DATED AS OF AUGUST 31, 1998
INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
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Exhibit A Form of Registration Rights Agreement
Exhibit B Form of Company Affiliate Agreement
Exhibit C Form of Parent Affiliate Agreement
Exhibit D Form of Voting Agreement
Exhibit E Form of Legal Opinion of Counsel to Parent
Exhibit F Form of Legal Opinion of Counsel to the Company
Exhibit F Form of Employment and Non-Competition Agreement
INDEX OF SCHEDULES
SCHEDULE DESCRIPTION
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2.2(a) Stockholder List
2.2(b) Option List
2.4 Governmental and Third Party Consents
2.5 Company Financials
2.6 Undisclosed Liabilities
2.7 No Changes
2.8 Tax Returns and Audits
2.10(a) Leased Real Property
2.10(b) Liens on Property
2.11(a) Intellectual Property
2.11(b) Intellectual Property Licenses
2.12(a) Agreements, Contracts and Commitments
2.12(b) Breaches
2.13 Interested Party Transactions
2.15 Litigation
2.19 Brokers/Finders Fees; Expenses of Transaction
2.20(b) Employee Benefit Plans and Employees
2.20(d) Employee Plan Compliance
2.20(g) Post Employment Obligations
2.20(h)(i) Effect of Transaction
2.20(h)(ii) Excess Parachute Payments
2.20(j) Labor
5.12 Company Affiliate List
5.17 Employees to Sign Employment and Non-Competition Agreement
6.2(c) Third Party Consents Required of the Company
6.3(c) Third Party Consents Required of Parent
TABLE OF CONTENTS
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ARTICLE I
THE MERGER................................................................ 1
1.1 The Merger......................................................... 2
1.2 Effective Time..................................................... 2
1.3 Effect of the Merger............................................... 2
1.4 Certificate of Incorporation; Bylaws............................... 2
1.5 Directors and Officers............................................. 2
1.6 Maximum Shares to Be Issued; Effect on Capital Stock............... 2
1.7 Dissenting Shares.................................................. 7
1.8 Surrender of Certificates.......................................... 8
1.9 No Further Ownership Rights in Company Common Stock............... 10
1.10 Lost, Stolen or Destroyed Certificates............................ 10
1.11 Tax and Accounting Consequences................................... 10
1.12 Taking of Necessary Action; Further Action........................ 10
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................ 10
2.1 Organization of the Company....................................... 10
2.2 Company Capital Structure......................................... 11
2.3 Subsidiaries...................................................... 12
2.4 Authority......................................................... 12
2.5 Company Financial Statements...................................... 12
2.6 No Undisclosed Liabilities........................................ 13
2.7 No Changes........................................................ 13
2.8 Tax and Other Returns and Reports................................. 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............................. 18
2.13 Interested Party Transactions..................................... 19
2.14 Compliance with Laws.............................................. 20
2.15 Litigation........................................................ 20
2.16 Insurance......................................................... 20
2.17 Minute Books...................................................... 20
2.18 Environmental Matters............................................. 20
2.19 Brokers' and Finders' Fees; Third Party Expenses.................. 21
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TABLE OF CONTENTS
(CONTINUED)
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2.20 Employee Matters and Benefit Plans................................. 21
2.21 Representations Complete........................................... 25
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.................. 25
3.1 Organization, Standing and Power................................... 25
3.2 Authority.......................................................... 26
3.3 Capital Structure.................................................. 26
3.4 SEC Documents; Parent Financial Statements......................... 26
3.5 No Material Adverse Change......................................... 27
3.6 Litigation......................................................... 27
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME...................................... 27
4.1 Conduct of Business of the Company................................. 27
4.2 No Solicitation.................................................... 30
4.3 Strategic Agreements............................................... 30
ARTICLE V
ADDITIONAL AGREEMENTS.................................................... 30
5.1 Registration Rights Agreement...................................... 30
5.2 Stockholder Meetings............................................... 30
5.3 Access to Information.............................................. 31
5.4 Confidentiality.................................................... 31
5.5 Expenses........................................................... 31
5.6 Public Disclosure.................................................. 31
5.7 Consents........................................................... 31
5.8 FIRPTA Compliance.................................................. 31
5.9 Reasonable Efforts................................................. 31
5.10 Notification of Certain Matters.................................... 32
5.11 Pooling Accounting................................................. 32
5.12 Affiliate Agreements............................................... 32
5.13 Additional Documents and Further Assurances........................ 33
5.14 Form S-8........................................................... 33
5.15 NMS Listing........................................................ 33
5.16 Voting Agreements.................................................. 33
5.17 Employment and Non-Competition Agreements.......................... 33
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TABLE OF CONTENTS
(CONTINUED)
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5.18 Blue Sky Laws...................................................... 33
5.19 Indemnification.................................................... 33
5.20 Employee Benefits.................................................. 33
5.21 Termination of Company Investor Rights............................. 34
ARTICLE VI
CONDITIONS TO THE MERGER................................................. 34
6.1 Conditions to Obligations of Each Party to Effect the Merger....... 34
6.2 Additional Conditions to Obligations of the Company................ 35
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.. 35
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW....................... 37
7.1 Survival of Representations and Warranties......................... 37
7.2 Escrow Arrangements................................................ 37
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER........................................ 44
8.1 Termination........................................................ 44
8.2 Effect of Termination.............................................. 45
8.3 Amendment.......................................................... 45
8.4 Extension; Waiver.................................................. 45
ARTICLE IX
GENERAL PROVISIONS....................................................... 46
9.1 Notices............................................................ 46
9.2 Interpretation..................................................... 47
9.3 Counterparts....................................................... 47
9.4 Entire Agreement; Assignment....................................... 47
9.5 Severability....................................................... 48
9.6 Other Remedies..................................................... 48
9.7 Governing Law...................................................... 48
9.8 Rules of Construction.............................................. 48
9.9 Specific Performance............................................... 48
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
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entered into as of August 31, 1998 among Inktomi Corporation, a Delaware
corporation ("Parent"), IC Merger Corp., Inc., a Delaware corporation and a
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wholly-owned subsidiary of Parent ("Merger Sub"), and C\\2\\B Technologies,
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Incorporated, a Delaware corporation (the "Company").
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RECITALS
A. The Boards of Directors of each of the Company, Parent 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,
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have approved the Merger.
B. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, all of the issued and outstanding shares of
capital stock of the Company ("Company Capital Stock") and all outstanding
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options, warrants and other rights to acquire or receive shares of Company
Capital Stock shall be converted into the right to receive shares of Common
Stock of Parent ("Parent Common Stock").
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C. A portion of the shares of Parent Common Stock otherwise issuable by
Parent in connection with the Merger shall be placed in escrow by Parent, the
release of which amount shall be contingent upon certain events and conditions,
all as set forth in Article VII hereof.
D. The Company, Parent and Merger Sub desire to make certain
representations and warranties 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:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
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subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law ("Delaware Law")
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and 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".
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1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
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to Section 8.1, the closing of the Merger (the "Closing") will take place as
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promptly as practicable, but no later than three (3) business days, following
satisfaction or waiver of the conditions set forth in Article VI, at the offices
of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, 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
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to be consummated by filing a Certificate of Merger (or like instrument) with
the Secretary of State of the State of Delaware (the "Certificate of Merger"),
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in accordance with the relevant provisions of applicable law (the time of
acceptance by the Secretary of State of Delaware of such filing being referred
to herein as the "Effective Time"). The parties currently intend that the
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Closing Date will occur on or prior to September 18, 1998.
1.3 Effect of the Merger. At the Effective Time, the effect of the
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Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
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(a) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time, the Certificate of Incorporation of Merger Sub
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Certificate of Incorporation;
provided, however, that Article I of the Certificate of Incorporation of the
Surviving Corporation shall be amended to read as follows: "The name of the
corporation is C\\2\\B Technologies, Incorporated."
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. The director(s) of Merger Sub immediately
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prior to the Effective Time shall be the initial director(s) of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, each to hold office in accordance with the Bylaws of the
Surviving Corporation.
1.6 Maximum Shares to Be Issued; Effect on Capital Stock. The maximum
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number of shares of Parent Common Stock to be issued (including Parent Common
Stock to be reserved for issuance upon exercise of any of the Company's options
and warrants to be assumed by Parent) in exchange for the acquisition by Parent
of all outstanding Company Capital Stock and all outstanding unexpired and
unexercised options and warrants to acquire Company Capital Stock shall be
2,026,871 (the "Aggregate Share Number"). No adjustment shall be made in the
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number of shares of
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Parent Common Stock issued in the Merger as a result of any cash proceeds
received by the Company from the date hereof to the Closing Date pursuant to the
exercise of options or warrants to acquire Company Capital Stock. Subject to the
terms and conditions of this Agreement, as of the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or the
holder of any shares of Company Capital Stock, the holder of any options,
warrants or other rights to acquire or receive shares of Company Capital Stock,
the following shall occur:
(a) Conversion of Company Common Stock. Each share of Common Stock
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of the Company ("Company Common Stock") issued and outstanding immediately prior
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to the Effective Time (other than any shares of Company Common Stock to be
canceled pursuant to Section 1.6(c) and any Dissenting Shares (as defined and to
the extent provided in Section 1.7(a))) will be canceled and extinguished and be
converted automatically into the right to receive that number of shares of
Parent Common Stock equal to the Common Exchange Ratio (as defined in Section
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1.6(i) below), upon surrender of the certificate representing such share of
Company Common Stock in the manner provided in Section 1.8.
(b) Conversion of Company Preferred Stock.
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(i) Series A Preferred Stock. Each share of Series A
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Preferred Stock of the Company ("Series A Preferred") issued and outstanding
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immediately prior to the Effective Time (other than any shares of Series A
Preferred that are converted into shares of Company Common Stock immediately
prior to the Effective Time, any shares of Series A Preferred to be canceled
pursuant to Section 1.6(c) and any Dissenting Shares (as defined and to the
extent provided in Section 1.7(a))) will be canceled and extinguished and be
converted automatically into the right to receive that number of shares of
Parent Common Stock equal to the Series A Exchange Ratio (as defined in Section
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1.6(i) below), upon surrender of the certificate representing such share of
Series A Preferred in the manner provided in Section 1.8.
(ii) Series B Preferred Stock. Each share of Series B
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Preferred Stock of the Company ("Series B Preferred") issued and outstanding
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immediately prior to the Effective Time (other than any shares of Series B
Preferred that are converted into shares of Company Common Stock immediately
prior to the Effective Time, any shares of Series B Preferred to be canceled
pursuant to Section 1.6(c) and any Dissenting Shares (as defined and to the
extent provided in Section 1.7(a))) will be canceled and extinguished and be
converted automatically into the right to receive that number of shares of
Parent Common Stock equal to the Series B Exchange Ratio (as defined in Section
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1.6(i) below), upon surrender of the certificate representing such share of
Series B Preferred in the manner provided in Section 1.8.
(iii) Series C Preferred Stock. Each share of Series C
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Preferred Stock of the Company ("Series C Preferred") issued and outstanding
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immediately prior to the Effective Time (other than any shares of Series C
Preferred that are converted into shares of Company Common Stock immediately
prior to the Effective Time, any shares of Series C Preferred to be canceled
pursuant to Section 1.6(c) and any Dissenting Shares (as defined and to the
extent provided in Section 1.7(a))) will be canceled and extinguished and be
converted automatically into the right to
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receive that number of shares of Parent Common Stock equal to the Series C
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Exchange Ratio (as defined in Section 1.6(i) below), upon surrender of the
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certificate representing such share of Series C Preferred in the manner provided
in Section 1.8.
(iv) Series D Preferred Stock. Each share of Series D
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Preferred Stock of the Company ("Series D Preferred"; and together with the
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Series A Preferred, Series B Preferred and Series C Preferred, the "Company
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Preferred Stock") issued and outstanding immediately prior to the Effective Time
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(other than any shares of Series D Preferred that are converted into shares of
Company Common Stock immediately prior to the Effective Time, any shares of
Series D Preferred to be canceled pursuant to Section 1.6(c) and any Dissenting
Shares (as defined and to the extent provided in Section 1.7(a))) will be
canceled and extinguished and be converted automatically into the right to
receive that number of shares of Parent Common Stock equal to the Series D
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Exchange Ratio (as defined in Section 1.6(i) below), upon surrender of the
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certificate representing such share of Series D Preferred in the manner provided
in Section 1.8.
(v) If at the Closing Date, the Aggregate Share Number thus
distributed among the holders of Company Preferred Stock shall be insufficient
to permit the payment to such holders of the full amounts described in
subsections 1.6(b)(i)-(iv) above, then the Aggregate Share Number shall be
distributed ratably among the holders of Company Preferred Stock in proportion
to the following amounts: $0.205 for each share of Company Series A Preferred
Stock; $1.6217 for each share of Company Series B Preferred Stock; $1.6217 for
each share of Company Series C Preferred Stock; and $0.83 for each share of
Company Series D Preferred Stock.
(c) Cancellation of Parent-Owned and Company-Owned Stock. Each share
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of Company Capital Stock owned by Merger Sub, Parent, the Company or any direct
or indirect wholly-owned subsidiary of Parent or of the Company immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(d) Stock Options. At the Effective Time, all options to purchase
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Company Common Stock then outstanding under the Company's 1997 Stock Plan, as
amended (the "Option Plan"), or otherwise, shall be assumed by Parent in
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accordance with provisions described below.
(i) At the Effective Time, each outstanding option to
purchase shares of Company Common Stock (each a "Company Option") under the
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Option Plan or otherwise, whether vested or unvested, shall be, in connection
with the Merger, assumed by Parent. Each Company Option so assumed by Parent
under this Agreement shall continue to have, and be subject to, the same terms
and conditions set forth in the Option Plan and/or as provided in the respective
option agreements governing such Company Option immediately prior to the
Effective Time, except that (A) such Company Option shall be exercisable for
that number of whole shares of Parent Common Stock equal to the product of the
number of shares of Company Common Stock that were issuable upon exercise of
such Company Option immediately prior to the Effective Time multiplied by the
Common Exchange Ratio, rounded down (in the case of Company Options granted
under the Option Plan) to the nearest whole number of shares of Parent Common
Stock and (B) the per share exercise price for the shares of Parent Common Stock
issuable upon exercise of such assumed Company
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Option shall be equal to the quotient determined by dividing the exercise price
per share of Company Common Stock at which such Company Option was exercisable
immediately prior to the Effective Time by the Common Exchange Ratio, rounded up
to the nearest whole cent.
(ii) It is the intention of the parties that the Company
Options assumed by Parent qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Code to the extent the Company
Options qualified as incentive stock options immediately prior to the Effective
Time.
(iii) Promptly following the Effective Time, Parent will issue
to each holder of an outstanding Company Option a document evidencing the
foregoing assumption of such Company Option by Parent.
(e) Warrants. Each warrant to purchase shares of Company Common or
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Preferred Stock outstanding at the Effective Time shall be, in connection with
the Merger, assumed by Parent. Each warrant so assumed by Parent under this
Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the respective warrant agreements governing such warrant
immediately prior to the Effective Time, except that each such warrant shall,
following the Effective Time, be exercisable only for shares of Parent Common
Stock, in such number, and at such exercise price as is determined by applying
the appropriate Exchange Ratio in accordance with the terms of the applicable
warrant agreement.
(f) Capital Stock of Merger Sub. Each share of Common Stock of
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Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares shall continue
to evidence ownership of such shares of capital stock of the Surviving
Corporation.
(g) Adjustments to Exchange Ratios. The Exchange Ratios shall be
------------------------------
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or Company Capital Stock), reorganization, recapitalization
or other like change with respect to Parent Common Stock or Company Capital
Stock occurring after the date hereof and prior to the Effective Time.
(h) Fractional Shares. No fraction of a share of Parent Common
-----------------
Stock will be issued, but in lieu thereof, each holder of shares of Company
Capital Stock who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common Stock to
be received by such holder) shall be entitled to receive from Parent an amount
of cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the average closing price of a share of Parent
Common Stock for the five (5) consecutive trading days ending on the trading day
immediately prior to the Closing Date, as reported on the Nasdaq National
Market.
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(i) Definitions.
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(a) Aggregate Preferred Number. The "Aggregate Preferred
--------------------------
Number" shall mean the sum of (w) the product obtained by multiplying the
Outstanding Series A Amount by the Series A Exchange Ratio, plus (x) the product
obtained by multiplying the Outstanding Series B Amount by the Series B Exchange
Ratio, plus (y) the product obtained by multiplying the Outstanding Series C
Amount by the Series C Exchange Ratio, plus (z) the product obtained by
multiplying the Outstanding Series D Amount by the Series D Exchange Ratio.
(b) Aggregate Share Number. The "Aggregate Share Number"
----------------------
shall be a number of shares of Parent Common Stock equal to 2,026,871 shares (as
appropriately adjusted to reflect the effect of any stock split, stock dividend,
reorganization, recapitalization or the like with respect to the Parent Common
Stock occurring after the date hereof and prior to the Effective Time).
(c) Common Exchange Ratio. The "Common Exchange Ratio" shall
---------------------
mean the quotient obtained by dividing (x) the Aggregate Share Number minus the
Aggregate Preferred Number, by (y) the sum of (A) the Outstanding Common Amount
plus (B) the Outstanding Option Amount.
(d) Escrow Amount. The "Escrow Amount" shall be a number of
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shares of Parent Common Stock obtained by multiplying (x) the Aggregate Share
Number minus the product obtained by multiplying the Outstanding Option Amount
by the Common Exchange Ratio, by (y) 0.10.
(e) Exchange Ratios. The "Exchange Ratios" shall mean the
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Common Exchange Ratio, the Series A Exchange Ratio, the Series B Exchange Ratio,
the Series C Exchange Ratio or the Series D Exchange Ratio, as applicable.
(f) Outstanding Common Amount. The "Outstanding Common
-------------------------
Amount" shall mean the aggregate number of shares of Company Common Stock
outstanding immediately prior to the Effective Time (taking into account all
shares of Company Preferred Stock that shall be converted into Company Common
Stock as of such time).
(g) Outstanding Option Amount. The "Outstanding Option
-------------------------
Amount" shall mean the aggregate number of shares of Company Common Stock
issuable upon the exercise of all outstanding options and warrants to acquire
shares of Company Common Stock immediately prior to the Effective Time.
(h) Outstanding Series A Amount. The "Outstanding Series A
---------------------------
Amount" shall mean the aggregate number of shares of Series A Preferred
outstanding immediately prior to the Effective Time, together with all shares of
Series A Preferred issuable upon exercise of any options or warrants to acquire
shares of Series A Preferred then outstanding.
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(i) Outstanding Series B Amount. The "Outstanding Series B
---------------------------
Amount" shall mean the aggregate number of shares of Series B Preferred
outstanding immediately prior to the Effective Time, together with all shares of
Series B Preferred issuable upon exercise of any options or warrants to acquire
shares of Series B Preferred then outstanding.
(j) Outstanding Series C Amount. The "Outstanding Series C
---------------------------
Amount" shall mean the aggregate number of shares of Series C Preferred
outstanding immediately prior to the Effective Time, together with all shares of
Series C Preferred issuable upon exercise of any options or warrants to acquire
shares of Series C Preferred then outstanding.
(k) Outstanding Series D Amount. The "Outstanding Series D
---------------------------
Amount" shall mean the aggregate number of shares of Series D Preferred
outstanding immediately prior to the Effective Time, together with all shares of
Series D Preferred issuable upon exercise of any options or warrants to acquire
shares of Series D Preferred then outstanding.
(l) Parent Price. The Parent Price shall mean the average of
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the closing price of the Parent's Common Stock on The Nasdaq National Market as
reported in The Wall Street Journal over the thirty (30) day period ending three
(3) days prior to the Closing Date.
(m) Series A Exchange Ratio. The Series A Exchange Ratio
-----------------------
shall mean the quotient obtained by dividing $0.205 by the Parent Price.
