EXHIBIT 1
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Agreement and Plan of Merger
by and among
Kana Communications, Inc.
Arrow Acquisition Corp.
and
Broadbase Software, Inc.
April 9, 2001
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TABLE OF CONTENTS
Page
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Article I THE MERGER....................................................................... 2
1.1 The Merger....................................................................... 2
1.2 Effective Time; Closing.......................................................... 2
1.3 Effect of the Merger............................................................. 2
1.4 Certificate of Incorporation; Bylaws............................................. 2
1.5 Directors and Officers........................................................... 3
1.6 Effect on Capital Stock.......................................................... 3
1.7 Exchange of Certificates......................................................... 4
1.8 No Further Ownership Rights in Company Common Stock.............................. 7
1.9 Restricted Stock................................................................. 7
1.10 Tax Consequences................................................................. 7
1.11 Taking of Necessary Action; Further Action....................................... 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY........................................ 8
2.1 Organization; Subsidiaries....................................................... 8
2.2 Company Capitalization........................................................... 9
2.3 Obligations With Respect to Capital Stock........................................10
2.4 Authority; Non-Contravention.....................................................11
2.5 SEC Filings; Company Financial Statements........................................12
2.6 Absence of Certain Changes or Events.............................................13
2.7 Taxes............................................................................13
2.8 Title to Properties..............................................................15
2.9 Intellectual Property............................................................15
2.10 Compliance with Laws.............................................................16
2.11 Litigation.......................................................................16
2.12 Employee Benefit Plans...........................................................16
2.13 Environmental Matters............................................................18
2.14 Certain Agreements...............................................................19
2.15 Disclosure.......................................................................20
2.16 Board Approval...................................................................20
2.17 Fairness Opinion.................................................................20
2.18 DGCL Section 203 and Rights Agreement Not Applicable.............................21
2.19 Brokers' and Finders' Fees.......................................................21
2.20 Insurance........................................................................21
2.21 Certain Contracts................................................................21
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..........................21
3.1 Organization; Subsidiaries.......................................................21
3.2 Parent and Merger Sub Capitalization.............................................22
3.3 Obligations With Respect to Capital Stock........................................23
3.4 Authority; Non-Contravention.....................................................24
3.5 SEC Filings; Parent Financial Statements.........................................25
3.6 Absence of Certain Changes or Events.............................................26
3.7 Taxes............................................................................26
3.8 Title to Properties..............................................................27
2.9 Intellectual Property............................................................28
3.10 Compliance with Laws.............................................................29
3.11 Litigation.......................................................................29
3.12 Employee Benefit Plans...........................................................29
3.13 Environmental Matters............................................................31
3.14 Agreements, Contracts and Commitments............................................32
3.15 Disclosure.......................................................................32
3.16 Board Approval...................................................................33
3.17 Fairness Opinion.................................................................33
3.18 Brokers' and Finders' Fees.......................................................33
3.19 Insurance........................................................................33
3.20 Certain Contracts................................................................33
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME..............................................33
4.1 Conduct of Business by Company...................................................33
4.2 Conduct of Business by Parent....................................................36
ARTICLE V ADDITIONAL AGREEMENTS............................................................39
5.1 Proxy Statement/Prospectus; Registration Statement; Antitrust and Other Filings..39
5.2 Meeting of Company Stockholders..................................................40
5.3 Meeting of Parent Stockholders...................................................42
5.4 No Company Solicitation..........................................................44
5.5 No Parent Solicitation...........................................................45
5.6 Confidentiality; Access to Information...........................................47
5.7 Public Disclosure................................................................48
5.8 Reasonable Efforts; Notification.................................................48
5.9 Third Party Consents.............................................................49
5.10 Stock Options and ESPP...........................................................49
5.11 Company Warrants.................................................................50
5.12 Form S-8.........................................................................51
5.13 Indemnification..................................................................51
5.14 Parent Board of Directors........................................................52
5.15 Nasdaq Listing...................................................................52
5.16 Letters of Accountants...........................................................52
5.17 Takeover Statutes................................................................52
5.18 Certain Employee Benefits........................................................53
5.19 Section 16.......................................................................53
5.20 Tax Matters......................................................................54
ARTICLE VI CONDITIONS TO THE MERGER.........................................................54
6.1 Conditions to Obligations of Each Party to Effect the Merger.....................54
6.2 Additional Conditions to Obligations of Company..................................55
6.3 Additional Conditions to the Obligations of Parent and Merger Sub................56
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER................................................57
7.1 Termination......................................................................57
7.2 Notice of Termination; Effect of Termination.....................................60
7.3 Fees and Expenses................................................................60
7.4 Amendment........................................................................62
7.5 Extension; Waiver................................................................62
7.6 Liquidated Damages...............................................................62
ARTICLE VIII GENERAL PROVISIONS...............................................................62
8.1 Non-Survival of Representations and Warranties...................................62
8.2 Notices..........................................................................62
8.3 Interpretation; Certain Defined Terms............................................63
8.4 Counterparts.....................................................................65
8.5 Entire Agreement; Third Party Beneficiaries......................................65
8.6 Severability.....................................................................65
8.7 Other Remedies; Specific Performance.............................................65
8.8 Governing Law....................................................................65
8.9 Rules of Construction............................................................65
8.10 Assignment.......................................................................66
8.11 Waiver Of Jury Trial.............................................................66
Index of Exhibits
Exhibit A Form of Company Voting Agreement
Exhibit B Form of Parent Voting Agreement
Exhibit C Form of Company Stock Option Agreement
Exhibit D Form of Parent Stock Option Agreement
Exhibit E Form of Distribution and License Agreement
Exhibit F Form of Revolving Loan Agreement
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of April 9, 2001, among Kana Communications, Inc., a Delaware
corporation ("Parent"), Arrow Acquisition Corp., a Delaware corporation and a
wholly owned first-tier subsidiary of Parent ("Merger Sub"), and Broadbase
Software, Inc., a Delaware corporation ("Company").
RECITALS
A. The respective Boards of Directors of Parent, Merger Sub and
Company have approved this Agreement, and declared advisable the merger of
Merger Sub with and into Company (the "Merger") upon the terms and subject to
the conditions of this Agreement and in accordance with the General Corporation
Law of the State of Delaware ("Delaware Law").
B. For United States federal income tax purposes, the Merger is
intended to qualify as a "reorganization" pursuant to the provisions of Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"). For
accounting purposes, the Merger is intended to be accounted for as a "purchase"
under United States generally accepted accounting principles ("GAAP").
C. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
certain stockholders of Company are entering into a Company Voting Agreement
with Parent in the form of Exhibit A (the "Company Voting Agreement").
Concurrently with the execution of this Agreement, and as a condition and
inducement to Company's willingness to enter into this Agreement, certain
stockholders of Parent are entering into a Parent Voting Agreement with Company
in the form of Exhibit B (the "Parent Voting Agreement").
D. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
Company shall execute and deliver a Stock Option Agreement in favor of Parent in
substantially the form attached hereto as Exhibit C (the "Company Stock Option
Agreement"). The Board of Directors of Company has approved the Company Stock
Option Agreement. Concurrently with the execution of this Agreement, and as a
condition and inducement to Company's willingness to enter into this Agreement,
Parent shall execute and deliver a Stock Option Agreement in favor of Company in
substantially the form attached hereto as Exhibit D (the "Parent Stock Option
Agreement"). The Board of Directors of Parent has approved the Parent Stock
Option Agreement.
E. Concurrently with the execution of this Agreement, Parent and
Company are entering into a Distribution and License Agreement in the form of
Exhibit E (the "License Agreement").
F. Concurrently with the execution of this Agreement, Parent and
Company are entering into a Revolving Loan Agreement in the form of Exhibit F
(the "Loan Agreement").
G. In connection with the Merger, the Board of Directors of Parent
has approved a name change of Parent to "Kana Software, Inc." (the "Parent Name
Change") to be effective immediately prior to the Effective Time (as defined
below).
H. The respective boards of directors of Parent and Company have each
determined that the Merger and the other transactions contemplated hereby are
consistent with, and in furtherance of, their respective business strategies and
goals, that the Merger is advisable, and that the products and services of
Parent and Company will complement and enhance each other.
I. In consideration of the foregoing and the representations,
warranties, covenants and agreements set forth in this Agreement, the parties
agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions of this
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Agreement and the applicable provisions of Delaware Law, at the Effective Time,
Merger Sub shall be merged with and into Company, the separate corporate
existence of Merger Sub shall cease, and Company shall continue as the surviving
corporation of the Merger and a wholly-owned subsidiary of Parent (the
"Surviving Corporation").
1.2 Effective Time; Closing. Subject to the provisions of this
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Agreement, Company and Merger Sub will file a certificate of merger, in such
appropriate form as determined by the parties, with the Secretary of State of
the State of Delaware in accordance with the relevant provisions of Delaware Law
(the "Certificate of Merger") (the time of such filing (or such later time as
may be agreed in writing by Company and Parent and specified in the Certificate
of Merger) being the "Effective Time") as soon as practicable on or after the
Closing Date. The closing of the Merger (the "Closing") shall take place at the
offices of Fenwick & West LLP, Two Palo Alto Square, Palo Alto, California, at a
time and date to be specified by the parties, which shall be no later than the
second business day after the satisfaction or waiver of the conditions set forth
in Article VI, or at such other time, date and location as the parties hereto
agree in writing (the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the
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Merger shall be as provided in this Agreement and the applicable provisions of
Delaware Law. Without limiting the generality of the foregoing, at the
Effective Time, the Surviving Corporation shall possess all the property,
rights, privileges, powers and franchises of Company and Merger Sub, and shall
be subject to all debts, liabilities and duties of Company and Merger Sub.
1.4 Certificate of Incorporation; Bylaws.
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(a) At the Effective Time, the Certificate of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the
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Surviving Corporation until thereafter amended as provided by law and such
Certificate of Incorporation of the Surviving Corporation. At the Effective
Time, the Certificate of Incorporation of the Parent shall have been amended to
effect the Parent Name Change.
(b) At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 Directors and Officers. The initial directors of the Surviving
----------------------
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Company immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.6 Effect on Capital Stock. Subject to the terms and conditions of
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this Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, Company or the holders of any of the following
securities:
(a) Conversion of Company Common Stock. Each share of common stock,
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par value $0.001 per share, of Company ("Company Common Stock") issued and
outstanding immediately prior to the Effective Time, other than any shares of
Company Common Stock to be canceled pursuant to Section 1.6(b), will be canceled
and extinguished and automatically converted into the right to receive 1.05 (the
"Exchange Ratio") shares of common stock, par value $0.001 per share, of Parent
("Parent Common Stock") upon surrender of the certificate representing such
share of Company Common Stock in the manner provided in Section 1.7. No
fraction of a share of Parent Common Stock will be issued by virtue of the
Merger, but in lieu thereof, a cash payment shall be made pursuant to Section
1.7(e). As of the Effective Time, all such shares of Company Common Stock, when
so converted, shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the shares of Parent Common Stock and any
cash in lieu of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon the surrender of such certificates.
(b) Cancellation of Company-Owned and Parent-Owned Stock. Each share
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of Company Common Stock held by Company or owned by Merger Sub, Parent or any
direct or indirect wholly owned subsidiary of Company or of Parent immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(c) Stock Options; Employee Stock Purchase Plan. At the Effective
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Time, all options to purchase Company Common Stock ("Company Options") then
outstanding shall to the extent provided in Section 5.10 be assumed by Parent.
Rights outstanding under Company's 1999 Employee Stock Purchase Plan (the
"Company ESPP") shall be treated as set forth in Section 5.10 of this Agreement.
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(d) Warrants. At the Effective Time, each warrant to purchase
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Company Common Stock then outstanding ("Company Warrants") shall be assumed by
Parent in accordance with Section 5.11 of this Agreement.
(e) Capital Stock of Merger Sub. Each share of common stock, par
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value $0.001 per share, of Merger Sub (the "Merger Sub Common Stock"), issued
and outstanding immediately prior to the Effective Time shall be converted into
one validly issued, fully paid and nonassessable share of common stock, $0.001
par value per share, of the Surviving Corporation. Following the Effective
Time, each certificate evidencing ownership of shares of Merger Sub common stock
shall evidence ownership of such shares of capital stock of the Surviving
Corporation.
(f) Adjustments to Exchange Ratio. The Exchange Ratio shall be
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adjusted to reflect appropriately the effect of any stock split, reverse stock
split, stock dividend (including the Parent Stock Split, and any dividend or
distribution of securities convertible into Parent Common Stock or Company
Common Stock), reorganization, recapitalization, reclassification or other like
change with respect to Parent Common Stock or Company Common Stock occurring on
or after the date hereof and prior to the Effective Time.
1.7 Exchange of Certificates.
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(a) Exchange Agent. Parent shall select an institution reasonably
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acceptable to Company to act as the exchange agent (the "Exchange Agent") in the
Merger.
(b) Exchange Fund. Promptly after the Effective Time, Parent shall
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make available to the Exchange Agent for exchange in accordance with this
Article I, the shares of Parent Common Stock (such shares of Parent Common
Stock, together with cash in lieu of fractional shares and any dividends or
distributions with respect thereto, are hereinafter referred to as the "Exchange
Fund") issuable pursuant to Section 1.6 in exchange for outstanding shares of
Company Common Stock.
(c) Exchange Procedures. Promptly after the Effective Time, Parent
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shall instruct the Exchange Agent to mail to each holder of record a certificate
or certificates ("Certificates") which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock whose shares were
converted into shares of Parent Common Stock pursuant to Section 1.6, (i) a
letter of transmittal in customary form (that shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Exchange Agent and shall contain
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
Certificates for cancellation to the Exchange Agent together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holders of such Certificates shall be entitled to
receive in exchange therefor certificates representing the number of whole
shares of Parent Common Stock into which their shares of Company Common Stock
were converted at the Effective Time, payment in lieu of fractional shares that
such holders have the right to receive pursuant to Section 1.7(e) and any
dividends or
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distributions payable pursuant to Section 1.7(d), and the Certificates so
surrendered shall forthwith be canceled. Until so surrendered, outstanding
Certificates will be deemed from and after the Effective Time, for all corporate
purposes, to evidence only the ownership of the number of full shares of Parent
Common Stock into which such shares of Company Common 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 1.7(e) and any dividends or
distributions payable pursuant to Section 1.7(d). No interest will be paid or
accrued on any cash in lieu of fractional shares of Parent Common Stock or on
any unpaid dividends or distributions payable to holders of Certificates. In the
event of a transfer of ownership of shares of Company Common Stock which is not
registered in the transfer records of Company, a certificate representing the
proper number of shares of Parent Common Stock may be issued to a transferee if
the Certificate representing such shares of Company Common Stock is presented to
the Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid.
(d) Distributions With Respect to Unexchanged Shares. No dividends
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or other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holders of any unsurrendered Certificates with respect to the
shares of Parent Common Stock represented thereby until the holders of record of
such Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall deliver
to the holders of certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) promptly, the amount of any
cash payable with respect to a fractional share of Parent Common Stock to which
such holder is entitled pursuant to Section 1.7(e) and 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, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole shares of Parent
Common Stock.
(e) Fractional Shares. (i) As promptly as practicable following the
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Effective Time, the Exchange Agent shall determine the excess of (A) the number
of full shares of Parent Common Stock delivered to the Exchange Agent pursuant
to Section 1.7(b), over (B) the aggregate number of full shares of Parent Common
Stock to be distributed to holders of Company Common Stock pursuant to Section
1.7(c) (such excess, the "Excess Shares"). Following the Effective Time, the
Exchange Agent, as agent for the holders of Company Common Stock, shall sell the
Excess Shares at then prevailing prices on the Nasdaq Stock Market in the manner
set forth in paragraph (ii) of this Section 1.7(e).
(ii) The sale of the excess shares by the Exchange Agent shall
be executed on the Nasdaq Stock Market and shall be executed in round lots to
the extent practicable. The Exchange Agent shall use all commercially reasonable
efforts to complete the sale of the Excess Shares as promptly following the
Effective Time as, in the Exchange Agent's reasonable judgment, is practicable
consistent with obtaining the best execution of such sales in light of
prevailing market conditions. Until the net proceeds of such sales have been
distributed to the holders of Company Common Stock, the Exchange Agent will hold
such proceeds in trust
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for the holders of Company Common Stock. The Exchange Agent will determine the
portion of such net proceeds to which each holder of Company Common Stock shall
be entitled, if any, by multiplying the amount of the aggregate net proceeds by
a fraction the numerator of which is the amount of the fractional share interest
to which such holder of Company Common Stock is entitled (after taking into
account all shares of Parent Common Stock to be issued to such holder) and the
denominator of which is the aggregate amount of fractional share interests to
which all holders of Company Common Stock are entitled. As soon as practicable
after the determination of the amount of cash, if any, to be paid to holders of
Company Common Stock with respect to fractional share interests, the Exchange
Agent shall promptly pay such amounts to such holders of Company Common Stock in
accordance with the terms of Section 1.7(c).
(iii) Notwithstanding the provisions of paragraphs (i) and (ii)
of this Section 1.7(e), Parent may decide, at its option, exercised prior to the
Effective Time, in lieu of the issuance and sale of Excess Shares and the making
of the payments contemplated in such paragraphs, that Parent shall pay to the
Exchange Agent an amount sufficient for the Exchange Agent to pay each holder of
Company Common Stock the amount such holder would have received pursuant to
Section 1.7(e)(ii) assuming that the sales of Parent Common Stock were made at a
price equal to the average of the closing prices of the Parent Common Stock on
the Nasdaq Stock Market for the ten consecutive trading days immediately
preceding the Effective Time and, in such case, all references herein to the
cash proceeds of the sale of the Excess Shares and similar references shall be
deemed to mean and refer to the payments calculated as set forth in this
paragraph (iii). In such event, Excess Shares shall not be issued or otherwise
transferred to the Exchange Agent pursuant to Sections 1.7(b) or (e).
(f) Required Withholding. Each of the Exchange Agent, Parent and the
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Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Company Common Stock such amounts as may be required
to be deducted or withheld therefrom under the Code or under any provision of
state, local or foreign tax law or under any other applicable Legal Requirement
(as defined in Section 2.2(b)). To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the person to whom such amounts would otherwise have been
paid.
(g) Lost, Stolen or Destroyed Certificates. In the event that any
--------------------------------------
Certificates 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, certificates
representing the shares of Parent Common Stock into which the shares of Company
Common Stock represented by such Certificates were converted pursuant to Section
1.6, cash for fractional shares, if any, as may be required pursuant to Section
1.7(e) and any dividends or distributions payable pursuant to Section 1.7(d);
provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance of such certificates representing shares of Parent
Common Stock, cash and other distributions, 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, the Surviving Corporation or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
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(h) No Liability. Notwithstanding anything to the contrary in this
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Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation nor
any party hereto shall be liable to a holder of shares of Parent Common Stock or
Company Common Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(i) Termination of Exchange Fund. Any portion of the Exchange Fund
----------------------------
which remains undistributed to the holders of Company Common Stock for six
months after the Effective Time shall be delivered to Parent, upon demand, and
any holders of Company Common Stock who have not theretofore complied with the
provisions of this Section 1.7 shall thereafter look only to Parent for the
shares of Parent Common Stock, any cash in lieu of fractional shares of Parent
Common Stock to which they are entitled pursuant to Section 1.7(e) and any
dividends or other distributions with respect to Parent Common Stock to which
they are entitled pursuant to Section 1.7(d), in each case, without any interest
thereon.
1.8 No Further Ownership Rights in Company Common Stock. All shares
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of Parent Common Stock issued in accordance with the terms hereof (including any
cash paid in respect thereof pursuant to Section 1.7(d) and (e)) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of Company Common Stock, and there shall be no further registration of transfers
on the records of the Surviving Corporation of shares of Company Common Stock
that were outstanding immediately prior to the Effective Time. If after the
Effective Time Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
1.9 Restricted Stock. If any shares of Company Common Stock that
----------------
are outstanding immediately prior to the Effective Time are unvested or are
subject to a repurchase option, risk of forfeiture or other condition providing
that such shares ("Company Restricted Stock") may be forfeited by the
stockholder or repurchased by the Company upon any termination of the
stockholders' employment, directorship or other relationship with the Company
(and/or any affiliate of the Company) or otherwise under the terms of any
restricted stock purchase agreement or other agreement with the Company that
does not by its terms provide that such repurchase option, risk of forfeiture or
other condition lapses upon consummation of the Merger, then the shares of
Parent Common Stock issued upon the conversion of such shares of Company Common
Stock in the Merger will continue to be unvested and subject to the same
repurchase options, risks of forfeiture or other conditions following the
Effective Time, and the certificates representing such shares of Parent Common
Stock may accordingly be marked with appropriate legends noting such repurchase
options, risks of forfeiture or other conditions. Company shall take all actions
that may be necessary to ensure that, from and after the Effective Time, Parent
is entitled to exercise any such repurchase option or other right set forth in
any such restricted stock purchase agreement or other agreement.
1.10 Tax Consequences. It is intended by the parties hereto that the
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Merger shall constitute a "reorganization" within the meaning of Section 368 of
the Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations.
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1.11 Taking of Necessary Action; Further Action. If, at any time
------------------------------------------
after the Effective Time, any 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 Company and Merger Sub, the officers and directors of
Company and Merger Sub will take all such lawful and necessary action. Parent
shall cause Merger Sub to perform all of its obligations relating to this
Agreement and the transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as disclosed in the disclosure letter delivered by Company to
Parent dated as of the date hereof and certified by a duly authorized officer of
Company (the "Company Disclosure Letter") (each Part of which qualifies the
correspondingly numbered representation, warranty or covenant to the extent
specified therein, and such other representations, warranties or covenants to
the extent that the relevance of a disclosure set forth in such Part to such
other representations, warranties or covenants is reasonably evident), it being
understood that the disclosure of any item is not to be construed as the
admission of any fact, Company represents and warrants to Parent and Merger Sub
as follows:
2.1 Organization; Subsidiaries.
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(a) Each of Company and its Subsidiaries (as defined below) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority, and all requisite qualifications to do business as a foreign
corporation, to conduct its business in the manner in which its business is
currently being conducted, except where the failure to be so organized, existing
or in good standing or to have such power, authority or qualifications would not
individually or in the aggregate have a Material Adverse Effect on the Company.
Except as set forth in the Company SEC Reports (as defined in Section 2.5(a))
filed prior to the date hereof, neither Company nor any Subsidiary of Company
directly or indirectly owns any capital stock of, or any equity interest of any
nature in, any corporation, partnership, joint venture arrangement or other
business entity, except for passive investments in equity interests of public
companies as part of the cash management program of Company. Neither Company
nor any Subsidiary of Company has agreed or is obligated to make, or is bound by
any written, oral or other agreement, contract, subcontract, lease, binding
understanding, instrument, note, option, warranty, purchase order, license,
sublicense, insurance policy, benefit plan or legally binding commitment or
undertaking of any nature, as in effect as of the date hereof or as may
hereinafter be in effect under which it may become obligated to make any future
material investment in or material capital contribution to any other entity.
Neither Company, nor any Subsidiary of Company, is a general partner of any
general partnership, limited partnership or other similar entity. Part 2.1 of
the Company Disclosure Letter indicates the jurisdiction of organization of each
entity listed therein and
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Company's direct or indirect equity interest therein. As used in this Agreement,
the word "Subsidiary" or "Subsidiaries" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (i) such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any Subsidiary of such party do not have a majority of the voting
interest in such partnership) or (ii) at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the Board of Directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries.
(b) Company has delivered or made available to Parent a true and
correct copy of the Certificate of Incorporation and Bylaws of Company and
similar governing instruments of each of its Subsidiaries, each as amended to
date (collectively, the "Company Charter Documents"), and each such instrument
is in full force and effect. Neither Company nor any of its Subsidiaries is in
violation of any of the provisions of the Company Charter Documents.
2.2 Company Capitalization.
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(a) The authorized capital stock of Company consists solely of
350,000,000 shares of Company Common Stock, par value $0.001 per share, of which
there were 82,063,861 shares issued and outstanding as of the close of business
on April 6, 2001, and 5,000,000 shares of Preferred Stock, par value $0.001 per
share, of which no shares are issued or outstanding. All outstanding shares of
Company Common Stock are duly authorized, validly issued, fully paid and
nonassessable and are not subject to preemptive rights created by statute, the
Certificate of Incorporation or Bylaws of Company or any agreement or document
to which Company is a party or by which it is bound. As of the close of
business on April 6, 2001, there are no shares of Company Common Stock held in
treasury by the Company. No material change in such capitalization has occurred
between December 31, 2000 and the date of this Agreement.
(b) As of the close of business on April 6, 2001, (i) 26,569,623
shares of Company Common Stock are subject to issuance pursuant to outstanding
Company Options to purchase Company Common Stock for a weighted average
aggregate exercise price of approximately $12.53, (ii) 2,203,008 shares of
Company Common Stock are reserved for future issuance under the Company ESPP,
and (iii) 145,123 shares of Company Common Stock are subject to issuance
pursuant to outstanding Company Warrants. Part 2.2(b) of the Company Disclosure
Letter sets forth the following information with respect to each Company Option
and Company Warrant outstanding as of the date of this Agreement: (i) the name
of the optionee or warrant holder; (ii) the number of shares of Company Common
Stock subject to such Company Option or Company Warrant; (iii) the exercise
price of such Company Option or Company Warrant; (iv) the date on which such
Company Option was granted or assumed; (v) the date on which such Company Option
or Company Warrant expires; and (vi) with respect to any officer of the Company
or any of its Subsidiaries who is subject to Section 16 of the Exchange Act,
whether the exercisability of such Company Option or Company Warrant will be
accelerated in any way by the transactions contemplated by this Agreement, and
indicates the extent of any
-9-
such acceleration. Company has made available to Parent an accurate and complete
copies of the and the form of all stock option agreements evidencing Company
Options. All shares of Company Common Stock subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable.
(c) All outstanding shares of Company Common Stock, all outstanding
Company Options, all outstanding Company Warrants and all outstanding shares of
capital stock of each subsidiary of Company have been issued and granted in
compliance with (i) all applicable securities laws and other applicable material
Legal Requirements and (ii) all material requirements set forth in applicable
agreements or instruments. For the purposes of this Agreement, "Legal
Requirements" means any federal, state, local, municipal, foreign or other law,
statute, constitution, principle of common law, resolution, ordinance, code,
edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Entity (as defined in Section 2.4).
2.3 Obligations With Respect to Capital Stock. Except as set forth
-----------------------------------------
in Part 2.3 of the Company Disclosure Letter, there are no equity securities,
partnership interests or similar ownership interests of any class of Company
equity security, or any securities exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Company owns
all of the securities of its Subsidiaries identified on Part 2.1 of the Company
Disclosure Letter, free and clear of all claims and Encumbrances, and there are
no other equity securities, partnership interests or similar ownership interests
of any class of equity security of any Subsidiary of Company, or any security
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. For purposes of this Agreement, "Encumbrances" means
any material lien, pledge, hypothecation, charge, mortgage, security interest,
encumbrance, claim, infringement, interference, option, right of first refusal,
preemptive right, community property interest or restriction of any nature
(including any restriction on the voting of any security, any restriction on the
transfer of any security or other asset, any restriction on the receipt of any
income derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset). Except as set forth in Section 2.2 or Part 2.2 or Part
2.3 of the Company Disclosure Letter, there are no subscriptions, options,
warrants, equity securities, partnership interests or similar ownership
interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which Company or any of its Subsidiaries is a
party or by which it is bound obligating Company or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase,
redeem or otherwise acquire, or cause the repurchase, redemption or acquisition
of, any shares of capital stock, partnership interests or similar ownership
interests of Company or any of its Subsidiaries or obligating Company or any of
its Subsidiaries to grant, extend, accelerate the vesting of or enter into any
such subscription, option, warrant, equity security, call, right, commitment or
agreement. Except as contemplated by this Agreement, there are no registration
rights with respect to any equity security of any class of Company or with
respect to any equity security, partnership interest or similar ownership
interest of any class of any of its Subsidiaries.
-10-
2.4 Authority; Non-Contravention.
----------------------------
(a) Company has all requisite corporate power and authority to enter
into this Agreement, as well as the Company Option Agreement, the Parent Option
Agreement, the Parent Voting Agreement, the License Agreement and the Loan
Agreement (the Company Option Agreement, the Parent Option Agreement, the Parent
Voting Agreement, the License Agreement and the Loan Agreement together, the
"Company Authorization Agreements"), and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Company Authorization Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Company, subject only to the approval
and adoption of this Agreement and the approval of the Merger by Company's
stockholders (the "Company Stockholder Approvals") and the filing of the
Certificate of Merger pursuant to Delaware Law. The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock is
sufficient for Company's stockholders to approve and adopt this Agreement and
approve the Merger, and no other approval of any holder of any securities of
Company is required in connection with the consummation of the transactions
contemplated hereby. This Agreement and the Company Authorization Agreements
have been duly executed and delivered by Company and, assuming the due execution
and delivery by Parent and Merger Sub, constitute the valid and binding
obligations of Company, enforceable against Company in accordance with their
terms, except as enforceability may be limited by bankruptcy and other similar
laws affecting the rights of creditors generally and general principles of
equity.