(n) Series B Exchange Ratio. The Series B Exchange Ratio
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shall mean the quotient obtained by dividing $1.6217 by the Parent Price.
(o) Series C Exchange Ratio. The Series C Exchange Ratio
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shall mean the sum of (A) the quotient obtained by dividing $1.6217 by the
Parent Price plus (B) the Common Exchange Ratio; provided that such Series C
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Exchange Ratio shall never be greater than the quotient obtained by dividing
$2.50 by the Parent Price.
(p) Series D Exchange Ratio. The Series D Exchange Ratio
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shall mean the sum of (A) the quotient obtained by dividing $0.83 by the Parent
Price plus (B) the Common Exchange Ratio; provided that such Series D Exchange
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Ratio shall never be greater than the quotient obtained by dividing $1.28 by the
Parent Price.
1.7 Dissenting Shares.
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(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
Delaware Law and California Law and who, as of the Effective Time, has not
effectively withdrawn or lost such appraisal or dissenters' rights ("Dissenting
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Shares"), shall not be converted into or represent a right to receive Parent
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Common Stock pursuant to Section 1.6, but the holder thereof shall only be
entitled to such rights as are granted by Delaware Law and California Law.
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(b) Notwithstanding the provisions of subsection (a), if any holder
of shares of Company Capital Stock who demands appraisal of such shares under
Delaware Law or California Law shall effectively withdraw or lose (through
failure to perfect or otherwise) the right to appraisal, then, as of the later
of the Effective Time and the occurrence of such event, such holder's shares
shall automatically be converted into and represent only the right to receive
Parent Common Stock and fractional shares as provided in Section 1.6, without
interest thereon, upon surrender of the certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal of any shares of Company Capital Stock, withdrawals of
such demands, and any other instruments served pursuant to Delaware Law or
California Law and received by the Company and (ii) the opportunity to
participate in all negotiations and proceedings with respect to demands for
appraisal under Delaware Law and California Law. The Company shall not, except
with the prior written consent of Parent, voluntarily make any payment with
respect to any demands for appraisal of capital stock of the Company or offer to
settle or settle any such demands.
1.8 Surrender of Certificates.
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(a) Exchange Agent. Prior to the Effective Time, Parent shall
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designate Norwest Bank to act as exchange agent (the "Exchange Agent") in the
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Merger.
(b) Parent to Provide Common Stock. Promptly after the Effective
------------------------------
Time, Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I, the aggregate number of shares of Parent Common
Stock issuable pursuant to Section 1.6 in exchange for outstanding shares of
Company Capital Stock; provided that, on behalf of the holders of Company
Capital Stock, Parent shall deposit into an escrow account a number of shares of
Parent Common Stock equal to the Escrow Amount out of the aggregate number of
shares of Parent Common Stock otherwise issuable pursuant to Section 1.6. The
portion of the Escrow Amount contributed on behalf of each holder of Company
Capital Stock shall be in proportion to the aggregate number of shares of
Parent Common Stock which such holder would otherwise be entitled to receive
under Section 1.6 by virtue of ownership of outstanding shares of Company
Capital Stock; provided, however, that such aggregate number of shares of Parent
Common Stock shall not include any shares subject to the Company's right of
repurchase for the purposes of this Section 1.8(b).
(c) Exchange Procedures. Promptly after the Effective Time, the
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Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
------------
Effective Time represented outstanding shares of Company Capital Stock whose
shares were converted into the right to receive shares of Parent Common Stock
pursuant to Section 1.6, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as
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may be appointed by Parent, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, the
holder of such Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of whole shares of Parent Common Stock (less
the number of shares of Parent Common Stock, if any, to be deposited in the
Escrow Fund on such holder's behalf pursuant to Article VII hereof), plus cash
in lieu of fractional shares in accordance with Section 1.6, to which such
holder is entitled pursuant to Section 1.6, and the Certificate so surrendered
shall forthwith be canceled. As soon as practicable after the Effective Time,
and subject to and in accordance with the provisions of Article VII hereof,
Parent shall cause to be distributed to the Escrow Agent (as defined in Article
VII) a certificate or certificates representing that number of shares of Parent
Common Stock equal to the Escrow Amount which shall be registered in the name of
the Escrow Agent. Such shares shall be beneficially owned by the holders on
whose behalf such shares were deposited in the Escrow Fund and shall be
available to compensate Parent as provided in Article VII. Until so surrendered,
each outstanding Certificate that, prior to the Effective Time, represented
shares of Company Capital Stock will be deemed from and after the Effective
Time, for all corporate purposes, other than the payment of dividends, to
evidence the ownership of the number of full shares of Parent Common Stock into
which such shares of Company Capital Stock shall have been so converted and the
right to receive an amount in cash in lieu of the issuance of any fractional
shares in accordance with Section 1.6.
(d) Distributions With Respect to Unexchanged Shares. No dividends
------------------------------------------------
or other distributions declared or made after the Effective Time with respect to
Parent Common Stock with a record date after the Effective Time will be paid to
the holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock represented thereby until the holder of record of such Certificate
shall surrender such Certificate. Subject to applicable law, following surrender
of any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of Parent
----------------------
Common Stock is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
certificate surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
------------
Section 1.8, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to a holder of shares of Parent Common Stock or Company
Capital Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
-9-
1.9 No Further Ownership Rights in Company Common Stock. All shares of
---------------------------------------------------
Parent Common Stock issued upon the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof (including any cash paid in
respect thereof) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Capital Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Company Capital Stock 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.
1.10 Lost, Stolen or Destroyed Certificates. In the event any
--------------------------------------
certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed certificates, upon the making of an affidavit of that fact
by the holder thereof, such shares of Parent Common Stock and cash for
fractional shares, if any, as may be required 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.
1.11 Tax and Accounting Consequences. It is intended by the parties
-------------------------------
hereto that the Merger shall (i) constitute a reorganization within the meaning
of Section 368 of the Internal Revenue Code of 1986, as amended (the "Code")
----
(and this Agreement is intended to constitute a plan of reorganization for
purposes of Section 368 of the Code) and (ii) qualify for accounting treatment
as a pooling of interests.
1.12 Taking of Necessary Action; Further Action. If, at any time after
------------------------------------------
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and Merger Sub, the officers and directors
of the Company and Merger Sub are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful and
necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub,
subject to such exceptions as are clearly disclosed in the disclosure letter
supplied by the Company to Parent (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 the laws of the State of
Delaware. The Company has the corporate power to own its properties and to
carry on its business as now being conducted. The
-10-
Company is duly qualified to do business and in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified would
have a material adverse effect on the business, assets (including intangible
assets), financial condition or 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 its Certificate of Incorporation and
Bylaws, each as amended to date, to Parent.
2.2 Company Capital Structure.
-------------------------
(a) The authorized capital stock of the Company consists of
48,000,000 shares of authorized Common Stock, of which 9,515,346 shares are
issued and outstanding and 12,000,000 shares of authorized Preferred Stock. The
authorized Preferred Stock consists of 1,087,800 shares of authorized Series A
Preferred Stock, of which 1,087,800 shares are issued and outstanding, 600,000
shares of authorized Series B Preferred Stock, of which 308,412 shares are
issued and outstanding, 1,200,000 shares of authorized Series C Preferred Stock,
of which 848,520 shares are issued and outstanding, and 4,397,600 shares of
authorized Series D Preferred Stock, of which 4,241,080 shares are issued and
outstanding. The Company Capital Stock, including that subject to the Company's
right of repurchase, is held of record by the persons, with the addresses of
record and in the amounts set forth on Schedule 2.2(a). All outstanding shares
of Company Capital Common Stock are duly authorized, validly issued, fully paid
and non-assessable and not subject to preemptive rights created by statute, the
Certificate of Incorporation or Bylaws of the Company or any agreement to which
the Company is a party or by which it is bound.
(b) The Company has reserved 2,430,612 shares of Common Stock for
issuance to employees and consultants pursuant to the Option Plan, of which
1,118,000 shares are subject to outstanding, unexercised options and 852,612
shares remain available for future grant. Schedule 2.2(b) sets forth for each
outstanding Company Option the name of the holder of such option, the domicile
address of such holder, the number of shares of Common Stock subject to such
option, the exercise price of such option and the vesting schedule for such
option, including the extent vested to the date of this Agreement and whether
the exercisability of such option will be accelerated and become exercisable by
the transactions contemplated by this Agreement. The Company has reserved
51,342 shares of Series C Preferred Stock (and such number of shares of Common
Stock into which such Series C Preferred Stock is convertible) for issuance upon
exercise of outstanding warrants. Schedule 2.2(b) sets forth for each of the
warrants the name of the holder and exercise price of such warrants. Except for
the Company Options and warrants described in Schedule 2.2(b), there are no
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. Except for the Company Options and warrants
described in Schedule 2.2(b), there are no 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 grant,
extend, accelerate the vesting of, change the price of, otherwise amend or enter
into any such option, warrant, call, right, commitment or agreement. The holders
of Company Options and warrants have been or will be given, or shall have
properly waived, any required notice prior to the Merger and all such rights
will be terminated at or prior to
-11-
the Effective Time. As a result of the Merger, Parent will be the record and
sole beneficial owner of all Company Capital Stock and rights to acquire or
receive Company Capital Stock.
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 equity or debt 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 requisite approval of the Merger and
---------
this Agreement by the Company's stockholders, the Company has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The vote required of the Company's
stockholders to duly approve the Merger and this Agreement is that number of
shares as would constitute a majority of the outstanding shares of (a) the
Common Stock and Preferred Stock, voting together as a single class, and (b) the
Preferred Stock voting separately as a single class (in each case with each
share of Preferred Stock being entitled to a number of votes equal to the number
of whole shares of Common Stock into which such share of Preferred Stock could
be converted on the record date for the vote). The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject only to the approval of the Merger by the Company's
stockholders. The Company's Board of Directors has unanimously approved the
Merger and this Agreement. This Agreement has been duly executed and delivered
by the Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms. Except as set forth on Schedule 2.4,
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 Effective Time, the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of, or
default under (with or without notice or lapse of time, or both), or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of any benefit under (any such event, a "Conflict") (i) any provision of
the Certificate 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. No consent,
waiver, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other federal,
state, county, local or foreign governmental authority, instrumentality, agency
or commission ("Governmental Entity") or any third party (so as not to trigger
-------------------
any Conflict), is required by or with respect to the Company in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of the Certificate
of Merger with the Delaware Secretary of State, (ii) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under applicable federal and state securities laws and (iii)
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
----------------------------
unaudited balance sheet as of July 31, 1998 and the related unaudited statements
of operations and cash flows
-12-
for the ten-month period then ended (collectively, the "Company Financials").
------------------
The Company Financials are correct in all material respects and have been
prepared in accordance with generally accepted accounting principles ("GAAP")
----
applied on a basis consistent throughout the periods indicated and consistent
with each other, except for the absence of footnotes in the case of unaudited
Company Financials. The Company Financials present fairly the financial
condition and operating results of the Company as of the dates and during the
periods indicated therein, subject, in the case of the unaudited financial
statements, to normal year-end adjustments, which will not be material in amount
or significance.
2.6 No Undisclosed Liabilities. Except as set forth in Schedule 2.6, 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), which individually or in the
aggregate, (i) has not been reflected in the Company Financials, or (ii) has not
arisen in the ordinary course of the Company's business since July 31, 1998,
consistent with past practices.
2.7 No Changes. Except as set forth in Schedule 2.7, since July 31,
----------
1998, there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course of
business as conducted on that date and consistent with past practices;
(b) amendments or changes to the Certificate of Incorporation or
Bylaws of the Company;
(c) capital expenditure or commitment by the Company of $10,000 in
any individual case or $50,000 in the aggregate.
(d) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance);
(e) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;
(f) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;
(g) revaluation by the Company of any of its assets;
(h) 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;
-13-
(i) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors, employees or
advisors, or the declaration, payment or commitment or obligation of any kind
for the payment, by the Company, of a bonus or other additional salary or
compensation to any such person except as otherwise contemplated by this
Agreement;
(j) 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;
(k) amendment or termination of any material contract, agreement or
license to which the Company is a party or by which it is bound;
(l) loan by the Company to any person or entity, incurring by the
Company of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others except for advances to employees for travel and
business expenses in the ordinary course of business, consistent with past
practices;
(m) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company;
(n) commencement or notice or threat of commencement of any lawsuit
or proceeding against or investigation of the Company or its affairs;
(o) notice of any claim of ownership by a third party of the
Company's Intellectual Property (as defined in Section 2.11 below) or of
infringement by the Company of any third party's Intellectual Property rights;
(p) issuance or sale by the Company of any of its shares of capital
stock, or securities exchangeable, convertible or exercisable therefor, or of
any other of its securities;
(q) 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;
(r) event or condition of any character that has or reasonably would
be expected to have a Material Adverse Effect on the Company; or
(s) agreement by the Company or any officer or employees thereof to
do any of the things described in the preceding clauses (a) through (r) (other
than negotiations with Parent and its representatives regarding the transactions
contemplated by this Agreement).
2.8 Tax and Other Returns and Reports.
---------------------------------
-14-
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
------------------- ---
or, collectively, "Taxes", means any and all federal, state, local and foreign
-----
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Schedule 2.8:
----------------------
(i) The Company as of the Effective Time will have prepared
and filed all required federal, state, local and foreign returns, estimates,
information statements and reports ("Returns") relating to any and all Taxes
-------
concerning or attributable to the Company or its operations and, to the
Company's knowledge (except to the extent that an adequate reserve has been
established on the July Balance Sheet), such Returns have been completed in
accordance with applicable law.
(ii) The Company as of the Effective Time: (A) will have paid
or accrued all Taxes it is required to pay or accrue and (B) will have withheld
with respect to its employees all federal and state income taxes, FICA, FUTA and
other Taxes required to be withheld.
(iii) The Company is not presently delinquent in the payment of
any Tax nor is there any Tax deficiency outstanding, proposed or assessed
against the Company, nor has the Company executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(iv) No audit or other examination of any Return of the Company
is to the knowledge of the Company presently in progress, nor has the Company
been notified of any request for such an audit or other examination.
(v) Except for liabilities incurred since the date of the
Company Financials in the ordinary course of business, the Company does not have
any liabilities for unpaid federal, state, local and foreign Taxes which have
not been accrued or reserved against in accordance with GAAP in the Company
Financials, 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.
(vi) The Company has provided to Parent copies of all federal
and state income and all state sales and use Tax Returns for all periods since
the date of Company's incorporation.
(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
-----
-15-
the assets of the Company relating to or attributable to Taxes, other than
Liens for Taxes not yet due and payable.
(viii) None of the Company's assets are treated as "tax-exempt
use property" within the meaning of Section 168(h) of the Code.
(ix) As of the Effective Time, 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 that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to Section 280G of the Code or the limitations
in Sections 162(b) through (l) of the Code.
(x) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company.
(xi) The Company is not a party to a tax sharing or allocation
agreement nor does the Company owe any amount under any such agreement.
(xii) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
2.9 Restrictions on Business Activities. There is no agreement
-----------------------------------
(noncompete or otherwise), judgment, injunction, order or decree to which the
Company is a party or otherwise binding upon the Company which has or reasonably
would be expected to have the effect of prohibiting or impairing any business
practice of the Company, any acquisition of property (tangible or intangible) by
the Company or the conduct of business by the Company. Without limiting the
foregoing, the Company has not entered into any agreement under which the
Company is restricted from selling, licensing or otherwise distributing any of
its products 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) 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).
(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, real, personal and mixed, used or held for use in its
business, free and clear of any Liens (as defined in Section 2.8(b)(vii)),
except as reflected in the Company Financials or in Schedule 2.10(b) and except
-16-
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) The Company owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, maskworks, net lists, schematics,
technology, know-how, computer software programs or applications (in both source
code and object code form), and tangible or intangible proprietary information
or material that are used in the business of the Company as currently conducted
or as proposed to be conducted by the Company (the "Company Intellectual
--------------------
Property Rights").
---------------
(b) Schedule 2.11(a) sets forth a complete list of all patents,
registered and material unregistered trademarks, registered copyrights, trade
names and service marks, and any applications therefor, included in the Company
Intellectual Property Rights, and specifies, where applicable, the jurisdictions
in which each such Company Intellectual Property Right has been issued or
registered or in which an application for such issuance and registration has
been filed, including the respective registration or application numbers and the
names of all registered owners. Schedule 2.11(b) sets forth a complete list of
all licenses, sublicenses and other agreements to which the Company is a party
and pursuant to which the Company or any other person is authorized to use any
Company Intellectual Property Right (excluding object code end-user licenses
granted to end-users in the ordinary course of business that permit use of
software products without a right to modify, distribute or sublicense the same
("End-User Licenses")) or trade secret of the Company, and includes the identity
-----------------
of all parties thereto. The execution and delivery of this Agreement by the
Company, and the consummation of the transactions contemplated hereby, will
neither cause the Company to be in violation or default under any such license,
sublicense or agreement, nor entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement. Except as set forth in Schedules 2.11(a) or 2.11(b), the Company is
the sole and exclusive owner or licensee of, with all right, title and interest
in and to (free and clear of any liens or encumbrances), the Company
Intellectual Property Rights, and has sole and exclusive rights (and is not
contractually obligated to pay any compensation to any third party in respect
thereof) to the use thereof or the material covered thereby in connection with
the services or products in respect of which the Company Intellectual Property
Rights are being used.
(c) No claims with respect to the Company Intellectual Property
Rights have been asserted or are, to the Company's knowledge, threatened by any
person, nor are there any valid grounds for any bona fide claims (i) to the
effect that the manufacture, sale, licensing or use of any of the products of
the Company infringes on any copyright, patent, trade ▇▇▇▇, service ▇▇▇▇, trade
secret or other proprietary right, (ii) against the use by the Company of any
trademarks, service marks, trade names, trade secrets, copyrights, maskworks,
patents, technology, know-how or computer software programs and applications
used in the Company's business as currently conducted or as proposed to be
conducted by the Company, or (iii) challenging the ownership by the Company,
validity or effectiveness of any of the Company Intellectual Property Rights.
All registered trade-
-17-
marks, service marks and copyrights held by the Company are valid and
subsisting. To the Company's knowledge, there is no material unauthorized use,
infringement or misappropriation of any of the Company Intellectual Property
Rights by any third party, including any employee or former employee of the
Company. No Company Intellectual Property Right or product of the Company or any
of its subsidiaries is subject to any outstanding decree, order, judgment, or
stipulation restricting in any manner the licensing thereof by the Company. Each
employee, of and consultant to the Company that had access to or was involved in
the development of Company Intellectual Property has executed a proprietary
information and confidentiality agreement substantially in the Company's
standard forms and all such agreements provide for the full and complete
assignment to the Company of all intellectual property and rights thereto
developed by such employees or consultants.
2.12 Agreements, Contracts and Commitments. Except as set forth on
-------------------------------------
Schedule 2.12(a), the Company does not have, is not a party to nor is it bound
by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any severance pay
or post-employment liabilities or obligations,
(iii) any bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or arrangements,
(iv) any employment or consulting agreement with an employee or
individual consultant or salesperson or consulting or sales agreement, under
which a firm or other organization provides services to the Company,
(v) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation rights plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value individually in
excess of $50,000,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement containing any covenant limiting the freedom of
the Company to engage in any line of business or to compete with any person,
-18-
(x) any agreement relating to capital expenditures and involving
future payments in excess of $50,000,
(xi) any agreement relating to the disposition or acquisition of
assets or any interest in any business enterprise outside the ordinary course of
the Company's business,
(xii) 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,
(xiii) any purchase order or contract for the purchase of raw
materials involving $10,000 or more,
(xiv) any construction contracts,
(xv) any distribution, joint marketing (including any pilot
program), development, content provider, destination site or merchant agreement;
(xvi) any agreement 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
(xvii) any other agreement that involves $50,000 or more or is not
cancelable without penalty within thirty (30) days.