(b) The execution and delivery of this Agreement and the Company
Authorization Agreements by Company does not, and the consummation of the
transactions contemplated by this Agreement and the Company Authorization
Agreements will not, (i) conflict with, or result in any violation or breach of,
any provision of the Company Charter Documents, (ii) result in any violation or
breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any material benefit) under, or require a consent or
waiver under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which Company or its Subsidiaries is a party or by which any of
them or any of their properties or assets may be bound, or (iii) conflict with
or violate any permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Company or any
Subsidiary or any of its or their properties or assets, except in the case of
(ii) and (iii) for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which, individually or in the aggregate, would
not have a Material Adverse Effect to Company.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality, foreign or domestic
("Governmental Entity") or other person, is required to be obtained or made by
Company in connection with the execution and delivery of this Agreement or the
consummation of the Merger, except for (i) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which the Company is
qualified to do business, (ii) the filing of a
-11-
Form 8-K, the Joint Proxy Statement/Prospectus (as defined in Section 2.17) with
the Securities and Exchange Commission ("SEC") in accordance with the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), a Schedule 13D with
regard to the Parent Voting Agreement in accordance with the Securities Act and
the Exchange Act and the effectiveness of the Registration Statement (as defined
in Section 2.17), (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal, foreign and state securities (or related) laws and the ▇▇▇▇-▇▇▇▇▇-
▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
securities or antitrust laws of any foreign country, and (iv) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not be material to the Company, Parent or the Surviving
Corporation or have a material adverse effect on the ability of the parties
hereto to consummate the Merger.
2.5 SEC Filings; Company Financial Statements.
-----------------------------------------
(a) Company has filed or made available to Parent, all forms, reports
and documents required to be filed by Company with the SEC since the effective
date of the registration statement of Company's initial public offering. All
such required forms, reports and documents (including those that Company may
file subsequent to the date hereof) are referred to herein as the "Company SEC
Reports." As of their respective dates, the Company SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC thereunder applicable to such Company SEC
Reports and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except to the extent corrected prior to the date of this
Agreement by a subsequently filed Company SEC Report. As of the date of this
Agreement, the Company SEC Reports, taken as a whole, together with any press
release disseminated between the date of the most recent Company SEC Report and
the date of this Agreement, do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. None of Company's subsidiaries is
required to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports (the
"Company Financials"), including each Company SEC Report filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q, 8-K or any successor form under the Exchange Act) and (iii) fairly
presented the consolidated financial position of Company and its subsidiaries as
at the respective dates thereof and the consolidated results of Company's
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements may not contain footnotes and were or are subject
to normal and recurring year-end adjustments. The balance sheet of Company
contained in
-12-
Company's Annual Report on Form 10-K for December 31, 2000 (the "Company Form
10-K") is hereinafter referred to as the "Company Balance Sheet." Except as
disclosed in the Company Financials, since the date of the Company Balance
Sheet, neither Company nor any of its subsidiaries has any liabilities required
under GAAP to be set forth on a balance sheet (absolute, accrued, contingent or
otherwise) which are, individually or in the aggregate, material to the
business, results of operations or financial condition of Company and its
subsidiaries taken as a whole, except for liabilities incurred since the date of
the Company Balance Sheet in the ordinary course of business consistent with
past practices and liabilities incurred in connection with this Agreement.
2.6 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
Company SEC Reports filed prior to the date hereof or disclosed in Part 2.6 of
the Company Disclosure Letter, since the date of the Company Balance Sheet,
Company and its Subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and, since such
date, there has not been (i) any damage, destruction or loss (whether or not
covered by insurance) with respect to Company or any of its Subsidiaries having
a Material Adverse Effect with respect to the Company; (ii) any material change
by Company in its accounting methods, principles or practices to which Parent
has not previously consented in writing; (iii) any revaluation by Company of any
of its assets having a Material Adverse Effect with respect to the Company; or
(iv) any other action or event that, individually or in the aggregate, has had a
Material Adverse Effect with respect to the Company.
2.7 Taxes.
-----
(a) For the purposes of this Agreement, the terms "Tax" and,
---
collectively, "Taxes" mean (i) any and all federal, state, local and foreign
-----
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
gains, franchise, withholding, payroll, recapture, employment, excise,
unemployment insurance, social security, business license, occupation, business
organization, stamp, environmental and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts, (ii) any
liability for payment of any amounts of the type described in clause (i) as a
result of being a member of an affiliated, consolidated, combined or unitary
group, and (iii) any liability for amounts of the type described in clauses (i)
and (ii) as a result of any express or implied obligation to indemnify another
person or as a result of any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) Company, each of its Subsidiaries and any consolidated, combined,
unitary or affiliated group in which Company or any of its Subsidiaries is or
has been a member, have (i) filed all federal, state, local and foreign Tax
returns and reports required to be filed by them (taking into account applicable
extensions), and (ii) paid or accrued all Taxes due and payable, whether or not
shown on such Tax returns or reports (other than amounts being contested in good
faith by appropriate proceedings), except in the case of clause (i) or (ii) for
any such filings, payments or accruals which are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on Company.
Neither the Internal Revenue Service
-13-
(the "IRS") nor any other taxing authority has asserted any claim for taxes, or
---
to the knowledge of the executive officers of Company or any of its
Subsidiaries, is threatening to assert any claims for Taxes, which claims,
individually or in the aggregate, are reasonably likely to have a Material
Adverse Effect on Company. Neither Company nor any of its subsidiaries has been
delinquent in the payment of any material Tax nor is there any material Tax
deficiency outstanding, proposed or assessed against Company or any of its
subsidiaries, nor has Company or any of its subsidiaries executed any unexpired
waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax. No audit or other examination of any Return
of Company or any of its subsidiaries by any Tax authority is presently in
progress, nor has Company or any of its subsidiaries been notified of any
request for such an audit or other examination that is reasonably likely to
result in any adjustment that is material to Company. No adjustment relating to
any Returns filed by Company or any of its subsidiaries has been proposed in
writing formally or informally by any Tax authority to Company or any of its
subsidiaries or any representative thereof that is reasonably likely to be
material to Company. Company and each of its Subsidiaries have withheld or
collected and paid over to the appropriate governmental authorities (or are
properly holding for such timely payment) all Taxes required by law to be
withheld or collected, except for amounts which are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on Company.
Neither Company nor any of its Subsidiaries has 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 Company. There are no liens for Taxes upon the
assets of Company or its Subsidiaries (other than liens for Taxes that are not
yet due or that are being contested in good faith by appropriate proceedings),
except for liens which would not, individually or in the aggregate, have a
Material Adverse Effect on Company.
(c) Neither Company nor any of its subsidiaries is party to or has any
obligation under any tax-sharing, tax indemnity or tax allocation agreement or
arrangement.
(d) Except as may be required as a result of the Merger, Company and
its subsidiaries have not been and will not be required to include any
adjustment in Taxable income for any Tax period (or portion thereof) pursuant to
Section 481 or Section 262A of the Code or any comparable provision under state
or foreign Tax laws as a result of transactions, events or accounting methods
employed prior to the Closing.
(e) Company has not been distributed in a transaction qualifying under
Section 355 of the Code within the last two years, nor has Company distributed
any corporation in a transaction qualifying under Section 355 of the Code within
the last two years.
(f) There is no agreement, plan or arrangement to which Company or any
of its subsidiaries is a party, including this Agreement and the agreements
entered into in connection with this Agreement, covering any employee or former
employee of Company or any of its subsidiaries that, individually or
collectively, would be reasonably likely to give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G, 404 or 162(m) of
the Code. There is no contract, agreement, plan or arrangement to which Company
is a party or by which it is bound to compensate any individual for excise taxes
paid pursuant to Section 4999 of the Code.
-14-
(g) Company is not aware of any fact, circumstance, plan or intention on
the part of Company that would be reasonably likely to prevent the Merger from
qualifying as a "reorganization" pursuant to the provisions of Section 368 of
the Code.
2.8 Title to Properties.
-------------------
(a) Company has provided to Parent a true and complete list of all
material real property leased by Company or its Subsidiaries (collectively
"Material Lease(s)") and the location of the premises. Neither Company nor any
subsidiary is in default under such leases, except where the existence of such
defaults, individually or in the aggregate, is not reasonably likely to have a
Material Adverse Effect with respect to Company.
(b) Company owns no real property.
2.9 Intellectual Property.
---------------------
(a) Except as disclosed in Section 2.09 of the Company Disclosure
Letter, Company and its Subsidiaries own, or are licensed or otherwise possess
legally enforceable rights to use, all patents, trademarks, trade names, service
marks, copyrights and mask works, any applications for and registrations of such
patents, trademarks, trade names, service marks, copyrights and mask works, and
all processes, formulae, methods schematics, technology, know how, computer
software programs or applications and tangible or intangible proprietary
information or material that are necessary to conduct the business of Company
and its Subsidiaries as currently conducted or planned to be conducted by
Company and its Subsidiaries (the "Company Intellectual Property Rights").
(b) Except as disclosed in Section 2.09 of the Company Disclosure
Letter, neither Company nor any of its Subsidiaries is, or will be as a result
of the execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach of any material license, sublicense
or other agreement relating to the Company Intellectual Property Rights or any
material license, sublicense or other agreement pursuant to which Company or any
of its Subsidiaries is authorized to use any third party patents, trademarks or
copyrights, including software, which are incorporated in or form a part of any
product of Company or any of its Subsidiaries that is material to the business
of Company and its Subsidiaries, taking Company and its Subsidiaries together as
a whole, and where such breach would have a Material Adverse Effect on Company.
(c) Company has not received written notice from any third party that
the operation of the business of Company or any act, product or service of
Company, infringes or misappropriates the Intellectual Property of any third
party or constitutes unfair competition or trade practices under the laws of any
jurisdiction, which allegation, if true, would have a Material Adverse Effect to
Company.
(d) To the knowledge of Company, no person has or is infringing or
misappropriating any Company Intellectual Property, which infringement or
misappropriation, individually or in the aggregate, would have a Material
Adverse Effect to Company.
-15-
(e) Company and its subsidiaries have taken reasonable steps to
protect Company's and its subsidiaries' rights in Company's and such
subsidiaries' confidential information and trade secrets, except where the
failure to do so would not have a Material Adverse Effect to Company.
(f) Except as disclosed in Section 2.09 of the Company Disclosure
Letter, (i) all patents, registered trademarks, service marks and copyrights
which are held by Company or any of its Subsidiaries, and which are material to
the business of Company and its Subsidiaries, taking Company and its
Subsidiaries together as a whole, are valid and subsisting; (ii) Company has not
been sued in any suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, service marks, copyrights or violation
of any trade secret or other proprietary right of any third party; and (iii) the
manufacturing, marketing, licensing or sale of Company's products and services
does not infringe any patent, trademark, service ▇▇▇▇, copyright, trade secret
or other proprietary right of any third party, which infringement, either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on Company.
(g) None of the Company Intellectual Property or product or service of
Company contains any significant defect in connection with processing data
containing dates in leap years or in the year 2000 or any preceding of following
years, which defects, individually or in the aggregate, would have an Material
Adverse Effect to Company.
2.10 Compliance with Laws. Company and each of its Subsidiaries has
--------------------
complied with, is not in violation of, and has not received any notices of
violation with respect to, any federal, state or local statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for failures to comply or violations which,
individually or in the aggregate, have not had and are not reasonably likely to
have a Material Adverse Effect with respect to Company.
2.11 Litigation. There are no claims, suits, actions or proceedings
----------
pending or, to the knowledge of Company, threatened against, relating to or
affecting Company or any of its Subsidiaries, before any Governmental Entity or
any arbitrator that seeks to restrain or enjoin the consummation of the
transactions contemplated by this Agreement or which could reasonably be
expected, either singularly or in the aggregate with all such claims, actions or
proceedings, to have a Material Adverse Effect to Company or on the Surviving
Corporation following the Merger or have a material adverse effect on the
ability of the parties hereto to consummate the Merger. No director or
executive officer of Company has asserted a claim to seek indemnification from
Company under the Company Charter Documents or any indemnification agreement
between Company and such person.
2.12 Employee Benefit Plans.
----------------------
(a) Company has listed in Part 2.12 of the Company Disclosure Letter
all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ( ERISA")) and all bonus,
stock option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar employee benefit
-16-
plans, written or otherwise, for the benefit of, or relating to, any current or
former employee of Company or any trade or business (whether or not
incorporated) which is a member or which is under common control with Company
(an "ERISA Affiliate") within the meaning of Section 414 of the Internal Revenue
Code, or any Subsidiary of Company and all unexpired severance agreements with
respect to any officer of the Company or any of its Subsidiaries who is subject
tot Section 16 of the Exchange Act. (together, the "Company Employee Plans").
(b) With respect to each Company Employee Plan, Company has made
available to Parent, a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the IRS, (ii) such Company Employee Plan, (iii)
each trust agreement and group annuity contract, if any, relating to such
Company Employee Plan and (iv) the most recent actuarial report or valuation
relating to a Company Employee Plan subject to Title IV of ERISA.
(c) With respect to the Company Employee Plans, individually and in
the aggregate, no event has occurred, and to the knowledge of Company, there
exists no condition or set of circumstances in connection with which Company
could be subject to any liability that is reasonably likely to have a Material
Adverse Effect to Company under ERISA, the Internal Revenue Code or any other
applicable law.
(d) With respect to the Company Employee Plans, individually and in
the aggregate, there are no funded benefit obligations for which contributions
have not been made or properly accrued and there are no unfunded benefit
obligations which have not been accounted for by reserves, or otherwise properly
footnoted in accordance with generally accepted accounting principles, on the
financial statements of Company, which obligations are reasonably likely to have
a Material Adverse Effect to Company.
(e) Except as expressly contemplated by this Agreement, neither the
Company nor any of its Subsidiaries is a party to any oral or written: (i)
agreement with any officer of Company or any of its Subsidiaries providing any
term of employment or compensation guarantee extending for a period longer than
one year from the date hereof and for the payment of compensation in excess of
$200,000 per annum; (ii) agreement with any executive officer or other employee
thereof (A) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company
or any of its Subsidiaries or any of the other transactions contemplated by this
Agreement or any ancillary agreement, (B) providing any term of employment or
compensation guarantee, or (C) providing severance benefits or other benefits
after the termination of employment of such employee regardless of the reason
for such termination of employment, except as required by applicable law; or
(iii) agreement or plan, including 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
transaction contemplated by this Agreement or any ancillary 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 or any ancillary agreement.
(f) Except, in each case, as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, Company and each of
its subsidiaries: (i) is in compliance in all material respects with all
applicable foreign, federal, state and local laws, rules
-17-
and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Company Employees; and (ii) has withheld all amounts required by law or by
agreement to be withheld from the wages, salaries and other payments to Company
Employees;
(g) None of the Company and its Subsidiaries is bound by or subject to
(and none of its assets or properties is bound by or subject to) any written or
oral, express or implied, contract, commitment or arrangement with any labor
union, and no labor union has requested or, to the Company's knowledge, has
sought to represent any of the employees representatives or agents of the
Company. No work stoppage or labor strike against Company is pending,
threatened or reasonably anticipated. Company does not know of any activities
or proceedings of any labor union to organize any Company Employees. There are
no actions, suits, claims, labor disputes or grievances pending, or, to the
knowledge of Company, threatened relating to any labor, safety or discrimination
matters involving any Company Employee, including charges of unfair labor
practices or discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in any Material Adverse Effect to
Company. Neither Company nor any of its subsidiaries has engaged in any unfair
labor practices within the meaning of the National Labor Relations Act. 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 Company
Employees and no collective bargaining agreement is being negotiated by Company.
(h) Each Company International Employee Plan has been established,
maintained and administered in material compliance with its terms and conditions
and with the requirements prescribed by any and all statutory or regulatory laws
that are applicable to such Company International Employee Plan. No Company
International Employee Plan has material unfunded liabilities that, as of the
Effective Time, will not be offset by insurance or that are not fully accrued on
the Company balance sheet. Except as required by law, no condition exists that
would prevent the Company or any subsidiary from terminating or amending any
Company International Employee Plan at any time for any reason in accordance
with the terms of each such Company International Employee Plan (other than
expenses typically incurred in a termination event). "Company International
Employee Plan" shall mean each Company Employee Plan that has been adopted or
maintained by the Company or any Subsidiary, whether informally or formally, for
the benefit of Company Employees outside the United States.
2.13 Environmental Matters.
---------------------
(a) Hazardous Material. Except as would not have a Material Adverse
------------------
Effect to Company, no underground storage tanks and no 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 of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies (a "Hazardous
-18-
Material") are present, as a result of the actions of Company or any of its
subsidiaries or any affiliate of Company, or, to 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 Company or any of its subsidiaries has at any time owned,
operated, occupied or leased.
(b) Hazardous Materials Activities. Except as would not have a
------------------------------
Material Adverse Effect to Company (in any individual case or in the aggregate)
(i) neither Company nor any of its subsidiaries has 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, and (ii) neither Company nor any of its subsidiaries has disposed of,
transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material (collectively
"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. Company and its subsidiaries currently hold all
-------
environmental approvals, permits, licenses, clearances and consents
("Environmental Permits") material to and necessary for the conduct of Company's
and its subsidiaries' Hazardous Material Activities and other businesses of
Company and its subsidiaries as such activities and businesses are currently
being conducted.
(d) Environmental Liabilities. No material action, proceeding,
-------------------------
revocation proceeding, amendment procedure, writ or injunction is pending, and
to Company's knowledge, no material action, proceeding, revocation proceeding,
amendment procedure, writ or injunction has been threatened by any Governmental
Entity against Company or any of its subsidiaries in a writing delivered to
Company concerning any Environmental Permit of Company, Hazardous Material or
any Hazardous Materials Activity of Company or any of its subsidiaries. Company
is not aware of any fact or circumstance which reasonably could be expected to
involve Company or any of its subsidiaries in any environmental litigation or
impose upon Company any environmental liability, with such exceptions as would
not have a Material Adverse Effect to Company.
2.14 Agreements, Contracts and Commitments. Neither Company nor any
-------------------------------------
of its Subsidiaries is a party to any agreement which would require payment of
in excess of $1.0 million in 2001. Neither Company nor any of its Subsidiaries
nor to Company's knowledge, any other party thereto, is in breach, violation or
default under, and neither Company nor any of its Subsidiaries has received
written notice that it has breached, violated or defaulted, any of the terms or
conditions of any material agreement, contract or commitment to which it is a
party or by which any of its assets and properties are bound ("Company Material
Contracts") in such a manner as, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect on Company. Each Company Material
Contract that has not expired by its terms, is in full force and effect and is
not subject to any material default hereunder which Company is aware by any
party obligated to Company or any of its Subsidiaries pursuant to such Company
Material Contract.
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2.15 Disclosure.
----------
(a) The information supplied by Company for inclusion in the Form S-4
(or any similar successor form thereto) Registration Statement to be filed by
Parent with the SEC in connection with the issuance of Parent Common Stock in
the Merger (the "Registration Statement") shall not at the time the Registration
Statement is filed with the SEC and at the time it becomes effective under the
Securities Act contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The information supplied by Company for inclusion or
incorporation by reference in the proxy statement/prospectus to be filed with
the SEC as part of the Registration Statement (the "Joint Proxy
Statement/Prospectus") shall not, on the date the Joint Proxy
Statement/Prospectus is mailed to Company's stockholders or to Parent's
stockholders, at the time of the meeting of Company's stockholders (the "Company
Stockholders' Meeting") to consider the Company Stockholder Approvals, at the
time of the meeting of Parent's stockholders meeting (the "Parent Stockholders'
Meeting") to obtain the Parent Stockholder Approvals (as defined in Section
5.3(b)) or as of the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not false or misleading; or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Company Stockholders'
Meeting or Parent Stockholders' Meeting which has become false or misleading.
The Joint Proxy Statement/Prospectus will comply as to form in all material
respects with the provisions of the Securities Act, the Exchange Act and the
rules and regulations thereunder. If at any time prior to the Effective Time
any event relating to Company or any of its affiliates, officers or directors
should be discovered by Company which is required to be set forth in an
amendment to the Registration Statement or a supplement to the Joint Proxy
Statement/Prospectus, Company shall promptly inform Parent. Notwithstanding the
foregoing, Company makes no representation or warranty with respect to any
information supplied by Parent or Merger Sub which is contained in any of the
foregoing documents.
(b) The Board of Directors of Company has, as of the date hereof,
adopted the restructuring plan set forth in Part 2.15 of the Company Disclosure
Letter (the "Company Interim Plan").
2.16 Board Approval. The Board of Directors of Company has, as of
--------------
the date of this Agreement, (i) determined that the Merger is in the best
interests of Company and its stockholders, and has approved this Agreement and
the Company Authorization Agreements (ii) declared the advisability of the
Merger and recommends that the stockholders of Company approve and adopt this
Agreement and approve the Merger.
2.17 Fairness Opinion. Company's Board of Directors has received an
----------------
opinion from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co., dated as of the date hereof, to the effect
that, as of the date hereof, the Exchange Ratio is fair to Company's
stockholders from a financial point of view.
-20-
2.18 DGCL Section 203 Not Applicable. The restrictions contained in
-------------------------------
Section 203 of the Delaware Law applicable to a "business combination" (as
defined in such Section 203) are not applicable to the execution, delivery or
performance of this Agreement or to the consummation of the Merger. To
Company's knowledge, no other anti-takeover, control share acquisition, fair
price, moratorium or other similar statute or regulation (each, a "Takeover
Statute") applies or purports to apply to this Agreement, the Merger or the
other transactions contemplated hereby. Company is not a party to, and
Company's equity securities will not be affected by, any rights agreement,
"poison pill" or similar plan, agreement or arrangement which would have an
adverse effect on the ability of Parent to consummate the Merger or the other
transactions contemplated hereby.
2.19 Brokers' and Finders' Fees. Except for fees payable to ▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇▇ & Co., Company has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby.
2.20 Insurance. All material fire and casualty, general liability,
---------
business interruption, product liability, and sprinkler and water damage
insurance policies maintained by Company or any of its Subsidiaries are with
reputable insurance carriers, and copies or a summary of such policies have been
made available to Parent.
2.21 Certain Contracts. Neither Company nor any of its Subsidiaries
-----------------
is a party to or bound by any non-competition agreement or any other similar
agreement or obligation which purports to limit in any material respect the
manner in which, or the localities in which, all or any material portion of the
business of Company and its Subsidiaries, taken as a whole, is conducted.
Article III
Representations and Warranties of Parent and Merger Sub
Except as disclosed in the disclosure letter delivered by Parent to
Company dated as of the date hereof and certified by a duly authorized officer
of Parent (the "Parent Disclosure Letter")(each Part of which qualifies the
correspondingly numbered representation, warranty or covenant to the extent
specified therein, and such other representations, warranties or covenants to
the extent that the relevance of a disclosure set forth in such Part to such
other representations, warranties or covenants is reasonably evident), it being
understood that the disclosure of any item is not to be construed as the
admission of any fact, Parent and Merger Sub represent and warrant to Company as
follows:
3.1 Organization; Subsidiaries.
--------------------------
(a) Each of Parent and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority, and all requisite qualifications to do business as a foreign
corporation, to conduct its business in the manner in which its business is
currently being conducted, except where the failure to be so organized, existing
or in good standing or to have
-21-
such power, authority or qualifications would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. Except as set forth in the
Parent SEC Reports (as defined in Section 3.5(a)) filed prior to the date
hereof, neither Parent nor any Subsidiary of Parent directly or indirectly owns
any capital stock of, or any equity interest of any nature in, any corporation,
partnership, joint venture arrangement or other business entity, except for
passive investments in equity interests of public companies as part of the cash
management program of Parent. Neither Parent nor any of its Subsidiaries has
agreed or is obligated to make, or is bound by any written, oral or other
agreement, contract, subcontract, lease, binding understanding, instrument,
note, option, warranty, purchase order, license, sublicense, insurance policy,
benefit plan or legally binding commitment or undertaking of any nature, as in
effect as of the date hereof or as may hereinafter be in effect under which it
may become obligated to make any future material investment in or material
capital contribution to any other entity. Neither Parent, nor any of its
Subsidiaries, is a general partner of any general partnership, limited
partnership or other similar entity. Part 3.1 of the Parent Disclosure Letter
indicates the jurisdiction of organization of each entity listed therein and
Parent's direct or indirect equity interest therein.
(b) Parent has delivered or made available to Company a true and
correct copy of the Certificate of Incorporation and Bylaws of Parent and
similar governing instruments of each of its Subsidiaries, each as amended to
date (collectively, the "Parent Charter Documents"), and each such instrument is
in full force and effect. Neither Parent nor any of its Subsidiaries is in
violation of any of the provisions of the Parent Charter Documents.
3.2 Parent and Merger Sub Capitalization.
------------------------------------
(a) The authorized capital stock of Parent consists solely of
1,000,000,000 shares of Parent Common Stock, par value $0.001 per share, of
which there were 94,325,615 shares issued and outstanding as of the close of
business on April 6, 2001, and 5,000,000 shares of Preferred Stock, par value
$0.001 per share, of which no shares are issued or outstanding. All outstanding
shares of Parent Common Stock are duly authorized, validly issued, fully paid
and nonassessable and are not subject to preemptive rights created by statute,
the Certificate of Incorporation or Bylaws of Parent or any agreement or
document to which Parent is a party or by which it is bound. As of the close of
business on April 5, 2001, there are no shares of Parent Common Stock held in
treasury by the Parent. No material change in such capitalization has occurred
between December 31, 2000 and the date of this Agreement.
(b) As of the close of business on April 5, 2001, (i) 19,503,810
shares of Parent Common Stock are subject to issuance pursuant to outstanding
options to purchase Parent Common Stock ("Parent Options") for a weighted
average aggregate exercise price of approximately $41.56, (ii) 1,630,148 shares
of Parent Common Stock are reserved for future issuance under the Parent's 1999
Employee Stock Purchase Plan (the "Parent ESPP"), (iii) no shares of Parent
Common Stock are reserved for future issuance under the Parent's 401(k) Plan,
and (iv) 1,057,000 shares of Parent Common Stock are subject to issuance
pursuant to outstanding warrants ("Parent Warrants"). Part 3.2(b) of the Parent
Disclosure Letter sets forth the following information with respect to each
Parent Option and Parent Warrant outstanding as of the date of this Agreement:
(i) the name of the optionee or warrant holder; (ii) the number of shares of
Parent Common Stock subject to such Parent Option or Parent Warrant; (iii) the
-22-
exercise price of such Parent Option or Parent Warrant; (iv) the date on which
such Parent Option was granted or assumed; (v) the date on which such Parent
Option or Parent Warrant expires and (vi) whether the exercisability of such
Parent Option or Parent Warrant will be accelerated in any way by the
transactions contemplated by this Agreement, and indicates the extent of any
such acceleration. Parent has made available to Company an accurate and
complete copies of the form of all stock option agreements evidencing Parent
Options. All shares of Parent Common Stock subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable.
(c) The authorized capital stock of Merger Sub consists of 1,000
shares of common stock, $0.01 par value, all of which, as of the date hereof,
are issued and outstanding and are held by Parent. All of the outstanding
shares of Merger Sub's common stock have been duly authorized and validly
issued, and are fully paid and nonassessable. Merger Sub was formed for the
purpose of consummating the Merger and has no material assets or liabilities
except as necessary for such purpose.
(d) All outstanding shares of Parent Common Stock, all outstanding
Parent Options, all outstanding Parent Warrants and all outstanding shares of
capital stock of each subsidiary of Parent have been issued and granted in
compliance with (i) all applicable securities laws and other applicable material
Legal Requirements and (ii) all material requirements set forth in applicable
agreements or instruments.
(e) The Parent Common Stock to be issued in the Merger, when issued in
accordance with the provisions of this Agreement, will be validly issued, fully
paid and nonassessable.
3.3 Obligations With Respect to Capital Stock. Except as set forth
-----------------------------------------
in Part 3.3 of the Parent Disclosure Letter, there are no equity securities,
partnership interests or similar ownership interests of any class of Parent
equity security, or any securities exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except for
securities Parent owns free and clear of all claims and Encumbrances, directly
or indirectly through one or more Subsidiaries, as of the date of this
Agreement, there are no equity securities, partnership interests or similar
ownership interests of any class of equity security of any Subsidiary of Parent,
or any security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except as set forth in Section 3.2 or
Part 3.2 or Part 3.3 of the Parent Disclosure Letter, there are no
subscriptions, options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which Parent or any of its
Subsidiaries is a party or by which it is bound obligating Parent or any of its
subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition of, any shares of capital stock, partnership interests
or similar ownership interests of Parent or any of its Subsidiaries or
obligating Parent or any of its Subsidiaries to grant, extend, accelerate the
vesting of or enter into any such subscription, option, warrant, equity
security, call, right,
-23-
commitment or agreement. Except as contemplated by this Agreement or disclosed
in the Parent SEC Reports, there are no registration rights with respect to any
equity security of any class of Parent or with respect to any equity security,
partnership interest or similar ownership interest of any class of any of its
Subsidiaries.
3.4 Authority; Non-Contravention.
----------------------------
(a) Each of Parent and Merger Sub has all requisite corporate power
and authority to enter into this Agreement, as well as the Company Option
Agreement, the Parent Option Agreement, the Company Voting Agreement, the
License Agreement and the Loan Agreement (the Company Option Agreement, the
Parent Option Agreement, the Company Voting Agreement, the License Agreement and
the Loan Agreement together, the "Parent Authorization Agreements"), and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Parent Authorization Agreements, and the
consummation of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub, subject only to the Parent Stockholder Approvals and the filing of the
Certificate of Merger pursuant to Delaware Law. The affirmative vote of the
holders of a majority in interest of the stock present or represented by proxy
at the Parent Stockholders' Meeting is sufficient for Parent's stockholders to
approve the issuance of shares of Parent Common Stock pursuant to the Merger,
and no other approval of any holder of any securities of Company is required in
connection with the consummation of the transactions contemplated hereby. This
Agreement and the Parent Authorization Agreements have been duly executed and
delivered by each of Parent and Merger Sub and, assuming the due authorization,
execution and delivery by Company, constitute the valid and binding obligations
of Parent and Merger Sub, respectively, enforceable against Parent and Merger
Sub in accordance with their terms, except as enforceability may be limited by
bankruptcy and other similar laws affecting the rights of creditors generally
and general principles of equity.
(b) The execution and delivery of this Agreement and the Parent
Authorization Agreements by Parent does not, and the consummation of the
transactions contemplated by this Agreement and the Parent Authorization
Agreements will not, (i) conflict with, or result in any violation or breach of,
any provision of the Parent Charter Documents, (ii) result in any violation or
breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any material benefit) under, or require a consent or
waiver under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or
obligation to which Parent or its Subsidiaries is a party or by which any of
them or any of their properties or assets may be bound, or (iii) conflict with
or violate any permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or any
Subsidiary or any of its or their properties or assets, except in the case of
(ii) and (iii) for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which, individually or in the aggregate, would
not have a Material Adverse Effect to Parent.
-24-
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity or other person is required
to be obtained or made by Parent or Merger Sub in connection with the execution
and delivery of this Agreement or the consummation of the Merger, except for (i)
the filing of the Certificate of Merger with the Secretary of State of the State
of Delaware, (ii) the filing of the Joint Proxy Statement/Prospectus and the
Registration Statement with the SEC, a Form 8-K and a Schedule 13D with regard
to the Company Voting Agreement in accordance with the Securities Act and the
Exchange Act, and the effectiveness of the Registration Statement, (iii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal, foreign and state
securities (or related) laws and the HSR Act and the securities or antitrust
laws of any foreign country, and (iv) such other consents, authorizations,
filings, approvals and registrations which if not obtained or made would not be
material to Parent or the Surviving Corporation or have a material adverse
effect on the ability of the parties hereto to consummate the Merger.
3.5 SEC Filings; Parent Financial Statements.
----------------------------------------
(a) Parent has filed or made available to Company all forms, reports
and documents required to be filed by Parent with the SEC since the effective
date of the registration statement of Parent's initial public offering. All
such required forms, reports and documents (including those that Parent may file
subsequent to the date hereof) are referred to herein as the "Parent SEC
Reports." As of their respective dates, the Parent SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Parent SEC Reports, and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except to the extent
corrected prior to the date of this Agreement by a subsequently filed Parent SEC
Report. As of the date of this Agreement, the Parent SEC Reports, taken as a
whole, together with any press release disseminated between the date of the most
recent Parent SEC Report and the date of this Agreement, do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. None of
Parent's subsidiaries is required to file any forms, reports or other documents
with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports (the
"Parent Financials"), including each Parent SEC Report filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
Scase of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q, 8-K or any successor form under the Exchange Act) and (iii) fairly
presented the consolidated financial position of Parent and its subsidiaries as
at the respective dates thereof and the consolidated results of Parent's
-25-
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements may not contain footnotes and were or are subject
to normal and recurring year-end adjustments. The balance sheet of Parent
contained in Parent's Annual Report on Form 10-K for December 31, 2000 (the
"Parent Form 10-K") is hereinafter referred to as the "Parent Balance Sheet."
Except as disclosed in the Parent Financials, since the date of the Parent
Balance Sheet neither Parent nor any of its subsidiaries has any liabilities
required under GAAP to be set forth on a balance sheet (absolute, accrued,
contingent or otherwise) which are, individually or in the aggregate, material
to the business, results of operations or financial condition of Parent and its
subsidiaries taken as a whole, except for liabilities incurred since the date of
the Parent Balance Sheet in the ordinary course of business consistent with past
practices and liabilities incurred in connection with this Agreement.
3.6 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
Parent SEC Reports filed prior to the date hereof or disclosed in Part 3.6 of
the Parent Disclosure Letter by Parent to Company on or prior to the date
hereof, since the date of the Parent Balance Sheet, Parent and its Subsidiaries
have conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been (i) any
damage, destruction or loss (whether or not covered by insurance) with respect
to Parent or any of its Subsidiaries having a Material Adverse Effect with
respect to the Parent; (ii) any material change by Parent in its accounting
methods, principles or practices to which Company has not previously consented
in writing; (iii) any revaluation by Parent of any of its assets having a
Material Adverse Effect with respect to the Parent; or (iv) any other action or
event that, individually or in the aggregate, has had a Material Adverse Effect
with respect to the Parent.
3.7 Taxes.
-----
(a) Parent, each of its Subsidiaries and any consolidated, combined,
unitary or affiliated group in which Company or any of its Subsidiaries is or
has been a member, have (i) filed all federal, state, local and foreign Tax
returns and reports required to be filed by them (taking into account
extensions), and (ii) paid or accrued all Taxes due and payable, whether or not
shown on such Tax returns or reports (other than amounts being contested in good
faith by appropriate proceedings), except in the case of clause (i) or (ii) for
any such filings, payments or accruals which are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on Parent.
Neither Parent nor any of its subsidiaries has been delinquent in the payment of
any material Tax nor is there any material Tax deficiency outstanding, proposed
or assessed against Parent or any of its subsidiaries, nor has Parent or any of
its subsidiaries executed any unexpired waiver of any statute of limitations on
or extending the period for the assessment or collection of any Tax. No audit
or other examination of any Return of Parent or any of its subsidiaries by any
Tax authority is presently in progress, nor has Parent or any of its
subsidiaries been notified of any request for such an audit or other examination
that is reasonably likely to result in any adjustment that is material to
Parent. No adjustment relating to any Returns filed by Parent or any of its
subsidiaries has been proposed in writing formally or informally by any Tax
authority to Parent or any of its subsidiaries or any representative thereof
that is reasonably likely to be material to Parent. Neither the Internal
Revenue Service (the "IRS") nor any other taxing authority has asserted any
---
claim for taxes, or to the knowledge of the executive officers of Parent or any
of its Subsidiaries, is threatening to assert any claims for
-26-
Taxes, which claims, individually or in the aggregate, are reasonably likely to
have a Material Adverse Effect on Parent. Parent and each of its Subsidiaries
have withheld or collected and paid over to the appropriate governmental
authorities (or are properly holding for such timely payment) all Taxes required
by law to be withheld or collected, except for amounts which are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
Parent. Neither Parent nor any of its Subsidiaries has 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 Parent. There are no liens for Taxes
upon the assets of Parent or its Subsidiaries (other than liens for Taxes that
are not yet due or that are being contested in good faith by appropriate
proceedings), except for liens which would not, individually or in the
aggregate, have a Material Adverse Effect on Parent.
(c) Neither Parent nor any of its subsidiaries is party to or has any
obligation under any tax-sharing, tax indemnity or tax allocation agreement or
arrangement.
(d) Except as may be required as a result of the Merger, Parent and
its subsidiaries have not been and will not be required to include any
adjustment in Taxable income for any Tax period (or portion thereof) pursuant to
Section 481 or Section 262A of the Code or any comparable provision under state
or foreign Tax laws as a result of transactions, events or accounting methods
employed prior to the Closing.
(e) Parent has not been distributed in a transaction qualifying under
Section 355 of the Code within the last two years, nor has Parent distributed
any corporation in a transaction qualifying under Section 355 of the Code within
the last two years.
(f) There is no agreement, plan or arrangement to which Parent or any
of its subsidiaries is a party, including this Agreement and the agreements
entered into in connection with this Agreement, covering any employee or former
employee of Parent or any of its subsidiaries that, individually or
collectively, would be reasonably likely to give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G, 404 or 162(m) of
the Code. There is no contract, agreement, plan or arrangement to which Parent
is a party or by which it is bound to compensate any individual for excise taxes
paid pursuant to Section 4999 of the Code.
(g) Parent is not aware of any fact, circumstance, plan or intention
on the part of Parent that would be reasonably likely to prevent the Merger from
qualifying as a "reorganization" pursuant to the provisions of Section 368 of
the Code.
3.8 Title to Properties.
-------------------
(a) Parent has provided to Company a true and complete list of all
material real property leased by Parent or its Subsidiaries (collectively
"Material Leases") and the location of the premises. Neither Parent nor any
subsidiary is in default under such leases, except where the existence of such
defaults, individually or in the aggregate, is not reasonably likely to have a
Material Adverse Effect with respect to Parent.
(b) Parent owns no real property.
-27-
3.9 Intellectual Property.
---------------------
(a) Except as disclosed in Section 3.09 of the Parent Disclosure
Letter, Parent and its Subsidiaries own, or are licensed or otherwise possess
legally enforceable rights to use, all patents, trademarks, trade names, service
marks, copyrights and mask works, any applications for and registrations of such
patents, trademarks, trade names, service marks, copyrights and mask works, and
all processes, formulae, methods schematics, technology, know how, computer
software programs or applications and tangible or intangible proprietary
information or material that are necessary to conduct the business of Parent and
its Subsidiaries as currently conducted or planned to be conducted by Parent and
its Subsidiaries (the "Parent Intellectual Property Rights").
(b) Except as disclosed in Section 3.09 of the Parent Disclosure
Letter, neither Parent nor any of its Subsidiaries is, or will be as a result of
the execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach of any material license, sublicense
or other agreement relating to the Parent Intellectual Property Rights or any
material license, sublicense or other agreement pursuant to which Parent or any
of its Subsidiaries is authorized to use any third party patents, trademarks or
copyrights, including software, which are incorporated in or form a part of any
product or service of Parent or any of its Subsidiaries that is material to the
business of Parent and its Subsidiaries, taking Parent and its Subsidiaries
together as a whole, and where such breach would have a Material Adverse Effect
on Parent.
(c) Neither Parent nor any of its Subsidiaries has received written
notice from any third party that the operation of the business of Parent or any
act, product or service of Parent, infringes or misappropriates the Intellectual
Property of any third party or constitutes unfair competition or trade practices
under the laws of any jurisdiction, which allegation, if true, would have a
Material Adverse Effect to Parent.
(d) To the knowledge of Parent, no person has or is infringing or
misappropriating any Parent Intellectual Property, which infringement or
misappropriation, individually or in the aggregate, would have a Material
Adverse Effect to Parent.
(e) Parent and its subsidiaries have taken reasonable steps to protect
Parent's and its subsidiaries' rights in Parent's and such subsidiaries'
confidential information and trade secrets, except where the failure to do so
would not have a Material Adverse Effect to Parent.
(f) Except as disclosed in Section 3.09 of the Parent Disclosure
Letter, (i) all patents, registered trademarks, service marks and copyrights
which are held by Parent or any of its Subsidiaries, and which are material to
the business of Parent and its Subsidiaries, taking Parent and its Subsidiaries
together as a whole, are valid and subsisting; (ii) neither Parent nor any of
its Subsidiaries has been sued in any suit, action or proceeding which involves
a claim of infringement of any patents, trademarks, service marks, copyrights or
violation of any trade secret or other proprietary right of any third party; and
(iii) the manufacturing, marketing, licensing or sale of Parent's products and
services does not infringe any patent, trademark, service ▇▇▇▇, copyright, trade
secret or other proprietary right of any third party, which
-28-
infringement, either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on Parent.
(g) None of the Parent Intellectual Property or product or service of
Parent contains any significant defect in connection with processing data
containing dates in leap years or in the year 2000 or any preceding of following
years, which defects, individually or in the aggregate, would have an Material
Adverse Effect to Parent.
3.10 Compliance with Laws.
--------------------
(a) Parent and each of its Subsidiaries has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state or local statute, law or regulation with respect to the conduct
of its business, or the ownership or operation of its business, except for
failures to comply or violations which, individually, or in the aggregate, have
not had and are not reasonably likely to have Material Adverse Effect with
respect to Parent.
3.11 Litigation. There are no claims, suits, actions or proceedings
----------
pending or, to the knowledge of Parent, threatened against, relating to or
affecting Parent or any of its Subsidiaries, before any Governmental Entity or
any arbitrator that seeks to restrain or enjoin the consummation of the
transactions contemplated by this Agreement or which could reasonably be
expected, either singularly or in the aggregate with all such claims, actions or
proceedings, to have a Material Adverse Effect to Parent or on the Surviving
Corporation following the Merger or have a material adverse effect on the
ability of the parties hereto to consummate the Merger. No director or
executive officer of the Parent has asserted a claim to seek indemnification
from the Parent under Parent Charter Documents or any indemnification agreement
between Parent and such person.
3.12 Employee Benefit Plans.
----------------------
(a) Parent has listed in Part 3.12 of the Parent Disclosure Letter all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, incentive, deferred compensation, supplemental retirement,
severance and other similar employee benefit plans, written or otherwise, for
the benefit of, or relating to, any current or former employee of Parent or any
trade or business (whether or not incorporated) which is a member or which is
under common control with Parent (an "ERISA Affiliate") within the meaning of
Section 414 of the Internal Revenue Code, or any Subsidiary of Parent and all
unexpired severance agreements with respect to any officer of the Company or any
of its Subsidiaries who is subject to Section 16 of the Exchange Act (together,
the "Parent Employee Plans").
(b) With respect to each Parent Employee Plan, Parent has made
available to Company, a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the IRS, (ii) such Parent Employee Plan, (iii)
each trust agreement and group annuity contract, if any, relating to such Parent
Employee Plan and (iv) the most recent actuarial report or valuation relating to
a Parent Employee Plan subject to Title IV of ERISA.
-29-
(c) With respect to the Parent Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of Parent, there exists
no condition or set of circumstances in connection with which Parent could be
subject to any liability that is reasonably likely to have Parent Material
Adverse Effect to Parent under ERISA, the Internal Revenue Code or any other
applicable law.
(d) With respect to the Parent Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accounted for by reserves, or otherwise properly footnoted
in accordance with generally accepted accounting principles, on the financial
statements of Parent, which obligations are reasonably likely to have a Material
Adverse Effect to Parent.
(e) Except as expressly contemplated by this Agreement, neither the
Parent nor any of its Subsidiaries is a party to any oral or written: (i)
agreement with any officer of Parent or any of its Subsidiaries providing any
term of employment or compensation guarantee extending for a period longer than
one year from the date hereof and for the payment of compensation in excess of
$200,000 per annum; (ii) agreement with any executive officer or other employee
thereof (A) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving Parent or any
of its Subsidiaries or any of the other transactions contemplated by this
Agreement or any ancillary agreement, (B) providing any term of employment or
compensation guarantee, or (C) providing severance benefits or other benefits
after the termination of employment of such employee regardless of the reason
for such termination of employment, except as required by applicable law; or
(iii) agreement or plan, including 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
transaction contemplated by this Agreement or any ancillary 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 or any ancillary agreement.
(f) Except, in each case, as would not, individually or in the
aggregate, have a Material Adverse Effect on the Parent, Parent and each of its
subsidiaries: (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 Parent Employees; and (ii) has withheld
all amounts required by law or by agreement to be withheld from the wages,
salaries and other payments to Parent Employees.
(g) None of the Parent and its Subsidiaries is bound by or subject to
(and none of its assets or properties is bound by or subject to) any written or
oral, express or implied, contract, commitment or arrangement with any labor
union, and no labor union has requested or, to the Parent's knowledge, has
sought to represent any of the employees, representatives or agents of the
Parent. No work stoppage or labor strike against Parent is pending, threatened
or reasonably anticipated. Parent does not know of any activities or
proceedings of any labor union to organize any Parent Employees. There are no
actions, suits, claims, labor disputes or grievances pending, or, to the
knowledge of Parent, threatened relating to any labor, safety or
-30-
discrimination matters involving any Parent Employee, including charges of
unfair labor practices or discrimination complaints, which, if adversely
determined, would, individually or in the aggregate, result in any Material
Adverse Effect to Parent. Neither Parent nor any of its subsidiaries has engaged
in any unfair labor practices within the meaning of the National Labor Relations
Act. Parent 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 Parent
Employees and no collective bargaining agreement is being negotiated by Parent.
(h) Each Parent International Employee Plan has been established,
maintained and administered in material compliance with its terms and conditions
and with the requirements prescribed by any and all statutory or regulatory laws
that are applicable to such Parent International Employee Plan. No Parent
International Employee Plan has material unfunded liabilities that, as of the
Effective Time, will not be offset by insurance or that are not fully accrued on
Parent balance sheet. Except as required by law, no condition exists that would
prevent Parent or any subsidiary from terminating or amending any Parent
International Employee Plan at any time for any reason in accordance with the
terms of each such International Employee Plan (other than expenses typically
incurred in a termination event). "Parent International Employee Plan" shall
mean each Parent Employee Plan that has been adopted or maintained by Parent or
any subsidiary, whether informally or formally, for the benefit of Parent
Employees outside the United States.
3.13 Environmental Matters.
---------------------
(a) Hazardous Material. Except as would not have a Material Adverse
------------------
Effect to Parent, no underground storage tanks and no amount of any Hazardous
Materials are present, as a result of the actions of Parent or any of its
subsidiaries or any affiliate of Parent, or, to Parent'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 Parent or any of its subsidiaries has at any time owned, operated, occupied
or leased.
(b) Hazardous Materials Activities. Except as would not have a
------------------------------
Material Adverse Effect to Parent (in any individual case or in the aggregate)
(i) neither Parent nor any of its subsidiaries has 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, and (ii) neither Parent nor any of its subsidiaries has disposed of;
transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material 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. Parent and its subsidiaries currently hold all
-------
Environmental Permits material to and necessary for the conduct of Parent's and
its subsidiaries' Hazardous Material Activities and other businesses of Parent
and its subsidiaries as such activities and businesses are currently being
conducted.
-31-
(d) Environmental Liabilities. No material action, proceeding,
-------------------------
revocation proceeding, amendment procedure, writ or injunction is pending, and
to Parent's knowledge, no material action, proceeding, revocation proceeding,
amendment procedure, writ or injunction has been threatened by any Governmental
Entity against Parent or any of its subsidiaries in a writing delivered to
Parent concerning any Environmental Permit of Parent, Hazardous Material or any
Hazardous Materials Activity of Parent or any of its subsidiaries. Parent is
not aware of any fact or circumstance which reasonably could be expected to
involve Parent or any subsidiaries in any environmental litigation or impose
upon Parent any environmental liability, with such exceptions as would not have
a Material Adverse Effect to Parent.
3.14 Agreements, Contracts and Commitments. Neither Parent nor any
-------------------------------------
of its Subsidiaries is a party to any agreement which would require payment of
in excess of $1.0 million in 2001. Neither Parent nor any of its Subsidiaries,
nor to Parent's knowledge, any other party thereto, is in breach, violation or
default under, and neither Parent nor any of its Subsidiaries has received
written notice that it has breached, violated or defaulted, any of the terms or
conditions of any material agreement, contract or commitment to which it is a
party or by which any of its assets and properties are bound ("Parent Material
Contracts") in such a manner as, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect on Company. Each Parent Material
Contract that has not expired by its terms, is in full force and effect and is
not subject to any material default hereunder which Parent is aware by any party
obligated to Parent or any of its Subsidiaries pursuant to such Parent Material
Contract.
3.15 Disclosure.
----------
(a) The information supplied by Parent for inclusion in the
Registration Statement shall not at the time the Registration Statement is filed
with the SEC and at the time it becomes effective under the Securities Act
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The information supplied by Parent for inclusion or incorporation
by reference in the Joint Proxy Statement/Prospectus shall not, on the date the
Joint Proxy Statement/Prospectus is mailed to Company's stockholders or to
Parent's stockholders, at the time of the Company Stockholders' Meeting, at the
time of the Parent Stockholders' Meeting or as of the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not false or
misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders' Meeting or the Parent Stockholders'
Meeting which has become false or misleading. The Registration Statement and
Joint Proxy Statement/Prospectus will comply as to form in all material respects
with the provisions of the Securities Act and the rules and regulations
thereunder. If at any time prior to the Effective Time, any event relating to
Parent or any of its affiliates, officers or directors should be discovered by
Parent which is required to be set forth in an amendment to the Registration
Statement or a supplement to the Joint Proxy Statement/Prospectus, Parent shall
promptly inform Company.
-32-
(b) The Board of Directors of Parent has, as of the date hereof,
adopted the restructuring plan set forth in Part 3.15 of the Parent Disclosure
Letter (the "Parent Interim Plan").
3.16 Board Approval. The Board of Directors of Parent has, as of the
--------------
date of this Agreement, (i) determined that the Merger is in the best interests
of Parent and its stockholders, and has approved this Agreement and the Parent
Authorization Agreements, and (ii) recommends that the stockholders of Parent
approve each of the Parent Stockholder Approvals.
3.17 Fairness Opinion. Parent's Board of Directors has received an
----------------
opinion from ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co., dated as of the date hereof, to the effect
that, as of the date hereof, the Exchange Ratio is fair to Parent from a
financial point of view.
3.18 Brokers' and Finders' Fees. Except for fees payable to ▇▇▇▇▇▇▇,
--------------------------
Sachs & Co., Parent 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.
3.19 Insurance. All material fire and casualty, general liability,
---------
business interruption, product liability, and sprinkler and water damage
insurance policies maintained by Parent or any of its Subsidiaries are with
reputable insurance carriers, and copies or a summary of such policies have been
made available to Company.
3.20 Certain Contracts. Neither Parent nor any of its Subsidiaries
-----------------
is a party to or bound by any non-competition agreement or any other similar
agreement or obligation which purports to limit in any material respect the
manner in which, or the localities in which, all or any material portion of the
business of Parent and its Subsidiaries, taken as a whole, is conducted.
Article IV
Conduct Prior to the Effective Time
4.1 Conduct of Business by Company. During the period from the date
------------------------------
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Company and each of its
subsidiaries shall, except to the extent that Parent shall otherwise consent in
writing, carry on its business in the usual, regular and ordinary course, in
substantially the same manner as heretofore conducted and in compliance in all
material respects with all applicable laws and regulations, pay its debts and
Taxes when due subject to good faith disputes over such debts or Taxes, pay or
perform other material obligations when due, and use all reasonable efforts to
preserve its relationships with customers, suppliers, licensors, licensees, and
others with which it has business dealings, except as contemplated by the
Company Interim Plan and except in each case where the failure to do so would
not have a Material Adverse Effect with respect to Company. In addition, during
that period Company will promptly notify Parent of any material event involving
its business or operations consistent with the agreements contained herein.
-33-
In addition, except as permitted by the terms of this Agreement, and
except as contemplated by this Agreement or provided in Part 4.1 of the Company
Disclosure Letter, without the prior written consent of Parent (which shall not
be unreasonably withheld or delayed), during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, Company shall not do any of the
following and shall not permit its subsidiaries to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of such
plans;
(b) Grant any severance or termination pay to, or any additional
notice of termination, or extension or acceleration of the exercisability or
vesting of any equity securities held by any officer or employee except (i)
pursuant to written agreements in effect, or policies existing, on the date
hereof and as previously disclosed to Parent, consistent with the terms of the
Company Interim Plan or (ii) pursuant to written agreements entered into after
the date hereof that are consistent with the terms of the Company Interim Plan
or Part 4.1(b) of the Company Disclosure Letter;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the material Company
Intellectual Property, other than non-exclusive licenses in the ordinary course
of business;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock of Company or split, combine or reclassify any capital
stock of Company or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for any capital stock of Company
(except for a reverse stock split of outstanding Company Common Stock);
(e) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Company or its subsidiaries, except repurchases of
unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber any
shares of capital stock or any securities convertible into shares of capital
stock, or subscriptions, rights, warrants or options to acquire any shares of
capital stock or any securities convertible into shares of capital stock, or
enter into other agreements or commitments of any character obligating it to
issue any such shares or convertible securities, other than the issuance,
delivery and/or sale of (i) shares of Company Common Stock pursuant to the
exercise of Company Options and Company Warrants, (ii) shares of Company Common
Stock issuable to participants in the Company ESPP, (iii) shares of Company
Common Stock issuable to participants in the Company's 401(k) Plan, in the case
of (i), (ii) and (iii), consistent with the terms thereof, and (iv) pursuant to
grants of Company Options to newly hired employees, upon promotions of existing
employees, as retention grants to existing employees, or as part of Company's
annual option grant program, in
-34-
each case, in the ordinary course of business, consistent with past practice,
and not to exceed in the aggregate pursuant to this clause (iv), the balance of
the options as of the date of this Agreement in the Company's existing stock
option pool (net of cancellations) and which will not be entitled to
acceleration as a result of the Merger and which shall vest in a manner as
otherwise mutually agreed to by the parties in writing or as set forth in Part
4.1(f) of the Company Disclosure Letter;
(g) Cause, permit or propose any amendments to its Certificate of
Incorporation, Bylaws or other charter documents (or similar governing
instruments of any of its subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a portion of the assets 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 which are material, individually or in the aggregate, to the
business of Company or enter into any material joint ventures, strategic
relationships or alliances that would have a Material Adverse Effect on Company;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of Company, except other sales, leases, encumbrances or
dispositions or non-exclusive licenses in the ordinary course;
(j) Incur any indebtedness for borrowed money (excluding for the
avoidance of doubt, trade debt) or guarantee any such indebtedness of another
person (other than a subsidiary), extend or enter into any commitment to make an
extension of any indebtedness (excluding trade credits) except immaterial
transactions in each case in the ordinary course of business consistent with
past practice, issue or sell any debt securities or options, warrants, calls or
other rights to acquire any debt securities of Company, enter into any "keep
well" or other agreement to maintain any financial statement condition or enter
into any arrangement having the economic effect of any of the foregoing other
than pursuant to existing credit facilities, in the ordinary course of business;
(k) Except as required to comply with any Legal Requirement, adopt or
amend any employee benefit plan or employee stock purchase or employee stock
option plan, or enter into any employment contract (other than offer letters and
letter agreements entered into in the ordinary course of business consistent
with past practice providing for compensation and other benefits generally
commensurate with similarly situated employees) or collective bargaining
agreement, pay any special bonus or special remuneration to any director or
employee (other than pursuant to the Company Interim Plan), or increase the
salaries or wage rates or fringe benefits (including rights to severance or
indemnification) of its directors, officers, employees or consultants, other
than bonuses, increases in salary or wage rates for non-directors or non-
executive officers in the ordinary course of business consistent with past
practice;
(l) Make any material capital expenditures other than as consistent
with the Company Interim Plan;
-35-
(m) Modify, amend or terminate any Company Contract to which Company
or any subsidiary thereof is a party or waive, release or assign any material
rights or claims thereunder, in each case, in a manner that could reasonably be
expected to have a Material Adverse Effect on the Company;
(n) Enter into any licensing or other agreement with regard to the
acquisition, distribution or licensing of any material Company Intellectual
Property other than licenses, distribution or other similar agreements entered
into in the ordinary course of business, and other than in connection with the
License Agreement;
(o) Initiate any litigation or arbitration proceeding, where the
initiation of such proceedings, if determined adversely, would have a Material
Adverse Effect on Company;
(p) Pay, discharge, settle or satisfy any material claims,
liabilities, obligations or litigation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than in the ordinary course of
business and where such action would not have a Material Adverse Effect on
Company, provided, that no such settlement would create a material liability or
require a material payment;
(q) Materially revalue any of its assets or, except as required by
GAAP, make any change in accounting methods, principles or practices; or
(r) Agree in writing or otherwise to take any of the actions described
in Section 4.1 (a) through (q) above.
4.2 Conduct of Business by Parent. During the period from the date
-----------------------------
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Parent and each of its
subsidiaries shall, except to the extent that Company shall otherwise consent in
writing, carry on its business in the usual, regular and ordinary course, in
substantially the same manner as heretofore conducted and in compliance in all
material respects with all applicable laws and regulations, pay its debts and
Taxes when due subject to good faith disputes over such debts or Taxes, pay or
perform other material obligations when due, and use all reasonable efforts to
preserve its relationships with customers, suppliers, licensors, licensees, and
others with which it has business dealings, except as contemplated by the Parent
Interim Plan and except in each case where the failure to do so would not have a
Material Adverse Effect with respect to Parent. In addition, during that period
Parent will promptly notify Company of any material event involving its business
or operations consistent with the agreements contained herein.