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, as are all noted in Schedule 2.12(b), the Company has not
breached, violated or defaulted under, or received notice that it has breached,
violated or defaulted under, any of the terms or conditions of any agreement,
contract or commitment required to be set forth on Schedule 2.12(a) or Schedule
2.11(b) (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), 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. Except as set forth on Schedule 2.13,
-----------------------------
to the Company's knowledge, no officer, director or affiliate (as defined under
Regulation C under the Securities Act of 1933, as amended (the "Securities
----------
Act")) of the Company (nor any ancestor, sibling, descendant or spouse of any of
---
such persons, or any trust, partnership or corporation in which any of such
persons has or has had an economic interest), has or has had, directly or
indirectly, (i) an 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) an economic interest in any entity that
purchases from or sells or furnishes to, the Company, any goods or services or
(iii) a beneficial interest in any contract or agreement set forth in Schedule
2.12(a) or Schedule 2.11(b); provided, that (x) ownership of no more than one
percent (1%) of the outstanding voting stock of a publicly traded corporation
and no more than ten percent (10%) of the outstanding equity of any
-19-
other entity shall not be deemed an "economic interest in any entity" for
purposes of this Section 2.13 and (y) this provision shall only apply if the
terms and conditions applicable to the subject relationship are materially less
favorable to the Company than the terms and conditions that could be obtained in
an arms-length relationship.
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.
2.15 Litigation. Except as set forth in Schedule 2.15, there is no
----------
action, suit or proceeding of any nature pending or to the Company's knowledge
threatened against the Company, its properties or any of its officers, directors
or employees, in their respective capacities as such. Except as set forth in
Schedule 2.15, there is no investigation pending or to the Company's knowledge,
threatened against the Company, its properties or any of its officers, directors
or employees by or before any governmental entity. Schedule 2.15 sets forth,
with respect to any pending or threatened action, suit, proceeding or
investigation, the forum, the parties thereto, the subject matter thereof and
the amount of damages claimed or other remedy requested. No governmental entity
has at any time challenged or questioned the legal right of the Company to
manufacture, offer or sell any of its products in the present manner or style
thereof.
2.16 Insurance. With respect to the insurance policies and fidelity
---------
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company, there is no claim by the
Company pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have been
paid and the Company is otherwise in material compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially similar
insurance coverage). The Company has no knowledge of any threatened termination
of, or material premium increase with respect to, any of such policies.
2.17 Minute Books. The minute books of the Company made available to
------------
counsel for Parent are the only minute books of the Company and contain a
reasonably accurate summary of all meetings of directors (or committees thereof)
and stockholders or actions by written consent since the time of incorporation
of the Company.
2.18 Environmental Matters.
---------------------
(a) Hazardous Material. The Company has not: (i) operated any
------------------
underground storage tanks at any property that the Company has at any time
owned, operated, occupied or leased; or (ii) illegally released any material
amount of any substance that has been designated by any Governmental Entity or
by applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including, without limitation,
PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act
-20-
of 1976, as amended, and the regulations promulgated pursuant to said laws, (a
"Hazardous Material"), but excluding office and janitorial supplies properly and
-------------------
safely maintained. No Hazardous Materials are present, as a result of the
deliberate actions of the Company, or, to the Company's knowledge, as a result
of any actions of any third party or otherwise, in, on or under any property,
including the land and the improvements, ground water and surface water thereof,
that the Company has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not transported,
------------------------------
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before the
Closing Date, nor has the Company disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (any or all of the
foregoing being collectively referred to as "Hazardous Materials Activities") in
------------------------------
violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental
-------
approvals, permits, licenses, clearances and consents (the "Environmental
-------------
Permits") necessary for the conduct of the Company's Hazardous Material
-------
Activities and other businesses of the Company as such activities and businesses
are currently being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
-------------------------
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Company's knowledge, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of the Company. The Company is not
aware of any fact or circumstance which could involve the Company in any
environmental litigation or impose upon the Company any environmental liability.
2.19 Brokers' and Finders' Fees; Third Party Expenses. Except as set
------------------------------------------------
forth on Schedule 2.19, 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. Any fee or commission owing to Sequoia Partners
shall be paid by the Company's shareholders and not by the Company. Attached to
Schedule 2.19 are any agreements, written or oral, with respect to such fees.
Schedule 2.19 sets forth the Company's current reasonable estimate of all Third
Party Expenses (as defined in Section 5.4) expected to be incurred by the
Company in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby.
2.20 Employee Matters and Benefit Plans.
----------------------------------
(a) Definitions. With the exception of the definition of "Affiliate"
-----------
set forth in Section 2.20(a)(i) below (such definition shall only apply to this
Section 2.20), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
-21-
(i) "Affiliate" shall mean any other person or entity under
---------
common control with the Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations thereunder;
(ii) "ERISA" shall mean the Employee Retirement Income
-----
Security Act of 1974, as amended;
(iii) "Company Employee Plan" shall refer to any plan, program,
---------------------
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or stock-
related awards, fringe benefits or other employee benefits or remuneration of
any kind, whether formal or informal, funded or unfunded, including without
limitation, each "employee benefit plan", within the meaning of Section 3(3) of
ERISA which is or has been maintained, contributed to, or required to be
contributed to, by the Company or any Affiliate for the benefit of any
"Employee" (as defined below), and pursuant to which the Company or any
Affiliate has or may have any material liability contingent or otherwise;
(iv) "Employee" shall mean any current, former, or retired
--------
employee, officer, or director of the Company or any Affiliate;
(v) "Employee Agreement" shall refer to each management,
------------------
employment, severance, consulting, relocation, repatriation, expatriation, visa,
work permit or similar agreement or contract between the Company or any
Affiliate and any Employee or consultant;
(vi) "IRS" shall mean the Internal Revenue Service;
---
(vii) "Multiemployer Plan" shall mean any "Pension Plan" (as
------------------
defined below) which is a "multiemployer plan", as defined in Section 3(37) of
ERISA; and
(viii) "Pension Plan" shall refer to each Company Employee Plan
------------
which is an "employee pension benefit plan", within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Schedule 2.20(b) contains an accurate and complete
--------
list of each Company Employee Plan and each Employee Agreement, together with a
schedule of all liabilities, whether or not accrued, under each such Company
Employee Plan or Employee Agreement. The Company does not have any stated plan
or commitment to establish any new Company Employee Plan or Employee Agreement,
to modify any Company Employee Plan or Employee Agreement (except to the extent
required by law or to conform any such Company Employee Plan or Employee
Agreement to the requirements of any applicable law, in each case as previously
disclosed to Parent in writing, or as required by this Agreement), or to enter
into any Company Employee Plan or Employee Agreement.
(c) Documents. The Company has provided to Parent (i) correct and
---------
complete copies of all documents embodying or relating to each Company Employee
Plan and each Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the most recent
-22-
annual actuarial valuations, if any, prepared for each Company Employee Plan;
(iii) the three most recent annual reports (Series 5500 and all schedules
thereto), if any, required under ERISA or the Code in connection with each
Company Employee Plan or related trust; (iv) if the Company Employee Plan is
funded, the most recent annual and periodic accounting of Company Employee Plan
assets; (v) the most recent summary plan description together with the most
recent summary of material modifications, if any, required under ERISA with
respect to each Company Employee Plan; (vi) all IRS determination, opinion,
notification and advisory letters and rulings relating to Company Employee Plans
and copies of all applications and correspondence to or from the IRS, the
Department of Labor ("DOL") or any other governmental agency with respect to any
---
Company Employee Plan; (vii) all material written agreements and contracts
relating to each Company Employee Plan; (viii) all communications material to
any Employee or Employees relating to any Company Employee Plan and any proposed
Company Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to the Company; (ix) all discrimination tests, if any, for each Company Employee
Plan for the most recent plan year; and (x) all registration statements and
prospectuses prepared in connection with each Company Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule
------------------------
2.20(d), (i) the Company has performed in all material respects all obligations
required to be performed by it under each Company Employee Plan and each Company
Employee Plan has been established and maintained in all material respects in
accordance with its terms and in compliance with all applicable laws, statutes,
orders, rules and regulations, including but not limited to ERISA or the Code;
(ii) each Company Employee Plan intended to qualify under Section 401(a) of the
Code and each trust intended to qualify under Section 501(a) of the Code has
either received a favorable determination, opinion, notification or advisory
letter from the IRS with respect to each such Company Employee Plan as to its
qualified status under the Code, including all amendments to the Code effected
by the Tax Reform Acts of 1986 and subsequent legislation, or has a period of
time remaining under applicable Treasury regulations or IRS pronouncements in
which to apply for and obtain such a letter; (iii) no "prohibited transaction",
within the meaning of Section 4975 of the Code or Section 406 of ERISA, has
occurred with respect to any Company Employee Plan; (iv) there are no actions,
suits or claims pending, or, to the knowledge of the Company, threatened or
anticipated (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan; and (v) each
Company Employee Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance with its terms, without liability to the
Company, Parent or any of its Affiliates and its (other than ordinary
administration expenses typically incurred in a termination event); (vi) there
are no audits, inquiries or proceedings pending or, to the knowledge of the
Company or any affiliates, threatened by the IRS or DOL with respect to any
Company Employee Plan; and (vii) neither the Company nor any Affiliate is
subject to any penalty or tax with respect to any Company Employee Plan under
Section 501(i) of ERISA or Section 4975 through 4980 of the Code.
-23-
(e) Pension Plans. The Company does not now, nor has it ever,
-------------
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company contributed to
-------------------
or been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. Except as set forth in Schedule
------------------------------
2.20(g), no Company Employee Plan provides, or has any liability to provide,
life insurance, medical or other employee benefits to any Employee upon his or
her retirement or termination of employment for any reason, except as may be
required by statute, and the Company has never represented, promised or
contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) that such Employee(s) would be provided
with life insurance, medical or other employee welfare benefits upon their
retirement or termination of employment, except to the extent required by
statute.
(h) Effect of Transaction.
---------------------
(i) Except as provided in Section 1.6 of this Agreement or as
set forth on Schedule 2.20(h)(i), the execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Company Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(ii) Except as set forth on Schedule 2.20(h)(ii), no payment or
benefit which will or may be made by the Company or Parent or any of their
respective affiliates with respect to any Employee will be characterized as an
"excess parachute payment", within the meaning of Section 280G(b)(2) of the
Code.
(i) Employment Matters. The Company (i) is in compliance in all
------------------
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld all amounts required by law or by agreement to be
withheld from the 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 or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice). There are no
pending, threatened or reasonably anticipated claims or actions against the
Company under any workers compensation policy or long-term disability policy.
-24-
(j) Labor. No work stoppage or labor strike against the Company is
-----
pending or, to the best knowledge of the Company, threatened. Except as set
forth in Schedule 2.20(j), the Company is not involved in or, to the knowledge
of the Company, threatened with, any labor dispute, grievance, or litigation
relating to 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 liability to the Company. Neither the Company
nor any of its subsidiaries has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act which would, individually or in the
aggregate, directly or indirectly result in any liability to the Company. The
Company does not know of any activities or proceedings of any labor union to
organize any Employees. Except as set forth in Schedule 2.20(j), the Company is
not presently, nor has it been in the past, a party to, or bound by, any
collective bargaining agreement or union contract with respect to Employees and
no collective bargaining agreement is being negotiated by the Company.
2.21 Representations Complete. None of the representations or warranties
------------------------
made by the Company (as modified by the Company Schedules), nor any statement
made in any Schedule or certificate furnished by the Company pursuant to this
Agreement, or furnished in or in connection with documents mailed or delivered
to the stockholders of the Company in connection with soliciting their consent
to this Agreement and the Merger (to the extent that such documents were
prepared by or include information provided by the Company), contains or will
contain at the Effective Time, any untrue statement of a material fact, or omits
or will omit at the Effective Time to state any material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of Parent and
Merger Sub has the corporate power to own its properties and to carry on its
business as now being conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified would
have a Material Adverse Effect on Parent and its subsidiaries taken as a whole.
For purposes of this Article III, a reduction in the trading price of Parent's
Common Stock, as reported by Nasdaq or any other automated quotation system or
exchange, changes in economic conditions or changes in the industry and markets
in which the Parent competes shall not be deemed to have a Material Adverse
Effect on Parent and its subsidiaries taken as a whole, whether occurring at any
time or from time to time. The execution and delivery of this Agreement by
Parent and Merger Sub do not, and, as of the Effective Time, the consummation of
the transactions contemplated hereby will not, conflict with, or result in any
violation of, or default
-25-
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 (i) any provision of the Certificate of Incorporation or
Bylaws of Parent or Merger Sub or (ii) any agreement required to be filed as an
exhibit to any registration statement or report filed with the SEC (as defined
below) or any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Parent or Merger Sub, which would have a Material
Adverse Effect on Parent and its subsidiaries taken as a whole. No consent,
waiver, approval, order or authorization of, or registration, declaration or
filing with, any governmental Entity or any third party (so as not to trigger
any conflict), is required by Parent in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of the Certificate of Merger with the Delaware
Secretary of State, (ii) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws and federal, state or foreign anti-
trust laws, (iii) such consents, waivers, authorizations, filings, approvals and
registrations which are required to be obtained by the Company and (iv) such
other consents, waivers, authorizations, filings, approvals and registrations,
the absence of which could not reasonably be expected to have a Material Adverse
Effect on the business or financial condition of Parent and its subsidiaries
taken as a whole.
3.2 Authority. Parent and Merger Sub have all requisite corporate power
---------
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub. This
Agreement has been duly executed and delivered by Parent and Merger Sub and
constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable in accordance with its terms.
3.3 Capital Structure.
-----------------
(a) The authorized stock of Parent consists of 100,000,000 shares of
Common Stock, of which 21,456,058 shares were issued and outstanding as of July
31, 1998, and 10,000,000 shares of Preferred Stock, none of which is issued or
outstanding. The authorized capital stock of Merger Sub consists of 1,000 shares
of Common Stock, 1,000 shares of which, as of the date hereof, are issued and
outstanding and are held by Parent. All such shares have been duly authorized,
and all such issued and outstanding shares have been validly issued, are fully
paid and nonassessable and are free of any liens or encumbrances other than any
liens or encumbrances created by or imposed upon the holders thereof.
(b) The shares of Parent Common Stock to be issued pursuant to the
Merger will be duly authorized, validly issued, fully paid, non-assessable and,
when issued in accordance with the terms of this Agreement, will be free and
clear of any liens, claims, encumbrances or restrictions other than (i) liens or
encumbrances created by or imposed upon the holders thereof; or (ii) other than
as required by the provisions of this Agreement; or (iii) applicable federal or
state securities laws.
3.4 SEC Documents; Parent Financial Statements. Parent has furnished or
------------------------------------------
made available to the Company true and complete copies of all reports or
registration statements filed by it
-26-
with the U.S. Securities and Exchange Commission (the "SEC") under the
---
Securities Exchange Act of 1934 (the "Exchange Act") or the Securities Act
------------
for all periods subsequent to June 9, 1998, all in the form so filed (all of the
foregoing being collectively referred to as the "SEC Documents"). As of their
--------------
respective filing dates, the SEC Documents complied in all material respects
with the requirements of the Exchange Act, or the Securities Act, as the case
may be, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
in which they were made, not misleading, except to the extent corrected by a
subsequently filed document with the SEC. The financial statements of Parent,
including the notes thereto, included in the SEC Documents (the "Parent
-------
Financial Statements") comply as to form in all material respects with
--------------------
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
consistently applied (except as may be indicated in the notes thereto) and
present fairly the consolidated financial position of Parent at the dates
thereof and of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal audit adjustments).
There has been no change in Parent accounting policies except as described in
the notes to the Parent Financial Statements.
3.5 No Material Adverse Change. Since the date of the balance sheet
--------------------------
included in the Parent's most recently filed report on Form 10-Q, Parent has
conducted its business in the ordinary course and there has not occurred: (a)
any material adverse change in the financial condition, liabilities, assets or
business of Parent; (b) any amendment or change in the Certificate of
Incorporation or Bylaws of Parent; or (c) any damage to, destruction or loss of
any assets of the Parent, (whether or not covered by insurance) that materially
and adversely affects the financial condition or business of Parent. For
purposes of this section, a reduction in the trading price of Parent's Common
Stock, as reported by Nasdaq or any other automated quotation system or
exchange, changes in economic conditions or changes in the industry and markets
in which the Parent competes shall not constitute a material adverse change,
whether occurring at any time or from time to time.
3.6 Litigation. There is no action, suit, proceeding, claim,
----------
arbitration or investigation pending, or as to which Parent has received any
notice of assertion against Parent which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date
----------------------------------
of this Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, the Company agrees (except to the extent that
Parent shall otherwise consent in writing) to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay its debts and Taxes when due, to pay or perform
other obligations when due, and, to the extent consistent with such business, to
use all reasonable efforts consistent with past
-27-
practice and policies to preserve intact its present business organization, keep
available the services of its present officers and key employees and preserve
their relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, all with the goal of
preserving unimpaired its goodwill and ongoing businesses at the Effective Time.
The Company shall promptly notify Parent of any materially negative event
involving or adversely affecting the Company or its business. Except as
expressly contemplated by this Agreement, the Company shall not, without the
prior written consent of Parent, provided that such consent shall not be
unreasonably withheld:
(a) Enter into any commitment or transaction not in the ordinary
course of business.
(b) Transfer to any person or entity any rights to the Company
Intellectual Property Rights (other than pursuant to End-User Licenses in the
ordinary course of business);
(c) Enter into or amend any agreements pursuant to which any other
party is granted marketing, distribution or similar rights of any type or scope
with respect to any products of the Company;
(d) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the agreements set
forth or described in the Company Schedules;
(e) Commence any litigation except to enforce its rights hereunder
or under any agreements related hereto;
(f) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of the Company, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of its capital
stock (or options, warrants or other rights exercisable therefor);
(g) Except for the issuance of shares of Company Capital Stock upon
exercise or conversion of presently outstanding Company Options, warrants or
Company Preferred Stock, or the grant of stock options to new employees pursuant
to outstanding written offers of employment, issue, grant, deliver or sell or
authorize or propose the issuance, grant, delivery or sale of, or purchase or
propose the purchase of, any shares of its capital stock or securities
convertible into, or subscriptions, rights, warrants or options to acquire, or
other agreements or commitments of any character obligating it to issue any such
shares or other convertible securities;
(h) Cause or permit any amendments to its Certificate of
Incorporation or Bylaws;
-28-
(i) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets in an amount in excess of $10,000 in the case of a single transaction or
in excess of $50,000 in the aggregate in any 30-day period;
(j) Sell, lease, license or otherwise dispose of any of its
properties or assets, except in the ordinary course of business;
(k) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities of the Company or guarantee
any debt securities of others;
(l) Grant any severance or termination pay (i) to any director or
officer or (ii) to any other employee except payments made pursuant to written
agreements outstanding on the date hereof;
(m) Subject to the provisions of Section 4.5 below, adopt or amend
any employee benefit plan, or enter into any employment contract, extend
employment offers, pay or agree to pay any special bonus or special remuneration
to any director or employee, or increase the salaries or wage rates of its
employees, except as consistent with the ordinary course of the Company
consistent with past practice (provided that the price per share of any equity
participation in the Company shall be agreed in advance by Parent);
(n) Revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business;
(o) Pay, discharge or satisfy, in an amount in excess of $10,000 (in
any one case) or $50,000 (in the aggregate), any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in the Company Financial Statements
(or the notes thereto) or that arose in the ordinary course of business
subsequent to July 31, 1998 or expenses consistent with the provisions of this
Agreement incurred in connection with any transaction contemplated hereby;
(p) Make or change any material election in respect of Taxes, adopt
or change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes; or
(q) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (p) above, or any other action that
would prevent the Company from performing or cause the Company not to perform
its covenants hereunder.