In addition, except as permitted by the terms of this Agreement, and
except as contemplated by this Agreement or provided in Part 4.2 of the Parent
Disclosure Letter, without the prior written consent of Company (which shall not
be unreasonably withheld or delayed), during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, Parent shall not do any of the
following and shall not permit its subsidiaries to do any of the following:
-36-
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of such
plans;
(b) Grant any severance or termination pay to, or any additional
notice of termination, or extension or acceleration of the exercisability or
vesting of any equity securities held by any officer or employee except (i)
pursuant to written agreements in effect, or policies existing, on the date
hereof and as previously disclosed in writing to Parent, consistent with the
terms of the Parent Interim Plan or (ii) pursuant to written agreements entered
into after the date hereof and consistent with the terms of the Parent Interim
Plan or Part 4.2(b) of the Parent Disclosure Letter;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the material Parent
Intellectual Property, other than non-exclusive licenses in the ordinary course
of business;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock of Parent or split, combine or reclassify any capital stock
of Parent or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for any capital stock of Parent (except for a
reverse stock split of outstanding Parent Common Stock);
(e) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Parent or its subsidiaries, except repurchases of
unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber any
shares of capital stock or any securities convertible into shares of capital
stock, or subscriptions, rights, warrants or options to acquire any shares of
capital stock or any securities convertible into shares of capital stock, or
enter into other agreements or commitments of any character obligating it to
issue any such shares or convertible securities, other than the issuance,
delivery and/or sale of (i) shares of Parent Common Stock pursuant to the
exercise of outstanding Parent Options and Parent Warrants, (ii) shares of
Parent Common Stock issuable to participants in the Parent ESPP, (iii) shares of
Parent Common Stock issuable to participants in the Parent's 401(k) Plan, in the
case of (i), (ii) and (iii), consistent with the terms thereof, and (iv)
pursuant to grants of Parent Options to newly hired employees, upon promotions
of existing employees, as retention grants to existing employees, or as part of
Parent's annual option grant program, in each case, in the ordinary course of
business, consistent with past practice, and not to exceed in the aggregate
pursuant to this clause, the balance of the options as of the date of this
Agreement in the Parent's existing stock option pool (net of cancellations) and
which will not be entitled to acceleration as a result of the Merger which shall
vest in a manner as otherwise mutually agreed to by the parties in writing or as
set forth in Part 4.2(f) of the Parent Disclosure Letter;
-37-
(g) Cause, permit or propose any amendments to its Certificate of
Incorporation, Bylaws or other charter documents (or similar governing
instruments of any of its subsidiaries), except as required for the Parent Name
Change;
(h) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a portion of the assets 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 which are material, individually or in the aggregate, to the
business of Parent or enter into any material joint ventures, strategic
relationships or alliances that would have a Material Adverse Effect on Parent;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of Parent, except for other sales, leases, encumbrances or
dispositions or non-exclusive licenses in the ordinary course of business;
(j) Incur any indebtedness for borrowed money (excluding, for the
avoidance of doubt, trade debt) or guarantee any such indebtedness of another
person (other than a subsidiary), extend or enter into any commitment to make an
extension of any indebtedness (excluding trade credits) except immaterial
transactions in each case in the ordinary course of business consistent with
past practice, issue or sell any debt securities or options, warrants, calls or
other rights to acquire any debt securities of Parent, enter into any "keep
well" or other agreement to maintain any financial statement condition or enter
into any arrangement having the economic effect of any of the foregoing other
than pursuant to existing credit facilities, in the ordinary course of business
except in connection with loans made under the Loan Agreement;
(k) Except as required to comply with any Legal Requirement, adopt or
amend any employee benefit plan or employee stock purchase or employee stock
option plan, or enter into any employment contract (other than offer letters and
letter agreements entered into in the ordinary course of business consistent
with past practice providing for compensation and other benefits generally
commensurate with similarly situated employees) or collective bargaining
agreement, pay any special bonus or special remuneration to any director or
employee (other than pursuant to the Parent Interim Plan), or increase the
salaries or wage rates or fringe benefits (including rights to severance or
indemnification) of its directors, officers, employees or consultants other than
bonuses, increases in salary or wage rates for non-directors or non-executive
officers in the ordinary course consistent with past practice;
(l) Make any material capital expenditures other than capital
expenditures in the expressly permitted in and consistent with the Parent
Interim Plan;
(m) Modify, amend or terminate any Parent Contract to which Parent or
any subsidiary thereof is a party or waive, release or assign any material
rights or claims thereunder, in each case, in a manner that could reasonably be
expected to have a Material Adverse Effect on Parent (other than changes to
existing credit facilities in connection with the Loan Agreement);
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(n) Enter into any licensing or other agreement with regard to the
acquisition, distribution or licensing of any material Parent Intellectual
Property other than licenses, distribution or other similar agreements entered
into in the ordinary course of business, and other in connection with the
License Agreement;
(o) Initiate any litigation or arbitration proceeding, where the
initiation of such proceedings, if determined adversely, would have a Material
Adverse Effect on Parent;
(p) Pay, discharge, settle or satisfy any material claims,
liabilities, obligations or litigation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than in the ordinary course of
business and where such action would not have a Material Adverse Effect on
Parent, provided, that no such settlement would create a material liability or
require a material payment;
(q) Materially revalue any of its assets or, except as required by
GAAP, make any change in accounting methods, principles or practices; or
(r) Agree in writing or otherwise to take any of the actions described
in Section 4.2(a) through (q) above.
4.3 Interim Plans. Parent shall use all reasonable efforts to
-------------
implement, fully comply with and timely complete the Parent Interim Plan in
accordance with its terms, and Company shall use all reasonable efforts to
implement, fully comply with and timely complete the Company Interim Plan in
accordance with its terms, in each case subject to compliance with the HSR Act.
Article V
Additional Agreements
5.1 Joint Proxy Statement/Prospectus; Registration Statement;
---------------------------------------------------------
Antitrust and Other Filings.
---------------------------
(a) As promptly as reasonably practicable after the execution of this
Agreement, Company and Parent will prepare and file with the SEC, the Joint
Proxy Statement/Prospectus and Parent will prepare and file with the SEC the
Registration Statement in which the Joint Proxy Statement/Prospectus will be
included as a prospectus. Each of Parent and the Company shall provide promptly
to the other such information concerning its business and financial statements
and affairs as, in the reasonable judgment of the providing party or its
counsel, may be required or appropriate for inclusion in the Joint Proxy
Statement/Prospectus and the Registration Statement, or in any amendments or
supplements thereto, and to cause its counsel and auditors to cooperate with the
other's counsel and auditors in the preparation of the Joint Proxy
Statement/Prospectus and the Registration Statement. Each of Company and Parent
will respond to any comments of the SEC, will use its respective commercially
reasonable efforts to have the Registration Statement declared effective under
the Securities Act as promptly as practicable after such filing and each of
Company and Parent will cause the Joint Proxy Statement/Prospectus to be mailed
to its respective stockholders at the earliest practicable time after the
Registration Statement is declared effective by the SEC. Promptly after the
date of this
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Agreement, each of the Company and Parent will prepare and file (i) with the
United States Federal Trade Commission and the Antitrust Division of the United
States Department of Justice Notification and Report Forms relating to the
transactions contemplated herein as required by the HSR Act, as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by the
parties (the "Antitrust Filings") and (ii) any other filings required to be
filed by it under the Exchange Act, the Securities Act or any other federal,
state or foreign laws relating to the Merger and the transactions contemplated
by this Agreement (the "Other Filings"). The Company and Parent each shall
promptly supply the other with any information which may be required in order to
effectuate any filings pursuant to this Section 5.1.
(b) Each of the Company and Parent will notify the other promptly upon
the receipt of any comments from the SEC or its staff or any other government
officials in connection with any filing made pursuant hereto and of any request
by the SEC or its staff or any other government officials for amendments or
supplements to the Registration Statement, the Joint Proxy Statement/Prospectus
or any Antitrust Filings or Other Filings or for additional information and will
supply the other with copies of all correspondence between such party or any of
its representatives, on the one hand, and the SEC, or its staff or any other
government officials, on the other hand, with respect to the Registration
Statement, the Joint Proxy Statement/Prospectus, the Merger or any Antitrust
Filing or Other Filing. Each of the Company and Parent will cause all documents
that it is responsible for filing with the SEC or other regulatory authorities
under this Section 5.1 to comply in all material respects with all applicable
requirements of law and the rules and regulations promulgated thereunder.
Whenever any event occurs which is required to be set forth in an amendment or
supplement to the Joint Proxy Statement/Prospectus, the Registration Statement
or any Antitrust Filing or Other Filing, the Company or Parent, as the case may
be, will promptly inform the other of such occurrence and cooperate in filing
with the SEC or its staff or any other government officials, and/or mailing to
stockholders of the Company and/or Parent, such amendment or supplement.
Notwithstanding any other provision of this Agreement, nothing herein shall
require Parent to qualify to do business in any jurisdiction in which it is not
now so qualified or to file a general consent to service of process under any
applicable state securities laws in connection with the issuance of Parent
Common Stock in the Merger.
5.2 Meeting of Company Stockholders.
-------------------------------
(a) Promptly after the date hereof, Company will take all action
necessary in accordance with the Delaware Law and its Certificate of
Incorporation and Bylaws to convene the Company Stockholders' Meeting (including
any adjournments thereof) to be held as promptly as practicable, and in any
event (to the extent permissible under applicable law) within 45 days after the
declaration of effectiveness of the Registration Statement, for the purpose of
voting upon approval and adoption of this Agreement and approval of the Merger.
Subject to Section 5.2(c), Company will use its commercially reasonable efforts
to solicit from its stockholders proxies in favor of the adoption and approval
of this Agreement and the approval of the Merger and will take all other action
necessary to secure the vote or consent of its stockholders required by the
rules of the Nasdaq Stock Market or Delaware Law to obtain such approvals.
Notwithstanding anything to the contrary contained in this Agreement, Company
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may adjourn or postpone the Company Stockholders' Meeting to the extent
necessary to ensure that any necessary supplement or amendment to the Joint
Proxy Statement/Prospectus is provided to Company's stockholders in advance of a
vote on the Merger and this Agreement or, if as of the time for which Company
Stockholders' Meeting is originally scheduled (as set forth in the Joint Proxy
Statement/Prospectus) there are insufficient shares of Company Common Stock
represented (either in person or by proxy) to constitute a quorum necessary to
conduct the business of the Company Stockholders' Meeting. Company shall ensure
that the Company Stockholders' Meeting is called, noticed, convened, held and
conducted, and that all proxies solicited by the Company in connection with the
Company Stockholders' Meeting are solicited, in compliance with the Delaware
Law, its Certificate of Incorporation and Bylaws, the rules of the Nasdaq Stock
Market and all other applicable legal requirements. Company's obligation to
call, give notice of, convene and hold the Company Stockholders' Meeting in
accordance with this Section 5.2(a) shall not be limited to or otherwise
affected by the commencement, disclosure, announcement or submission to Company
of any Company Acquisition Proposal or Company Superior Offer, or by any
withdrawal, amendment or modification of the recommendation of the Board of
Directors of Company with respect to this Agreement or the Merger.
(b) Subject to Section 5.2(c): (i) the Board of Directors of Company
shall recommend that Company's stockholders vote in favor of and adopt and
approve this Agreement and approve the Merger at the Company Stockholders'
Meeting; (ii) the Joint Proxy Statement/Prospectus shall include a statement to
the effect that the Board of Directors of Company has recommended that Company's
stockholders vote in favor of and adopt and approve this Agreement and the
Merger at the Company Stockholders' Meeting; and (iii) neither the Board of
Directors of Company nor any committee thereof shall withdraw, amend or modify,
or propose or resolve to withdraw, amend or modify in a manner adverse to
Parent, the recommendation of the Board of Directors of Company that Company's
stockholders vote in favor of and adopt and approve this Agreement and the
Merger.
(c) Nothing in this Agreement shall prevent the Board of Directors of
the Company from withholding, withdrawing, amending or modifying its
recommendation in favor of the Merger or endorsing or recommending a Company
Superior Offer (as defined below) if (i) a Company Superior Offer (as defined
below) is made to the Company and is not withdrawn, (ii) the Company shall have
provided written notice to Parent (a "Notice of Company Superior Offer")
advising Parent that the Company has received a Company Superior Offer,
summarizing the material terms and conditions of such Company Superior Offer and
identifying the person or entity making such Company Superior Offer, (iii)
Parent shall not have, within two business days of Parent's receipt of the
Notice of Company Superior Offer, made an offer that the Company's Board of
Directors by a majority vote determines in its good faith judgment (after
consultation with a financial advisor of national standing) to be at least as
favorable to Company's stockholders as such Company Superior Offer (it being
agreed that the Board of Directors of Company shall convene a meeting to
consider any such offer by Parent promptly following the receipt thereof), (iv)
the Board of Directors of Company concludes in good faith, after consultation
with its outside legal counsel, that, in light of such Company Superior Offer,
the failure to withhold, withdraw, amend or modify such recommendation would be
inconsistent with the fiduciary duties of the Board of Directors of Company to
Company's stockholders under
-41-
applicable law and (v) Company shall not knowingly have violated any of the
restrictions set forth in Section 5.4 or any of the material provisions of this
Section 5.2. Company shall provide Parent with at least two business days prior
notice (or such lesser prior notice as provided to the members of the Company's
Board of Directors) of any meeting of the Company's Board of Directors at which
Company's Board of Directors is reasonably expected to consider any Company
Acquisition Proposal (as defined in Section 5.4) to determine whether such
Company Acquisition Proposal is a Company Superior Offer. Nothing contained in
this Section 5.2(c) shall limit the Company's obligation to hold and convene the
Company Stockholders' Meeting (regardless of whether the recommendation of the
Board of Directors of Company shall have been withdrawn, amended or modified).
For purposes of this Agreement, "Company Superior Offer" shall mean (a) an
unsolicited, bona fide Company Acquisition Proposal that the Board of Directors
of the Company determines, in its good faith determination (after consultation
with a financial advisor of national standing) to be substantially more
favorable to the Company stockholders than the Merger and (b) which requires by
its terms that as a condition to the consummation of the transaction
contemplated by such written offer the Merger and the transactions contemplated
thereby be terminated; provided, however, that any such offer shall not be
deemed to be a "Company Superior Offer" if any financing required to consummate
the transaction contemplated by such offer is not committed and is not likely in
the good faith determination of the Company's Board of Directors (after
consultation with its financial advisor) to be obtained by such third party on a
timely basis.
(d) Nothing contained in this Agreement shall prohibit the Company or
its Board of Directors from taking and disclosing to its stockholders a position
contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or
otherwise required by directors' duties of disclosure to stockholders under
Delaware Law.
5.3 Meeting of Parent Stockholders
------------------------------
(a) Promptly after the date hereof, Parent will take all action
necessary in accordance with the Delaware Law and its Certificate of
Incorporation and Bylaws to convene the Parent Stockholders' Meeting (including
any adjournments thereof) to be held as promptly as practicable, and in any
event (to the extent permissible under applicable law) within 45 days after the
declaration of effectiveness of the Registration Statement, for the purpose of
voting upon the Parent Stockholder Approvals. Subject to Section 5.3(c), Parent
will use its commercially reasonable efforts to solicit from its stockholders
proxies in favor of the approval of the Parent Stockholder Approvals and will
take all other action necessary to secure the vote or consent of its
stockholders required by the rules of the Nasdaq Stock Market or Delaware Law to
obtain such approvals. Notwithstanding anything to the contrary contained in
this Agreement, Parent may adjourn or postpone the Parent Stockholders' Meeting
to the extent necessary to ensure that any necessary supplement or amendment to
the Joint Proxy Statement/Prospectus is provided to Parent's stockholders in
advance of a vote on the Parent Stockholder Approvals or, if as of the time for
which Parent Stockholders' Meeting is originally scheduled (as set forth in the
Joint Proxy Statement/Prospectus) there are insufficient shares of Parent Common
Stock represented (either in person or by proxy) to constitute a quorum
necessary to conduct the business of the Parent Stockholders' Meeting. Parent
shall ensure that the Parent Stockholders' Meeting is called, noticed, convened,
held and conducted, and that all proxies solicited by Parent in
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connection with the Parent Stockholders' Meeting are solicited, in compliance
with the Delaware Law, its Certificate of Incorporation and Bylaws, the rules of
the Nasdaq Stock Market and all other applicable legal requirements.
(b) Subject to Section 5.3(c): (a) the Board of Directors of Parent
shall recommend that Parent's stockholders at the Parent Stockholder Meeting
approve the following (i) the issuance of Parent Common Stock pursuant to the
Merger, and (ii) the amendment of Parent's Certificate of Incorporation to
effect the Parent Name Change (collectively, the "Parent Stockholder
Approvals"); (b) the Joint Proxy Statement/Prospectus shall include a statement
to the effect that the Board of Directors of Parent has recommended that
Parent's stockholders approve the Parent Stockholder Approvals at the Parent
Stockholders' Meeting; and (c) neither the Board of Directors of Parent nor any
committee thereof shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify in a manner adverse to Company, the recommendation of
the Board of Directors of Parent that Parent's stockholders approve the Parent
Stockholder Approvals.
(c) Nothing in this Agreement shall prevent the Board of Directors of
Parent from withholding, withdrawing, amending or modifying its recommendation
in favor of the Merger or endorsing or recommending a Parent Superior Offer (as
defined below) if (i) a Parent Superior Offer (as defined below) is made to
Parent and is not withdrawn, (ii) Parent shall have provided written notice to
the Company (a "Notice of Parent Superior Offer") advising the Company that
Parent has received a Parent Superior Offer, summarizing all of the material
terms and conditions of such Parent Superior Offer and identifying the person or
entity making such Parent Superior Offer, (iii) the Company shall not have,
within two business days of the Company's receipt of the Notice of Parent
Superior Offer, made an offer that Parent's Board of Directors by a majority
vote determines in its good faith judgment (after consultation with a financial
advisor of national standing) to be at least as favorable to Parent's
stockholders as such Parent Superior Offer (it being agreed that the Board of
Directors of Parent shall convene a meeting to consider any such offer by
Company promptly following the receipt thereof), (iv) the Board of Directors of
Parent concludes in good faith, after consultation with its outside legal
counsel, that, in light of such Parent Superior Offer, the failure to withhold,
withdraw, amend or modify such recommendation would be inconsistent with the
fiduciary duties of the Board of Directors of Parent to Parent's stockholders
under applicable law and (v) Parent shall not have knowingly violated any of the
restrictions set forth in Section 5.5 or any of the material provisions of this
Section 5.3. Parent shall provide Company with at least two business days prior
notice (or such lesser prior notice as provided to the members of the Parent's
Board of Directors) of any meeting of Parent's Board of Directors at which
Parent's Board of Directors is reasonably expected to consider any Parent
Acquisition Proposal (as defined in Section 5.5) to determine whether such
Parent Acquisition Proposal is a Parent Superior Offer. Nothing contained in
this Section 5.3(c) shall limit the Parent's obligation to hold and convene the
Parent Stockholders' Meeting (regardless of whether the recommendation of the
Board of Directors of Parent shall have been withdrawn, amended or modified).
For purposes of this Agreement, "Parent Superior Offer" shall mean (a) an
unsolicited, bona fide Parent Acquisition Proposal that the Board of Directors
of Parent determines, in its good faith determination (after consultation with a
financial advisor of national standing) to be substantially more favorable to
the Parent stockholders than the Merger and (b) which requires by its terms that
as a condition to
-43-
the consummation of the transaction contemplated by such written offer the
Merger and the transactions contemplated thereby be terminated; provided,
however, that any such offer shall not be deemed to be a "Parent Superior Offer"
if any financing required to consummate the transaction contemplated by such
offer is not committed and is not likely in the good faith determination of the
Parent's Board of Directors (after consultation with its financial advisor) to
be obtained by such third party on a timely basis.
(d) Nothing contained in this Agreement shall prohibit Parent or its
Board of Directors from taking and disclosing to its stockholders a position
contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or
otherwise required by directors' duties of disclosure to stockholders under
Delaware Law.
5.4 No Company Solicitation.
-----------------------
(a) From and after the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement pursuant to Article VII, Company
and its subsidiaries will not, nor will they authorize or permit any of their
respective officers, directors, affiliates under the control of the Company or
employees or any investment banker, attorney or other advisor or representative
retained by any of them (collectively, "Company Representatives") to, directly
or indirectly, (i) solicit, initiate, knowingly encourage or knowingly induce
the making, submission or announcement of any Company Acquisition Proposal (as
hereinafter defined), (ii) participate in any discussions (except discussions to
elicit information concerning a Company Acquisition Proposal which is required
to determine whether such proposal may constitute a Company Superior Offer) or
negotiations regarding, or furnish to any person any non-public information with
respect to, or take any other action to facilitate any inquiries or the making
of any Company Acquisition Proposal, except to elicit information concerning a
Company Acquisition Proposal which is required to determine whether such
proposal may constitute a Company Superior Offer, (iii) approve, endorse or
recommend any Company Acquisition Proposal or (iv) enter into any letter of
intent or similar document or any contract, agreement or commitment proposing or
providing for any Company Acquisition Proposal; provided, however, that
notwithstanding the foregoing, Company may disclose the provisions of this
Section 5.4 in response to an unsolicited inquiry from any person or group, and
prior to the approval of this Agreement and the Merger at the Company
Stockholders' Meeting, this Section 5.4(a) shall not prohibit Company from
furnishing nonpublic information regarding Company and its subsidiaries to, or
entering into or participating in discussions or negotiations with, any person
or group who has submitted (and not withdrawn) to Company an unsolicited,
written Company Acquisition Proposal, if the Board of Directors of Company
concludes in good faith (after consultation with a financial advisor of national
standing) may constitute a Company Superior Offer if (1) neither Company nor any
authorized Company Representative and its subsidiaries shall have violated any
of the restrictions set forth in this Section 5.4, (2) the Board of Directors of
Company concludes in good faith, after consultation with its outside legal
counsel, that the failure to take such action would be inconsistent with the
fiduciary obligations of the Board of Directors of Company to Company's
stockholders under applicable law, (3) prior to furnishing any such nonpublic
information to, or entering into any such discussions (except discussions to
elicit information to concerning a Company Acquisition Proposal which is
required to determine whether such proposal may constitute a Company Superior
Offer) or negotiations with, such person or group,
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Company gives Parent written notice of the identity of such person or group and
all of the material terms and conditions of such Company Acquisition Proposal
and of Company's intention to furnish nonpublic information to, or enter into
discussions with, such person or group, and Company receives from such person or
group an executed confidentiality agreement containing terms which shall not
restrict Company from complying with its disclosure obligations under this
Agreement and which shall otherwise contain customary limitations on the use and
disclosure of all non-public information furnished to such person or group or on
behalf of the Company and other terms no less favorable to Company than those
set forth in the Confidentiality Agreement, and (4) contemporaneously with
furnishing any such nonpublic information to such person or group, Company
furnishes such nonpublic information to Parent (to the extent such nonpublic
information has not been previously furnished by the Company to Parent). Company
and its subsidiaries will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Company Acquisition Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding two
sentences by any authorized Company Representative or any of its subsidiaries
shall be deemed to be a breach of this Section 5.4 by Company; provided,
however, that if a violation consists of a communication by any such Company
Representative (other than an executive officer or director) which was
unauthorized by Company and Company terminates its relationship with such
Company Representative and with such Company Representative employer (if a third
party) immediately upon becoming aware of such communication, then such from and
after such termination, then such communication shall no longer be deemed to
constitute a material breach of this Agreement for purposes of Sections 6.3(b)
and 7.1(i). For purposes of this Section 5.4(a), a Company Acquisition Proposal
(as defined below) that was first received by the Company prior to the date of
this Agreement shall be deemed "unsolicited" only if (i) discussions with
respect to such Company Acquisition Proposal were terminated by Company prior to
the date of this Agreement in accordance with this Section 5.4(a) and (ii) the
Company received after the date of this Agreement, a renewed expression of
interest with respect to such Company Acquisition Proposal without any
solicitation on the part of the Company.
For purposes of this Agreement, "Company Acquisition Proposal" shall
mean any offer or proposal by a third party relating to: (A) any acquisition or
purchase from the Company by any person or "group" (as defined under Section
13(d) of the Exchange Act and the rules and regulations thereunder) of more than
a 30% interest in the total outstanding voting securities of the Company or any
of its subsidiaries or any tender offer or exchange offer that if consummated
would result in any person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) beneficially owning 30%
or more of the total outstanding voting securities of the Company or any of its
subsidiaries or any merger, consolidation, business combination or similar
transaction involving the Company pursuant to which the stockholders of the
Company immediately preceding such transaction hold less than 60% of the equity
interests in the surviving or resulting entity of such transaction or (B) any
sale, lease (other than in the ordinary course of business), exchange, transfer,
license (other than in the ordinary course of business), acquisition, or
disposition of more than 50% of the assets of the Company.
5.5 No Parent Solicitation.
----------------------
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(a) From and after the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement pursuant to Article VII,
Parent and its subsidiaries will not, nor will they authorize or permit any of
their respective officers, directors, affiliates under the control of the Parent
or employees or any investment banker, attorney or other advisor or
representative retained by any of them (collectively, "Parent Representatives")
to, directly or indirectly, (i) solicit, initiate, knowingly encourage or
knowingly induce the making, submission or announcement of any Parent
Acquisition Proposal (as hereinafter defined), (ii) participate in any
discussions (except discussions to elicit information to concerning a Parent
Acquisition Proposal which is required to determine whether such proposal may
constitute a Parent Superior Offer) or negotiations regarding, or furnish to any
person any non-public information with respect to, or take any other action to
facilitate any inquiries or the making of any Parent Acquisition Proposal,
except to elicit information concerning a Parent Acquisition Proposal which is
required to determine whether such proposal may constitute a Parent Superior
Offer, (iii) approve, endorse or recommend any Parent Acquisition Proposal or
(iv) enter into any letter of intent or similar document or any contract,
agreement or commitment proposing or providing for any Parent Acquisition
Proposal; provided, however, that notwithstanding the foregoing, Parent may
disclose the provisions of this Section 5.5 in response to an unsolicited
inquiry from any person or group, and prior to the Parent Stockholder Approval
at the Parent Stockholders' Meeting, this Section 5.5(a) shall not prohibit
Parent from furnishing nonpublic information regarding Parent and its
subsidiaries to, or entering into or participating in discussions or
negotiations with, any person or group who has submitted (and not withdrawn) to
Parent an unsolicited, written Parent Acquisition Proposal, if the Board of
Directors of Parent concludes in good faith (after consultation with a financial
advisor of national standing) may constitute a Parent Superior Offer (which for
purposes of this Section 5.5(a) shall be defined without reference to subsection
(b) of the definition of Parent Superior Offer in Section 5.3(c) hereof) if (1)
neither Parent nor any authorized Parent Representative and its subsidiaries
shall have violated any of the restrictions set forth in this Section 5.5, (2)
the Board of Directors of Parent concludes in good faith, after consultation
with its outside legal counsel, that the failure to take such action would be
inconsistent with the fiduciary obligations of the Board of Directors of Parent
to Parent's stockholders under applicable law, (3) prior to furnishing any such
nonpublic information to, or entering into any such discussions (except
discussions to elicit information concerning a Parent Acquisition Proposal which
is required to determine whether such proposal may constitute a Parent Superior
Offer) or negotiations with, such person or group, Parent gives Company written
notice of the identity of such person or group and all of the material terms and
conditions of such Parent Acquisition Proposal and of Parent's intention to
furnish nonpublic information to, or enter into discussions with, such person or
group, and Parent receives from such person or group an executed confidentiality
agreement containing terms which shall not restrict Parent from complying with
its disclosure obligations under this Agreement and which shall otherwise
contain customary limitations on the use and disclosure of all non-public
information furnished to such person or group or on behalf of Parent and other
terms no less favorable to Parent than those set forth in the Confidentiality
Agreement, and (4) contemporaneously with furnishing any such nonpublic
information to such person or group, Parent furnishes such nonpublic information
to Company (to the extent such nonpublic information has not been previously
furnished by Parent to Company). Parent and its subsidiaries will immediately
cease any and all existing activities, discussions or negotiations
-46-
with any parties conducted heretofore with respect to any Parent Acquisition
Proposal. Without limiting the foregoing, it is understood that any violation of
the restrictions set forth in the preceding two sentences by any authorized
Parent Representative or any of its subsidiaries shall be deemed to be a breach
of this Section 5.5 by Company; provided, however, that if a violation consists
of a communication by any Parent Representative (other than an executive,
officer or director) which was unauthorized by Parent and Parent terminates its
relationship with such Parent Representative and with such Parent Representative
employer (if a third party) immediately upon becoming aware of such
communication, then such from and after such termination, then such
communication shall no longer be deemed to constitute a material breach of this
Agreement for purposes of Sections 6.2(b) and 7.1(h). For purposes of this
Section 5.5(a), a Parent Acquisition Proposal (as defined below) that was first
received by the Parent prior to the date of this Agreement shall be deemed
"unsolicited" only if (i) discussions with respect to such Parent Acquisition
Proposal were terminated by Parent prior to the date of this Agreement in
accordance with this Section 5.5(a) and (ii) the Parent received after the date
of this Agreement, a renewed expression of interest with respect to such Parent
Acquisition Proposal without any solicitation on the part of the Parent.
For purposes of this Agreement, "Parent Acquisition Proposal" shall
mean any offer or proposal by a third party relating to: (A) any acquisition or
purchase from Parent by any person or "group" (as defined under Section 13(d) of
the Exchange Act and the rules and regulations thereunder) of more than a 30%
interest in the total outstanding voting securities of Parent or any of its
subsidiaries or any tender offer or exchange offer that if consummated would
result in any person or "group" (as defined under Section 13(d) of the Exchange
Act and the rules and regulations thereunder) beneficially owning 30% or more of
the total outstanding voting securities of Parent or any of its subsidiaries or
any merger, consolidation, business combination or similar transaction involving
Parent pursuant to which the stockholders of Parent immediately preceding such
transaction hold less than 60% of the equity interests in the surviving or
resulting entity of such transaction or (B) any sale, lease (other than in the
ordinary course of business), exchange, transfer, license (other than in the
ordinary course of business), acquisition, or disposition of more than 50% of
the assets of Parent.
5.6 Confidentiality; Access to Information.
--------------------------------------
(a) The parties acknowledge that Company and Parent have previously
executed a mutual confidentiality agreement, dated as of April 5, 2001 (the
"Confidentiality Agreement"), which Confidentiality Agreement will continue in
full force and effect in accordance with its terms.
(b) Access to Information. Company will afford Parent and its
---------------------
accountants, counsel and other representatives reasonable access during normal
business hours to the properties, books, contracts, commitments, records
(including tax returns and related work papers) and personnel of Company during
the period prior to the Effective Time to obtain all information concerning the
business, including the status of product development efforts, properties,
results of operations and personnel of Company, as Parent may reasonably
request; provided that Company shall not be required to provide Parent or its
agents with access to any files, books, records or information where (i) such
access would waive any privileges available under applicable law, or (ii) would
breach the terms of any nondisclosure agreement with any third party after
Company shall have used all reasonable efforts to obtain a waiver of, or consent
to disclosure under, such agreement. Parent will afford Company and its
accountants, counsel and other representatives reasonable access during normal
business hours to the properties, books, contracts, commitments, records
(including returns and related work papers) and personnel of Parent during the
period prior to the Effective Time to obtain all information concerning the
business, including the status of product development efforts, properties,
results of operations and personnel of Parent, as Company may reasonably
request; provided that Parent shall not be required to provide Company or its
agents with access to any files, books, records or information where (i) such
access would waive any privileges available
-47-
under applicable law, or (ii) would breach the terms of any nondisclosure
agreement with any third party after Parent shall have used all reasonable
efforts to obtain a waiver of, or consent to disclosure under, such agreement.