-29-
4.2 No Solicitation. Until the earlier of the Effective Time and the
---------------
date of termination of this Agreement pursuant to the provisions of Section 8.1
hereof, the Company will not (nor will the Company permit any of the Company's
officers, directors, agents, representatives or affiliates to) directly or
indirectly, take any of the following actions with any party other than Parent
and its designees: (a) solicit, conduct discussions with or engage in
negotiations with any person, relating to the possible acquisition of the
Company or any of its subsidiaries (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise) or any material portion of its
or their capital stock or assets, (b) provide information with respect to the
Company to any person other than Parent, relating to the possible acquisition of
the Company (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise) or any material portion of its or their capital stock or
assets, (c) enter into an agreement with any person, other than Parent,
providing for the acquisition of the Company (whether by way of merger, purchase
of capital stock, purchase of assets or otherwise) or any material portion of
its or their capital stock or assets or (d) make or authorize any statement,
recommendation or solicitation in support of any possible acquisition of the
Company or any of its subsidiaries (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise) or any material portion of its
or their capital stock or assets by any person, other than by Parent. In
addition to the foregoing, if the Company receives prior to the Effective Time
or the termination of this Agreement any offer or proposal relating to any of
the above, the Company shall promptly notify Parent thereof, including
information as to the identity of the party making any such offer or proposal
and the specific terms of such offer or proposal, as the case may be, and such
other information related thereto as Parent may reasonably request.
4.3 Strategic Agreements. The Company agrees that it will not enter into
--------------------
any strategic alliance, joint development or joint marketing agreement during
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement and the Effective Time unless it has first
consulted with the Chief Financial Officer of Parent.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Registration Rights Agreement. Parent agrees that the Shareholders
-----------------------------
receiving Parent Common in the Merger shall be entitled to the registration
rights set forth in the Registration Rights Agreement of even date herewith
between the Company, the Parent, and such Shareholders in the form attached
hereto as Exhibit A.
---------
5.2 Stockholder Meetings. As promptly as practicable after the execution
--------------------
of this Agreement and at such time as Parent may request, the Company shall
submit this Agreement and the transactions contemplated hereby to its
stockholders for approval and adoption as provided by applicable law. The
Company shall use its reasonable efforts to solicit and obtain the consent of
its stockholders sufficient to approve the Merger and this Agreement and to
enable the Closing to occur as promptly as practicable. The materials submitted
to the Company's stockholders shall be subject to review and approval by Parent
and include information regarding the Company, the terms of the
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Merger and this Agreement and the unanimous recommendation of the Board of
Directors of the Company in favor of the Merger and this Agreement.
5.3 Access to Information. Subject to any applicable contractual
---------------------
confidentiality obligations (which the Company or the Parent, as the case may
be, shall use its best efforts to cause to be waived) each party shall afford
the others and its accountants, counsel and other representatives, reasonable
access during normal business hours during the period prior to the Effective
Time to (a) all of its properties, books, contracts, agreements and records, and
(b) all other information concerning the business, properties and personnel
(subject to restrictions imposed by applicable law) of it as the others may
reasonably request. No information or knowledge obtained in any investigation
pursuant to this Section 5.2 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
5.4 Confidentiality. Each of the parties hereto hereby agrees to and
---------------
reaffirms the terms and provisions of the Mutual Nondisclosure Agreement between
Parent and the Company dated as of July 9, 1998.
5.5 Expenses. Whether or not the Merger is consummated, all fees and
--------
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("Third Party Expenses") incurred by a party in
--------------------
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall be the obligation
of the respective party incurring such fees and expenses.
5.6 Public Disclosure. Unless otherwise required by law (including,
-----------------
without limitation, securities laws) or, as to Parent, by the rules and
regulations of the National Association of Securities Dealers, Inc., prior to
the Effective Time, no disclosure (whether or not in response to an inquiry) of
the subject matter of this Agreement shall be made by any party hereto unless
approved by Parent and the Company prior to release, provided that such approval
shall not be unreasonably withheld.
5.7 Consents. The Company shall use its reasonable efforts to obtain the
--------
consents, waivers and approvals under any of the Contracts as may be required in
connection with the Merger (all of such consents, waivers and approvals are set
forth in Company Schedules) so as to preserve all rights of, and benefits to the
Company thereunder.
5.8 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).
5.9 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 and to effect all
necessary registrations
-31-
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.
5.10 Notification of Certain Matters. The Company shall give prompt
-------------------------------
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event which is likely to cause any
representation or warranty of the Company and Parent or Merger Sub,
respectively, contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Effective Time except as contemplated by
their Agreement (including the Company Schedules) and (ii) any failure of the
Company or Parent, as the case may be, to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.10 shall not limit or otherwise affect any remedies available to
the party receiving such notice.
5.11 Pooling Accounting. Parent and the Company shall each use its
------------------
reasonable efforts to cause the business combination to be effected by the
Merger to be accounted for as a pooling of interests. Each of Parent and the
Company shall use its reasonable efforts to cause its respective employees,
directors, stockholders and affiliates not to take any action that would
adversely affect the ability of Parent to account for the business combination
to be effected by the Merger as a pooling of interests. Except for any
agreements in effect as of the date hereof, neither Parent nor the Company shall
take any action, either before or after consummation of the Merger, including
the acceleration of vesting of any options, warrants, restricted stock or other
rights to acquire shares of the capital stock of the Company, which reasonably
would be expected to (i) interfere with Parent's ability to account for the
Merger as a pooling of interests or (ii) jeopardize the tax-free nature of the
reorganization hereunder.
5.12 Affiliate Agreements. Schedule 5.12 sets forth those persons who, in
--------------------
the Company's reasonable judgment, are "affiliates" of the Company within the
meaning of Rule 145 (each such person an "Affiliate") promulgated under the
Securities Act ("Rule 145"). The Company shall provide Parent such information
and documents as Parent shall reasonably request for purposes of reviewing such
list. Each of Parent and the Company has delivered or shall cause to be
delivered to the other, concurrently with the execution of this Agreement, from
each of their respective Affiliates, an executed Affiliate Agreement in the form
attached hereto as Exhibit B or Exhibit C. Parent and Merger Sub shall be
--------- ---------
entitled to place appropriate legends on the certificates evidencing any Parent
Common Stock to be received by Affiliates of the Company pursuant to the terms
of this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for Parent Common Stock, consistent with the terms of such
Affiliate Agreements.
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5.13 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
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
5.14 Form S-8. Parent shall file a registration statement on Form S-8 for
--------
the shares of Parent Common Stock issuable with respect to assumed Company
Options no later than December 9, 1998.
5.15 NMS Listing. On or before the Closing, Parent shall authorize for
-----------
listing on the Nasdaq Stock Market the shares of Parent Common Stock issuable,
and those required to be reserved for issuance, in connection with the Merger,
upon official notice of issuance.
5.16 Voting Agreements. Concurrently with the execution of this
-----------------
Agreement, the Company will cause the persons and entities listed in the
preamble to Exhibit D hereto to execute Voting Agreements in the form attached
---------
hereto as Exhibit D (the "Voting Agreements"), agreeing, among other things, to
--------- -----------------
vote in favor of the Merger and against any competing proposals.
5.17 Employment and Non-Competition Agreements. Concurrently with the
-----------------------------------------
execution of this Agreement, the Company will cause the employees listed on
Schedule 5.17 to execute Employment and Non-Competition Agreements in the form
attached hereto as Exhibit F (the "Employment and Non-Competition Agreements").
--------- -----------------------------------------
5.18 Blue Sky Laws. Parent shall take such steps as may be necessary to
-------------
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Common Stock pursuant hereto. The
Company shall use its best efforts to assist Parent as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable in connection with the issuance of Parent Common Stock pursuant
hereto.
5.19 Indemnification. Parent shall either (i) cause the Company to
---------------
continue to indemnify or (ii) directly indemnify the persons who are currently
officers and directors of the Company substantially in accordance with the
Bylaws of the Company as they are currently in effect for action or inaction by
such person prior to the Merger.
5.20 Employee Benefits. All Company employees shall be entitled to
-----------------
participate in all employee benefit plans and programs of Parent that are
available to other employees of Parent or its subsidiaries in comparable
positions, and all parent employee benefit plans and programs shall give Company
employees full credit for their prior employment by Company. In the case of
medical and health insurance coverage, Parent shall cause the Surviving
Corporation to either continue to insure Company employees under Company's
existing insurance plans or provide generally comparable medical and health
insurance with no limitations, restrictions or reduction in benefits related to
preexisting conditions, waiting periods, deductibles, copayments, stop-loss
provisions or similar features.
-33-
5.21 Termination of Company Investor Rights. The Company shall take such
--------------------------------------
steps as may be necessary to provide for the termination as of Closing of all
Company investor rights granted by the Company to its stockholders and in effect
prior to the Closing, including but not limited to rights of co-sale, voting,
registration, first refusal, board observation or information or to operational
covenants.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have
--------------------
been approved and adopted by the stockholders of the Company by the requisite
vote under applicable law and the Company's Certificate of Incorporation.
(b) No Injunctions or Restraints; Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect.
(c) Opinion of Accountants. Each of Parent and the Company shall
----------------------
have received letters from PricewaterhouseCoopers LLP affirming that firm's
written concurrence, delivered concurrently with the Closing, with Parent
management's and the Company management's conclusions, respectively, as to the
appropriateness of pooling of interests accounting for the Merger under
Accounting Principles Board Opinion No. 16, if consummated in accordance with
this Agreement.
(d) Affiliate Agreements. Each of the parties identified by the
--------------------
Company or Parent as being one of their respective Affiliates shall have
delivered an executed Affiliate Agreement which shall be in full force and
effect.
(e) Registration Rights. Each of the parties to the Registration
-------------------
Rights Agreement shall have delivered an executed counterpart of the
Registration Rights Agreement.
(f) Tax Opinions. Parent and the Company shall each have received
------------
substantially identical written opinions from their counsel, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP, respectively, in form and substance
reasonably satisfactory to them, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code. The parties to
this
-34-
Agreement agree to make reasonable representations as requested by such
counsel for the purpose of rendering such opinion.
6.2 Additional Conditions to Obligations of the Company. The obligations
---------------------------------------------------
of the Company to consummate the Merger and the transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct in all material respects on and as of the Effective Time, except for
changes contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as if
made on and as of the Effective Time, except, in all such cases, for such
breaches, inaccuracies or omissions of such representations and warranties which
have neither had nor reasonably would be expected to have a Material Adverse
Effect on Parent; and the Company shall have received a certificate to such
effect signed on behalf of Parent by a duly authorized officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
------------------------
performed or complied (which performance or compliance shall be subject to
Parent's or Merger Sub's ability to cure as provided in Section 8.1(e) below) in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the Effective
Time, and the Company shall have received a certificate to such effect signed by
a duly authorized officer of Parent.
(c) Third Party Consents. The Company shall have been furnished with
--------------------
evidence satisfactory to it that Parent has obtained the consents, approvals and
waivers set forth in Schedule 6.2(c).
(d) Legal Opinion. The Company shall have received a legal opinion
-------------
from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., counsel to Parent, in substantially
the form attached hereto as Exhibit D.
---------
(e) Material Adverse Change. There shall not have occurred any
-----------------------
material adverse change in the business, assets (including intangible assets),
financial condition or results of operations of Parent since June 30, 1998. For
purposes of this condition, a reduction in the trading price of Parent's Common
Stock, as reported by Nasdaq or any other automated quotation system or
exchange, changes in economic conditions or changes in the industry and markets
in which the Parent competes shall not constitute a material adverse change,
whether occurring at any time or from time to time.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
-----------------------------------------------------------------
The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this
-35-
Agreement shall be subject to the satisfaction at or prior to the Closing of
each of the following conditions, any of which may be waived, in writing,
exclusively by Parent:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in this Agreement shall be true and correct
in all material respects on and as of the Effective Time, except for changes
contemplated by this Agreement (including the Company Schedules) and except for
those representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such date), with the
same force and effect as if made on and as of the Effective Time, except, in all
such cases, for such breaches, inaccuracies or omissions of such representations
and warranties which have neither had nor reasonably would be expected to have a
Material Adverse Effect on the Company or Parent; and Parent and Merger Sub
shall have received a certificate to such effect signed on behalf of the Company
by a duly authorized officer of the Company;
(b) Agreements and Covenants. The Company shall have performed or
------------------------
complied (which performance or compliance shall be subject to the Company's
ability to cure as provided in Section 8.1(d) below) in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time, and Parent and Merger Sub
shall have received a certificate to such effect signed by a duly authorized
officer of the Company;
(c) Third Party Consents. Parent shall have been furnished with
--------------------
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Schedule 6.3(c).
(d) Legal Opinion. Parent shall have received a legal opinion from
-------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, legal counsel to
the Company, in substantially the form attached hereto as Exhibit E.
---------
(e) Balance Sheet. Parent shall have received a balance sheet of the
-------------
Company, dated no later than two weeks prior to the Closing, indicating that the
Company's net worth is not less than a negative one million dollars
(-$1,000,000), together with a certificate executed by the President and Chief
Financial Officer of the Company stating that there have been no material
changes to the balance sheet from its date through the Closing.
(f) Material Adverse Change. There shall not have occurred any
-----------------------
material adverse change in the business, assets (including intangible assets)
financial condition or results of operations of the Company since July 31, 1998.
For purposes of this condition, changes in economic conditions or changes in the
industry and markets in which the Company competes shall not constitute a
material adverse change, whether occurring at any time or from time to time.
-36-
(g) Dissenters' Rights. Holders of more than 3% of the outstanding
------------------
shares of Company Capital Stock shall not have exercised, nor shall they have
any continued right to exercise, appraisal, dissenters' or similar rights under
applicable law with respect to their shares by virtue of the Merger.
(h) Termination of Company Investor Rights. All Company investor
--------------------------------------
rights granted by the Company to its stockholders and in effect prior to the
Closing, including but not limited to rights of co-sale, voting, registration,
first refusal, board observation or information or to operational covenants,
shall terminate as of the Closing.
(i) Validity of Employment Agreements. All Employment Agreements
---------------------------------
entered into in connection with this Agreement shall continue to be in full
force and effect at the Closing.
(j) Conversion of Preferred Stock. All shares of the Series A,
-----------------------------
Series B, Series C and Series D Preferred Stock of the Company shall have
converted into Company Common Stock in accordance with the Company's Certificate
of Incorporation, subject to and effective upon the consummation of the Merger.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
7.1 Survival of Representations and Warranties. All of the Company's
------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement (each as modified by the Company Schedules) shall
survive the Merger and continue until 5:00 p.m., California time, on the date
which is one year following the Closing Date (the "Expiration Date").
7.2 Escrow Arrangements.
-------------------
(a) Escrow Fund. At the Effective Time the Company's stockholders
-----------
will be deemed to have received and deposited with the Escrow Agent (as defined
below) the Escrow Amount (plus any additional shares as may be issued upon any
stock split, stock dividend or recapitalization effected by Parent after the
Effective Time) without any act of any stockholder. As soon as practicable
after the Effective Time, the Escrow Amount, without any act of any stockholder,
will be deposited with U.S. Bank Trust NA (or other institution acceptable to
Parent and the Securityholder Agent (as defined in Section 7.2(g) below)) as
Escrow Agent (the "Escrow Agent"), such deposit to constitute an escrow fund
------------
(the "Escrow Fund") to be governed by the terms set forth herein and at Parent's
-----------
cost and expense. The portion of the Escrow Amount contributed on behalf of
each stockholder of the Company shall be in proportion to the aggregate Parent
Common Stock which such holder would otherwise be entitled under Section 1.6(a).
No portion of the Escrow Amount shall be contributed in respect of any Company
Options or warrants. The Escrow Fund shall be 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
-37-
investigation and defense (hereinafter individually a "Loss" and collectively
----
"Losses") incurred by Parent, its officers, directors, or affiliates (including
------
the Surviving Corporation) directly or indirectly as a result of (i) any
inaccuracy or breach of a representation or warranty of the Company or any
contained in Article II herein (as modified by the Company Schedules), (ii) any
failure by the Company to perform or comply with any covenant contained herein,
(iii) the payment of $500,000 in connection with the obligation of the Company
set forth in Schedule 2.19, which payment shall be deemed a "Loss" for purposes
of this Agreement (the "Fee Payment") or (iv) the payment by the Parent of cash
to Imperial Bank in connection with the exercise of the put right contained in
that certain Warrant dated June 27, 1997 (the "Warrant Payment"). Parent may not
receive any shares from the Escrow Fund unless and until Officer's Certificates
(as defined in paragraph (d) below) identifying Losses, the aggregate amount of
which exceed $75,000, have been delivered to the Escrow Agent as provided in
paragraph (e) and such amount is determined pursuant to this Article VII to be
payable; in such case, Parent may recover shares from the Escrow Fund equal in
value to all indemnified Losses; provided, however, that in connection with the
-----------------
Fee Payment, Parent shall receive shares from the Escrow Fund immediately
following the Closing in an amount equal to the Fee Payment and/or the Warrant
Payment (in accordance with Section 7.2(d)(ii) below) and such shares shall be
paid without regard to the $75,000 limitation referenced above.
(b) Escrow Period; Distribution upon Termination of Escrow Periods.
--------------------------------------------------------------
Subject to the following requirements, the Escrow Fund shall be in existence
immediately following the Effective Time and shall terminate at 5:00 p.m.,
California time, on the Expiration Date (the "Escrow Period"); provided that the
-------------
Escrow Period shall not terminate with respect to such amount (or some portion
thereof), that together with the aggregate amount remaining in the Escrow Fund
is necessary in the reasonable judgment of Parent, subject to the objection of
the Securityholder Agent and the subsequent arbitration of the matter in the
manner provided in Section 7.2(f) hereof, to satisfy any unsatisfied claims
concerning facts and circumstances existing prior to the termination of such
Escrow Period specified in any Officer's Certificate delivered to the Escrow
Agent prior to termination of such Escrow Period. As soon as all such claims
have been resolved, the Escrow Agent shall deliver to the stockholders of the
Company the remaining portion of the Escrow Fund and not required to satisfy
such claims. Deliveries of Escrow Amounts to the stockholders of the Company
pursuant to this Section 7.2(b) shall be made in proportion to their respective
original contributions to the Escrow Fund.
(c) Protection of Escrow Fund.
-------------------------
(i) The Escrow Agent shall hold and safeguard the Escrow Fund
during the Escrow Period, shall treat such fund as a trust fund in accordance
with the terms of this Agreement and not as the property of Parent and shall
hold and dispose of the Escrow Fund only in accordance with the terms hereof.
(ii) Any shares of Parent Common Stock or other equity
securities issued or distributed by Parent (including shares issued upon a stock
split) ("New Shares") in respect of Parent Common Stock in the Escrow Fund which
----------
have not been released from the Escrow Fund shall be added to the Escrow Fund
and become a part thereof. New Shares issued in respect of shares of
-▇▇-
▇▇▇▇▇▇ ▇▇▇▇▇▇ Stock which have been released from the Escrow Fund shall not be
added to the Escrow Fund but shall be distributed to the recordholders thereof.
Cash dividends on Parent Common Stock shall not be added to the Escrow Fund but
shall be distributed to the recordholders thereof.
(iii) Each stockholder shall have voting rights with respect to
the shares of Parent Common Stock contributed to the Escrow Fund by such
stockholder (and on any voting securities added to the Escrow Fund in respect of
such shares of Parent Common Stock).
(d) Claims Upon Escrow Fund.
-----------------------
(i) Upon receipt by the Escrow Agent at any time on or before
the last day of the Escrow Period of a certificate signed by the Chief Executive
Officer, Chief Financial Officer or General Counsel 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, or the
basis for such anticipated liability, 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 7.2(e) hereof, deliver to Parent out
of the Escrow Fund, as promptly as practicable, shares of Parent Common Stock
held in the Escrow Fund in an amount equal to such Losses provided, however,
that no shares of Parent Common Stock shall be delivered to Parent, as a result
of a claim based upon an accrual or upon a substantial likelihood of having to
incur, pay or accrue Losses until such time as the Parent has actually incurred
or paid Losses. All shares of Parent Common Stock subject to such claims shall
remain in the Escrow Fund until Losses are actually incurred or paid or the
Parent determines in its reasonably good faith judgment that no Losses will be
required to be incurred or paid (in which event such shares shall be distributed
to the former Company Stockholders in accordance with Section 7.2(b)).
(ii) For the purposes of determining the number of shares of
Parent Common Stock to be delivered to Parent out of the Escrow Fund pursuant to
Section 7.2(d)(i) hereof, the shares of Parent Common Stock shall be valued at
the average of the closing prices of Parent's Common Stock on the principal
securities exchange on which Parent's Common Stock is then traded, or if not so
traded, the National Market System of the National Association of Securities
Dealers Automated Quotation system, in either case as reported in The Wall
--------
Street Journal for the five (5) consecutive trading days ending on the date that
--------------
is two (2) trading days prior to the Closing Date. Parent and the Securityholder
Agent shall certify such fair market value in a certificate signed by both
Parent and the Securityholder Agent, and shall deliver such certificate to the
Escrow Agent.
(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 Securityholder Agent and for a period of thirty (30) days after
such delivery, the Escrow Agent shall make no delivery to Parent of any Escrow
Amounts pursuant to Section 7.2(d) hereof unless the Escrow Agent shall have
received written authorization from the Securityholder Agent to make such
delivery. After the expiration of such thirty (30) day period, the Escrow Agent
shall make delivery of shares of Parent
-39-
Common Stock from the Escrow Fund in accordance with Section 7.2(d) hereof,
provided that no such payment or delivery may be made if the Securityholder
Agent shall object in a written statement to the claim made in the Officer's
Certificate, and such statement shall have been delivered to the Escrow Agent
prior to the expiration of such thirty (30) day period.
(f) Resolution of Conflicts; Arbitration.
------------------------------------
(i) In case the Securityholder Agent shall so object in writing
to any claim or claims made in any Officer's Certificate, the Securityholder
Agent and Parent shall attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims. If the Securityholder
Agent and Parent should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties and shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum
and distribute shares of Parent Common Stock 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 Securityholder Agent may demand arbitration of
the matter unless the amount of the damage or loss is at issue in pending
litigation with a third party, in which event arbitration shall not be commenced
until such amount is ascertained or both parties agree to arbitration; and in
either such event the matter shall be settled by arbitration conducted by three
arbitrators. Parent and the Securityholder Agent shall each select one
arbitrator, and the two arbitrators so selected shall select a third arbitrator,
each of which arbitrators shall be independent and have at least ten years
relevant experience. The arbitrators shall set a limited time period and
establish procedures designed to reduce the cost and time for discovery while
allowing the parties an opportunity, adequate in the sole judgment of the
arbitrators, to discover relevant information from the opposing parties about
the subject matter of the dispute. The arbitrators shall rule upon motions to
compel or limit discovery and shall have the authority to impose sanctions,
including attorneys fees and costs, to the extent as a court of competent law or
equity, should the arbitrators determine that discovery was sought without
substantial justification or that discovery was refused or objected to without
substantial justification. The decision of a majority of the three arbitrators
as to the validity and amount of any claim in such Officer's Certificate shall
be binding and conclusive upon the parties to this Agreement, and
notwithstanding anything in Section 7.2(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 Mateo or Santa ▇▇▇▇▇ Counties, California under the rules then in effect of
the Judicial Arbitration and Mediation Services, Inc. For purposes of this
Section 7.2(f), in any arbitration hereunder in which any claim or the amount
thereof stated in the Officer's Certificate is at issue, Parent shall be deemed
to be the Non-Prevailing Party in the event that the arbitrators award Parent
less than the sum of one-half (1/2) of the disputed amount plus any amounts not
in dispute; otherwise, the stockholders of the Company as represented by the
Securityholder Agent shall be deemed to be the Non-Prevailing Party. The Non-
-40-
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.
(g) Securityholder Agent of the Stockholders; Power of Attorney.
-----------------------------------------------------------
(i) In the event that the Merger is approved, effective upon
such vote, and without further act of any stockholder, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇ shall each be appointed as agent and attorney-in-fact (each a
"Securityholder Agent") for each stockholder of the Company (except such
--------------------
stockholders, if any, as shall have perfected their appraisal or dissenters'
rights under Delaware Law or California Law), for and on behalf of stockholders
of the Company, to give and receive notices and communications, to authorize
delivery to Parent of shares of Parent Common Stock from the Escrow Fund in
satisfaction of claims by Parent, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of
Securityholder Agent for the accomplishment of the foregoing. Such agency may be
changed by the stockholders of the Company from time to time upon not less than
thirty (30) days prior written notice to Parent; provided that the
Securityholder Agent may not be removed unless holders of a two-thirds interest
of the Escrow Fund agree to such removal and to the identity of the substituted
agent. Any vacancy in the position of Securityholder Agent may be filled by
approval of the holders of a majority in interest of the Escrow Fund. No bond
shall be required of the Securityholder Agent, and the Securityholder Agent
shall not receive compensation for his or her services. Notices or
communications to or from the Securityholder Agent shall constitute notice to or
from each of the stockholders of the Company.
(ii) The Securityholder Agent shall not be liable for any act
done or omitted hereunder as Securityholder Agent while acting in good faith and
in the exercise of reasonable judgment. The stockholders of the Company on whose
behalf the Escrow Amount was contributed to the Escrow Fund shall severally
indemnify the Securityholder Agent and hold the Securityholder Agent harmless
against any loss, liability or expense incurred without negligence or bad faith
on the part of the Securityholder Agent and arising out of or in connection with
the acceptance or administration of the Securityholder Agent's duties hereunder,
including the reasonable fees and expenses of any legal counsel retained by the
Securityholder Agent.
(h) Actions of the Securityholder Agent. A decision, act, consent or
-----------------------------------
instruction of the Securityholder Agent shall constitute a decision of all the
stockholders for whom a portion of the Escrow Amount otherwise issuable to them
are deposited in the Escrow Fund and shall be final, binding and conclusive upon
each of such stockholders, and the Escrow Agent and Parent may rely upon any
such decision, act, consent or instruction of the Securityholder 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 Securityholder Agent.
-41-
(i) Third-Party Claims. In the event Parent becomes aware of a
------------------
third-party claim which Parent believes may result in a demand against the
Escrow Fund, Parent shall notify the Securityholder Agent of such claim, and the
Securityholder Agent, as representative for the stockholders of the Company,
shall be entitled, at their expense, to participate in any defense of such
claim. Parent shall have the right in its sole discretion to settle any such
claim; provided, however, that except with the consent of the Securityholder
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 Securityholder Agent has consented to any such settlement and
acknowledged that the claim is a valid claim against the Escrow Fund, the
Securityholder Agent shall have no power or authority to object under any
provision of this Article VII to the amount of any claim by Parent against the
Escrow Fund with respect 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 officer of
Parent and the Securityholder Agent, and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or parties. The
Escrow Agent shall not be liable for any act done or omitted hereunder as Escrow
Agent while acting in good faith and in the exercise of reasonable judgment, and
any act done or omitted pursuant to the advice of counsel shall be conclusive
evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto or by any
other person, excepting only orders or process of courts of law, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of
any court. In case the Escrow Agent obeys or complies with any such order,
judgment or decree of any court, the Escrow Agent shall not be liable to any of
the parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
(iii) The Escrow Agent shall not be liable in any respect on
account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver this Agreement or any documents
or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the expiration of
any rights under any statute of limitations with respect to this Agreement or
any documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement, the Escrow
Agent shall not be liable to any party for damages, losses, or expenses, except
for gross negligence or willful misconduct on the part of the Escrow Agent. The
Escrow Agent shall not incur any such
-42-
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. The Escrow
Agent is not responsible for determining and verifying the authority of any
person acting or purporting to act on behalf of any party to this Agreement.
(vi) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and shares of Parent Common Stock and may wait for
settlement of any such controversy by final appropriate legal proceedings or
other means as, in the Escrow Agent's discretion, the Escrow Agent may be
required, despite what may be set forth elsewhere in this Agreement. In such
event, the Escrow Agent will not be liable for damage. Furthermore, the
Escrow Agent may at its option, file an action of interpleader requiring the
parties to answer and litigate any claims and rights among themselves. The
Escrow Agent is authorized to deposit with the clerk of the court all documents
and shares of Parent Common Stock held in escrow, except all cost, expenses,
charges and reasonable attorney fees incurred by the Escrow Agent due to the
interpleader action and which the parties jointly and severally agree to pay.
Upon initiating such action, the Escrow Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of
this Agreement.
(vii) The parties and their respective successors and assigns
agree jointly and severally to indemnify and hold Escrow Agent harmless against
any and all losses, claims, damages, liabilities, and expenses, including
reasonable costs of investigation, counsel fees, and disbursements that may be
imposed on Escrow Agent or incurred by Escrow Agent in connection with the
performance of his/her duties under this Agreement, including but not limited to
any litigation arising from this Agreement or involving its subject matter.
(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.
-43-
(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 for such extraordinary services and reimbursed
for all costs, attorney's fees, and expenses occasioned by such default, delay,
controversy or litigation. Parent promises to pay these sums upon demand.
(l) Maximum Liability and Remedies. Except for intentional fraud and
------------------------------
willful misconduct, the rights of the Parent to make claims upon the Escrow Fund
in accordance with this Article VII shall be the sole and exclusive remedy of
Parent and the Surviving Corporation after the Closing with respect to any
representation, warranty, covenant or agreement made by Company under this
Agreement and no former stockholder, optionholder, warrantholder, director,
officer, employee or agent of Company shall have any personal liability to
Parent or the Surviving Corporation after the Closing in connection with the
Merger.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this Agreement
-----------
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual consent of the Company and Parent;
(b) by Parent or the Company if: (i) the Effective Time has not
occurred by October 31, 1998 (provided that the right to terminate this
Agreement under this clause 8.1(b)(i) shall not be available to any party whose
willful failure to fulfill any obligation hereunder has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such date);
(ii) there shall be a final nonappealable order of a federal or state court in
effect preventing consummation of the Merger; or (iii) there shall be any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any governmental entity that would make consummation
of the Merger illegal;
(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger, by any Governmental Entity, which would: (i) prohibit Parent's or
the Company's ownership or operation of any portion of the business of the
Company or (ii) compel Parent or the Company to dispose of or hold separate, as
a result of the Merger, any portion of the business or assets of the Company or
Parent;
-44-
(d) by Parent if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Company and as a result of such breach the conditions set forth in Section
6.3(a) or 6.3(b), as the case may be, would not then be satisfied; provided,
however, that if such breach is curable by the Company within twenty (20) days
through the exercise of its reasonable best efforts, then for so long as the
Company continues to exercise such reasonable best efforts Parent may not
terminate this Agreement under this Section 8.1(d) unless such breach is not
cured within twenty (20) days (but no cure period shall be required for a breach
which by its nature cannot be cured);
(e) by the Company if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Parent or Merger Sub and as a result of such breach the conditions
set forth in Section 6.2(a) or 6.2(b), as the case may be, would not then be
satisfied; provided, however, that if such breach is curable by Parent or Merger
Sub within twenty (20) days through the exercise of its reasonable best efforts,
then for so long as Parent or Merger Sub continues to exercise such reasonable
best efforts the Company may not terminate this Agreement under this Section
8.1(e) unless such breach is not cured within twenty (20) days (but no cure
period shall be required for a breach which by its nature cannot be cured).
Where action is taken to terminate this Agreement pursuant to this Section
8.1, it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
8.2 Effect of Termination. In the event of termination of this Agreement
---------------------
as provided in Section 8.1, this Agreement shall forthwith become void, there
shall be no liability or obligation on the part of Parent, Merger Sub or the
Company, or their respective officers, directors or stockholders, provided that,
the provisions of Sections 5.4 and 5.5 and Article VIII of this Agreement shall
remain in full force and effect and survive any termination of this Agreement.
8.3 Amendment. Except as is otherwise required by applicable law after
---------
the stockholders of the Company approve this Agreement, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, Parent
-----------------
and Merger Sub, on the one hand, and the Company, on the other, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
-45-
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Inktomi Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Vice President, General Counsel
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to:
C\2\B Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., #▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telephone No.: (650)
Facsimile No.: (650)
-46-
with a copy to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to the Securityholder Agent:
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(d) if to the Escrow Agent:
U.S. Bank Trust NA
Global Escrow Depository Services
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
9.2 Interpretation. The words "include," "includes" and "including" when
--------------
used herein shall be deemed in each case to be followed by the words "without
limitation." The word "agreement" when used herein shall be deemed in each case
to mean any contract, commitment or other agreement, whether oral or written,
that is legally binding. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.3 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.
9.4 Entire Agreement; Assignment. This Agreement, the schedules and
----------------------------
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise except as
-47-
otherwise specifically provided, except that Parent and Merger Sub may assign
their respective rights and delegate their respective obligations hereunder to
their respective affiliates.
9.5 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.
9.6 Other Remedies. Except as otherwise provided herein, including as
--------------
set forth in Section 7.2(l) any and all remedies herein expressly conferred upon
a party will be deemed cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such party, and the exercise by a
party of any one remedy will not preclude the exercise of any other remedy.
9.7 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto agrees that process may be served upon them in any
manner authorized by the laws of the State of California for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
9.8 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.9 Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
-48-
IN WITNESS WHEREOF, Parent, Merger Sub, the Company the Securityholder
Agent (as to Article VII only) and the Escrow Agent (as to matters set forth in
Article VII only) have caused this Agreement to be signed by their duly
authorized respective officers, all as of the date first written above.
C\2\B TECHNOLOGIES, INC. INKTOMI CORPORATION
By __________________________ By __________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
President and Chief Executive President and Chief Executive
Officer Officer
SECURITYHOLDER AGENTS: IC MERGER CORP.
_______________________________ By __________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
President and Chief Executive
Officer
_______________________________
▇▇▇▇ ▇▇▇▇▇▇
ESCROW AGENT
By_____________________________
Name:
Title:
**REORGANIZATION AGREEMENT**
EXHIBIT A
---------
REGISTRATION RIGHTS AGREEMENT
Between
INKTOMI CORPORATION
and
C2B TECHNOLOGIES, INC.
Dated as of September ___, 1998
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of September ___, 1998 by and among Inktomi Corporation, a Delaware
corporation (the "Parent"), and each of the holders of the Parent's Common
Stock, $.01 par value per share ("Parent Common Stock"), set forth in the
Schedule of Stockholders attached as Exhibit A hereto (each, a "Holder"). Each
of the Holders has received Parent Common Stock in connection with the merger of
C2B Technologies, Inc. ("C2B") with a wholly owned subsidiary of the Parent
pursuant to an Agreement and Plan of Reorganization dated as of August 31, 1998
(the "Reorganization Agreement").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and conditions herein and in the Reorganization Agreement, the parties
hereto hereby agree as follows:
SECTION 1
REGISTRATION RIGHTS
1.1 Certain Definitions. As used in this Agreement:
-------------------
(a) The term "beneficially owned" refers to the meaning of such terms
as provided in Rule 13d-3 promulgated under the Exchange Act.
(b) The term "Exchange Act" means the Securities Exchange Act of 1934,
as amended, or any similar federal statute and the rules and regulations of the
SEC thereunder, all as the same shall be in effect from time to time.
(c) The term "person" shall mean any person, individual, corporation,
partnership, trust or other nongovernmental entity or any governmental agency,
court, authority or other body (whether foreign, federal, state, local or
otherwise).
(d) The term "Holder" means each Stockholder and any transferee of
Registrable Securities pursuant to Section 1.9 of this Agreement, provided that
any such person shall cease to be a Holder at such time as the registration
rights to which such person is entitled hereunder terminate pursuant to Section
1.10.
(e) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering by the SEC
of the effectiveness of such registration statement.
(f) The term "Registrable Securities" means (i) the Parent Common Stock
and (ii) any Parent Common Stock issued by the Parent upon any stock split,
stock dividend, recapitalization, or similar event; provided, that if, upon any
--------
stock dividend, recapitalization or similar event, the Parent issues securities
which are not immediately convertible into Common Stock, the term "Registrable
Securities" shall also include such securities.
(g) The term "Securities Act" means the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time.
(h) The term "SEC" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
1.2 Parent Registration.
-------------------
(a) If, at any time or from time to time after the date of this
Agreement and prior to the first anniversary of the merger contemplated by the
Reorganization Agreement, the Parent shall determine to register any of its
securities in connection with an offering of its securities to the general
public for cash on a form which would permit the registration of Registrable
Securities, other than (i) a registration relating solely to employee benefit
plans on Form S-1 or S-8 or similar forms which may be promulgated in the
future, or (ii) a registration on Form S-4 or similar form which may be
promulgated in the future relating solely to a SEC Rule 145 transaction, the
Parent will promptly give to the Holders written notice thereof and include in
such registration (and any related qualification under Blue Sky laws or other
compliance), and in any underwriting involved therein, all of the Registrable
Securities specified in a written request or requests, made within thirty (30)
business days after mailing or personal delivery of such written notice from the
Parent by any Holders. Such written request may specify all or a part of the
Holder's Registrable Securities.
(b) If the registration of which the Parent gives notice is for a
registered public offering involving an underwriting, the Parent shall so advise
the Holders as a part of the written notice given pursuant to Section 1.2(a).
In such event the right of any Holder to registration pursuant to this Section
1.2 shall be conditioned upon such Holder's participating in such underwriting
and the inclusion of such Holder's Registrable Securities in the underwriting to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Parent) enter into an
underwriting agreement in the form negotiated by the Parent with the underwriter
or underwriters selected for such underwriting by the Parent. Notwithstanding
any other provision of this Section 1.2, if the underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may limit the number of Registrable Securities to
be included in such registration and underwriting to not less than thirty
percent (30%) of the total amount of securities sought to be included in such
registration (based on aggregate market values). The Parent shall so advise all
Holders whose securities would otherwise be registered and underwritten pursuant
hereto, and the number of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities entitled to inclusion in such registration held by such Holders at
the time of filing the registration statement. If any Holder disapproves of the
terms of any such underwriting, such holder may elect to withdraw therefrom by
written notice to the Parent and the underwriter.
2
(c) In the case of each registration effected by the Parent pursuant to
Section 1.2, the Parent will keep each Holder participating therein advised in
writing as to the initiation of each registration and as to the completion
thereof. At its expense the Parent will furnish such number of prospectuses and
other documents incident thereto as a Holder participating in such registration
from time to time may reasonably request.
1.3 Shelf Registration.
------------------
(a) Parent Common Stock. Subject to the terms of this Agreement, and
-------------------
only if the Parent does not consummate an offering under the terms set forth in
Section 1.2 above prior to December 31, 1998, in connection with which the
Holders have the opportunity to register and sell at least 50% of the Parent
Common Stock received by them pursuant to the Reorganization Agreement, then the
Parent shall:
(i) give written notice of the registration contemplated by
this Section 1.3 to all Holders; and
(ii) as soon as practicable following the earlier to occur of
(i) an offering under the terms set forth in Section 1.2 above where such
offering is completed prior to December 31, 1998, or (ii) a determination by
the Parent not to proceed with such offering at any time prior to December 31,
1998, use its reasonable best efforts to file within 45 days thereafter a
registration statement or such other documents as may be necessary to effect
such registration, (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act and any other
governmental requirements or regulations) as would permit or facilitate the
sale and distribution of all of Registrable Securities then outstanding (other
than any Registrable Securities which any Holder may direct the Parent to
exclude from such registration);
provided, however, that the Parent shall not be obligated to take any action (A)
-------- -------
to effect any such registration, qualification or compliance pursuant to this
Section in any particular jurisdiction in which the Parent would be required to
execute a general consent to service of process in effecting such registration,
qualification or compliance unless the Parent is already subject to service in
such jurisdiction and except as may be required by the Securities Act or (B)
prior to the publication of financial results covering at least thirty (30) days
of the combined operations of the Parent and C2B after the merger contemplated
by the Reorganization Agreement has been completed, and such publication is in
accordance with the requirements of Accounting Series Release No. 130 of the
Securities and Exchange Commission.