No information or knowledge obtained in any investigation pursuant to this
Section 5.6 will 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. Unless otherwise required by law, the parties will hold
such non-public information in confidence in accordance with the Confidentiality
Agreement. Company will take all reasonable precautions to prevent any trading
in the securities of Parent by officers, directors, employees and agents of
Company, having knowledge of any material information regarding Parent provided
hereunder, including, without limitation, the existence of the transactions
contemplated by this Agreement until the information in question has been
publicly disclosed. Parent will take all reasonable precautions to prevent any
trading in the securities of Company by officers, directors, employees and
agents of Parent, having knowledge of any material information regarding Company
provided hereunder, including, without limitation, the existence of the
transactions contemplated by this Agreement until the information in question
has been publicly disclosed.
5.7 Public Disclosure. Parent and Company will consult with each
-----------------
other, and to the extent practicable, agree, before issuing any press release or
otherwise making any public statement with respect to the Merger or this
Agreement, and will not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law or any
listing agreement with a national securities exchange. The parties have agreed
to the text of the joint press release announcing the signing of this Agreement.
5.8 Reasonable Efforts; Notification.
--------------------------------
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by this
Agreement, including using commercially reasonable efforts to accomplish the
following: (i) the taking of all reasonable acts necessary to cause the
conditions precedent set forth in Article VI to be satisfied, (ii) the obtaining
of all necessary actions or nonactions, waivers, consents, approvals, orders and
authorizations from Governmental Entities and the making of all necessary
registrations, declarations and filings (including registrations, declarations
and filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to
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avoid any suit, claim, action, investigation or proceeding by any Governmental
Entity, (iii) the obtaining of all necessary consents, approvals or waivers from
third parties, (iv) the defending of any suits, claims, actions, investigations
or proceedings, whether judicial or administrative, challenging this Agreement
or the consummation of the transactions contemplated hereby, including seeking
to have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed and (v) the execution or delivery of any
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement.
(b) Each of Company and Parent will give prompt notice to the other
of (i) any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the Merger, (ii)
any notice or other communication from any Governmental Entity in connection
with the Merger, (iii) any litigation relating to, involving or otherwise
affecting Company, Parent or their respective subsidiaries that relates to the
consummation of the Merger. Company shall give prompt notice to Parent of any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate, or any failure of Company to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 6.3 would not be satisfied, provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement. Parent shall give prompt notice to Company of any
representation or warranty made by it or Merger Sub contained in this Agreement
becoming untrue or inaccurate, or any failure of Parent or Merger Sub to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement, in each case, such
that the conditions set forth in Section 6.2 would not be satisfied, provided,
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
5.9 Third Party Consents. As soon as practicable following the date
--------------------
hereof, Parent and Company will each use all commercially reasonable efforts to
obtain any material consents, waivers and approvals under any of its or its
subsidiaries' respective agreements, contracts, licenses or leases required to
be obtained in connection with the consummation of the transactions contemplated
hereby.
5.10 Stock Options and ESPP.
----------------------
(a) At the Effective Time, each outstanding Company Option, whether
granted under the Company's stock option plans or subject to a non-plan
agreement and whether or not exercised, outstanding immediately prior to the
Effective Time, whether or not then exercisable, will be assumed by Parent (an
"Assumed Company Option"). Each Assumed Company Option so assumed by Parent
under this Agreement will continue to have, and be subject to, the same terms
and conditions set forth in the Assumed Company Options immediately prior to the
Effective Time (including, without limitation, any repurchase rights or vesting
provisions), except that (i) each such Assumed Company Option will be
exercisable (or will become exercisable in accordance with its terms) for that
number of whole shares of Parent
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Common Stock equal to the product of the number of shares of Company Common
Stock that were issuable upon exercise of such Assumed Company Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock and
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such Assumed Company Option will be equal to the quotient
determined by dividing the exercise price per share of Company Common Stock at
which such Assumed Company Option was exercisable immediately prior to the
Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.
Continuous employment with Company or its subsidiaries shall be credited to the
optionee for purposes of determining the vesting of all assumed Company Options
after the Effective Time.
(b) It is intended that Assumed Company Options assumed by Parent
shall qualify following the Effective Time as incentive stock options as defined
in Section 422 of the Code to the extent Company Options qualified as incentive
stock options immediately prior to the Effective Time and the provisions of this
Section 5.10 shall be applied consistent with such intent.
(c) Each outstanding purchase right under the Company ESPP (each an
"Assumed Purchase Right") shall be assumed by Buyer. Each Assumed Purchase
Right shall continue to have, and be subject to, the terms and conditions set
forth in the Company ESPP and the documents governing the Assumed Purchase
Rights, except that the number of shares of Buyer Common Stock issuable upon
exercise thereof shall equal the number of shares of Company Common Stock
otherwise issuable upon exercise thereof multiplied by the Exchange Ratio and
the purchase price of such shares of Buyer Common Stock on the Purchase Date (as
defined in the ESPP) shall be the lower of (i) the quotient determined by
dividing eighty-five percent (85%) of the fair market value per share of the
Company Common Stock on the Offering Date for such Purchase Period by the
Exchange Ratio or (ii) eighty-five percent (85%) of the fair market value per
share of the Buyer Common Stock on the applicable Purchase Date (with the number
of shares rounded down to the nearest whole share and the purchase price rounded
up to the nearest whole cent). The Assumed Purchase Rights shall be exercised
on the applicable Purchase Date, and each participant shall, accordingly, be
issued shares of Buyer Common Stock at such time. The Company ESPP and all
outstanding purchase rights thereunder shall terminate on the last day of any
Offering Period in effect on the date hereof, and no additional purchase rights
shall be granted and no additional Offering Periods shall commence following the
date hereof. Buyer agrees that from and after the Effective Time, employees of
Company may participate in Buyer's employee stock purchase plan, subject to the
terms and conditions of such plan if they are not participating in the ESPP on
such date. Capitalized terms in this Section 6.14 if not otherwise defined in
this Agreement, have the meanings ascribed to them in the Company ESPP.
5.11 Company Warrants. At the Effective Time, each outstanding
----------------
Company Warrant, whether or not then exercisable, will be assumed by Parent.
Each Company Warrant so assumed by Parent under this Agreement will continue to
have, and be subject to, the same terms and conditions set forth in such Company
Warrant immediately prior to the Effective Time (including, without limitation,
any vesting provisions), except that (i) each such Company Warrant will be
exercisable (or will become exercisable in accordance with its terms) for that
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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 Warrant immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounded down to the nearest whole number of shares of Parent
Common Stock and (ii) the per share exercise price for the shares of Parent
Common Stock issuable upon exercise of such Company Warrant will be equal to the
quotient determined by dividing the exercise price per share of Company Common
Stock at which such Company Warrant was exercisable immediately prior to the
Effective Time by the Exchange Ratio, rounded up to the nearest whole cent. The
exercisability period and other terms and conditions of the Company Warrants
will remain unchanged.
5.12 Form S-8. Parent agrees to file a registration statement on
--------
Form S-8 for the shares of Parent Common Stock issuable with respect to assumed
Company Options as soon as is reasonably practicable, after the Effective Time
and shall maintain the effectiveness of such registration statement thereafter
for so long as any of such options or other rights remain outstanding.
5.13 Indemnification.
---------------
(a) From and after the Effective Time, Parent will cause the
Surviving Corporation to fulfill and honor in all respects the obligations of
Company pursuant to any indemnification agreements between Company and its
directors and officers as of the Effective Time (the "Indemnified Parties") and
any indemnification provisions under Company's Certificate of Incorporation or
Bylaws as in effect on the date hereof. The Certificate of Incorporation and
Bylaws of the Surviving Corporation will contain provisions with respect to
exculpation and indemnification that are at least as favorable to the
Indemnified Parties as those contained in the Certificate of Incorporation and
Bylaws of Company as in effect on the date hereof, which provisions will not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who, immediately prior to the Effective Time, were directors,
officers, employees or agents of Company, unless such modification is required
by law.
(b) For a period of six years after the Effective Time, Parent will
cause the Surviving Corporation to maintain in effect, if available, directors'
and officers' liability insurance covering those persons who are currently
covered by Company's directors' and officers' liability insurance policy on
terms comparable to those applicable to the current directors and officers of
Company; provided, however, that in no event will Parent or the Surviving
Corporation be required to expend in excess of 200% of the annual premium
currently paid by Company for such coverage (or such coverage as is available
for such 200% of such annual premium).
(c) This Section 5.13 shall survive the consummation of the Merger,
is intended to benefit Company, the Surviving Corporation and each Indemnified
Party, shall be binding on all successors and assigns of the Surviving
Corporation and Parent, and shall be enforceable by the Indemnified Parties.
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5.14 Parent Board of Directors. The Board of Directors of Parent
-------------------------
will take all actions reasonably necessary such that, effective upon the
Effective Time, two persons designated by a majority of Parent's Board of
Directors, two persons designated by a majority of Company's Board of Directors
and one person to be mutually agreed to by Parent and Company which will be
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ or such other person as may be mutually agreed (the "New
Directors") shall be appointed to Parent's Board of Directors, which directors
will be appointed to the respective classes (Class I, Class II or Class III) as
follows: (i) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (or his replacement or substitute) will serve in
Class I, (ii) one of the two directors designed by Parent's Board of Directors
will serve in Class II and the other director designated by Parent's Board of
Directors will serve in Class II, and (iii) one of the two directors designed by
Company's Board of Directors will serve in Class III and the other director
designated by Company's Board of Directors will serve in Class III. Parent will
use all commercially reasonable efforts to fulfill the conditions set forth in
Section 6.2(e). Upon the Effective Time, ▇▇▇▇▇ Bay will be appointed to serve as
Chief Executive Officer and President of Parent, and ▇▇▇▇▇ ▇▇▇▇ will be
appointed to serve as Chairman of Parent.
5.15 Nasdaq Listing. Parent shall use all requisite commercially
--------------
reasonable efforts to 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, subject to official notice of issuance.
Each of Company and Parent agrees to continue the quotation of Parent Common
Stock and Company Common Stock, respectively, on the Nasdaq National Market,
during the term of this Agreement so that appraisal rights will not be available
to stockholders of Company under Section 262 of Delaware Law. Nothing in this
Agreement shall prohibit or limit the right of any party to effect a reverse
stock split of such party's outstanding common stock, including taking any
action under such party's charter documents to accomplish such stock split
(provided that the Exchange Ratio shall be subject to proportional adjustment in
accordance with Section 1.6(f) in the event of any reverse stock split effected
prior to the Effective Time).
5.16 Letters of Accountants. Company and Parent shall use their
----------------------
respective reasonable efforts to cause to be delivered to Parent letters of
Company's and Parent's independent accountants, respectively, dated no more than
two business days before the date on which the Registration Statement becomes
effective (and satisfactory in form and substance to Parent), that is customary
in scope and substance for letters delivered by independent public accountants
in connection with registration statements similar to the Registration
Statement.
5.17 Takeover Statutes. If any Takeover Statute is or may become
-----------------
applicable to the Merger or the other transactions contemplated by this
Agreement, each of Parent and Company and their respective Boards of Directors
shall grant such approvals and take such lawful actions as are necessary to
ensure that such transactions may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise act to eliminate or
minimize the effects of such statute and any regulations promulgated thereunder
on such transactions.
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5.18 Certain Employee Benefits.
-------------------------
(a) As soon as practicable after the execution of this Agreement, Company
and Parent shall confer and work together in good faith to agree upon mutually
acceptable employee benefit and compensation arrangements (and terminate Company
Employee Plans immediately prior to the Effective Time if appropriate).
(b) Employees of the Company and its subsidiaries will be granted credit
for all service with the Company, its subsidiaries or its Affiliates under each
Company employee benefit plan, program or arrangement of Parent or its
Affiliates in which such Employees are eligible to participate for all purposes,
except for purposes of benefit accrual under a defined benefit pension plan.
If Employees become eligible to participate in a medical, dental or health plan
of Parent or its Affiliates, Parent will cause such plan to (i) waive any
preexisting condition exclusions and waiting period limitations for conditions
covered under the applicable medical, dental or health plans maintained or
contributed to by Company (but only to the extent corresponding exclusions and
limitations were satisfied by such Employees under the applicable medical,
dental or health plans maintained or contributed to by Company); and (ii) credit
any deductible or out of pocket expenses incurred by the Employees and their
beneficiaries under such plans during the portion of the calendar year prior to
such participation.
(c) Parent and Company shall each perform and undertake all acts as may be
necessary to comply with the applicable provisions of the Workers Adjustment and
Retaining Act ("WARN") and laws for all of their respective employees. Parent
shall be responsible for and pay any liability for severance payments, pursuant
to WARN or otherwise, to any Parent employee that accrues or becomes payable
during the period of such employee's employment or service with Parent or arises
out of the termination of such person's employment with Parent. Company shall
be responsible for and pay any liability for severance payments, pursuant to
WARN or otherwise, to any Company employee that accrues or becomes payable
during the period of such employee's employment or service with Company or
arises out of the termination of such persons employment with Company.
5.19 Section 16. Provided that Company delivers to Parent the
----------
Section 16 Information (as defined below) in a timely fashion, the Board of
Directors of Parent, or a committee of two or more Non-Employee Directors
thereof (as such term is defined for purposes of Rule 16b-3 under the Exchange
Act), shall adopt resolutions prior to the consummation of the Merger, providing
that the receipt by the Company Insiders (as defined below) of the Parent Common
Stock upon conversion of the Company Common Stock, and of options for Parent
Common Stock upon conversion of the Company Options, in each case pursuant to
the transactions contemplated hereby, are intended to be exempt from liability
pursuant to Section 16(b) under the Exchange Act. Such resolutions shall comply
with the approval conditions of Rule 16b-3 under the Exchange Act for purposes
of such Section 16(b) exemption, including, but not limited to, specifying the
name of the Company Insiders, the number of securities to be acquired or
disposed of for each such person, the material terms of any derivative
securities, and that the approval is intended to make the receipt of such
securities exempt pursuant to Rule 16b-3(d). "Section 16 Information" shall
mean information regarding the Company Insiders, the number of shares of Company
capital stock held by each such Company Insider and expected to
-53-
be exchanged for Parent Common Stock in connection with the Merger, and the
number and description of the Company Options held by each such Company Insider
and expected to be converted into options for Parent Common Stock in connection
with the Merger. "Company Insiders" shall mean those officers and directors of
Company who will be subject to the reporting requirement of Section 16(b) of the
Exchange Act with respect to Parent and who are listed in the Section 16
Information.
5.20 Tax Matters. Each of Parent, Merger Sub and Company agrees that
-----------
it will not take any action, or fail to take any action, which action or failure
to act would be reasonably likely to cause the Merger to fail to qualify as a
"reorganization" pursuant to the provisions of Section 368 of the Code.
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 Date of the
following conditions:
(a) Company Stockholder Approval. This Agreement shall have been
----------------------------
approved and adopted, and the Merger shall have been approved, by the requisite
vote of the stockholders of Company under applicable law and the Company Charter
Documents.
(b) Parent Stockholder Approval. The Parent Stockholder Approvals
---------------------------
shall have been approved by the requisite vote of the stockholders of Parent
under applicable law and the Parent Charter Documents.
(c) Registration Statement Effective; Proxy Statement. The SEC shall
-------------------------------------------------
have declared the Registration Statement effective. No stop order suspending
the effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose, and no similar proceeding in
respect of the Joint Proxy Statement/Prospectus, shall have been initiated or
threatened in writing by the SEC.
(d) No Order; HSR Act. No Governmental Entity shall have enacted,
-----------------
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger. All
waiting periods, if any, under the HSR Act relating to the transactions
contemplated hereby will have expired or been terminated.
(e) Nasdaq Listing. The shares of Parent Common Stock to be issued
--------------
in the Merger shall have been approved for listing on the Nasdaq Stock Market,
subject to official notice of issuance.
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(f) Consents. Other than the filing of the Certificate of Merger
--------
with the Delaware Secretary of State, all required approvals or consents of any
Governmental Entity or other person in connection with the Merger and the
consummation of the other transactions contemplated hereby shall have been
obtained (and all relevant statutory, regulatory or other governmental waiting
periods, shall have expired) unless the failure to receive any such approval or
consent would not be reasonably likely, directly or indirectly, to result in a
Material Adverse Effect on Parent and its subsidiaries (including, for the
purposes of this condition, Company and its subsidiaries), taken as a whole.
6.2 Additional Conditions to Obligations of Company. The obligation
-----------------------------------------------
of Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Company:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Parent and Merger Sub contained in this Agreement, disregarding
all qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect or any similar standard or qualification, shall be true
and correct at and as of the Closing Date as if made at and as of the Closing
Date (other than representations and warranties that address matters only as of
a certain date, which shall be true and correct as of such date), except as a
result of transactions contemplated by this Agreement, and where the failure of
such representations or warranties to be true or correct would not have,
individually or in the aggregate, a Material Adverse Effect on Parent. It is
understood that, for purposes of determining the accuracy of such
representations and warranties, any update of or modification to the Parent
Disclosure Letter made or purported to have been made after the execution of
this Agreement, unless agreed to in writing by the Company, shall be
disregarded. Company shall have received a certificate with respect to the
foregoing signed on behalf of Parent by the Chief Executive Officer or Chief
Financial Officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
------------------------
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date and Company shall have received a certificate to such effect
signed on behalf of Parent by the Chief Executive Officer or Chief Financial
Officer of Parent.
(c) Material Adverse Effect. No Material Adverse Effect with respect
-----------------------
to Parent shall have occurred since the date of this Agreement and be
continuing.
(d) Tax Opinion. Company shall have received an opinion of Fenwick &
-----------
West LLP, dated as of the Closing Date, in form and substance reasonably
satisfactory to it, on the basis of the facts, representations and assumptions
set forth or referred to in such opinion, that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code; provided,
however, that if the counsel to Company does not render such opinion, this
condition shall nonetheless be deemed to be satisfied with respect to Company if
counsel to Parent renders such opinion to Company. The parties to this
Agreement agree to make such
-55-
reasonable representations as requested by such counsel for the purpose of
rendering such opinions.
(e) Parent Board of Directors. All actions necessary in order for
-------------------------
the New Directors to become members of the Parent Board of Directors upon the
Effective Time in accordance with Section 5.14 shall have occurred.
(f) Parent Interim Plan. Parent shall have complied with and timely
-------------------
completed, in all material respects, the Parent Interim Plan.
6.3 Additional Conditions to the Obligations of Parent and Merger
-------------------------------------------------------------
Sub. The obligations of Parent and Merger Sub to consummate and effect the
---
Merger shall be subject to the satisfaction at or prior to the Closing Date 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 Company contained in this Agreement, disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect or any similar standard or qualification, shall be true
and correct at and as of the Closing Date as if made at and as of the Closing
Date (other than representations and warranties that address matters only as of
a certain date, which shall be true and correct as of such date), except as a
result of transactions contemplated by this Agreement and except where the
failure of such representations or warranties to be true or correct would not
have, individually or in the aggregate, a Material Adverse Effect on Company.
It is understood that, for purposes of determining the accuracy of such
representations and warranties, any update of or modification to the Company
Disclosure Letter made or purported to have been made after the execution of
this Agreement, unless agreed to in writing by the Company, shall be
disregarded. Parent shall have received a certificate with respect to the
foregoing signed on behalf of Company by the Chief Executive Officer or Chief
Financial Officer of Company.
(b) Agreements and Covenants. Company shall have performed or
------------------------
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date and Parent shall have received a certificate to such effect signed on
behalf of Company by the Chief Executive Officer or Chief Financial Officer of
Company.
(c) Material Adverse Effect. No Material Adverse Effect with respect
-----------------------
to Company shall have occurred since the date of this Agreement and be
continuing.
(d) Company Interim Plan. The Company shall have complied with and
--------------------
timely completed, in all material respects, the Company Interim Plan.
(e) Tax Opinion. Parent shall have received an opinion of ▇▇▇▇▇▇▇,
-----------
Phleger & ▇▇▇▇▇▇▇▇ LLP, dated as of the Closing Date, in form and substance
reasonably satisfactory to it, on the basis of the facts, representations and
assumptions set forth or referred to in such opinion, that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Code;
provided, however, that if the counsel to Parent does not render such opinion,
this
-56-
condition shall nonetheless be deemed to be satisfied with respect to Parent if
counsel to the Company renders such opinion to Parent. The parties to this
Agreement agree to make such reasonable representations as requested by such
counsel for the purpose of rendering such opinions.
Article VII
Termination, Amendment and Waiver
7.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Effective Time, whether before or after the requisite approvals of the
stockholders of Company or Parent:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and Company;
(b) by either Company or Parent if the Merger shall not have been
consummated by October 31, 2001 for any reason; provided, however, that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose action or failure to act has been a proximate cause
of the failure of the Merger to occur on or before such date and such action or
failure to act constitutes a material breach of this Agreement, provided further
that such date shall be extended to December 31, 2001 in the event that the
waiting period under the HSR Act has not expired or been terminated or the
Registration Statement has not been declared effective, and the extending party
reasonably believes that the waiting period will expire or the registration
statement will be declared effective in time to permit the closing to occur on
or before December 31, 2001.
(c) by either Company or Parent if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action, in any case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, which order, decree, ruling or other action is final and non-appealable;
(d) by either Company or Parent, if the approval and adoption of this
Agreement, and the approval of the Merger, by the stockholders of Company shall
not have been obtained by reason of the failure to obtain the required vote at a
meeting of Company stockholders duly convened therefore or at any adjournment
thereof; provided, however, that the right to terminate this Agreement under
this Section 7.1(d) shall not be available to Company where the failure to
obtain the Company stockholder approval shall have been caused by the action or
failure to act of Company and such action or failure to act constitutes a
material breach by Company of this Agreement;
(e) by either Company or Parent, if the approval of the issuance of
shares of Parent Common Stock pursuant to the Merger by the stockholders of
Parent shall not have been obtained by reason of the failure to obtain the
respective required votes at a meeting of Parent stockholders duly convened
therefore or at any adjournment thereof; provided, however, that the right to
terminate this Agreement under this Section 7.1(e) shall not be available to
Parent where the failure to obtain the Parent stockholder approvals shall have
been caused by the action or failure to act of Parent and such action or
-57-
failure to act constitutes a material breach by Parent of this Agreement;
(f) by Parent (at any time prior to the adoption and approval of this
Agreement and the Merger by the required vote of the stockholders of Company) if
a Company Triggering Event (as defined below) shall have occurred;
(g) by Company (at any time prior to the approval of the Parent
Stockholder Approval by the required vote of the stockholders of Parent) if a
Parent Triggering Event (as defined below) shall have occurred;
(h) by Company, if Parent shall have breached any representation or
warranty or shall breach any covenant or agreement on the part of Parent set
forth in this Agreement, or if any representation or warranty of Parent shall
have become materially inaccurate, in either case such that the conditions set
forth in Section 6.2(a) or Section 6.2(b) would not be satisfied as of the time
of such breach or as of the time such representation or warranty shall have
become materially inaccurate, provided that if such inaccuracy in Parent's
representations and warranties or material breach by Parent is curable by Parent
through the exercise of its commercially reasonable efforts, then Company may
not terminate this Agreement under this Section 7.1(h) for 45 days after
delivery of written notice from Company to Parent of such material breach,
provided Parent continues to exercise commercially reasonable efforts to cure
such material breach (it being understood that Company may not terminate this
Agreement pursuant to this paragraph (h) if such material breach or material
inaccuracy by Parent is cured during such 45-day period, or if Company is then
in material breach under this Agreement);
(i) by Parent, if the Company shall have breached any representation
or warranty or shall breach any covenant or agreement on the part of the Company
set forth in this Agreement, or if any representation or warranty of the Company
shall have become materially inaccurate, in either case such that the conditions
set forth in Section 6.3(a) or Section 6.3(b) would not be satisfied as of the
time of such breach or as of the time such representation or warranty shall have
become materially inaccurate, provided that if such inaccuracy in the Company's
representations and warranties or material breach by the Company is curable by
the Company through the exercise of its commercially reasonable efforts, then
Parent may not terminate this Agreement under this Section 7.1(i) for 45 days
after delivery of written notice from Parent to the Company of such material
breach, provided the Company continues to exercise commercially reasonable
efforts to cure such material breach (it being understood that the Parent may
not terminate this Agreement pursuant to this paragraph (h) if such material
breach or material inaccuracy by the Company is cured during such 45-day period,
or if Parent is then in material breach under this Agreement); or
(j) By Parent, if Company shall have willfully and materially breached
the Company's obligations under the Loan Agreement and such breach shall
continue despite two (2) business days written notice and opportunity to cure;
or
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(k) By the Company, if Parent shall have willfully and materially
breached Parent's obligations under the Loan Agreement and such breach shall
continue despite two (2) business days written notice and an opportunity to
cure.
For the purposes of this Agreement, a "Company Triggering Event" shall
be deemed to have occurred if: (i) the Board of Directors of Company or any
committee thereof shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to Parent its recommendation in favor of the
adoption and approval of the Agreement or the approval of the Merger; (ii)
Company shall have failed to include in the Joint Proxy Statement/Prospectus the
recommendation of the Board of Directors of Company in favor of the adoption and
approval of the Agreement and the approval of the Merger; (iii) the Board of
Directors of Company fails to reaffirm its recommendation in favor of the
adoption and approval of the Agreement and the approval of the Merger within 10
business days after Parent requests in writing that such recommendation be
reaffirmed at any time following the public announcement of a Company
Acquisition Proposal; (iv) the Board of Directors of Company or any committee
thereof shall have approved or publicly recommended any Company Acquisition
Proposal; (v) Company shall have entered into any letter of intent of similar
document or any agreement, contract or commitment accepting any Company
Acquisition Proposal; (vi) Company shall have knowingly breached any of the
material provisions of Sections 5.2 or any of the provisions of Section 5.4; or
(vii) a tender or exchange offer relating to securities of Company shall have
been commenced by a person unaffiliated with Parent, and Company shall not have
sent to its securityholders pursuant to Rule 14e-2 promulgated under the
Securities Act, within 10 business days after such tender or exchange offer is
first published sent or given, a statement disclosing that Company recommends
rejection of such tender or exchange offer.
For the purposes of this Agreement, a "Parent Triggering Event" shall
be deemed to have occurred if: (i) the Board of Directors of Parent or any
committee thereof shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to Company its recommendation in favor of the
Parent Stockholder Approval; (ii) Parent shall have failed to include in the
Joint Proxy Statement/Prospectus the recommendation of the Board of Directors of
Parent in favor of the Parent Stockholder Approval; (iii) the Board of Directors
of Parent fails to reaffirm its recommendation in favor of the adoption and
approval of the Agreement and the approval of the Merger within 10 business days
after Company requests in writing that such recommendation be reaffirmed at any
time following the public announcement of an Parent Acquisition Proposal; (iv)
the Board of Directors of Parent or any committee thereof shall have approved or
publicly recommended any Parent Acquisition Proposal; (v) Parent shall have
entered into any letter of intent of similar document or any agreement, contract
or commitment accepting any Parent Acquisition Proposal; (vi) Parent shall have
knowingly breached any of the material provisions of Sections 5.3 or any of the
provisions of Section 5.5, or (vii) a tender or exchange offer relating to
securities of Parent shall have been commenced by a person unaffiliated with
Company, and Parent shall not have sent to its securityholders pursuant to Rule
14e-2 promulgated under the Securities Act, within 10 business days after such
tender or exchange offer is first published sent or given, a statement
disclosing that Parent recommends rejection of such tender or exchange offer.
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7.2 Notice of Termination; Effect of Termination. Any proper
--------------------------------------------
termination of this Agreement under Section 7.1 above will be effective
immediately upon the delivery of written notice of the terminating party to the
other parties hereto. In the event of the termination of this Agreement as
provided in Section 7.1, this Agreement shall be of no further force or effect,
and there shall be no obligation or liability on the part of Parent, Merger Sub,
Company, or any of their respective officers, directors, securityholders or
affiliates, except (i) as set forth in Section 5.7, this Section 7.2, Section
7.3 and Article 8, each of which shall survive the termination of this
Agreement, and (ii) nothing herein shall relieve any party from liability for
any fraud or, notwithstanding Section 7.6, willful breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
7.3 Fees and Expenses.
-----------------
(a) General. Except as set forth in this Section 7.3, all fees and
-------
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; provided, however, that Parent and Company
shall share equally all fees and expenses, other than attorneys' and accountants
fees and expenses, incurred in relation to the printing and filing with the SEC
of the Joint Proxy Statement/Prospectus (including any preliminary materials
related thereto) and the Registration Statement (including financial statements
and exhibits), any amendments or supplements thereto and any HSR Act filing
fees.
(b) Company Payments. In the event that this Agreement is terminated
----------------
by Parent or Company, as applicable, pursuant to Sections 7.1(b), 7.1(d) or
7.1(f), the Company shall promptly, but in no event later than two days after
the date of such termination, pay Parent a fee equal to $2.5 million in
immediately available funds (the "Termination Fee"); provided, that in the case
of a termination under Sections 7.1(b) or 7.1(d) prior to which no Company
Triggering Event has occurred, (i) such payment shall be made only if (A)
following the date of this Agreement and prior to the termination of this
Agreement, a person has publicly announced and not withdrawn a Company
Acquisition Proposal and (B) within twelve months following the termination of
this Agreement, either a Company Acquisition (as defined below) is consummated
with such person, or the Company enters into an agreement providing for a
Company Acquisition with such person and such Company Acquisition is later
consummated with such person (or an affiliate of such person) with whom such
agreement was entered into (regardless of when such consummation occurs if the
Company has entered into such an agreement within such twelve-month period), and
(ii) such payment shall be made promptly, but in no event later than two days
after the consummation of such Company Acquisition (regardless of when such
consummation occurs if the Company has entered into such an agreement within
such twelve-month period). Company acknowledges that the agreements contained
in this Section 7.3(b) are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Parent would not enter into
this Agreement. Accordingly, if the Company fails to pay in a timely manner the
amounts due pursuant to this Section 7.3(b), and, in order to obtain such
payment, Parent makes a claim that results in a judgment against the Company for
the amounts set forth in this Section 7.3(b), Company shall pay to Parent its
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reasonable costs and expenses (including reasonable attorneys' fees and
expenses) in connection with such suit, together with interest on the amounts
set forth in this Section 7.3(b) at the prime rate of The Chase Manhattan Bank
in effect on the date such payment was required to be made. Payment of the fees
described in this Section 7.3(b) shall not be in lieu of damages incurred in the
event of willful breach of this Agreement.