Notwithstanding the foregoing obligation of the Parent under this Section
1.3, if the Parent shall furnish to the Holder or Holders requesting a
Registration Statement pursuant to this Section a certificate signed by the
President of the Parent stating that in the good faith judgment of such officer,
it would be detrimental to the Parent and its stockholders for such Registration
Statement to
3
be filed at such time and it is therefore essential to defer the filing of
such Registration Statement, the Parent shall have the right to defer such
filing for a period of not more than 30 days beyond the 45 day period
permitted under Section 1.3(a)(ii) above.
1.4 Obligations of the Parent. In connection with any registration of
-------------------------
Registrable Securities pursuant to this Section 1, the Parent shall:
(a) Use its commercially reasonable efforts to cause such registration
statement to become effective and to remain effective until the earlier of (A)
180 days from the effective date thereof or (B) the sale of all of such shares
of Registrable Securities so registered.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus (the "Prospectus") used in
connection therewith as may be necessary to make and to keep such registration
statement effective and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of all securities proposed to be
registered in such registration statement.
(c) Furnish to the participating Holders or the underwriters such
number of copies of any Prospectus (including any preliminary Prospectus and any
amended or supplemented Prospectus), in conformity with the requirements of the
Securities Act, as the Holders may reasonably request in order to effect the
offering and sale of the shares of Registrable Securities to be offered and
sold, but only while the Parent shall be required under the provisions hereof to
cause the registration statement to remain current.
(d) Use its best efforts to register or qualify the shares of
Registrable Securities covered by such registration statement under the
securities or Blue Sky laws of such states as the participating Holders shall
reasonably request, maintain any such registration or qualification current
until the earlier of (A) 180 days from the effective date thereof or (B) the
sale of all the shares of Registrable Securities so registered; provided,
however, that the Parent shall not be required to take any action that would
subject it to the general jurisdiction of the courts of any jurisdiction in
which it is not so subject or to qualify as a foreign corporation in any
jurisdiction where the Parent is not so qualified.
(e) Take all such other action either necessary or desirable to permit
the shares of Registrable Securities held by the Holders to be registered and
disposed of in accordance with the method of disposition described herein.
(f) Enter into and perform its obligations under an underwriting
agreement, if applicable, in usual and customary form, with the managing
underwriter, if any, selected by a majority-in-interest of such Holders with
respect to such offering. Each participating Holder participating in such
underwriting shall also enter into and perform its obligations under any such
agreement.
4
(g) Cause all Registrable Securities registered pursuant to this
Section 1 to be listed on The Nasdaq National Market or such other exchange as
the Parent's Common Stock is then listed or quoted.
1.5 Notwithstanding anything else in this Section 1, if, at any time
during which a Prospectus is required to be delivered in connection with the
sale of Registrable Securities, the President of the Parent determines in good
faith that a development has occurred or a condition exists as a result of which
the registration statement or the related prospectus contains or incorporates by
reference a material misstatement or omission, the correction of which would
require the premature disclosure of confidential information that would, in the
good faith determination of the Board of Directors, materially and adversely
affect the Parent, the Parent will immediately notify the Holders thereof by
telephone and in writing. Upon receipt of such notification, the Holders will
immediately suspend all offers and sales of any Registrable Securities pursuant
to the registration statement for a period not to exceed 20 days; provided,
however, that the total number of days during which the Holders may be prevented
hereby from engaging in offers and sales of Registrable Securities shall not
exceed 45 days in the aggregate.
1.6 Expenses.
--------
(a) All expenses, other than underwriting discounts and commissions,
if any, incurred in connection with any registration pursuant to Section 1.2,
Section 1.3 and Section 1.4 shall be borne by the Parent. The costs and
expenses of any such registration shall include, without limitation, the
reasonable fees and expenses of the Parent's counsel and its accountants, the
reasonable fees and expenses of one counsel for the Holders and all other costs
and expenses of the Parent incident to the preparation, printing and filing
under the Securities Act of the registration statement and all amendments and
supplements thereto and the cost of furnishing copies of each preliminary
prospectus, each final prospectus and each amendment or supplement thereto to
underwriters, dealers and other purchasers of the securities so registered, the
costs and expenses incurred in connection with the qualification of such
securities so registered under the "blue sky" laws of various jurisdictions, the
fees and expenses of the Parent's transfer agent and all other costs and
expenses of complying with the provisions of this Section 1 with respect to such
registration (collectively, "Registration Expenses").
(b) Excluding the Registration Expenses, the participating Holders
shall pay all other expenses incurred on their behalf with respect to any
registration pursuant to Section 1.2, Section 1.3 or 1.4, including any counsel
for the participating Holders (other than counsel as provided in Section 1.3(a))
and all underwriting discounts and selling commissions with respect to the
Registrable Securities sold by them pursuant to such registration statement.
1.7 Indemnification.
---------------
(a) To the extent permitted by law, the Parent will indemnify each
Holder (excluding Holders who are then directors or officers of the Parent),
each of their respective
5
officers and directors, and each person controlling such person, with respect
to which registration, qualification or compliance has been effected pursuant
to this Section 1, and each underwriter, if any, and each person who controls
any underwriter, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on (i) any untrue
statement (or alleged untrue statement) of a material fact contained in any
prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or (ii) any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any
violation by the Parent of any rule or regulation promulgated under the
Securities Act or any state securities laws or rule or regulation promulgated
thereunder applicable to the Parent and relating to action or inaction
required of the Parent in connection with any such registration, qualification
or compliance, and will reimburse each such person, each of its officers and
directors, and each person controlling such person, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, provided that the Parent will
not be liable in any such case to the extent that any such claim, loss, damage
or liability arises out of or is based on any untrue statement or omission
based upon written information furnished to the Parent by an instrument duly
executed by such person or underwriter and stated to be specifically for use
therein.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by or issuable to such person are included in the securities as
to which such registration, qualification or compliance is being effected,
indemnify the Parent, its legal counsel, each of its directors and officers who
sign such registration statement, each underwriter, if any, of the Parent's
securities covered by such a registration statement, each person who controls
the Parent within the meaning of the Securities Act and each other such Holder,
each of its officers and directors and each person controlling such Holder,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on (i) any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or (ii) any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Parent, such Holders, such directors, officers, persons or underwriters for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the Parent
by an instrument duly executed by such Holder and stated to be specifically for
use therein; and provided, further, that the Parent will not be liable to any
such person or entity with respect to any such untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus that is
corrected in the final prospectus filed with the Commission pursuant to Rule
424(b) promulgated under the Securities Act (or any amendment or supplement to
such prospectus) if the person asserting any such loss, claim, damage or
liability purchased securities but
6
was not sent or given a copy of the prospectus (as amended or supplemented) at
or prior to the written confirmation of the sale of such securities to such
person in any case where such delivery of the prospectus (as amended or
supplemented) is required by the Securities Act, unless such failure to
deliver the prospectus (as amended or supplemented) was a result of the
Parent's failure to provide such prospectus (as amended or supplemented). In
no event shall any indemnity obligation of a Holder under this Section 1.7(b)
exceed the net proceeds from such Holder's sale of the Registrable Securities
giving rise to such obligation.
(c) Each party entitled to indemnification under this Section 1.7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, if such
counsel is other than counsel named herein, shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld), and the Indemnified
Party may participate in such defense at such party's expense, and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall, if such failure is prejudicial to the Indemnifying Party's ability
to defend such action, relieve the Indemnifying Party of its obligations under
this Section 1, but not of any obligation arising apart from this Section 1. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation. If any
such Indemnified Party shall have reasonably concluded that there may be one or
more legal defenses available to such Indemnified Party which are different from
or additional to those available to the Indemnifying Party, or that such claim
or litigation involves or could have an effect upon matters beyond the scope of
the indemnity agreement provided in this Section 1.7, the Indemnifying Party
shall not have the right to assume the defense of such action on behalf of such
Indemnified Party and such Indemnifying Party shall reimburse such Indemnified
Party and any person controlling such Indemnified Party for that portion of the
fees and expenses of any counsel retained by the Indemnified Party which are
reasonably related to the matters covered by the indemnity agreement provided in
this Section 1.7.
1.8 Information by Holder. The Holders whose securities are included in
---------------------
any registration effected pursuant to this Section 1 shall furnish in writing to
the Parent such information regarding such persons and the distribution proposed
by such persons as the Parent may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
this Section 1. The Parent's obligations under this Section 1 are conditioned
upon compliance by such persons with the provisions of this Section 1.8.
1.9 Sale without Registration. The holder of each certificate
-------------------------
representing securities of the Parent required to bear the legend in
substantially the form set forth in the Reorganization Agreement (or any similar
legend) by acceptance thereof agrees to comply in all respects with the
7
provisions of this Section 1.9. Prior to any proposed transfer of any
Registrable Securities which shall not be registered under the Securities Act,
the holder thereof shall give written notice to the Parent of such holder's
intention to effect such transfer, accompanied by: (a) such information as is
reasonably necessary in order to establish that such transfer may be made
without registration under the Securities Act; and (b) except for transfers
proposed to be made in accordance with SEC Rule 144 (as in effect at the date
hereof and as amended from time to time thereafter) or to any constituent
partner of any Holder, at the expense of the Holder or transferee, an
unqualified written opinion of legal counsel, satisfactory in form and substance
to the Parent, to the effect that such transfer may be made without registration
under the Securities Act; provided that nothing contained in this Section 1.7
shall relieve the Parent from complying with any request for registration,
qualification or compliance made pursuant to the other provisions of this
Section 1.
1.10 Transfer of Registration Rights. The rights to cause the Parent to
-------------------------------
register securities granted by the Parent under Section 1 may be assigned by any
Holder to the transferee or assignee of not less than (i) 100,000 shares
constituting Registrable Securities (as adjusted for stock splits and the like)
or such lesser number of shares constituting Registrable Securities if such
lesser number represents all of the Registrable Securities held by a Holder or
(ii) any affiliate or constituent partner of any Holder; and provided that the
Parent is given written notice of any such transfer within thirty (30) days of
the date of said transfer, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being assigned and provided further that the transferee or assignee
of such rights is not deemed by the Board of Directors of the Parent, in its
reasonable judgment, to be a competitor of the Parent and provided further that
the transferee or assignee of such rights assumes in writing in a form
reasonably acceptable to the Parent the obligations of the Holder under this
Agreement.
1.11 Termination of Registration Rights. The registration rights granted
----------------------------------
pursuant to this Section 1 shall terminate as to any Holder at such time as all
Registrable Securities beneficially owned by such Holder can be sold within a
given three-month period without compliance with the registration requirements
of the Securities Act pursuant to Rule 144 and a written opinion to that effect
of legal counsel for the Parent delivered to such Holder which shall be
reasonably satisfactory in form and substance to legal counsel for such Holder.
Notwithstanding the foregoing, such registration rights shall terminate on the
date that is the first anniversary of the closing of the merger contemplated by
the Regorganization Agreement.
SECTION 2
SECURITIES MATTERS
2.1 Securities Act Exemption. The Parent Common Stock to be issued
------------------------
pursuant to the Reorganization Agreement will not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), in reliance on the
exemption set forth in Section 4(2) thereof. In connection with the acquisition
of Parent Common Stock, each of the Holders hereby represents to the Parent that
(i) the Holder is acquiring the Parent Common Stock for investment purposes only
and not with a
8
view to, or for resale in connection with any "distribution" thereof as that
term is used for purposes of the Securities Act; (ii) the Holder is aware of
the Parent's business affairs and financial condition and has acquired
sufficient information about the Parent to reach an informed and knowledgeable
decision to acquire the Parent Common Stock; and (iii) the Holder understands
that the Parent Common Stock has not been registered under the Securities Act
in reliance upon a specific exemption therefrom, which exemption depends upon,
among other things, the bona fide nature of the investment intent as expressed
herein.
2.2 Stock Restrictions. In addition to any legend imposed by applicable
------------------
state securities laws, the certificates representing the shares of Parent Common
Stock issued pursuant to the Reorganization Agreement shall bear a restrictive
legend (and stop transfer orders shall be placed against the transfer thereof
with Parent's transfer agent), stating substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").
THEY MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, OR AN
OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT, OR A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION.
2.3 Holders' Representations Regarding Securities Law Matters. Except as
---------------------------------------------------------
may otherwise be required by the Affiliate's Agreement to be executed by each
person identified as an affiliate of the Parent pursuant to Section 5.12 of the
Reorganization Agreement and by any additional representation required of any
stockholder of the Parent required by the Parent or C2B or their respective
counsel to ensure that the Merger is treated as a tax-free reorganization under
Section 368(a) of the Internal Revenue Code, the Holders, by virtue of the
Merger and the conversion into Parent Common Stock of the C2B Common Stock
and/or Preferred Stock held by them, shall be bound by the following provisions:
(a) The Holder will not offer, sell or otherwise dispose of any shares
of Parent Common Stock except in compliance with the Securities Act and the
rules and regulations thereunder; and except pursuant to a registration effected
in accordance with Section 1.2 or 1.3 hereunder, the Holder will not offer,
sell, contract to sell or otherwise dispose of any securities of the Parent
(including but not limited to any Registrable Securities) that are substantially
similar to the Common Stock of the Parent, including but not limited to any
securities that are convertible into or exchangeable for, or that represent the
right to receive, Common Stock or any such substantially similar securities,
until December 8, 1998.
(b) The Holder will not sell, transfer or otherwise dispose of any
shares of the Parent Common Stock unless (i) such sale, transfer or other
disposition is within the limitations of and in compliance with Rule 144
promulgated by the SEC under the Securities Act and the Holder furnishes the
Parent with reasonable proof of compliance with such Rule, (ii) in the opinion
of
9
counsel, satisfactory to Parent and its counsel, some other exemption from
registration under the Securities Act is available with respect to any such
proposed sale, transfer, or other disposition of Parent Common Stock, or (iii)
the offer and sale of Parent Common Stock is registered under the Securities
Act.
SECTION 3
MISCELLANEOUS
3.1 Governing Law. This Agreement shall be governed in all respects by
-------------
the laws of the State of California as applied to contracts entered into solely
between residents of, and to be performed entirely within, such state.
3.2 Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the parties hereto and their respective successors
and assigns. This Agreement may not be assigned by a party without the prior
written consent of the other party. This Agreement is not intended and shall
not be construed to create any rights or remedies in any parties other than the
Holders and the Parent and no other person shall assert any rights as third
party beneficiary hereunder.
3.3 Entire Agreement; Amendment. This Agreement contains the entire
---------------------------
understanding and agreement between the parties with regard to the subject
matter hereof and thereof and supersedes all prior agreements and understandings
among the parties relating to the subject matter hereof. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other than
by a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.
3.4 Notices and Dates. All notices or other communications required or
-----------------
permitted under this Agreement shall be made in the manner provided in Section
9.1 of the Reorganization Agreement. In the event that any date provided for in
this Agreement falls on a Saturday, Sunday or legal holiday, such date shall be
deemed extended to the next business day.
3.5 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 a binding agreement when one or more counterparts have been signed
by each party and delivered to the other party.
3.6 Severability. If any provision of this Agreement or portion thereof
------------
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
3.7 Effectiveness. This Agreement shall be effective only upon completion
-------------
of the merger contemplated by the Reorganization Agreement.
10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective authorized officers as of the date aforesaid.
"PARENT" INKTOMI CORPORATION,
a Delaware corporation
By:
Name:
Title:
"HOLDERS"
By:
Name:
Title:
**REGISTRATION RIGHTS AGREEMENT**
C2B TECHNOLOGIES, INC.
AFFILIATE AGREEMENT
C2B TECHNOLOGIES, INC. AFFILIATE AGREEMENT ("Agreement") dated as of
August___, 1998, between Inktomi Corporation, a Delaware corporation ("Parent")
and the undersigned affiliate ("Affiliate") of C2B Technologies, Inc., a
Delaware corporation ("Company").
WHEREAS, Parent and Company propose to enter into an Agreement and Plan of
Reorganization ("Merger Agreement") pursuant to which a subsidiary of Parent
will merge into Company ("Merger"), and Company will become a subsidiary of
Parent (capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the Merger Agreement);
WHEREAS, pursuant to the Merger, at the Effective Time outstanding shares
of Company Capital Stock, including any shares owned by Affiliate, will be
converted into the right to receive shares of Common Stock of Parent;
WHEREAS, it will be a condition to effectiveness of the Merger that (i) the
attorneys for each of Company and Parent will have delivered written opinions
that the Merger will constitute a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986 as amended (the "Code"), and (ii)
the independent accounting firms that audit the annual financial statements of
Company and Parent will have delivered their written concurrences to the effect
that the Merger will be accounted for as a pooling of interests;
WHEREAS, the execution and delivery of this Agreement by Affiliate is a
material inducement to Parent to enter into the Merger Agreement;
WHEREAS, Affiliate has been advised that Affiliate may be deemed to be an
"affiliate" of Company, as the term "affiliate" is used (i) for purposes of
paragraphs (c) and (d) of Rule 145 of the Rules and Regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") and
(ii) in the Commission's Accounting Series Releases 130 and 135, as amended,
although nothing contained herein shall be construed as an admission by
Affiliate that Affiliate is in fact an affiliate of Company.
NOW, THEREFORE, intending to be legally bound, the parties hereby agree as
follows:
1. Acknowledgments by Affiliate. Affiliate acknowledges and understands
----------------------------
that the representations, warranties and covenants by Affiliate set forth herein
will be relied upon by Parent, Company, and their respective Affiliates, counsel
and accounting firms, and that substantial losses and damages may be incurred by
these persons if Affiliate's representations, warranties or covenants are
breached. Affiliate has carefully read this Agreement and the Merger Agreement
and has discussed
the requirements of this Agreement with his professional advisors, who are
qualified to advise him with regard to such matters.
2. Compliance with Rule 145 and the Act.
------------------------------------
(a) Affiliate has been advised that (i) the shares of Parent Common
Stock issued in connection with the Merger are expected to be "restricted
securities" within the meaning of Rule 144 under the Securities Act of 1933 as
amended (the "Act") and resale of such shares will be subject to the
restrictions set forth in Rules 144 and 145 of the Act unless otherwise
transferred pursuant to an effective registration statement under the Act or an
appropriate exemption from registration, (ii) Affiliate may be deemed to be an
affiliate of Company, (iii) no sale, transfer or other disposition by Affiliate
of any Parent Common Stock received by Affiliate will be registered under the
Act. Affiliate accordingly agrees not to sell, transfer or otherwise dispose of
any Parent Common Stock issued to Affiliate in the Merger unless (i) such sale,
transfer or other disposition is made in conformity with the requirements of
Rule 145(d) promulgated under the Act, or (ii) Affiliate delivers to Parent a
written opinion of counsel, reasonably acceptable to Parent in form and
substance, that such sale, transfer or other disposition is otherwise exempt
from registration under the Act.
(b) Parent will give stop transfer instructions to its transfer agent
with respect to any Parent Common Stock received by Affiliate pursuant to the
Merger and there will be placed on the certificates representing such Common
Stock, or any substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 applies and may only be transferred in
conformity with Rule 145(d) or in accordance with a written opinion of
counsel, reasonably acceptable to the issuer in form and substance,
that such transfer is exempt from registration under the Securities
Act of 1933. "
The legend set forth above shall be removed (by delivery of a substitute
certificate without such legend) and Parent shall so instruct its transfer
agent, if Affiliate delivers to Parent (i) satisfactory written evidence that
the shares have been sold in compliance with Rule 145 (in which case, the
substitute certificate will be issued in the name of the transferee), or (ii) an
opinion of counsel, in form and substance reasonably satisfactory to Parent, to
the effect that public sale of the shares by the holder thereof is no longer
subject to Rule 145.