For the purposes of this Agreement, "Company Acquisition" shall mean
any of the following transactions (other than the transactions contemplated by
this Agreement); (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company pursuant to which the stockholders of the Company immediately preceding
such transaction hold less than 50% of the aggregate equity interests in the
surviving or resulting entity of such transaction (or the parent thereof), (ii)
a sale or other disposition by the Company of assets representing in excess of
50% of the aggregate fair market value of the Company's business immediately
prior to such sale, or (iii) the acquisition by any person or group (including
by way of a tender offer or an exchange offer or issuance by Company), directly
or indirectly, of beneficial ownership or a right to acquire beneficial
ownership of shares representing in excess of 50% of the voting power of the
then outstanding shares of capital stock of the Company.
(c) Parent Payments. In the event that this Agreement is terminated
---------------
by Parent or Company, as applicable, pursuant to Sections 7.1(b), 7.1(e) or
7.1(g), Parent shall promptly, but in no event later than two days after the
date of such termination, pay Company a fee equal to $2.5 million in immediately
available funds (the "Termination Fee"); provided, that in the case of a
termination under Sections 7.1(b) or 7.1(e) prior to which no Parent Triggering
Event has occurred, (i) such payment shall be made only if (A) following the
date of this Agreement and prior to the termination of this Agreement, a person
has publicly announced and not withdrawn a Parent Acquisition Proposal and (B)
within twelve months following the termination of this Agreement, either a
Parent Acquisition (as defined below) is consummated with such person, or Parent
enters into an agreement providing for a Parent Acquisition with such person and
such Parent Acquisition is later consummated with such person (or affiliate of
such person) with whom such agreement was entered into (regardless of when such
consummation occurs if the Parent has entered into such an agreement within such
twelve-month period), and (ii) such payment shall be made promptly, but in no
event later than two days after the consummation of such Parent Acquisition
(regardless of when such consummation occurs if Parent has entered into such an
agreement within such twelve-month period). Parent acknowledges that the
agreements contained in this Section 7.3(c) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Company would not enter into this Agreement. Accordingly, if Parent fails to
pay in a timely manner the amounts due pursuant to this Section 7.3(c), and, in
order to obtain such payment, Parent makes a claim that results in a judgment
against Parent for the amounts set forth in this Section 7.3(c), Parent shall
pay to Company its reasonable costs and expenses (including reasonable
attorneys' fees and expenses) in connection with such suit, together with
interest on the amounts set forth in this Section 7.3(c) at the prime rate of
The Chase Manhattan Bank in effect on the date such payment was required to be
made. Payment of the fees described in this Section 7.3(c) shall not be in lieu
of damages incurred in the event of willful breach of this Agreement.
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For the purposes of this Agreement, "Parent Acquisition" shall mean
any of the following transactions (other than the transactions contemplated by
this Agreement); (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
Parent pursuant to which the stockholders of Parent immediately preceding such
transaction hold less than 50% of the aggregate equity interests in the
surviving or resulting entity of such transaction (or the parent thereof), (ii)
a sale or other disposition by Parent of assets representing in excess of 50% of
the aggregate fair market value of Parent's business immediately prior to such
sale, or (iii) the acquisition by any person or group (including by way of a
tender offer or an exchange offer or issuance by Parent), directly or
indirectly, of beneficial ownership or a right to acquire beneficial ownership
of shares representing in excess of 50% of the voting power of the then
outstanding shares of capital stock of Parent.
7.4 Amendment. Subject to applicable law, 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 Parent and Company.
7.5 Extension; Waiver. At any time prior to the Effective Time any
-----------------
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties 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. Delay in exercising any right under
this Agreement shall not constitute a waiver of such right.
7.6 Liquidated Damages. The Parent Termination Fee or the Company
------------------
Termination Fee when paid to the receiving party in the manner herein provided
shall constitute liquidated damages to the receiving party and the paying party
shall have no further liability in respect thereof. The parties agree that such
damages are difficult to estimate and that such amounts are reasonable
approximations of actual damages.
Article VIII
General Provisions
8.1 Non-Survival of Representations and Warranties. The
----------------------------------------------
representations and warranties of Company, Parent and Merger Sub contained in
this Agreement shall terminate at the Effective Time, and only the covenants and
agreements that by their terms survive the Effective Time shall survive the
Effective Time.
8.2 Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed given upon delivery either personally or by
commercial delivery service, or sent via facsimile (receipt confirmed) to the
parties at the following addresses or
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facsimile numbers (or at such other address or facsimile numbers for a party as
shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Kana Communications, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇, Chief Executive Officer
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP
Two Embarcadero Place
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
(b) if to Company, to:
Broadbase Software, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ Bay, Chief Executive Officer
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
Fenwick & West LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
8.3 Interpretation; Certain Defined Terms .
-------------------------------------
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement unless otherwise indicated. The words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When reference is
made herein to "the
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business of" an entity, such reference shall be deemed to include the business
of all direct and indirect subsidiaries of such entity. Reference to the
subsidiaries of an entity shall be deemed to include all direct and indirect
subsidiaries of such entity.
(b) For purposes of this Agreement, the term "knowledge" means with
respect to a party hereto, with respect to any matter in question, that any of
the executive officers of such party has actual knowledge of such matter. For
purposes of this definition, the "executive officers" of Company shall be those
person listed on Part 8.3(b) of the Company Disclosure Letter. For purposes of
this definition, the "executive officers" of Parent shall be those person listed
on Part 8.3(b) of the Parent Disclosure Letter.
(c) For purposes of this Agreement, the term "Material Adverse Effect"
when used in connection with an entity means any change, event, circumstance or
effect that is materially adverse to the business, assets (including intangible
assets), capitalization, financial condition, cash position, operations or
results of operations of such entity taken as a whole with its subsidiaries,
except to the extent that such change, event, circumstance or effect directly
results from any of the following (none of which shall in and of itself
constitute a Material Adverse Effect): (i) changes in general economic,
political or social conditions, (ii) short term variations in revenues, (iii)
changes in the industry generally in which such entity operates (provided that
such changes do not affect such entity in a substantially disproportionate
manner), (iv) changes in the trading prices or volume for such entity's capital
stock, (v) any changes in the electronic customer relationship management market
(provided that such changes do not affect such entity in a substantially
disproportionate manner), (vi) the effect of the public announcement or pendency
of the transactions contemplated hereby on customers, suppliers, distributors,
partners, employees, of such entity, (vii) the effect of performing any
obligations under this Agreement or the Loan Agreement or implementing the
Parent Interim Plan or the Company Interim Plan, or (viii) changes or effects
which are proximately caused by one party's (the "first party's") refusal to
consent to action reasonably requested to be taken by the other party (the
"second party") which the second party (at the time of such request) certified
to the first party was necessary, in the good faith judgment of the second
party's Board of Directors, to avoid a Material Adverse Effect on the second
party.
(d) For purposes of this Agreement, the term "person" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited liability company, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization, entity or Governmental Entity.
(e) For purposes of this Agreement, "subsidiary" of a specified entity
will be any corporation, partnership, limited liability company, joint venture
or other legal entity of which the specified entity (either alone or through or
together with any other subsidiary) owns, directly or indirectly, 50% or more of
the stock or other equity or partnership interests the holders of which are
generally entitled to vote for the election of the Board of Directors or other
governing body of such corporation or other legal entity.
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8.4 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement,
-------------------------------------------
its Exhibits and the documents and instruments and other agreements among the
parties hereto as contemplated by or referred to herein, including the Company
Disclosure Letter and the Parent Disclosure Letter (a) constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, it being understood that
the Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as specifically provided in Section 5.14.
8.6 Severability. In the event that any provision of this
------------
Agreement or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise
------------------------------------
provided herein, 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. 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 seek 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.
8.8 Governing Law. Except for matters required to be governed by,
-------------
and construed in accordance with, Delaware corporate law (which shall be so
governed and construed), 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 law thereof.
8.9 Rules of Construction. The parties hereto agree that they have
---------------------
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
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8.10 Assignment. No party may assign either this Agreement or any
----------
of its rights, interests, or obligations hereunder without the prior written
consent of the other parties hereto. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Any purported
assignment in violation of this Section shall be void.
8.11 Waiver Of Jury Trial. EACH OF PARENT, COMPANY AND MERGER SUB
--------------------
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, COMPANY OR MERGER SUB IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
* * * * *
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In Witness Whereof, the parties hereto have caused this Agreement and
Plan of Merger to be executed by their duly authorized respective officers as of
the date first written above.
KANA COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Executive Officer
ARROW ACQUISITION CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Executive Officer
BROADBASE SOFTWARE, INC.
By: /s/ ▇▇▇▇▇ Bay
---------------------------------
Name: ▇▇▇▇▇ Bay
Title: Chief Executive Officer
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Exhibit A
COMPANY VOTING AGREEMENT AND IRREVOCABLE PROXY
This Voting Agreement and irrevocable proxy (this "Agreement") is made and
entered into as of April 9, 2001 (the "Effective Date"), by and between Kana
Communications, Inc., a Delaware corporation ("Parent"), and the undersigned
stockholder ("Stockholder") of Broadbase Software, Inc., a Delaware corporation
("Company").
RECITALS
--------
A. Concurrently with the execution of this Agreement, Parent, Company and
Arrow Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Merger Sub"), are entering into an Agreement and Plan of Merger of even
date herewith (as such agreement may hereafter be amended from time to time, the
"Merger Agreement") which provides for the merger of Merger Sub with and into
Company (the "Merger"). Pursuant to the Merger, shares of common stock of
Company, par value $0.001 per share ("Company Common Stock") will be converted
into shares of common stock of Parent, par value $0.001 per share ("Parent
Common Stock") on the basis described in the Merger Agreement; capitalized terms
that are used in this Agreement and are not otherwise defined herein will have
the same meanings that such terms have in the Merger Agreement.
B. Stockholder owns of record or has the power to direct the voting with
respect to such number of Shares (as defined herein) as are indicated on the
final page of this Agreement;
C. Stockholder is entering into this Agreement as a material inducement
and consideration to Parent to enter into the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
1. Definitions.
-----------
(a) "Expiration Date" means the earlier to occur of (i) the Effective
Time of the Merger; and (ii) such time as the Merger Agreement may be terminated
in accordance with its terms.
(b) "Shares" means all issued and outstanding shares of Company Common
Stock owned of record by Stockholder or over which Stockholder exercises voting
power, in each case, as of the record date for persons entitled (i) to receive
notice of, and to vote at the meeting of the stockholders of Company called for
the purpose of voting on the matters referred to in Section 2.1, or (ii) to take
action by written consent of the stockholders of Company with respect to the
matters referred to in Section 2.1; provided, however, that any shares of
-------- -------
capital stock of Company that Stockholder purchases or with respect to which
Stockholder otherwise exercises voting power after the execution of this
Agreement and prior to the Expiration Date shall be subject to the terms and
conditions of this Agreement to the same extent as if they constituted Shares on
the date hereof.
(c) "Transfer" with respect to any security means to directly or
indirectly: (i) sell, pledge, encumber, transfer or dispose of, or grant an
option with respect to, such security or any interest in such security; or (ii)
enter into an agreement or commitment providing for the sale, pledge,
encumbrance, transfer or disposition of, or grant of an option with respect to,
such security or any interest therein.
2. Agreement to Vote.
-----------------
2.1 Voting Agreement. Stockholder hereby covenants and agrees that,
----------------
prior to the Expiration Date, at any meeting (whether annual or special and
whether or not an adjourned or postponed meeting) of the stockholders of
Company, however called, and in any action taken by the written consent of
stockholders of Company without a meeting, unless otherwise directed in writing
by Parent, Stockholder will appear at the meeting or otherwise cause the Shares
to be counted as present thereat for purposes of establishing a quorum and vote
or consent for cause to be voted or consented the Shares:
(a) in favor of the Merger, the execution and delivery by
Company of the Merger Agreement and the adoption and approval of the terms
thereof and in favor of the other actions contemplated by the Merger Agreement
and, to the extent that a vote is solicited in connection with this Voting
Agreement or the Merger Agreement, any other action required in furtherance
hereof or thereof;
(b) against any action or agreement that would result in a
breach of any representation, warranty, covenant or obligation of Company in the
Merger Agreement or that would preclude fulfillment of a condition precedent
under the Merger Agreement to Company's or Parent's obligation to consummate the
Merger; and
(c) against approval of any proposal made in opposition to or
in competition with the consummation of the Merger, including, without
limitation, any Company Acquisition Proposal or Company Superior Offer (each as
defined in the Merger Agreement).
Prior to the Expiration Date, Stockholder will not enter into any
agreement or understanding with any person or entity to vote or give
instructions in any manner inconsistent with any provision of this Section 2.1.
This Agreement is intended to bind Shareholder only with respect to the specific
matters set forth herein.
2.2 Irrevocable Proxy. Contemporaneously with the execution of this
-----------------
Agreement, Stockholder will deliver to Parent a proxy with respect to Shares in
the form attached hereto as Exhibit 1, which proxy will be irrevocable to the
---------
fullest extent permitted by applicable law (the "Proxy"); provided, however,
that the Proxy shall be revoked upon termination of this Agreement in accordance
with its terms.
2.3 Transfer and Other Restrictions. (a) From and after the date
-------------------------------
hereof until the termination of this Agreement, Stockholder agrees not to,
directly or indirectly:
(i) except pursuant to the terms of the Merger Agreement,
Transfer any or all of the Shares or any interest therein except as
provided in Section 2.2 hereof;
(ii) grant any proxy, power of attorney, deposit any of the
Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares except as provided in this Agreement; or
(iii) take any other action that would make any representation
or warranty of Stockholder contained herein untrue or incorrect or have the
effect of preventing or disabling Stockholder from performing its
obligations under this Agreement.
2
(b) To the extent Stockholder is, as of the date hereof, party
to a contract or agreement that requires Stockholder to Transfer Shares to
another person or entity (excluding a contract or agreement pledging Shares to
Company), Stockholder will not effect any such Transfer unless to cause the
transferee to be bound by and to execute an agreement in the form of this
Agreement with respect to the Shares to be Transferred. Nothing herein shall
prohibit Stockholder from exercising (in accordance with the terms of the option
or warrant, as applicable) any option or warrant Stockholder may hold; provided,
--------
however, that the securities acquired upon such exercise shall be deemed Shares.
-------
(c) Stockholder agrees with, and covenants to, Parent that
Stockholder shall not request that Company register the transfer (book-entry or
otherwise) of any certificate or uncertificated interest representing any
Shares, unless such transfer is made pursuant to and in compliance with this
Agreement.
The foregoing restrictions shall not prohibit a transfer of Shares (i) in the
case of an individual, to any member of his immediate family, to a trust for the
benefit of Stockholder or any member of his immediate family or a transfer of
Shares upon the death of Stockholder, (ii) in the case of a partnership or
limited liability company, to one or more partners or members or to an
affiliated corporation or (iii) which Stockholder can not prevent (it being
understood that Stockholder shall use his best efforts to prevent transfers
other than pursuant to (i) or (ii) hereof); provided, however, that any
transferee with respect to a transfer permitted under (i) or (ii) shall, as a
precondition to such transfer, agree in a writing delivered to Parent, to be
bound by the terms and conditions of this Agreement and executed and deliver to
Company a proxy in the form attached hereto.
3. Waivers. Stockholder agrees not to exercise any rights of appraisal
-------
and any dissenters' rights that Stockholder may have (whether under applicable
law or otherwise) or could potentially have or acquire in connection with the
Merger.
4. Representations, Warranties and Covenants of Stockholder. Stockholder
--------------------------------------------------------
hereby represents, warrants and covenants as follows:
4.1 Authority, Enforceability. Stockholder has power and authority
-------------------------
to enter into, execute, deliver and perform Stockholder's obligations under this
Agreement and to make the representations, warranties and covenants contained
herein. This Agreement has been duly executed and delivered by Stockholder and
constitutes a legal, valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
4.2 No Conflicts, No Defaults and Consents. The execution and
--------------------------------------
delivery of this Agreement by Stockholder do not, and the performance of this
Agreement by Stockholder will not: (i) conflict with or violate any order,
decree or judgment applicable to Stockholder or by which Stockholder or any of
Stockholder's properties or Shares is bound or affected; (ii) violate any
agreement to which Stockholder is a party or is subject, including, without
limitation, any voting agreement or voting trust; (iii) result in any breach of
or constitute a default (with notice or lapse of time, or both) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of any lien, restriction, adverse claim, option on,
right to acquire, or any encumbrance or security interest in or to any of the
Shares, pursuant to any written, oral or other agreement, contract or legally
binding commitment to which Stockholder is a party or by which Stockholder or
any of the
3
Shares is bound or affected, or (iv) require any written, oral or other
agreement, contract or legally binding commitment of any third party.
4.3 Shares Owned. As of the Effective Date of this Agreement,
------------
Stockholder owns of record or has the power to direct the voting with respect
to, in the aggregate the number of shares of Company Common Stock set forth
below Stockholder's name on the signature page of this Agreement, and does not
own of record, or have the power to direct the voting with respect to, any
shares of capital stock of Company other than the Shares set forth below
Stockholder's name on the signature page hereof.
4.4 Accuracy of Representations; Reliance by Parent. The
representations and warranties contained in this Agreement are accurate in all
respects as of the date of this Agreement, will be accurate in all respects at
all times through the Expiration Date and will be accurate in all respects as of
the Effective Time of the Merger as if made on that date. Stockholder
understands and acknowledges that Parent is entering into the Merger Agreement
in reliance upon Stockholder's execution and delivery of this Agreement.
4.5 Further Assurances. Stockholder agrees to execute and deliver any
additional documents reasonably necessary or desirable, in the opinion of Parent
or Company, to carry out the purposes and intent of this Agreement and the
Proxy.
5. Miscellaneous.
-------------
5.1 Severability. If any provision of this Agreement is found by any
------------
arbitrator or court of competent jurisdiction to be invalid or unenforceable,
then the parties hereby waive such provision to the extent that it is found to
be invalid or unenforceable and to the extent that to do so would not deprive
one of the parties of the substantial benefit of its bargain. Such provision
will, to the extent allowable by law and the preceding sentence, not be voided
or canceled but will instead be modified by such arbitrator or court so that it
becomes enforceable and, as modified, will be enforced as any other provision
hereof, all the other provisions hereof continuing in full force and effect.
5.2 Amendment; Waiver. This Agreement may be amended, modified,
-----------------
superseded, canceled, renewed or extended only by an agreement in writing
executed by Parent and Stockholder. The failure by either party at any time to
require performance or compliance by the other of any of its obligations or
agreements will in no way affect the right to require such performance or
compliance at any time thereafter. The waiver by either party of a breach of
any provision of this Agreement will not be treated as a waiver of any preceding
or succeeding breach of such provision or as a waiver of the provision itself.
No waiver of any kind will be effective or binding, unless it is in writing and
is signed by the party against whom such waiver is sought to be enforced.
5.3 Entire Agreement. This Agreement, together with the Merger
----------------
Agreement, constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
5.4 Assignment. This Agreement and all rights and obligations
----------
hereunder are personal to Stockholder and may not be transferred or assigned by
Stockholder at any time. Parent may assign its rights, and may delegate its
obligations hereunder, to any subsidiary of Parent; provided however, that any
-------- -------
such assignee assumes Parent's obligations hereunder. This Agreement will be
4
binding upon, and inure to the benefit of, the persons or entities who are
permitted, by the terms of this Agreement, to be successors, assigns and
personal representatives of the respective parties hereto.
5.5 Governing Law. Except for matters required to be governed by and
-------------
administered in accordance with Delaware corporate law, this Agreement will be
governed by and construed in accordance with the internal laws of the State of
California, excluding that body of laws pertaining to conflict of laws.
5.6 Costs of Enforcement. If any party to this Agreement seeks to
--------------------
enforce its rights under this Agreement by legal proceedings or otherwise, the
non-prevailing party will pay all costs and expenses incurred by the prevailing
party, including, without limitation, all reasonable attorneys' and experts'
fees.
5.7 Notices. Any and all notices required or permitted to be given
-------
to a party pursuant to the provisions of this Agreement will be in writing and
will be effective and deemed to provide such party sufficient notice under this
Agreement on the earliest of the following: (i) at the time of personal
delivery, if personal delivery is made to the receiving party; (ii) one (1)
business day after deposit with an express overnight courier for United States
deliveries, or two (2) business days after such deposit for deliveries outside
of the United States; or (iii) three (3) business days after deposit in the
United States mail by registered or certified mail (return receipt requested)
for United States deliveries. All notices for delivery outside the United
States will be sent by express courier. All notices not delivered personally
will be sent with postage and/or other charges prepaid and properly addressed to
the party to be notified at the address set forth below, or at such other
address as such other party may designate by ten (10) days advance written
notice to the other parties hereto.
If to Stockholder:
---------------------------------------
c/o Broadbase Software, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ Bay
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Fenwick & West LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Parent: Kana Communications, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
5
with a copy to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
Two Embarcadero Place
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
5.8 Specific Performance. Each of the parties hereto recognizes and
--------------------
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damage for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
5.9 Counterparts. This Agreement may be executed in counterparts,
------------
each of which will be deemed an original but all of which, taken together,
constitute one and the same agreement.
5.10 Titles. The titles and captions of the sections and paragraphs
------
of this Agreement are included for convenience of reference only and will have
no effect on the construction or meaning of this Agreement.
5.11 Termination. This Agreement will be terminated and will be of
-----------
no further force and effect upon the earlier to occur of (i) the Effective Time
and (ii) the termination of the Merger Agreement pursuant to its terms.
6
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement as
of the date first above written.
KANA COMMUNICATIONS, INC. STOCKHOLDER
By:
-------------------------------- -----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------
Title: Chief Executive Officer
-----------------------------
Broadbase Software, Inc. Common Stock:
[SIGNATURE PAGE TO COMPANY VOTING AGREEMENT]
EXHIBIT 1 TO VOTING AGREEMENT
-----------------------------
IRREVOCABLE PROXY
The undersigned stockholder (the "Stockholder") of Broadbase Software,
Inc., a Delaware corporation ("Company"), hereby irrevocably (to the fullest
extent permitted by applicable law) appoints and constitutes the members of the
Board of Directors of Kana Communications, Inc., a Delaware corporation
("Parent"), and each of them (collectively the "Proxyholders"), the agents,
attorneys and proxies of the undersigned, with full power of substitution and
resubstitution, to the fullest extent of the undersigned's rights with respect
to (i) the shares of capital stock of Company owned of record by the
undersigned, or over which the undersigned has voting power, as of the date of
this proxy, which shares are specified on the final page of this proxy; (ii) any
and all other shares of capital stock of Company which the undersigned may
acquire or with respect to which the undersigned shall acquire voting power
after the date hereof, including, without limitation, in the event of a dividend
or distribution of capital stock of Company, or any change in Company's capital
stock by reason of any stock dividend, split-up, recapitalization, combination,
exchange of shares or the like, all shares of Company's capital stock issued or
distributed pursuant to such stock dividends and distributions and any shares of
Company's capital stock into which or for which any or all of the shares
otherwise held by the undersigned may be so changed or exchanged. (The shares
of the capital stock of Company referred to in clauses (i) and (ii) of the
immediately preceding sentence are collectively referred to as the "Shares.")
Upon the execution hereof, all prior proxies given by the undersigned with
respect to any of the Shares are hereby revoked, and no subsequent proxies will
be given with respect to any of the Shares until such time as this proxy shall
be terminated in accordance with its terms.
The Proxyholders named above will be empowered, and may exercise this
proxy, to vote the Shares at any time until the Expiration Date (as defined in
the Voting Agreement dated as of the date hereof, between Parent and the
undersigned (the "Voting Agreement")) at any meeting of the stockholders of
Company, however called, or in any action by written consent of stockholders of
Company:
(i) in favor of the merger (the "Merger") contemplated by the
Agreement and Plan of Merger by and among Parent, Arrow Acquisition Corp., and
Company, dated as of the date hereof (the "Merger Agreement"), the execution and
delivery by Company of the Merger Agreement and the adoption and approval of the
terms thereof and in favor of the other actions contemplated by the Merger
Agreement and, to the extent that a vote is solicited in connection with this
Voting Agreement or the Merger Agreement, any other action required in
furtherance hereof or thereof;
(ii) against any action or agreement that would result in a breach
of any representation, warranty, covenant or obligation of Company in the Merger
Agreement or that would preclude fulfillment of a condition precedent under the
Merger Agreement to Company's or Parent's obligation to consummate the Merger;
and
(iii) against approval of any proposal made in opposition to or in
competition with the consummation of the Merger including, without limitation,
any Company Acquisition Proposal or Company Superior Offer (each as defined in
the Merger Agreement).
The Proxyholders may not exercise this proxy on any other matter. The
Stockholder may vote the Shares on all such other matters. The proxy granted by
the Stockholder to the Proxyholders hereby is granted as of the date of this
Irrevocable Proxy in order to secure the obligations of the Stockholder set
forth in Section 2 of the Voting Agreement.
This proxy will terminate upon the termination of the Voting Agreement in
accordance with its terms. Any obligation of the undersigned hereunder shall be
binding upon the successors and assigns of the undersigned. The undersigned
Stockholder authorizes the Proxyholders to file this proxy and any substitution
or revocation of substitution with the Secretary of Company and with any
Inspector of Elections at any meeting of the stockholders of Company.
This proxy is irrevocable, is coupled with an interest, and shall survive
the insolvency, incapacity, death or liquidation of the undersigned and will be
binding upon the heirs, successors and assigns of the undersigned (including any
transferee of any of the Shares).
Dated: April ___, 2001.
STOCKHOLDER
------------------------------------------
Broadbase Software, Inc. Common Stock:____
Exhibit B
---------
PARENT VOTING AGREEMENT AND IRREVOCABLE PROXY
THIS VOTING AGREEMENT AND IRREVOCABLE PROXY (this "Agreement") is made and
entered into as of April 9, 2001 (the "Effective Date"), by and between
Broadbase Software, Inc., a Delaware corporation ("Company"), and the
undersigned stockholder ("Stockholder") of Kana Communications, Inc., a Delaware
corporation ("Parent").
RECITALS
--------
A. Concurrently with the execution of this Agreement, Company, Parent and
Arrow Acquisition Corporation, a Delaware corporation and a wholly-owned
subsidiary of Company ("Merger Sub"), are entering into an Agreement and Plan of
Merger of even date herewith (as such agreement may hereafter be amended from
time to time, the "Merger Agreement") which provides for the merger of Merger
Sub with and into Company (the "Merger"). Pursuant to the Merger, shares of
common stock of Company, par value $0.001 per share ("Company Common Stock")
will be converted into shares of common stock of Parent, par value $0.001 per
share ("Parent Common Stock") on the basis described in the Merger Agreement;
capitalized terms that are used in this Agreement and are not otherwise defined
herein will have the same meanings that such terms have in the Merger Agreement.
B. Stockholder owns of record or has the power to direct the voting with
respect to such number of Shares (as defined herein) as are indicated on the
final page of this Agreement;
C. Stockholder is entering into this Agreement as a material inducement
and consideration to Company to enter into the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
1. Definitions.
-----------
(a) "Expiration Date" means the earlier to occur of (i) the Effective
Time of the Merger; and (ii) such time as the Merger Agreement may be terminated
in accordance with its terms.
(b) "Shares" means all issued and outstanding shares of Parent Common
Stock owned of record by Stockholder or over which Stockholder exercises voting
power, in each case, as of the record date for persons entitled (i) to receive
notice of, and to vote at the meeting of the stockholders of Parent called for
the purpose of voting on the matters referred to in Section 2.1, or (ii) to take
action by written consent of the stockholders of Parent with respect to the
matters referred to in Section 2.1; provided, however, that any shares of
-------- -------
capital stock of Parent that Stockholder purchases or with respect to which
Stockholder otherwise exercises voting power after the execution of this
Agreement and prior to the Expiration Date shall be subject to the terms and
conditions of this Agreement to the same extent as if they constituted Shares on
the date hereof.
(c) "Transfer" with respect to any security means to directly or
indirectly: (i) sell, pledge, encumber, transfer or dispose of, or grant an
option with respect to, such security or any interest in such security; or (ii)
enter into an agreement or commitment providing for the sale, pledge,
encumbrance, transfer or disposition of, or grant of an option with respect to,
such security or any interest therein.
2. Agreement to Vote.
-----------------
2.1 Voting Agreement. Stockholder hereby covenants and agrees that,
----------------
prior to the Expiration Date, at any meeting (whether annual or special and
whether or not an adjourned or postponed meeting) of the stockholders of Parent,
however called, and in any action taken by the written consent of stockholders
of Parent without a meeting, unless otherwise directed in writing by Company,
Stockholder will appear at the meeting or otherwise cause the Shares to be
counted as present thereat for purposes of establishing a quorum and vote or
consent for cause to be voted or consented the Shares:
(a) in favor of the issuance of Parent Common Stock pursuant to
the Merger, the change of the name of Parent to Kana Software, Inc., the
execution and delivery by Parent of the Merger Agreement and the adoption and
approval of the terms thereof, and in favor of the other actions contemplated by
the Merger Agreement and, to the extent that a vote is solicited in connection
with this Voting Agreement or the Merger Agreement, any other action required in
furtherance hereof or thereof;
(b) against any action or agreement that would result in a breach
of any representation, warranty, covenant or obligation of Parent in the Merger
Agreement or that would preclude fulfillment of a condition precedent under the
Merger Agreement to Parent's or Company's obligation to consummate the Merger;
and
(c) against approval of any proposal made in opposition to or in
competition with the issuance of the Parent Common Stock pursuant to the Merger
and the consummation of the Merger, including, without limitation, any Parent
Acquisition Proposal or Parent Superior Offer (each as defined in the Merger
Agreement).
Prior to the Expiration Date, Stockholder will not enter into any
agreement or understanding with any person or entity to vote or give
instructions in any manner inconsistent with any provision of this Section 2.1.
This Agreement is intended to bind Shareholder only with respect to the specific
matters set forth herein.
2.2 Irrevocable Proxy. Contemporaneously with the execution of this
-----------------
Agreement, Stockholder will deliver to Company a proxy with respect to Shares in
the form attached hereto as Exhibit 1, which proxy will be irrevocable to the
---------
fullest extent permitted by applicable law (the "Proxy"); provided, however,
that the Proxy shall be revoked upon termination of this Agreement in accordance
with its terms.
2.3 Transfer and Other Restrictions. (a) From and after the date
-------------------------------
hereof until the termination of this Agreement, Stockholder agrees not to,
directly or indirectly:
(i) except pursuant to the terms of the Merger Agreement,
Transfer any or all of the Shares or any interest therein except as
provided in Section 2.2 hereof;
(ii) grant any proxy, power of attorney, deposit any of the
Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares except as provided in this Agreement; or
2
(iii) take any other action that would make any representation
or warranty of Stockholder contained herein untrue or incorrect or have the
effect of preventing or disabling Stockholder from performing its
obligations under this Agreement.
(b) To the extent Stockholder is, as of the date hereof, party to
a contract or agreement that requires Stockholder to Transfer Shares to another
person or entity (excluding a contract or agreement pledging Shares to Parent),
Stockholder will not effect any such Transfer unless to cause the transferee to
be bound by and to execute an agreement in the form of this Agreement with
respect to the Shares to be Transferred. Nothing herein shall prohibit
Stockholder from exercising (in accordance with the terms of the option or
warrant, as applicable) any option or warrant Stockholder may hold; provided,
--------
however, that the securities acquired upon such exercise shall be deemed Shares.
-------
(c) Stockholder agrees with, and covenants to, Company that
Stockholder shall not request that Parent register the transfer (book-entry or
otherwise) of any certificate or uncertificated interest representing any
Shares, unless such transfer is made pursuant to and in compliance with this
Agreement.
The foregoing restrictions shall not prohibit a transfer of Shares (i) in the
case of an individual, to any member of his immediate family, to a trust for the
benefit of Stockholder or any member of his immediate family or a transfer of
Shares upon the death of Stockholder, (ii) in the case of a partnership or
limited liability company, to one or more partners or members or to an
affiliated corporation or (iii) which Stockholder can not prevent (it being
understood that Stockholder shall use his best efforts to prevent transfers
other than pursuant to (i) or (ii) hereof); provided, however, that any
transferee with respect to a transfer permitted under (i) or (ii) shall, as a
precondition to such transfer, agree in a writing delivered to Parent, to be
bound by the terms and conditions of this Agreement and executed and deliver to
Parent a proxy in the form attached hereto
3. Waivers. Stockholder agrees not to exercise any rights of appraisal
-------
and any dissenters' rights that Stockholder may have (whether under applicable
law or otherwise) or could potentially have or acquire in connection with the
Merger.
4. Representations, Warranties and Covenants of Stockholder. Stockholder
--------------------------------------------------------
hereby represents, warrants and covenants as follows:
4.1 Authority, Enforceability. Stockholder has power and authority
-------------------------
to enter into, execute, deliver and perform Stockholder's obligations under this
Agreement and to make the representations, warranties and covenants contained
herein. This Agreement has been duly executed and delivered by Stockholder and
constitutes a legal, valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
4.2 No Conflicts, No Defaults and Consents. The execution and
--------------------------------------
delivery of this Agreement by Stockholder do not, and the performance of this
Agreement by Stockholder will not: (i) conflict with or violate any order,
decree or judgment applicable to Stockholder or by which Stockholder or any of
Stockholder's properties or Shares is bound or affected; (ii) violate any
agreement to which Stockholder is a party or is subject, including, without
limitation, any voting agreement or voting trust; (iii) result in any breach of
or constitute a default (with notice or lapse of time, or both)
3
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any lien, restriction, adverse
claim, option on, right to acquire, or any encumbrance or security interest in
or to any of the Shares, pursuant to any written, oral or other agreement,
contract or legally binding commitment to which Stockholder is a party or by
which Stockholder or any of the Shares is bound or affected, or (iv) require any
written, oral or other agreement, contract or legally binding commitment of any
third party.
4.3 Shares Owned. As of the Effective Date of this Agreement,
------------
Stockholder owns of record or has the power to direct the voting with respect
to, in the aggregate the number of shares of Parent Common Stock set forth below
Stockholder's name on the signature page of this Agreement, and does not own of
record, or have the power to direct the voting with respect to, any shares of
capital stock of Parent other than the Shares set forth below Stockholder's name
on the signature page hereof.
4.4 Accuracy of Representations; Reliance by Company. The
------------------------------------------------
representations and warranties contained in this Agreement are accurate in all
respects as of the date of this Agreement, will be accurate in all respects at
all times through the Expiration Date and will be accurate in all respects as of
the Effective Time of the Merger as if made on that date. Stockholder
understands and acknowledges that Company is entering into the Merger Agreement
in reliance upon Stockholder's execution and delivery of this Agreement.
4.5 Further Assurances. Stockholder agrees to execute and deliver any
------------------
additional documents reasonably necessary or desirable, in the opinion of
Company or Parent, to carry out the purposes and intent of this Agreement and
the Proxy.
5. Miscellaneous.
-------------
5.1 Severability. If any provision of this Agreement is found by any
------------
arbitrator or court of competent jurisdiction to be invalid or unenforceable,
then the parties hereby waive such provision to the extent that it is found to
be invalid or unenforceable and to the extent that to do so would not deprive
one of the parties of the substantial benefit of its bargain. Such provision
will, to the extent allowable by law and the preceding sentence, not be voided
or canceled but will instead be modified by such arbitrator or court so that it
becomes enforceable and, as modified, will be enforced as any other provision
hereof, all the other provisions hereof continuing in full force and effect.
5.2 Amendment; Waiver. This Agreement may be amended, modified,
-----------------
superseded, canceled, renewed or extended only by an agreement in writing
executed by Company and Stockholder. The failure by either party at any time to
require performance or compliance by the other of any of its obligations or
agreements will in no way affect the right to require such performance or
compliance at any time thereafter. The waiver by either party of a breach of
any provision of this Agreement will not be treated as a waiver of any preceding
or succeeding breach of such provision or as a waiver of the provision itself.
No waiver of any kind will be effective or binding, unless it is in writing and
is signed by the party against whom such waiver is sought to be enforced.
5.3 Entire Agreement. This Agreement, together with the Merger
----------------
Agreement, constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
4
5.4 Assignment. This Agreement and all rights and obligations
----------
hereunder are personal to Stockholder and may not be transferred or assigned by
Stockholder at any time. Company may assign its rights, and may delegate its
obligations hereunder, to any Subsidiary of Parent; provided however, that any
-------- -------
such assignee assumes Company's obligations hereunder. This Agreement will be
binding upon, and inure to the benefit of, the persons or entities who are
permitted, by the terms of this Agreement, to be successors, assigns and
personal representatives of the respective parties hereto.
5.5 Governing Law. Except for matters required to be governed by and
-------------
administered in accordance with Delaware corporate law, this Agreement will be
governed by and construed in accordance with the internal laws of the State of
California, excluding that body of laws pertaining to conflict of laws.
5.6 Costs of Enforcement. If any party to this Agreement seeks to
--------------------
enforce its rights under this Agreement by legal proceedings or otherwise, the
non-prevailing party will pay all costs and expenses incurred by the prevailing
party, including, without limitation, all reasonable attorneys' and experts'
fees.
5.7 Notices. Any and all notices required or permitted to be given
-------
to a party pursuant to the provisions of this Agreement will be in writing and
will be effective and deemed to provide such party sufficient notice under this
Agreement on the earliest of the following: (i) at the time of personal
delivery, if personal delivery is made to the receiving party; (ii) one (1)
business day after deposit with an express overnight courier for United States
deliveries, or two (2) business days after such deposit for deliveries outside
of the United States; or (iii) three (3) business days after deposit in the
United States mail by registered or certified mail (return receipt requested)
for United States deliveries. All notices for delivery outside the United
States will be sent by express courier. All notices not delivered personally
will be sent with postage and/or other charges prepaid and properly addressed to
the party to be notified at the address set forth below, or at such other
address as such other party may designate by ten (10) days advance written
notice to the other parties hereto.
If to Stockholder: ____________________
c/o Kana Communications, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP
Two Embarcadero Place
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▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Company: Broadbase Software, Inc.
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▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ Bay
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
5
with a copy to: Fenwick & West LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
5.8 Specific Performance. Each of the parties hereto recognizes and
--------------------
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damage for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
5.9 Counterparts. This Agreement may be executed in counterparts,
------------
each of which will be deemed an original but all of which, taken together,
constitute one and the same agreement.
5.10 Titles. The titles and captions of the sections and paragraphs
------
of this Agreement are included for convenience of reference only and will have
no effect on the construction or meaning of this Agreement.
5.11 Termination. This Agreement will be terminated and will be of
-----------
no further force and effect upon the earlier to occur of (i) the Effective Time
and (ii) the termination of the Merger Agreement pursuant to its terms.
6
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement as
of the date first above written.
BROADBASE SOFTWARE, INC. STOCKHOLDER
By:
---------------------------- ---------------------------------------
Name: ▇▇▇▇▇ Bay
Title: Chief Executive Officer
Kana Communications, Inc:
--------------
[SIGNATURE PAGE TO VOTING AGREEMENT]
EXHIBIT 1 TO VOTING AGREEMENT
-----------------------------
IRREVOCABLE PROXY
The undersigned stockholder (the "Stockholder") of Kana Communications,
Inc., a Delaware corporation ("Parent"), hereby irrevocably (to the fullest
extent permitted by applicable law) appoints and constitutes the members of the
Board of Directors of Broadbase Software, Inc., a Delaware corporation
("Company"), and each of them (collectively the "Proxyholders"), the agents,
attorneys and proxies of the undersigned, with full power of substitution and
resubstitution, to the fullest extent of the undersigned's rights with respect
to (i) the shares of capital stock of Parent owned of record by the undersigned,
or over which the undersigned has voting power, as of the date of this proxy,
which shares are specified on the final page of this proxy; (ii) any and all
other shares of capital stock of Parent which the undersigned may acquire or
with respect to which the undersigned shall acquire voting power after the date
hereof, including, without limitation, in the event of a dividend or
distribution of capital stock of Parent, or any change in Parent's capital stock
by reason of any stock dividend, split-up, recapitalization, combination,
exchange of shares or the like, all shares of Parent's capital stock issued or
distributed pursuant to such stock dividends and distributions and any shares of
Parent's capital stock into which or for which any or all of the shares
otherwise held by the undersigned may be so changed or exchanged. (The shares
of the capital stock of Parent referred to in clauses (i) and (ii) of the
immediately preceding sentence are collectively referred to as the "Shares.")
Upon the execution hereof, all prior proxies given by the undersigned with
respect to any of the Shares are hereby revoked, and no subsequent proxies will
be given with respect to any of the Shares until such time as this proxy shall
be terminated in accordance with its terms.
The Proxyholders named above will be empowered, and may exercise this
proxy, to vote the Shares at any time until the Expiration Date (as defined in
the Voting Agreement dated as of the date hereof, between Company and the
undersigned (the "Voting Agreement")) at any meeting of the stockholders of
Parent, however called, or in any action by written consent of stockholders of
Parent:
(i) in favor of the issuance of Parent Common Stock pursuant to the
merger (the "Merger") contemplated by the Agreement and Plan of Merger by and
among Company, Arrow Acquisition Corp., and Parent, dated as of the date hereof
(the "Merger Agreement"), the change of the name of Parent to Kana Software,
Inc., the execution and delivery by Parent of the Merger Agreement and the
adoption and approval of the terms thereof and in favor of the other actions
contemplated by the Merger Agreement and, to the extent that a vote is solicited
in connection with the Voting Agreement or the Merger Agreement, any other
action required in furtherance hereof or thereof;
(ii) against any action or agreement that would result in a breach of
any representation, warranty, covenant or obligation of Parent in the Merger
Agreement or that would preclude fulfillment of a condition precedent under the
Merger Agreement to Parent's or Company's obligation to consummate the Merger;
and
(iii) against approval of any proposal made in opposition to or in
competition with the consummation of the Merger including, without limitation,
any Parent Acquisition Proposal or Parent Superior Offer (each as defined in the
Merger Agreement).
The Proxyholders may not exercise this proxy on any other matter. The
Stockholder may vote the Shares on all such other matters. The proxy granted by
the Stockholder to the Proxyholders hereby is granted as of the date of this
Irrevocable Proxy in order to secure the obligations of the Stockholder set
forth in Section 2 of the Voting Agreement.
This proxy will terminate upon the termination of the Voting Agreement in
accordance with its terms. Any obligation of the undersigned hereunder shall be
binding upon the successors and assigns of the undersigned. The undersigned
Stockholder authorizes the Proxyholders to file this proxy and any substitution
or revocation of substitution with the Secretary of Parent and with any
Inspector of Elections at any meeting of the stockholders of Parent.
This proxy is irrevocable, is coupled with an interest, and shall survive
the insolvency, incapacity, death or liquidation of the undersigned and will be
binding upon the heirs, successors and assigns of the undersigned (including any
transferee of any of the Shares).
ii
Dated: April __, 2001
STOCKHOLDER
___________________________________________
Kana Communications, Inc. Stock:_______________
iii
Exhibit C
Company Stock Option Agreement
This Stock Option Agreement (the "Agreement") is made and entered into as
of April 9, 2001, between Broadbase Software, Inc., a Delaware corporation
("Company"), and Kana Communications, Inc., a Delaware corporation ("Parent").
Recitals
A. Concurrently with the execution and delivery of this Agreement,
Company, Parent and Arrow Acquisition Corporation, a Delaware corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), are entering into an Agreement
and Plan of Merger (the "Merger Agreement"), that provides, among other things,
upon the terms and subject to the conditions thereof, for the merger of Merger
Sub and Company (the "Merger"). Capitalized terms used in this Agreement but
not defined herein shall have the meanings ascribed to such terms in the Merger
Agreement.
B. As a condition to Parent's willingness to enter into the Merger
Agreement, Parent has required that the Company agree, and the Company has
agreed, to grant to Parent an option to acquire shares of Company Common Stock
("Company Shares"), upon the terms and subject to the conditions set forth
herein.
In consideration of the foregoing and of the mutual covenants and
agreements set forth herein and in the Merger Agreement and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
1. Grant of Option. Company hereby grants to Parent an irrevocable option
---------------
(the "Option"), exercisable following the occurrence of an Exercise Event (as
defined in Section 2(a)), to acquire up to a number of Company Shares equal to
19.9% of the Company Shares issued and outstanding as of the date, if any, upon
which an Exercise Notice (as defined in Section 2(b) below) shall have been
delivered (the "Option Shares"), in the manner set forth below by paying cash at
a price of $.7188 per share (the "Exercise Price"); provided, however, that the
-------- -------
Exercise Price will automatically, equitably and proportionally be adjusted to
reflect any subdivision, stock split, combination, reverse stock split, stock
dividend or other recapitalization affecting Company Shares; and provided,
---------
further, that the number of Company Shares issuable hereunder shall be subject
-------
to adjustment such that in no event shall the total number of Company Shares
issuable upon exercise of the Option exceed that number of shares which is equal
to the difference of 19.9% of the Company Shares issued and outstanding as of
the date, if any, upon which an Exercise Notice shall have been delivered less
the total number of Company Shares, if any, issued or issuable at or prior to
the time of such exercise upon conversion of that certain Convertible Promissory
Note pursuant to that certain Revolving Loan Agreement dated the date hereof
between Parent and Company. All references in this Agreement to Company Shares
issued to Parent hereunder shall be deemed to include any associated Rights.
2. Exercise of Option; Maximum Proceeds.
-------------------------------------
(a) For all purposes of this Agreement, an "Exercise Event" shall mean
the occurrence of any of (i) a Company Triggering Event (as such term is defined
in the Merger Agreement); or (ii) (A) the public announcement of an acquisition
or purchase by any person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) of more than a 30%
beneficial ownership interest in the total outstanding voting securities of
Company or any of its subsidiaries; or (B) the public announcement or
commencement of any tender offer or exchange offer that if consummated would
result in any person or "group" beneficially owning 30% or more of the total
outstanding voting securities of Company or any of its subsidiaries.
(b) At any time following the occurrence of an Exercise Event, Parent
may deliver to the Company a written notice (an "Exercise Notice") specifying
that it wishes to exercise its rights to acquire Company Shares under the Option
and close a purchase of Option Shares and specifying the total number of Option
Shares it wishes to acquire. Unless such Exercise Notice is withdrawn by
Parent, the closing of a purchase of such Option Shares (a "Closing") shall take
place at the principal offices of Company upon such date (which shall be no
earlier than three business days following the delivery of the Exercise Notice)
and at such time prior to the termination of the Option as may be designated by
Parent in the Exercise Notice.
(c) The Option shall terminate upon the earliest to occur of (i) the
Effective Time (as such term is defined in the Merger Agreement), (ii)
termination of the Merger Agreement pursuant to Section 7.1(a) thereof, (iii)
termination of the Merger Agreement pursuant to Section 7.1(h) thereof if prior
to such termination no Triggering Event shall have occurred; (iv) termination of
the Merger Agreement pursuant to Section 7.1(b), 7.1(c), 7.1(d) or 7.1(e)
thereof if prior to such termination no Exercise Event shall have occurred or
(v) 12 months following the termination of the Merger Agreement under any other
circumstances; provided, however, that if the Option is exercisable but cannot
be exercised by reason of any applicable government order or because the waiting
period related to the issuance of the Option Shares under the HSR Act shall not
have expired or been terminated, or because any other condition to closing has
not been satisfied, then the Option shall not terminate until the tenth business
day after all such impediments to exercise shall have been removed or shall have
become final and not subject to appeal, and provided, further that if,
subsequent to exercise of the Option, but prior to any other termination of the
Merger Agreement, the Merger Agreement is terminated by Company pursuant to
Section 7.1(h) thereof, then (1) the Option, to the extent it has not been
exercised, shall terminate and (2) to the extent the Option has been exercised,
Company may repurchase for cash all Option Shares then held by Parent at a per
Option Share price equal to the Exercise Price.
(d) If the sum of (i) any Termination Fee received by Parent under
Section 7.3(b) of the Merger Agreement plus (ii) the proceeds received by Parent
from any sales or other dispositions of Option Shares (including pursuant to
Company's exercise of its rights to purchase
2
Option Shares under Section 7(a) and Section 10 hereof) or the Option (including
pursuant to Parent's exercise of its rights to surrender the Option pursuant to
Section 9 hereof), plus (iii) any dividends or distributions received by Parent
declared on Option Shares is, in the aggregate, greater than the sum of (x)
$2,500,000 plus (y) the product of (1) the Exercise Price multiplied by (2) the
number of Company Shares purchased by Parent pursuant to the Option (the sum of
clauses (x) and (y), the "Profit Cap"), then all such proceeds received by
Parent in excess of the Profit Cap shall be promptly remitted in cash by Parent
to Company.
3. Conditions to Closing. The obligation of Company to issue Option
---------------------
Shares to Parent hereunder is subject to the conditions that (a) any waiting
period under the HSR Act applicable to the issuance of the Option Shares
hereunder shall have expired or been terminated; (b) all material consents,
approvals, orders or authorizations of, or registrations, declarations or
filings with, any Governmental Entity, if any, required in connection with the
issuance of the Option Shares hereunder shall have been obtained or made, as the
case may be; and (c) no preliminary or permanent injunction or other order by
any court of competent jurisdiction prohibiting or otherwise restraining such
issuance shall be in effect. It is understood and agreed that at any time
during which Parent shall be entitled to deliver to Company an Exercise Notice,
the parties will use their respective reasonable efforts to satisfy all
conditions to Closing, so that a Closing may take place as promptly as
practicable.
4. Closing. At any Closing, (a) Company shall deliver to Parent a single
-------
certificate in definitive form representing the number of Company Shares
designated by Parent in its Exercise Notice consistent with this Agreement, such
certificate to be registered in the name of Parent and to bear the legend set
forth in Section 10 hereof, against delivery of (b) payment by Parent to the
Company of the aggregate Exercise Price for the Company Shares so designated and
being purchased by delivery of a certified check, bank check or wire transfer of
immediately available funds.
5. Representations and Warranties of the Company. Company represents and
---------------------------------------------
warrants to Parent that (a) Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder; (b) the execution and delivery of this Agreement by
Company and consummation by Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Company
and no other corporate proceedings on the part of Company are necessary to
authorize this Agreement or any of the transactions contemplated hereby; (c)
this Agreement has been duly executed and delivered by Company and constitutes a
legal, valid and binding obligation of Company and, assuming this Agreement has
been duly executed and delivered by Parent, is enforceable against Company in
accordance with its terms, except as enforceability may be limited by bankruptcy
and other similar laws affecting the rights of creditors generally and general
principles of equity; (d) except for any filings, authorizations, approvals or
orders required under the applicable blue sky laws of any state, and the rules
and regulations promulgated thereunder, or by the Nasdaq Stock Market, Company
has taken all necessary
3
corporate and other action to authorize and reserve for issuance and to permit
it to issue upon exercise of the Option, and at all times from the date hereof
until the termination of the Option will have reserved for issuance, a
sufficient number of unissued Company Shares for Parent to exercise the Option
in full and will take all necessary corporate or other action to authorize and
reserve for issuance all additional Company Shares or other securities which may
be issuable pursuant to Section 8(a) upon exercise of the Option, all of which,
upon their issuance and delivery in accordance with the terms of this Agreement
and payment therefor by Parent, will be validly issued, fully paid and
nonassessable; (e) upon delivery of the Company Shares and any other securities
to Parent upon exercise of the Option, Parent will acquire such Company Shares
or other securities free and clear of all Encumbrances, excluding those imposed
by Parent; (f) the execution and delivery of this Agreement by Company do not,
and the performance of this Agreement by Company will not, (i) violate the
Certificate of Incorporation or Bylaws of the Company, (ii) conflict with or
violate any order applicable to the Company or any of its subsidiaries or by
which they or any of their material property is bound or affected or (iii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give rise to any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a material Encumbrance on any material property or assets of
Company or any of its subsidiaries pursuant to, any material contract or
agreement to which Company or any of its subsidiaries is a party or by which
Company or any of its subsidiaries or any of their material property is bound or
affected, except to the extent that any such breach, default, right of
termination, amendment, acceleration or cancellation or creation of a material
Encumbrance would not prevent or materially delay the performance by Company of
Company's obligations under this Agreement; and (g) the execution and delivery
of this Agreement by Company does not, and the performance of this Agreement by
Company will not, require any consent, approval, authorization or permit of, or
filing with, or notification to, any Governmental Entity.
6. Representations and Warranties of Parent. Parent represents and
----------------------------------------
warrants to Company that (i) the execution and delivery of this Agreement by
Parent and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Parent and
this Agreement has been duly executed and delivered by a duly authorized officer
of Parent and will constitute a legal, valid and binding obligation of Parent
and, assuming this Agreement has been duly executed and delivered by Parent, is
enforceable against Company in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws affecting the
rights of creditors generally and general principles of equity; and (ii) Parent
is acquiring the Option, and, if and when the Parent exercises the Option, it
will be acquiring the Option Shares issuable upon the exercise thereof for its
own account and not with a view to distribution or resale in any manner which
would be in violation of the Securities Act.
4
7. Registration Rights.
-------------------
(a) Following the termination of the Merger Agreement, Parent
(sometimes referred to herein as the "Holder") may by written notice (a
"Registration Notice") to Company (sometimes referred to herein as the
"Registrant") request the Registrant to register under the Securities Act all or
any part of the Option Shares acquired by the Holder pursuant to this Agreement
(such Option Shares, together with any other shares of the Company's capital
stock issuable in lieu of or with respect to such Option Shares, the
"Registrable Securities") in order to permit the public sale or other
disposition of such shares in accordance with the intended method of sale or
other disposition stated by the Holder; provided, however, that any such
Registration Notice must relate to a number of shares equal to at least 2% of
the outstanding Company Shares and that any rights to require registration
hereunder shall terminate with respect to any shares of the Company's capital
stock that may be sold pursuant to Rule 144(k) under the Securities Act or at
such time as all of the Registrable Securities may be sold in any three month
period pursuant to Rule 144 under the Securities Act. Upon receipt of a
Registration Notice, the Registrant will have the option exercisable by written
notice delivered to the Holder within ten business days after the receipt of the
Registration Notice, irrevocably to agree to purchase all or any part of the
Registrable Securities for cash at a price (the "Option Price") equal to the
product of (i) the number of Registrable Securities so purchased and (ii) the
per share average of the closing sale prices of the Registrant's Common Stock on
the Nasdaq Stock Market for the twenty trading days immediately preceding the
date of the Registration Notice. Any such purchase of Registrable Securities by
the Registrant hereunder will take place at a closing to be held at the
principal executive offices of the Registrant or its counsel at any reasonable
date and time designated by the Registrant in such notice within five business
days after delivery of such notice. The payment for the shares to be purchased
will be made by delivery at the time of such closing of the Option Price in
immediately available funds.
(b) If the Registrant receives a Registration Notice and does not
elect to exercise its option to purchase pursuant to Section 7(a), the
Registrant shall use all reasonable best efforts to effect, as promptly as
practicable, the registration under the Securities Act of the unpurchased
Registrable Securities requested to be registered in the Registration Notice;
provided, however, that (i) the Holder shall not be entitled to more than an
aggregate of two effective registration statements hereunder, and provided
further, that if the Registrant withdraws a filed registration statement at the
request of the Holder (other than as the result of a material adverse change in
the Registrant's business or prospects or the Holder's learning of new material
information concerning the Registrant), then such filing shall be deemed to have
been an effective registration for purposes of this clause (i), (ii) the
Registrant will not be required to file any such registration statement or
maintain its effectiveness during any period of time (not to exceed 45 days
after a Registration Notice in the case of clause (A) below or 60 days after a
Registration Notice in the case of clauses (B) and (C) below) when (A) the
Registrant is in possession of material non-public information which it
reasonably believes would be detrimental to be disclosed at such time and such
information would have to be disclosed if a registration statement were filed or
effective at that time; (B) the Registrant is required under the Securities
5
Act to include audited financial statements for any period in such registration
statement and such financial statements are not yet available for inclusion in
such registration statement; or (C) the Registrant determines, in its good
faith, reasonable judgment, that such registration would materially interfere
with any financing, acquisition or other material transaction involving the
Registrant and (iii) the Registrant will not be required to maintain the
effectiveness of any such registration statement for an aggregate period greater
than 180 days. If consummation of the sale of any Registrable Securities
pursuant to a registration hereunder does not occur within 180 days after the
filing with the SEC of the initial registration statement therefor, the
provisions of this Section 7 shall again be applicable to any proposed
registration. The Registrant shall use all reasonable best efforts to cause any
Registrable Securities registered pursuant to this Section 7 to be qualified for
sale under the securities or blue sky laws of such jurisdictions as the Holder
may reasonably request and shall continue such registration or qualification in
effect in such jurisdictions until the Holder has sold or otherwise disposed of
all of the securities subject to the registration statement; provided, however,
that the Registrant shall not be required to qualify to do business in, or
consent to general service of process in, any jurisdiction by reason of this
provision.
(c) The registration rights set forth in this Section 7 are subject to
the condition that the Holder shall provide the Registrant with such information
with respect to the Holder's Registrable Securities, the plan for distribution
thereof, and such other information with respect to the Holder as, in the
reasonable judgment of counsel for the Registrant, is necessary to enable the
Registrant to include in a registration statement all facts required to be
disclosed with respect to a registration thereunder, including the identity of
the Holder and the Holder's plan of distribution.
(d) A registration effected under this Section 7 shall be effected at
the Registrant's expense, except for underwriting discounts and commissions and
the fees and expenses of counsel to the Holder, and the Registrant shall use all
reasonable best efforts to: (i) provide such documentation (including
certificates, opinions of counsel and "comfort" letters from auditors) as are
customary in connection with underwritten public offerings and as an underwriter
may reasonably require, (ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statements as may be necessary to comply with the
provisions of the Securities Act and (iii) furnish to the Holder and to any
underwriter of such securities such number of copies of the final prospectus and
such other documents as the Holder or underwriters may reasonably request. In
connection with any registration which the Holder requests be underwritten, the
Holder and the Registrant agree to enter into an underwriting agreement
reasonably acceptable to each such party, in form and substance customary for
transactions of this type with the underwriters participating in such offering.
6
(e) Indemnification
---------------
(i) The Registrant will indemnify the Holder, each of the Holder's
directors and officers and each person who controls the Holder within the
meaning of Section 15 of the Securities Act, and each underwriter of the
Registrant's securities, with respect to any registration, qualification or
compliance which has been effected pursuant to this Agreement, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any action or
litigation, commenced or threatened (each, a "Damage Claim"), arising out of or
based on (A) any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular or
other document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, (B) any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or (C) any violation by the Registrant of any
rule or regulation promulgated under the Securities Act, the Securities Exchange
Act of 1934, as amended, any federal or state securities law or any rule or
regulation promulgated under any of them applicable to the Registrant (each
matter in clause (A), (B) or (C), a "Violation"), in each case in connection
with any such registration, qualification or compliance, and the Registrant will
reimburse the Holder and, each of its directors and officers and each person who
controls the Holder within the meaning of Section 15 of the Securities Act, and
each underwriter for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such Damage Claim,
provided that the Registrant will not be liable in any such case to the extent
that any such Damage Claim arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Registrant by the Holder or
director or officer or controlling person or underwriter seeking
indemnification, and provided, further, that the indemnity agreement contained
in this Section 7(e)(i) shall not apply to amounts paid in settlement of any
such Damage Claim if such settlement is effected without the consent of the
Registrant, which consent shall not be unreasonably withheld.