3. Covenants Related to Pooling of Interests. During the period
-----------------------------------------
beginning from the date hereof and ending on the second day after the day that
Parent publicly announces financial results covering at least 30 days of
combined operations of Parent and Company, Affiliate will not sell, exchange,
transfer, pledge, distribute, or otherwise dispose of or grant any option,
establish any "short" or put-equivalent position with respect to or enter into
any similar transaction (through derivatives or otherwise) intended or having
the effect, directly or indirectly, to reduce its risk relative to any
securities, or shares of Parent Common Stock received by Affiliate in connection
with the
-2-
Merger. Parent may, at its discretion, cause a restrictive legend to the
foregoing effect to be placed on Parent Common Stock certificates issued to
Affiliate in the Merger and place a stock transfer notice consistent with the
foregoing with its transfer agent with respect to the certificates.
Notwithstanding the foregoing, Affiliate will not be prohibited by the foregoing
from selling or disposing of shares so long as such sale or disposition is in
accordance with the "de minimis" test set forth in SEC Staff Accounting Bulletin
No. 76 and so long as Affiliate has obtained Parent's prior written approval of
such sale or disposition.
4. Miscellaneous.
-------------
(a) For the convenience of the parties hereto, this Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same document.
(b) This Agreement shall be enforceable by, and shall inure to the
benefit of and be binding upon, the parties hereto and their respective
successors and assigns. As used herein, the term "successors and assigns" shall
mean, where the context so permits, heirs, executors, administrators, trustees
and successor trustees, and personal and other representatives.
(c) This Agreement shall be governed by and construed, interpreted and
enforced in accordance with the internal laws of the State of California.
(d) If a court of competent jurisdiction determines that any provision
of this Agreement is not enforceable or enforceable only if limited in time
and/or scope, this Agreement shall continue in full force and effect with such
provision stricken or so limited.
(e) Counsel to and accountants for the parties to the Agreement shall
be entitled to rely upon this Agreement as needed.
(f) This Agreement shall not be modified or amended, or any right
hereunder waived or any obligation excused, except by a written agreement signed
by both parties.
-3-
Executed as of the date shown on the first page of this Agreement.
INKTOMI CORPORATION
By:
------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
AFFILIATE
By:
------------------------------------------
Name of Affiliate:
---------------------------
Name of Signatory (if different from name of
Affiliate):
----------------------------------
Title of Signatory
(if applicable):
-----------------------------
***C2B AFFILIATE AGREEMENT***
-4-
INKTOMI CORPORATION AFFILIATE AGREEMENT
INKTOMI CORPORATION AFFILIATE AGREEMENT ("Agreement") dated as of August
___, 1998, between Inktomi Corporation, a Delaware corporation ("Inktomi") and
the undersigned Affiliate ("Affiliate") of Inktomi.
WHEREAS, Inktomi and C2B Technologies, Inc., a Delaware corporation ("C2B")
propose to enter into an Agreement and Plan of Reorganization ("Merger
Agreement") pursuant to which a subsidiary of Inktomi will merge into C2B
("Merger"), and C2B will become a subsidiary of Inktomi;
WHEREAS, it will be a condition to effectiveness of the Merger that the
independent accounting firms that audit the annual financial statements of C2B
and Inktomi will have delivered their written concurrences to the effect that
the Merger will be accounted for as a pooling of interests;
WHEREAS, the execution and delivery of this Agreement by Affiliate is a
material inducement to Inktomi to enter into the Merger Agreement;
WHEREAS, Affiliate has been advised that Affiliate may be deemed to be an
"Affiliate" of Inktomi, as the term "Affiliate" is used in Accounting Series
Releases 130 and 135, as amended, although nothing contained herein shall be
construed as an admission by Affiliate that Affiliate is in fact an Affiliate of
Inktomi.
NOW, THEREFORE, intending to be legally bound, the parties hereby agree as
follows:
1. Acknowledgments by Affiliate. Affiliate acknowledges and understands
----------------------------
that the representations, warranties and covenants by Affiliate set forth herein
will be relied upon by Inktomi, C2B, and their respective Affiliates, counsel
and accounting firms, and that substantial losses and damages may be incurred by
these persons if Affiliate's representations, warranties or covenants are
breached. Affiliate has carefully read this Agreement and the Merger Agreement
and has discussed the requirements of this Agreement with his professional
advisors, who are qualified to advise him with regard to such matters.
2. Covenants Related to Pooling of Interests. During the period
-----------------------------------------
beginning from the date hereof and ending on the second day after the day that
Inktomi publicly announces financial results covering at least 30 days of
combined operations of Inktomi and C2B, Affiliate will not sell, exchange,
transfer, pledge, distribute, make any gift or otherwise dispose of or grant any
option, establish any "short" or put-equivalent position with respect to or
enter into any similar transaction (through derivatives or otherwise) intended
or having the effect, directly or indirectly, to reduce his risk relative to any
shares of Inktomi Common Stock. Inktomi may, at its discretion, place a stock
transfer notice consistent with the foregoing with its transfer agent with
respect to Affiliate's shares. Notwithstanding the foregoing, Affiliate will
not be prohibited by the foregoing
from selling or disposing of shares so long as such sale or disposition is in
accordance with the "de minimis" test set forth in SEC Staff Accounting Bulletin
No. 76.
3. Beneficial Ownership of Stock. Except for the Inktomi Common Stock
-----------------------------
and options to purchase Inktomi Common Stock set forth in Appendix A hereto,
Affiliate does not beneficially own any shares of Inktomi Common Stock or any
other equity securities of Inktomi or any options, warrants or other rights to
acquire any equity securities of Inktomi.
4. Miscellaneous.
-------------
(a) For the convenience of the parties hereto, this Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same document.
(b) This Agreement shall be enforceable by, and shall inure to the
benefit of and be binding upon, the parties hereto and their respective
successors and assigns. As used herein, the term "successors and assigns" shall
mean, where the context so permits, heirs, executors, administrators, trustees
and successor trustees, and personal and other representatives.
(c) This Agreement shall be governed by and construed, interpreted and
enforced in accordance with the internal laws of the State of California.
(d) If a court of competent jurisdiction determines that any provision
of this Agreement is not enforceable or enforceable only if limited in time
and/or scope, this Agreement shall continue in full force and effect with such
provision stricken or so limited.
(e) Counsel to and accountants for the parties to the Agreement shall
be entitled to rely upon this Agreement as needed.
(f) This Agreement shall not be modified or amended, or any right
hereunder waived or any obligation excused, except by a written agreement signed
by both parties.
Executed as of the date shown on the first page of this Agreement.
INKTOMI CORPORATION AFFILIATE
By: By:
--------------------------------- ---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ Print Name of Affiliate:
------------------------------ ------------
Title: President and Chief Executive Title (if applicable):
----------------------------- --------------
Officer
-------
-2-
APPENDIX A
Affiliate: _____________________________________________________
Total Number of shares of Inktomi Common Stock owned on the date hereof:
_______________________
Total Number of options to purchase Inktomi Common Stock owned on the date
hereof (including the dates of grant, vesting, exercise prices and expiration
dates):
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
-3-
C2B TECHNOLOGIES, INC.
VOTING AGREEMENT
This Voting Agreement ("Agreement") is made and entered into as of August
[28], 1998, between Inktomi Corporation, a Delaware corporation ("Parent"), and
the undersigned stockholder ("Stockholder") of C2B Technologies, Inc., a
Delaware corporation ("Company").
RECITALS
A. Concurrently with the execution of this Agreement, Parent, Company and
IC Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), have entered into an Agreement and Plan of Reorganization
(the "Merger Agreement") which provides for the merger (the "Merger") of Merger
Sub with and into the Company. Pursuant to the Merger, shares of capital stock
of the Company will be converted into Common Stock of Parent on the basis
described in the Merger Agreement.
B. The Stockholder is the record holder and beneficial owner (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of such number of shares of the outstanding Common Stock of the
Company as is indicated on the final page of this Agreement (the "Shares").
C. Parent desires the Stockholder to agree, and the Stockholder is
willing to agree, not to transfer or otherwise dispose of any of the Shares, or
any other shares of capital stock of the Company acquired hereafter and prior to
the Expiration Date (as defined in Section 1.1 below, except as otherwise
permitted hereby), and to vote the Shares and any other such shares of capital
stock of the Company so as to facilitate consummation of the Merger.
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Agreement to Retain Shares.
--------------------------
1.1 Transfer and Encumbrance. Stockholder agrees not to transfer
------------------------
(except as may be specifically required by court order), sell, exchange, pledge
or otherwise dispose of or encumber any of the Shares or any New Shares as
defined in Section 1.2 below, or to make any offer or agreement relating
thereto, at any time prior to the Expiration Date. As used herein, the term
"Expiration Date" shall mean the earlier to occur of (i) such date and time as
the Merger shall become effective in accordance with the terms and provisions of
the Merger Agreement and (ii) such date and time as the Merger Agreement shall
be terminated pursuant to Article [VIII] thereof.
1.2 Additional Purchases. Stockholder agrees that any shares of
--------------------
capital stock of the Company that Stockholder purchases or with respect to which
Stockholder otherwise acquires beneficial owner ship after the execution of
this Agreement and prior to the Expiration Date ("New Shares") shall be subject
to the terms and conditions of this Agreement to the same extent as if they
constituted Shares.
2. Agreement to Vote Shares. At every meeting of the stockholders of the
------------------------
Company called with respect to any of the following, and at every adjournment
thereof, and on every action or approval by written consent of the stockholders
of the Company with respect to any of the following, Stockholder shall vote the
Shares and any New Shares: (i) in favor of approval of the Merger Agreement and
the Merger and any matter that could reasonably be expected to facilitate the
Merger (including without limitation the conversion of any
shares of Preferred Stock of the Company into Common Stock of the Company
immediately prior to or at the effective time of the Merger, consistent with
the provisions of the Company's Certificate of Incorporation and with the
requirements necessary to account for the Merger as a "pooling-of-interests");
and (ii) against approval of any proposal made in opposition to or competition
with consummation of the Merger and against any merger, consolidation, sale of
assets, reorganization or recapitalization, with any party other than with
Parent and its affiliates and against any liquidation or winding up of the
Company (each of the foregoing is hereinafter referred to as an "Opposing
Proposal"). Stockholder agrees not to take any actions contrary to
Stockholder's obligations under this Agreement.
3. Irrevocable Proxy. Concurrently with the execution of this Agreement,
-----------------
Stockholder agrees to deliver to Parent a proxy in the form attached hereto as
Exhibit A (the "Proxy"), which shall be irrevocable, with the total number of
shares of capital stock of the Company beneficially owned (as such term is
defined in Rule 13d-3 under the Exchange Act) by Stockholder set forth therein.
4. Representations, Warranties and Covenants of the Stockholder.
------------------------------------------------------------
Stockholder hereby represents, warrants and covenants to Parent as follows:
4.1 Ownership of Shares. Stockholder (i) is the beneficial owner of
-------------------
the Shares, which at the date hereof and at all times up until the Expiration
Date will be free and clear of any liens, claims, options, charges or other
encumbrances; (ii) does not beneficially own any shares of capital stock of the
Company other than the Shares (excluding shares as to which Stockholder
currently disclaims beneficial ownership in accordance with applicable law); and
(iii) has full power and authority to make, enter into and carry out the terms
of this Agreement and the Proxy.
4.2 No Proxy Solicitations. Stockholder will not, and will not
----------------------
permit any entity under Stockholder's control to: (i) solicit proxies or become
a "participant" in a "solicitation" (as such terms are defined in Regulation 14A
under the Exchange Act) with respect to an Opposing Proposal or otherwise
encourage or assist any party in taking or planning any action that would
compete with, restrain or otherwise serve to interfere with or inhibit the
timely consummation of the Merger in accordance with the terms of the Merger
Agreement; (ii) initiate a stockholders' vote or action by consent of the
Company stockholders with respect to an Opposing Proposal; or (iii) become a
member of a "group" (as such term is used in Section 13(d) of the Exchange Act)
with respect to any voting securities of the Company with respect to an Opposing
Proposal.
5. Additional Documents. Stockholder hereby covenants and agrees to
--------------------
execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Parent or Stockholder, as the case may be, to carry out
the intent of this Agreement.
6. Consent and Waiver. Stockholder hereby gives any consents or waivers
------------------
that are reasonably required for the consummation of the Merger under the terms
of any agreements to which Stockholder is a party or pursuant to any rights
Stockholder may have.
7. Termination. This Agreement and the Proxy delivered in connection
-----------
herewith shall terminate and shall have no further force or effect as of the
Expiration Date.
2
8. Miscellaneous.
-------------
8.1 Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
8.2 Binding Effect and Assignment. This Agreement and all of the
-----------------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, either this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
of the parties without prior written consent of the other.
8.3 Amendments and Modification. This Agreement may not be modified,
---------------------------
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
8.4 Specific Performance; Injunctive Relief. The parties hereto
---------------------------------------
acknowledge that Parent will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreement of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Parent upon any such violation, Parent
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Parent at law
or in equity.
8.5 Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and sufficient if delivered in
person, by cable, telegram or telex, or sent by mail (registered or certified
mail, postage prepaid, return receipt requested) or overnight courier (prepaid)
to the respective parties as follows:
If to Parent: Inktomi Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
With a copy to: Wilson, Sonsini, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to the Stockholder: To the address for notice set forth on the
last page hereof.
With a copy to: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
3
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall only be
effective upon receipt.
8.6 Governing Law. This Agreement shall be governed by, and construed and
-------------
enforced in accordance with, the internal laws of the State of California.
8.7 Entire Agreement. This Agreement contains the entire understanding of
----------------
the parties in respect of the subject matter hereof, and supersedes all prior
negotiations and understandings between the parties with respect to such subject
matter.
8.8 Counterparts. This Agreement may be executed in several counterparts,
------------
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
8.9 Effect of Headings. The section headings herein are for convenience
------------------
only and shall not affect the construction of interpretation of this Agreement.
4
IN WITNESS WHEREOF, the parties have caused this Voting Agreement to be
duly executed on the date and year first above written.
INKTOMI CORPORATION
By:
-----------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
STOCKHOLDER:
By:
-----------------------------------------
Stockholder's Address for Notice:
--------------------------------------------
--------------------------------------------
--------------------------------------------
Shares beneficially owned:
____________________ shares of Common Stock
____________________ shares of Series A Preferred
Stock
____________________ shares of Series B Preferred
Stock
____________________ shares of Series C Preferred
Stock
____________________ shares of Series D Preferred
Stock
***VOTING AGREEMENT***
5
EXHIBIT A
IRREVOCABLE PROXY
The undersigned stockholder of C2B Technologies, Inc., a Delaware
corporation ("Company"), hereby irrevocably appoints the directors on the Board
of Directors of Inktomi Corporation, a Delaware corporation ("Parent"), and each
of them, as the sole and exclusive attorneys and proxies of the undersigned,
with full power of substitution and resubstitution, to the full extent of the
undersigned's rights with respect to the shares of capital stock of the Company
beneficially owned by the undersigned, which shares are listed on the final page
of this Proxy (the "Shares"), and any and all other shares or securities issued
or issuable in respect thereof on or after the date hereof, until such time as
that certain Agreement of Merger and Plan of Reorganization dated as of August
[28], 1998 (the "Merger Agreement"), among Parent, IC Acquistion Corp., a
Delaware corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and
Company, shall be terminated in accordance with its terms or the Merger (as
defined in the Merger Agreement) is effective. Upon the execution hereof, all
prior proxies given by the undersigned with respect to the Shares and any and
all other shares or securities issued or issuable in respect thereof on or after
the date hereof are hereby revoked and no subsequent proxies will be given.
This proxy is irrevocable, is granted pursuant to the Voting Agreement
dated as of August [28], 1998 between Parent and the undersigned stockholder
(the "Voting Agreement"), and is granted in consideration of Parent entering
into the Merger Agreement. The attorneys and proxies named above will be
empowered at any time prior to termination of the Merger Agreement to exercise
all voting and other rights (including, without limitation, the power to execute
and deliver written consents with respect to the Shares) of the undersigned at
every annual, special or adjourned meeting of Company stockholders, and in every
written consent in lieu of such a meeting, or otherwise, in favor of approval of
the Merger and the Merger Agreement and any matter that could reasonably be
expected to facilitate the Merger (including without limitation the conversion
of any shares of Preferred Stock of the Company into Common Stock of the Company
immediately prior to or at the effective time of the Merger, consistent with the
provisions of the Company's Certificate of Incorporation and with the
requirements necessary to account for the Merger as a "pooling-of-interests"),
and against any proposal made in opposition to or competition with the
consummation of the Merger and against any merger, consolidation, sale of
assets, reorganization or recapitalization of the Company with any party other
than Parent and its affiliates and against any liquidation or winding up of the
Company.
The attorneys and proxies named above may only exercise this proxy to vote
the Shares subject hereto at any time prior to termination of the Merger
Agreement at every annual, special or adjourned meeting of the stockholders of
Company and in every written consent in lieu of such meeting, in favor of
approval of the Merger and the Merger Agreement and any matter that could
reasonably be expected to facilitate the Merger (including without limitation
the conversion of any shares of Preferred Stock of the Company into Common Stock
of the Company immediately prior to or at the effective time of the Merger,
consistent with the provisions of the Company's Certificate of Incorporation and
with the requirements necessary to account for the Merger as a "pooling-of-
interests"), and against any merger, consolidation, sale of assets,
reorganization or recapitalization of Company with any party other than Parent
and its affiliates, and against any liquidation or winding up of the Company,
and may not exercise this proxy on any other matter. The undersigned
stockholder may vote the Shares on all other matters.
6
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
This proxy is irrevocable.
Dated: August __, 1998
Signature of Stockholder:_____________________________________
Print Name of Stockholder:____________________________________
Shares beneficially owned:
__________________________ shares of Common Stock
__________________________ shares of Series A Preferred Stock
__________________________ shares of Series B Preferred Stock
__________________________ shares of Series C Preferred Stock
__________________________ shares of Series D Preferred Stock
***PROXY***
7
[Form of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Opinion]
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, with the requisite
corporate power and authority to own its properties and to conduct its business
as presently conducted. The Company is qualified to do business in California.
2. The authorized capitalization of the Company is as follows:
(i) Preferred Stock. 12,000,000 shares of Preferred Stock, par
---------------
value $0.001 per share (the "Preferred Stock"), 1,087,800 of which shares have
been designated Series A Preferred Stock, of which 1,087,800 are issued and
outstanding, 600,000 of which shares have been designated Series B Preferred
Stock, 308,412 of which are issued or outstanding, 1,200,000 of which shares
have been designated Series C Preferred Stock, 848,520 of which are issued or
outstanding, and 4,397,600 of which shares have been designated Series D
Preferred Stock, 4,241,080 of which are issued or outstanding. The outstanding
shares of Preferred Stock have been duly authorized and validly issued, and, to
our knowledge, are fully paid and nonassessable.
(ii) Common Stock. 48,000,000 shares of Common Stock, par value
------------
$0.001 per share (the "Common Stock"), 9,815,346 of which have been duly
authorized and validly issued, and to our knowledge, are fully paid and
nonassessable.
(iii) Rights to Acquire Stock. Except for (i) the conversion
-----------------------
privileges of the Preferred Stock, (ii) the rights of first refusal as set forth
in the Schedule of Exceptions, (iii) the outstanding warrant to purchase 51,342
shares of Series C Preferred Stock, and (iv) 2,430,612 shares of Common Stock
reserved for issuance to employees, consultants, officers, or directors of the
Company pursuant to stock options or direct grants, of which, to our knowledge,
1,117,000 are currently outstanding, there are, to our knowledge, no options,
warrants, conversion privileges 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 grant, extend,
accelerate the vesting of, change the price of, otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement.
3. At or before the Effective Time, (i) any rights of any holder or
prospective holder of the Company's securities to cause such securities to be
registered under the Securities Act, and (ii) any information rights, voting
rights, rights of co-sale, rights to maintain equity percentage, or rights of
first refusal, in each case of clauses (i) and (ii) above granted pursuant to
that certain Amended and Restated Investors' Rights Agreement dated as of May
29, 1998 by and between the Company and each of the persons or entities listed
on Schedule A thereto, the Amended and Restated Rights of First Refusal and Co-
Sale Agreement dated as of May 29, 1998 by and among the Company, ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇ and several holders of Series C and Series D Preferred Stock of the
Company, and the Series D Preferred Stock Purchase Agreement dated as of May 29,
1998 by and among the Company and the investors listed on Schedule A thereto,
shall have been terminated, except as expressly contemplated by the Agreement.
4. The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Agreement. The
execution, delivery and performance of the Agreement have been duly authorized
by all necessary corporate action of the Company, and the Agreement has been
duly executed and delivered by the Company. The Agreement constitutes a legally
valid and binding obligation of the Company, enforceable against the Company
according to its terms.
5. The execution, delivery and performance of the obligations of
the Company under the Agreement, do not (i) to our knowledge, violate any
provision of any federal, Delaware corporate or California law, rule or
regulation applicable to the Company, (ii) violate any provision of the
Company's Restated Certificate of Incorporation or Bylaws, or (iii) conflict
with or constitute a material default under the provisions of judgments, writs,
decrees or orders, if any, specifically identified in the Schedule of Exceptions
or the provisions of any Material Agreement.
6. The execution, delivery and performance of the obligations of
the Company under the Agreement do not require any consents, approvals, permits,
orders or authorizations of, or any qualifications, registrations, designations,
declarations or filings with, any federal, Delaware corporate or California
state governmental authority on the part of the Company except (i) as have been
obtained and are effective, (ii) the filing of the Certificate of Merger with
the Delaware Secretary of State, (iii) such consents, waivers, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws, and (iv) such other
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings which if not made or obtained would not have a Material
Adverse Effect on the Company.
7. To our knowledge, except as set forth in the Schedule of
Exceptions, there is no action, suit, proceeding or investigation pending
against the Company before any court or
administrative agency (i) that questions the validity of the Merger Documents or
the right of the Company to enter into the Merger Documents or (ii) that, if
determined adversely, would be likely to result in a Material Adverse Effect on
the Company.
Our opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:
(A) We express no opinion as to the effect of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting the relief of debtors or the rights and remedies of creditors
generally, including without limitation the effect of statutory or other law
regarding fraudulent conveyances and preferential transfers.
(B) We express no opinion as to the compliance or noncompliance
with (a) applicable federal or state anti-fraud statutes, laws, rules, or
regulations, (b) any federal or state antitrust statutes, laws, rules or
regulations, including without limitation the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act of 1976, as
amended, or (c) any federal or state securities statutes, laws rules or
regulations or the rules or regulations of any stock exchanges or national
securities associations, including as such laws apply to or affect the issuance
of Parent Common Stock.
(C) Limitations imposed by state law, federal law or general
equitable principles upon the specific enforceability of any of the remedies,
covenants or other provisions of any applicable agreement and upon the
availability of injunctive relief or other equitable remedies, regardless of
whether enforcement of any such agreement is considered a proceeding in equity
or at law.
(D) The effect of court decisions, invoking statutes or
principles of equity, which have held that certain covenants and provisions of
agreements are unenforceable where enforcement of such covenants or provisions
under the circumstances would violate the enforcing party's implied covenant of
good faith and fair dealing.
(E) The effect of Section 1670.5 of the California Civil Code or
any other California law, federal law or equitable principle which provides that
a court may refuse to enforce, or may limit the application of, a contract or
any clause thereof which the court finds to have been unconscionable at the time
it was made or contrary to public policy.
(F) The unenforceability under certain circumstances of
provisions expressly or by implication waiving broadly or vaguely stated rights,
unknown future rights, or defenses to obligations or rights granted by law, when
such waivers are against public policy or prohibited by law.
(G) The unenforceability under certain circumstances of
provisions to the effect that rights or remedies are not exclusive, that rights
or remedies may be exercised without notice, that every right or remedy is
cumulative and may be exercised in addition to or
with any other right or remedy, that election of a particular remedy or remedies
does not preclude recourse to one or more remedies, or that failure to exercise
or delay in exercising rights or remedies will not operate as a waiver of any
such right or remedy.
(H) Any provisions of the Merger Documents requiring that
waivers must be in writing may not be binding or enforceable if a non-executory
oral agreement has been created modifying any such provision or an implied
agreement by trade practice or course of conduct has given rise to a waiver.
(I) We express no opinion as to the enforceability of any
provisions concerning the voting of the Company's capital stock, including
without limitation those provisions set forth in that certain Voting Agreement
of even date herewith.
[Form of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Opinion]
1. Parent is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware and is duly qualified to do
business as a foreign corporation in the State of California. Merger Sub is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. Each of Parent and Merger Sub has the corporate
power to own its properties and to carry on its business as now being conducted.
2. Parent and Merger Sub have all requisite corporate power and authority
to enter into the Reorganization Agreement and to consummate the transactions
contemplated thereby and Parent has all requisite corporate power and authority
to enter into the Registration Rights Agreement. The execution and delivery of
the Reorganization Agreement and the consummation of the transactions
contemplated thereby have been duly authorized by all necessary corporate action
on the part of Parent and Merger Sub and the execution and delivery of the
Registration Rights Agreement has been duly authorized by all corporate action
on the part of Parent. The Reorganization Agreement has been duly executed and
delivered by Parent and Merger Sub and constitutes the valid and binding
obligation of Parent and Merger Sub, enforceable in accordance with its terms.
The Registration Rights Agreement has been duly executed and delivered by Parent
and constitutes the valid and binding obligation of Parent, enforceable in
accordance with its terms. The execution and delivery of the Reorganization
Agreement and the Registration Rights Agreement does not, and the consummation
of the transactions contemplated thereby will not, result in any violation of,
or default (with or without notice or lapse of time, or both), or give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a benefit under any provision of the Certificate of Incorporation or Bylaws
of Parent or Merger Sub or (ii) any contract or other agreement included as an
exhibit to the SEC Documents or, to our knowledge, any order, decree, statute,
law, ordinance, rule or representation applicable to Parent or Merger Sub, the
breach, violation, default, termination or forfeiture of which would result in a
material adverse effect upon the ability of Parent or Merger Sub to consummate
the Merger, or a Material Adverse Effect on Parent. No consent, approval, order
or authorization of, or registration, declaration or filing with, any
Governmental Entity, is required by or with respect to Parent or Merger Sub in
connection with the execution and delivery of the Reorganization Agreement by
Parent and Merger Sub or the consummation by Parent and Merger Sub of the
transactions contemplated thereby except for (i) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware or (ii) such
consents, approvals, order, authorizations, registrations, declarations and
filings as may be required under applicable state and federal securities laws.
3. The shares of Parent Common Stock to be issued pursuant to the Merger
will, when issued and delivered in accordance with the Reorganization Agreement,
be duly authorized, validly issued, fully paid and non-assessable, and free of
liens, encumbrances, or preemptive or similar rights contained in the
Certificate of Incorporation or Bylaws of Parent; provided, however, that the
such shares may be subject to restriction on transfer under state and/or federal
securities laws.
4. There is no action, suit, proceeding, claim, arbitration or
investigation pending, or as to which Parent has received any notice of
assertion against Parent which in any manner challenges or seeks to prevent,
enjoin, alter, or materially delay any of the transactions contemplated by the
Reorganization Agreement.
5. Subject to the accuracy of representations provided by the C\\2\\B
stockholders, the Parent Common Stock to be issued pursuant to the
Reorganization Agreement will be exempt from the registration requirements of
the Securities Act of 1933, as amended.
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This Employment and Non-Competition Agreement is entered into by and
between Inktomi Corporation ("Inktomi"), C2B Technologies, Inc. ("C2B") and
________________________ ("Employee") as of August [28], 1998.
RECITALS
A. Pursuant to that certain Agreement and Plan of Reorganization (the
"Merger Agreement") dated as of August [28], 1998 by and between Inktomi, IC
Acquisition Corp. ("Sub") and C2B, Sub will merge with and into C2B (the
"Merger") and any shares of C2B capital stock owned by Employee will be
exchanged for Inktomi Common Stock and any options to acquire C2B Common Stock
will be assumed by Inktomi and become options to acquire Inktomi Common Stock;
B. Employee owns an equity interest in C2B (whether through outstanding
capital stock or options to purchase capital stock), has served as a _________
______________________________ at C2B and has gained substantial knowledge and
expertise in connection with C2B's products, organization and customers;
C. Inktomi desires to provide for the continued services of Employee
following the Merger;
D. Inktomi and Employee acknowledge that it would be detrimental to
Inktomi if Employee would compete with Inktomi following the Merger;
E. Inktomi and C2B are engaged in the development, manufacturing,
distributing and licensing of software products designed to provide shopping
services to businesses and consumers over networks and services related thereto
(the "Business");
F. It is a condition to the obligation of Inktomi to consummate the Merger
that certain key employees of C2B, including Employee, enter into this
Agreement;
G. As inducement to Inktomi to consummate the Merger, and in consideration
of the amounts paid to stockholders of C2B under the Merger Agreement, Employee
desires to agree with Inktomi as further provided herein;
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
Employment
----------
1.1 Period of Employment. Inktomi hereby employs Employee to render
--------------------
services to Inktomi in the position and with the duties and responsibilities
described in Section 2 for the period (the "Period of Employment") commencing on
--------------------
the Closing (as defined in the Merger Agreement) and ending upon the earlier of
(i) one (1) year from such date (the "Term Date"), and (ii) the date the Period
---------
of Employment is terminated in accordance with Section 4. After the initial
one-year Period of Employment, the employment relationship between Inktomi and
Employee shall be at will.
1.2 Position, Duties, Responsibilities.
----------------------------------
(a) Position. Employee hereby accepts employment with Inktomi as
--------
indicated on EXHIBIT A (or in such other position(s) as may be designated from
---------
time to time by Employee's supervisor and shall initially report to the person
indicated on EXHIBIT A. Employee agrees to devote his entire time, attention,
---------
energies and skills during usual business hours (and outside those hours when
reasonably necessary to the performance of his duties hereunder) to the business
and interests of Inktomi during the Period of Employment. However, Employee may
devote a reasonable amount of his time to civic, community, or charitable
activities and, with the prior written approval of the Board of Directors, to
serve as a director of other corporations and to other types of business or
public activities not expressly mentioned in this paragraph.
(b) Other Services. Employee may be required in pursuance of his
--------------
duties hereunder to perform services for any affiliated company but shall not be
entitled to any additional compensation for such services. Employee shall obey
all reasonable policies of Inktomi and reasonable applicable policies of its
affiliated companies.
1.3 Compensation, Benefits, Expenses.
--------------------------------
(a) Compensation. In consideration of the services to be rendered
------------
hereunder, including, without limitation, services to any affiliated company,
Employee shall be paid the compensation set forth on EXHIBIT A (the
---------
"Compensation"), payable at the time and pursuant to the procedures regularly
-------------
established, and as such time and procedures may be amended, by Inktomi during
the Period of Employment. Inktomi shall review annually the Compensation and in
light of such review may, in its discretion, increase the Compensation, taking
into account Employee's responsibilities, inflation in the cost of living,
performance by Employee and other pertinent factors.
(b) Benefits; Expenses. Employee shall be entitled to such expense
------------------
accounts, vacation time, sick leave, perquisites of office, fringe benefits,
insurance coverage and other terms and conditions of employment as Inktomi
generally provides to its employees having rank and seniority at Inktomi
comparable to Employee, as the same may be changed from time to time.
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1.4 Termination of Employment.
-------------------------
(a) By Death. The Period of Employment shall terminate automatically
--------
upon the death of Employee. Inktomi shall pay to Employee's beneficiaries or
estate, as appropriate, the Compensation to which he is entitled through the end
of the month in which death occurs. Thereafter, Inktomi's obligations hereunder
shall terminate. Nothing in this Subsection (a) shall affect any entitlement of
Employee's heirs to the benefits of any life insurance plan.
(b) By Disability. If, during the term of this Agreement, Employee
-------------
should become Totally Disabled (as hereinafter defined), Inktomi shall have the
right, to the extent permitted by law, in its sole discretion, to terminate this
Agreement and Employee's employment with Inktomi, in which case Employee's
Compensation shall be paid up through the last day of the month in which it has
been determined that Employee has become Totally Disabled. Nothing in this
Subsection (b) shall affect Employee's rights under any disability plan in which
he is a participant. For purposes hereof, Employee shall be considered "Totally
-------
Disabled" if (i) Employee is entitled to benefits under any long-term disability
--------
income plan applicable to Employee or (ii) Employee's physical and/or mental
condition is such that Employee is unable to perform those duties Employee would
otherwise be expected to continue to perform as an employee of Inktomi, and
Employee's non-performance of such duties can reasonably be expected to continue
or does continue for not less than six (6) months. The determination that
Employee is Totally Disabled shall be made in good faith by Inktomi, whose
determination shall be final and binding on Employee.
(c) By Inktomi for Cause. Inktomi may terminate, without liability,
--------------------
the Period of Employment for Cause (as defined below) at any time and upon
written notice to Employee. Inktomi shall pay Employee his Compensation through
the date of such notice and thereafter Inktomi's obligations hereunder shall
terminate. Termination shall be for "Cause" if (i) Employee commits an act of
-----
fraud or embezzlement, which is to the material detriment of Inktomi, Parent or
any affiliated company; (ii) Employee is convicted of a felony or other criminal
act involving moral turpitude; (iii) Employee willfully fails to perform his
reasonable employment duties for a period of 30 days or more (other than any
such failure resulting from Employee's incapacity due to physical or mental
illness) after a written demand for substantial performance is delivered to
Employee by Inktomi, which demand specifically identifies the manner in which
Inktomi believes that Employee has not substantially performed his duties; or
(iv) Employee breaches any material term of this Agreement or the Employee
Confidentiality Agreement (as defined in Section 3.4 below), which breach causes
or is reasonably expected to cause material harm to Inktomi, and, as to any such
breach which is subject to cure, such failure or breach continues for a period
of ten (10) days after Employee receives written notice of such breach from
Inktomi.
(d) At Will. At any time, Inktomi may terminate, without liability,
-------
the Period of Employment for any reason, with or without cause, by giving sixty
(60) days' advance written notice to Employee. Employee hereby agrees that
Inktomi may dismiss him under this Subsection (d) without regard to (i) any
general or specific policies (whether written or oral) of Inktomi relating to
the employment or termination of its employees or (ii) any statements made to
Employee, whether made orally or contained in any document, pertaining to
Employee's relationship with Inktomi.
-3-
(e) Resignation for Cause. Employee may resign and thereby terminate
---------------------
the Period of Employment, without liability, by giving 15 days notice to Inktomi
in the case that (i) without Employee's written consent, Inktomi significantly
reduces Employee's duties and responsibilities; (ii) Inktomi reduces Employee's
Compensation; or (iii) Inktomi relocates Employee to a facility or location more
than 35 miles from Inktomi's principal offices, without Employee's written
consent.
ARTICLE II
Non-Competition
---------------
2.1 Non-Competition.
---------------
(a) The parties understand and agree that this Agreement is entered
into in connection with the Merger. The parties further understand and agree
that Employee is a key and significant member of C2B, owns a significant number
of shares of C2B and that the Merger is contingent upon Employee entering into
this Agreement, including this non-competition provision. In addition, the
parties understand that prior to the Merger, C2B was engaged in business that,
due to the nature of the Internet, is global in scope. The parties further
understand that Inktomi is currently engaged in business that, due to the nature
of the Internet, is global in scope. (All the nations of the world shall
hereafter be referred to as the "Geographic Scope of the Business".) Employee
further acknowledges that C2B and Inktomi following the Merger will continue
conducting such business in all parts of the Geographic Scope of the Business.
The parties expressly acknowledge and agree that the non-competition provisions
contained in this Agreement are permissible and enforceable pursuant to the
provisions of applicable law.
(b) During the period commencing on the closing date of the Merger
(the "Merger") and ending two years after the Closing Date, without the prior
written consent of the Chief Executive Officer of Inktomi, Employee shall not
either as an individual or as an employee, agent, consultant, advisor,
independent contractor, general partner, officer, director, shareholder or
investor of any person, firm, corporation, partnership or other entity:
(i) participate or engage in the design, development,
manufacture, production, marketing, sale or servicing of any product, or the
provision of any service, that directly or indirectly competes with C2B's or
Inktomi's Products or Services (for purposes hereof "Products or Services" shall
be defined as the products produced, marketed, sold, serviced or under
development by, or services provided by, C2B or Inktomi at any time from the
Closing Date through the date when Employee ceases to be employed by Inktomi);
(ii) induce or attempt to induce any person who at the time of
such inducement is an employee of C2B or Inktomi to perform work or services for
any other person or entity other than C2B or Inktomi; or
(iii) permit the name of Employee to be used in connection with
a competitive Business.
-4-
Notwithstanding the foregoing, Employee may own, directly or indirectly,
solely as passive investment, up to 4.9% of any class of "publicly traded
securities" of any person or entity which owns a competitive Business, and up to
10% of the outstanding securities that are not "publicly traded securities" of
any person or entity which owns a competitive Business. For the purposes of
this Section 1.1, the term "publicly traded securities" shall mean securities
that are traded on a national securities exchange or listed on the Nasdaq
National Market, and the term "passive investment" shall include an investment
through a mutual fund, limited partnership or other investment vehicle which is
engaged in the business of portfolio investments.
2.2 Savings Clause. If any restriction set forth in Section 2.1 above is
--------------
held to be unreasonable or unenforceable, then Employee agrees, and hereby
submits, to the reduction and limitation of such prohibition to such area or
period as shall be deemed reasonable.
ARTICLE III
Miscellaneous
-------------
3.1 Successors, Assigns, Merger. This Agreement shall be binding upon and
---------------------------
shall inure to the benefit of Inktomi and its successors and assigns. This
Agreement shall be binding upon Employee and shall inure to his benefit and to
the benefit of his heirs, executors, administrators and legal representatives,
but shall not be assignable by Employee.
3.2 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between Inktomi and Employee relating to his employment and the additional
matters herein provided for. This Agreement supersedes and replaces any prior
verbal or written agreements between the parties. This Agreement may be amended
or altered only in a writing signed by the President of Inktomi and Employee.
3.3 Applicable Law; Severability. This Agreement shall be construed and
----------------------------
interpreted in accordance with the laws of the State of Delaware without regard
to conflicts of laws and principles. Each provision of this Agreement is
severable from the others, and if any provision hereof shall be to any extent
unenforceable it and the other provisions hereof shall continue to be
enforceable to the full extent allowable, as if such offending provision had not
been a part of this Agreement.
3.4 Proprietary Information Agreement. Employee shall execute Inktomi's
---------------------------------
Proprietary Information and Inventions Agreement in the form attached hereto as
EXHIBIT B concurrent with his execution of this Agreement.
---------
3.5 Effectiveness. This Agreement shall become effective upon the Closing,
-------------
and, if the Closing does not occur prior to October 31, 1998, this Agreement
shall immediately terminate and be of no further force or effect.
-5-
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first written above.
C2B TECHNOLOGIES, INC. INKTOMI CORPORATION
By By:
--------------------------- ------------------------------
Its: Chief Executive Officer By: President and Chief Executive Officer
----------------------- -------------------------------------
EMPLOYEE
---------------------------------
Name:
**EMPLOYMENT AND NON-COMPETITION AGREEMENT***
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