(ii) The Holder will indemnify the Registrant, each of the
Registrant's directors and officers and each underwriter of the Registrant's
securities covered by such registration statement and each person who controls
the Registrant within the meaning of Section 15 of the Securities Act, against
all Damage Claims arising out of or based on any Violation in connection with
any such registration, qualification or compliance, and will reimburse the
Registrant, such directors, officers or control persons or underwriters for any
legal or any other expenses reasonably incurred in connection with
investigating, preparing or defending any such Damage Claim, in each case to the
extent, but only to the extent, that such Violation occurs in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Registrant by the Holder
expressly for use therein, provided that in no event shall any indemnity under
this Section 7(e) exceed the gross proceeds of the offering received by the
Holder and provided, further that the indemnity agreement contained in this
Section 7(e)(ii) shall not apply to amounts
7
paid in settlement of any such Damage Claim if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld.
(iii) Each party entitled to indemnification under this Section 7(e)
(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, 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; provided, however, that the Indemnifying Party shall pay such
expense if representation of the Indemnified Party by counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests between the Indemnified Party and any other party represented by such
counsel in such proceeding, and provided, further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 7(e) unless the failure
to give such notice is materially prejudicial to an Indemnifying Party's ability
to defend such action. 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. No Indemnifying Party shall be required to indemnify any
Indemnified Party with respect to any settlement entered into without such
Indemnifying Party's prior consent (which shall not be unreasonably withheld).
(iv) If the indemnification provided for in this Section 7(e) is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any Damage Claim, then the Indemnifying Party, in lieu of
indemnifying the Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party with respect to such Damage Claim in the
proportion that is appropriate to reflect the relative fault of the Indemnifying
Party and the Indemnified Party in connection with the statements or omissions
that resulted in such Damage Claim, as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of material fact or the omission
to state a material fact relates to information supplied by the Indemnifying
Party or by the Indemnified Party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. In any such case, (A) the Holder will not be required to contribute
any amount in excess of the aggregate public offering price of all such
Registrable Securities offered and sold by the Holder pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
8
8. Adjustment Upon Changes in Capitalization; Rights Plans
-------------------------------------------------------
(a) In the event of any change in the Company Shares by reason of
stock dividends, stock splits, reverse stock splits, mergers (other than the
Merger), recapitalizations, combinations, exchanges of shares and the like, the
type and number of shares or securities subject to the Option shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction so that Parent shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Parent would
have received in respect of the Company Shares if the Option had been exercised
immediately prior to such event or the record date therefor, as applicable.
(b) Prior to such time as the Option is terminated, and at any time
after the Option is exercised (in whole or in part, if at all), the Company
shall not (i) adopt (nor permit the adoption of) a new stockholders rights plan
that contains provisions for the distribution or exercise of rights thereunder
as a result of Parent or any affiliate or transferee being the beneficial owner
of shares of the Company by virtue of the Option being exercisable or having
been exercised (or as a result of beneficially owning shares issuable in respect
of any Option Shares), or (ii) take any other action which would prevent or
disable Parent from exercising its rights under this Agreement or enjoying the
full rights and privileges possessed by other holders of Company Shares
generally with respect to the Option Shares obtained by the Holder upon exercise
of the Option.
9. Repurchase of Shares. Company shall have the right to purchase for
--------------------
cash (the "Repurchase Right") all, but not less than all, of the Option Shares
then beneficially owned by Parent at an aggregate price for all such shares
(regardless of the number of such shares) equal to the Adjusted Profit Cap.
Company's right to exercise the Repurchase Right shall expire on the twentieth
business day following the two year anniversary of the termination of the Merger
(the "Merger Termination Date"). In the event Company wishes to exercise the
Repurchase Right, Company shall send a written notice to Parent specifying a
date (not later than ten business days and not earlier than the second business
day following the date such notice is given) for the closing of such repurchase
(the "Repurchase Notice"), provided, however that Company may not repurchase any
Option Shares hereunder prior to the date that is one calendar year following
the date on which the Merger Agreement is terminated. The closing of the
repurchase of the Option Shares shall take place at the principal offices of
Company upon such specified date. Upon exercise of Company's right to
repurchase all outstanding Option Shares and full payment therefor to Parent
pursuant to this Section 9, any and all right of Parent to future exercises of
the Option shall be terminated. Notwithstanding anything to the contrary
herein, if application of the Adjusted Profit Cap formula below yields a number
that is less than zero, Company may exercise its Repurchase Right as provided in
this Section 9, and upon such exercise, Parent shall deliver all Option Shares
it holds to Company for cancellation, and neither Parent nor Company shall pay
each other any amount in connection with such exercise of the Repurchase Right.
9
For the purposes of this Agreement, the "Adjusted Profit Cap" means the
difference of (i) the Profit Cap minus (ii) the sum of (A) any Termination Fee
received by Parent under Section 7.3(b) of the Merger Agreement plus (B) the
proceeds received by Parent for any sales or other dispositions of Option Shares
(including pursuant to Company's exercise of its rights to purchase Option
Shares under Section 7(a) hereof) or the Option, and any dividends or
distributions received by Parent declared on Option Shares, in each case,
through the date of the closing of the repurchase under this Section 9; provided
that the Adjusted Profit Cap shall never be less than zero.
10. Restrictive Legends. Each certificate representing Option Shares
-------------------
issued to Parent hereunder (other than certificates representing shares sold in
a registered public offering pursuant to Section 7) shall include a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
11. Listing. The Company, upon the request of Parent, shall promptly file
-------
an application to list the Company Shares to be acquired upon exercise of the
Option for quotation on the Nasdaq Stock Market and shall use its reasonable
efforts to obtain approval of such listing as soon as practicable.
12. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties hereto and their respective successors and permitted
assigns. Except as set forth in Section 7, nothing contained in this Agreement,
express or implied, is intended to confer upon any person other than the parties
hereto and their respective successors and permitted assigns any rights or
remedies of any nature whatsoever by reason of this Agreement.
13. Specific Performance; Fees.
--------------------------
(a) The parties hereto recognize and agree that if for any reason any
of the provisions of this Agreement are not performed in accordance with their
specific terms or are otherwise breached, immediate and irreparable harm or
injury would be caused for which money damages would not be an adequate remedy.
Accordingly, each party agrees that in addition to other remedies the other
party shall be entitled to an injunction restraining any violation or threatened
violation of the provisions of this Agreement or the right to enforce any of the
covenants or agreements set forth herein by specific performance. In the event
that any action shall be brought in equity to enforce the provisions of the
Agreement, neither party will allege, and each party hereby waives the defense,
that there is an adequate remedy at law.
(b) If any action, suit or other proceeding (whether at law, in equity
or otherwise) is instituted concerning or arising out of this Agreement or any
transaction
10
contemplated hereunder, the prevailing party shall recover, in addition to any
other remedy granted to such party therein, all such party's costs and attorneys
fees incurred in connection with the prosecution or defense of such action, suit
or other proceeding.
14. Entire Agreement. This Agreement and the Merger Agreement (including
----------------
the appendices and exhibits thereto) constitute the entire agreement between the
parties with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
15. Further Assurances. Each party will execute and deliver all such
------------------
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
16. 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.
17. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given upon delivery either personally or by
commercial delivery service, or sent via telecopy (receipt confirmed) to the
parties at the following addresses or telecopy numbers (or at such other address
or telecopy numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Kana Communications, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP
Two Embarcadero Place
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
11
(b) if to Company, to:
Broadbase Software, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ Bay
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fenwick & West LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
18. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
19. 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.
20. Expenses. Except as otherwise expressly provided herein or in the
--------
Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
21. Amendments; Waiver. This Agreement may be amended by the parties
------------------
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
22. Assignment. Neither of the parties hereto may sell, transfer, assign
----------
or otherwise dispose of any of its rights or obligations under this Agreement or
the Option created hereunder to any other person, without the express written
consent of the other party, except that the rights and obligations hereunder
shall inure to the benefit of and be binding upon any successor or permitted
assign of a party hereto. No consent shall be required in connection with a
merger, consolidation, reorganization, sale of substantially all assets or
similar transaction with respect to a party hereto. Any purported assignment in
violation of this Section shall be void.
23. Public Announcement. Company shall consult with Parent and Parent
-------------------
shall consult with Company before issuing any press release with respect to the
initial announcement
12
of this Agreement or the transactions contemplated hereby and neither party
shall issue any such press release prior to such consultation except as may be
required by law.
24. Waiver Of Jury Trial. EACH OF PARENT AND COMPANY HEREBY IRREVOCABLY
--------------------
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT OR COMPANY IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
* * * * *
13
Exhibit C
---------
In Witness Whereof, the parties hereto have caused this Stock Option
Agreement to be executed by their duly authorized respective officers as of the
date first written above.
Broadbase Software, Inc.
By:
-------------------------------
Name: ▇▇▇▇▇ Bay
Title: Chief Executive Officer
Kana Communications, Inc.
By:
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Executive Officer
14
Exhibit D
---------
Parent Stock Option Agreement
This Stock Option Agreement (the "Agreement") is made and entered into as
of April 9, 2001, between Kana Communications, Inc., a Delaware corporation
("Parent"), and Broadbase Software, Inc., a Delaware corporation ("Company").
Recitals
A. Concurrently with the execution and delivery of this Agreement, Parent,
Company and Arrow Acquisition Corporation, a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), are entering into an Agreement and
Plan of Merger (the "Merger Agreement"), that provides, among other things, upon
the terms and subject to the conditions thereof, for the merger of Merger Sub
and Company (the "Merger"). Capitalized terms used in this Agreement but not
defined herein shall have the meanings ascribed to such terms in the Merger
Agreement.
B. As a condition to Company's willingness to enter into the Merger
Agreement, Company has required that the Parent agree, and the Parent has
agreed, to grant to Company an option to acquire shares of Parent Common Stock
("Parent Shares"), upon the terms and subject to the conditions set forth
herein.
In consideration of the foregoing and of the mutual covenants and
agreements set forth herein and in the Merger Agreement and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
1. Grant of Option. Parent hereby grants to Company an irrevocable option
---------------
(the "Option"), exercisable following the occurrence of an Exercise Event (as
defined in Section 2(a)), to acquire up to a number of Parent Shares equal to
19.9% of the Parent Shares issued and outstanding as of the date, if any, upon
which an Exercise Notice (as defined in Section 2(b) below) shall have been
delivered (the "Option Shares"), in the manner set forth below by paying cash at
a price of $.875 per share (the "Exercise Price"); provided, however, that the
-------- -------
Exercise Price will automatically, equitably and proportionally be adjusted to
reflect any subdivision, stock split, combination, reverse stock split, stock
dividend or other recapitalization affecting Parent Shares; and provided,
---------
further, that the number of Parent Shares issuable hereunder shall be subject to
-------
adjustment such that in no event shall the total number of Parent Shares
issuable upon exercise of the Option exceed that number of shares which is equal
to the difference of 19.9% of the Parent Shares issued and outstanding as of the
date, if any, upon which an Exercise Notice shall have been delivered less the
total number of Parent Shares, if any, issued or issuable at or prior to the
time of such exercise upon conversion of that certain Convertible Promissory
Note pursuant to that certain Revolving Loan Agreement dated the date hereof
between Parent and Company. All references in this Agreement to Parent Shares
issued to Company hereunder shall be deemed to include any associated Rights.
2. Exercise of Option; Maximum Proceeds.
-------------------------------------
(a) For all purposes of this Agreement, an "Exercise Event" shall mean
the occurrence of any of (i) a Parent Triggering Event (as such term is defined
in the Merger Agreement), (ii) (A) the public announcement of an acquisition or
purchase by any person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) of more than a 30%
beneficial ownership interest in the total outstanding voting securities of
Parent or any of its subsidiaries; or (B) the public announcement or
commencement of any tender offer or exchange offer that if consummated would
result in any person or "group" beneficially owning 30% or more of the total
outstanding voting securities of Parent or any of its subsidiaries.
(b) At any time following the occurrence of an Exercise Event, Company
may deliver to the Parent a written notice (an "Exercise Notice") specifying
that it wishes to exercise its rights to acquire Parent Shares under the Option
and close a purchase of Option Shares and specifying the total number of Option
Shares it wishes to acquire. Unless such Exercise Notice is withdrawn by
Company, the closing of a purchase of such Option Shares (a "Closing") shall
take place at the principal offices of Parent upon such date (which shall be no
earlier than three business days following the delivery of the Exercise Notice)
and at such time prior to the termination of the Option as may be designated by
Company in the Exercise Notice.
(c) The Option shall terminate upon the earliest to occur of (i) the
Effective Time (as such term is defined in the Merger Agreement), (ii)
termination of the Merger Agreement pursuant to Section 7.1(a) thereof, (iii)
termination of the Merger Agreement pursuant to Section 7.1(i) thereof if prior
to such termination no Triggering Event shall have occurred; (iv) termination of
the Merger Agreement pursuant to Section 7.1(b), 7.1(c), 7.1(d) or 7.1(e)
thereof if prior to such termination no Exercise Event shall have occurred or
(v) 12 months following the termination of the Merger Agreement under any other
circumstances; provided, however, that if the Option is exercisable but cannot
be exercised by reason of any applicable government order or because the waiting
period related to the issuance of the Option Shares under the HSR Act shall not
have expired or been terminated, or because any other condition to closing has
not been satisfied, then the Option shall not terminate until the tenth business
day after all such impediments to exercise shall have been removed or shall have
become final and not subject to appeal, and provided, further that if,
subsequent to exercise of the Option, but prior to any other termination of the
Merger Agreement, the Merger Agreement is terminated by Parent pursuant to
Section 7.1(i) thereof, then (1) the Option, to the extent it has not been
exercised, shall terminate and (2) to the extent the Option has been exercised,
Parent may repurchase for cash all Option Shares then held by Company at a per
Option Share price equal to the Exercise Price.
(d) If the sum of (i) any Termination Fee received by Company under
Section 7.3(c) of the Merger Agreement plus (ii) the proceeds received by
Company from any sales or other dispositions of Option Shares (including
pursuant to Parent's exercise of its rights to
2
purchase Option Shares under Section 7(a) and Section 10 hereof) or the Option
(including pursuant to Company's exercise of its rights to surrender the Option
pursuant to Section 9 hereof), plus (iii) any dividends or distributions
received by Company declared on Option Shares is, in the aggregate, greater than
the sum of (x) $2,500,000 plus (y) the product of (1) the Exercise Price
multiplied by (2) the number of Parent Shares purchased by Company pursuant to
the Option (the sum of clauses (x) and (y), the "Profit Cap"), then all such
proceeds received by Company in excess of the Profit Cap shall be promptly
remitted in cash by Company to Parent.
3. Conditions to Closing. The obligation of Parent to issue Option Shares
---------------------
to Company hereunder is subject to the conditions that (a) any waiting period
under the HSR Act applicable to the issuance of the Option Shares hereunder
shall have expired or been terminated; (b) all material consents, approvals,
orders or authorizations of, or registrations, declarations or filings with, any
Governmental Entity, if any, required in connection with the issuance of the
Option Shares hereunder shall have been obtained or made, as the case may be;
and (c) no preliminary or permanent injunction or other order by any court of
competent jurisdiction prohibiting or otherwise restraining such issuance shall
be in effect. It is understood and agreed that at any time during which Company
shall be entitled to deliver to Parent an Exercise Notice, the parties will use
their respective reasonable efforts to satisfy all conditions to Closing, so
that a Closing may take place as promptly as practicable.
4. Closing. At any Closing, (a) Parent shall deliver to Company a single
-------
certificate in definitive form representing the number of Parent Shares
designated by Company in its Exercise Notice consistent with this Agreement,
such certificate to be registered in the name of Company and to bear the legend
set forth in Section 10 hereof, against delivery of (b) payment by Company to
the Parent of the aggregate Exercise Price for the Parent Shares so designated
and being purchased by delivery of a certified check, bank check or wire
transfer of immediately available funds.
5. Representations and Warranties of the Parent. Parent represents and
--------------------------------------------
warrants to Company that (a) Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder; (b) the execution and delivery of this Agreement by
Parent and consummation by Parent of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Parent and
no other corporate proceedings on the part of Parent are necessary to authorize
this Agreement or any of the transactions contemplated hereby; (c) this
Agreement has been duly executed and delivered by Parent and constitutes a
legal, valid and binding obligation of Parent and, assuming this Agreement has
been duly executed and delivered by Company, is enforceable against Parent in
accordance with its terms, except as enforceability may be limited by bankruptcy
and other similar laws affecting the rights of creditors generally and general
principles of equity; (d) except for any filings, authorizations, approvals or
orders required under the applicable blue sky laws of any state, and the rules
and regulations promulgated thereunder, Parent has taken all necessary corporate
and other action to authorize and reserve for issuance and to permit it to issue
upon
3
exercise of the Option, and at all times from the date hereof until the
termination of the Option will have reserved for issuance, a sufficient number
of unissued Parent Shares for Company to exercise the Option in full and will
take all necessary corporate or other action to authorize and reserve for
issuance all additional Parent Shares or other securities which may be issuable
pursuant to Section 8(a) upon exercise of the Option, all of which, upon their
issuance and delivery in accordance with the terms of this Agreement and payment
therefor by Company, will be validly issued, fully paid and nonassessable; (e)
upon delivery of the Parent Shares and any other securities to Company upon
exercise of the Option, Company will acquire such Parent Shares or other
securities free and clear of all Encumbrances, excluding those imposed by
Company; (f) the execution and delivery of this Agreement by Parent do not, and
the performance of this Agreement by Parent will not, (i) violate the
Certificate of Incorporation or Bylaws of the Parent, (ii) conflict with or
violate any order applicable to the Parent or any of its subsidiaries or by
which they or any of their material property is bound or affected or (iii)
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give rise to any
right of termination, amendment, acceleration or cancellation of, or result in
the creation of a material Encumbrance on any material property or assets of
Parent or any of its subsidiaries pursuant to, any material contract or
agreement to which Parent or any of its subsidiaries is a party or by which
Parent or any of its subsidiaries or any of their material property is bound or
affected, except to the extent that any such breach, default, right of
termination, amendment, acceleration or cancellation or creation of a material
Encumbrance would not prevent or materially delay the performance by Parent of
Parent's obligations under this Agreement; and (g) the execution and delivery of
this Agreement by Parent does not, and the performance of this Agreement by
Parent will not, require any consent, approval, authorization or permit of, or
filing with, or notification to, any Governmental Entity.
6. Representations and Warranties of Company. Company represents and
-----------------------------------------
warrants to Parent that (i) the execution and delivery of this Agreement by
Company and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Company
and this Agreement has been duly executed and delivered by a duly authorized
officer of Company and will constitute a legal, valid and binding obligation of
Company and, assuming this Agreement has been duly executed and delivered by
Company, is enforceable against Parent in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws affecting the
rights of creditors generally and general principles of equity; and (ii) Company
is acquiring the Option, and, if and when the Company exercises the Option, it
will be acquiring the Option Shares issuable upon the exercise thereof for its
own account and not with a view to distribution or resale in any manner which
would be in violation of the Securities Act.
7. Registration Rights.
-------------------
(a) Following the termination of the Merger Agreement, Company
(sometimes referred to herein as the "Holder") may by written notice (a
"Registration Notice") to Parent (sometimes referred to herein as the
"Registrant") request the Registrant to register
4
under the Securities Act all or any part of the Option Shares acquired by the
Holder pursuant to this Agreement (such Option Shares, together with any other
shares of the Parent's capital stock issuable in lieu of or with respect to such
Option Shares, the "Registrable Securities") in order to permit the public sale
or other disposition of such shares in accordance with the intended method of
sale or other disposition stated by the Holder; provided, however, that any such
Registration Notice must relate to a number of shares equal to at least 2% of
the outstanding Parent Shares and that any rights to require registration
hereunder shall terminate with respect to any shares of the Parent's capital
stock that may be sold pursuant to Rule 144(k) under the Securities Act or at
such time as all of the Registrable Securities may be sold in any three month
period pursuant to Rule 144 under the Securities Act. Upon receipt of a
Registration Notice, the Registrant will have the option exercisable by written
notice delivered to the Holder within ten business days after the receipt of the
Registration Notice, irrevocably to agree to purchase all or any part of the
Registrable Securities for cash at a price (the "Option Price") equal to the
product of (i) the number of Registrable Securities so purchased and (ii) the
per share average of the closing sale prices of the Registrant's Common Stock on
the Nasdaq Stock Market for the twenty trading days immediately preceding the
date of the Registration Notice. Any such purchase of Registrable Securities by
the Registrant hereunder will take place at a closing to be held at the
principal executive offices of the Registrant or its counsel at any reasonable
date and time designated by the Registrant in such notice within five business
days after delivery of such notice. The payment for the shares to be purchased
will be made by delivery at the time of such closing of the Option Price in
immediately available funds.
(b) If the Registrant receives a Registration Notice and does not
elect to exercise its option to purchase pursuant to Section 7(a), the
Registrant shall use all reasonable best efforts to effect, as promptly as
practicable, the registration under the Securities Act of the unpurchased
Registrable Securities requested to be registered in the Registration Notice;
provided, however, that (i) the Holder shall not be entitled to more than an
aggregate of two effective registration statements hereunder, and provided
further, that if the Registrant withdraws a filed registration statement at the
request of the Holder (other than as the result of a material adverse change in
the Registrant's business or prospects or the Holder's learning of new material
information concerning the Registrant), then such filing shall be deemed to have
been an effective registration for purposes of this clause (i), (ii) the
Registrant will not be required to file any such registration statement or
maintain its effectiveness during any period of time (not to exceed 45 days
after a Registration Notice in the case of clause (A) below or 60 days after a
Registration Notice in the case of clauses (B) and (C) below) when (A) the
Registrant is in possession of material non-public information which it
reasonably believes would be detrimental to be disclosed at such time and such
information would have to be disclosed if a registration statement were filed or
effective at that time; (B) the Registrant is required under the Securities Act
to include audited financial statements for any period in such registration
statement and such financial statements are not yet available for inclusion in
such registration statement; or (C) the Registrant determines, in its good
faith, reasonable judgment, that such registration would materially interfere
with any financing, acquisition or other material transaction involving the
Registrant and (iii) the Registrant will not be required to maintain the
effectiveness of any such
5
registration statement for an aggregate period greater than 180 days. If
consummation of the sale of any Registrable Securities pursuant to a
registration hereunder does not occur within 180 days after the filing with the
SEC of the initial registration statement therefor, the provisions of this
Section 7 shall again be applicable to any proposed registration. The Registrant
shall use all reasonable best efforts to cause any Registrable Securities
registered pursuant to this Section 7 to be qualified for sale under the
securities or blue sky laws of such jurisdictions as the Holder may reasonably
request and shall continue such registration or qualification in effect in such
jurisdictions until the Holder has sold or otherwise disposed of all of the
securities subject to the registration statement; provided, however, that the
Registrant shall not be required to qualify to do business in, or consent to
general service of process in, any jurisdiction by reason of this
provision.
(c) The registration rights set forth in this Section 7 are subject to
the condition that the Holder shall provide the Registrant with such information
with respect to the Holder's Registrable Securities, the plan for distribution
thereof, and such other information with respect to the Holder as, in the
reasonable judgment of counsel for the Registrant, is necessary to enable the
Registrant to include in a registration statement all facts required to be
disclosed with respect to a registration thereunder, including the identity of
the Holder and the Holder's plan of distribution.
(d) A registration effected under this Section 7 shall be effected at
the Registrant's expense, except for underwriting discounts and commissions and
the fees and expenses of counsel to the Holder, and the Registrant shall use all
reasonable best efforts to: (i) provide such documentation (including
certificates, opinions of counsel and "comfort" letters from auditors) as are
customary in connection with underwritten public offerings and as an underwriter
may reasonably require, (ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statements as may be necessary to comply with the
provisions of the Securities Act and (iii) furnish to the Holder and to any
underwriter of such securities such number of copies of the final prospectus and
such other documents as the Holder or underwriters may reasonably request. In
connection with any registration which the Holder requests be underwritten, the
Holder and the Registrant agree to enter into an underwriting agreement
reasonably acceptable to each such party, in form and substance customary for
transactions of this type with the underwriters participating in such offering.
(e) Indemnification
---------------
(i) The Registrant will indemnify the Holder, each of the
Holder's directors and officers and each person who controls the Holder within
the meaning of Section 15 of the Securities Act, and each underwriter of the
Registrant's securities, with respect to any registration, qualification or
compliance which has been effected pursuant to this Agreement, against all
expenses, claims, losses, damages or liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any action or
litigation, commenced or
6
threatened (each, a "Damage Claim"), arising out of or based on (A) any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, (B) any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, or (C) any violation by the Registrant of any rule or regulation
promulgated under the Securities Act, the Securities Exchange Act of 1934, as
amended, any federal or state securities law or any rule or regulation
promulgated under any of them applicable to the Registrant (each matter in
clause (A), (B) or (C), a "Violation"), in each case in connection with any such
registration, qualification or compliance, and the Registrant will reimburse the
Holder and, each of its directors and officers and each person who controls the
Holder within the meaning of Section 15 of the Securities Act, and each
underwriter for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such Damage Claim,
provided that the Registrant will not be liable in any such case to the extent
that any such Damage Claim arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Registrant by the Holder or
director or officer or controlling person or underwriter seeking
indemnification, and provided, further, that the indemnity agreement contained
in this Section 7(e)(i) shall not apply to amounts paid in settlement of any
such Damage Claim if such settlement is effected without the consent of the
Registrant, which consent shall not be unreasonably withheld.
(ii) The Holder will indemnify the Registrant, each of the
Registrant's directors and officers and each underwriter of the Registrant's
securities covered by such registration statement and each person who controls
the Registrant within the meaning of Section 15 of the Securities Act, against
all Damage Claims arising out of or based on any Violation in connection with
any such registration, qualification or compliance, and will reimburse the
Registrant, such directors, officers or control persons or underwriters for any
legal or any other expenses reasonably incurred in connection with
investigating, preparing or defending any such Damage Claim, in each case to the
extent, but only to the extent, that such Violation occurs in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Registrant by the Holder
expressly for use therein, provided that in no event shall any indemnity under
this Section 7(e) exceed the gross proceeds of the offering received by the
Holder and provided, further that the indemnity agreement contained in this
Section 7(e)(ii) shall not apply to amounts paid in settlement of any such
Damage Claim if such settlement is effected without the consent of the Holder,
which consent shall not be unreasonably withheld.
(iii) Each party entitled to indemnification under this Section 7(e)
(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
7
Indemnifying Party, who shall conduct the defense of such claim or litigation,
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; provided, however, that the Indemnifying Party
shall pay such expense if representation of the Indemnified Party by counsel
retained by the Indemnifying Party would be inappropriate due to actual or
potential differing interests between the Indemnified Party and any other party
represented by such counsel in such proceeding, and provided, further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 7(e) unless
the failure to give such notice is materially prejudicial to an Indemnifying
Party's ability to defend such action. 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. No Indemnifying Party shall be required to
indemnify any Indemnified Party with respect to any settlement entered into
without such Indemnifying Party's prior consent (which shall not be unreasonably
withheld).
(iv) If the indemnification provided for in this Section 7(e) is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any Damage Claim, then the Indemnifying Party, in lieu of
indemnifying the Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party with respect to such Damage Claim in the
proportion that is appropriate to reflect the relative fault of the Indemnifying
Party and the Indemnified Party in connection with the statements or omissions
that resulted in such Damage Claim, as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of material fact or the omission
to state a material fact relates to information supplied by the Indemnifying
Party or by the Indemnified Party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. In any such case, (A) the Holder will not be required to contribute
any amount in excess of the aggregate public offering price of all such
Registrable Securities offered and sold by the Holder pursuant to such
registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
8. Adjustment Upon Changes in Capitalization; Rights Plans
-------------------------------------------------------
(a) In the event of any change in the Parent Shares by reason of stock
dividends, stock splits, reverse stock splits, mergers (other than the Merger),
recapitalizations, combinations, exchanges of shares and the like, the type and
number of shares or securities subject to the Option shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction so that Company shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Company would
have
8
received in respect of the Parent Shares if the Option had been exercised
immediately prior to such event or the record date therefor, as applicable.
(b) Prior to such time as the Option is terminated, and at any time
after the Option is exercised (in whole or in part, if at all), the Parent shall
not (i) adopt (nor permit the adoption of) a new stockholders rights plan that
contains provisions for the distribution or exercise of rights thereunder as a
result of Company or any affiliate or transferee being the beneficial owner of
shares of the Parent by virtue of the Option being exercisable or having been
exercised (or as a result of beneficially owning shares issuable in respect of
any Option Shares), or (ii) take any other action which would prevent or disable
Company from exercising its rights under this Agreement or enjoying the full
rights and privileges possessed by other holders of Parent Shares generally with
respect to the Option Shares obtained by the Holder upon exercise of the Option.
9. Repurchase of Shares. Parent shall have the right to purchase for cash
--------------------
(the "Repurchase Right") all, but not less than all, of the Option Shares then
beneficially owned by Company at an aggregate price for all such shares
(regardless of the number of such shares) equal to the Adjusted Profit Cap.
Parent's right to exercise the Repurchase Right shall expire on the twentieth
business day following the two year anniversary of the termination of the Merger
(the "Merger Termination Date"). In the event Parent wishes to exercise the
Repurchase Right, Parent shall send a written notice to Company specifying a
date (not later than ten business days and not earlier than the second business
day following the date such notice is given) for the closing of such repurchase
(the "Repurchase Notice"), provided, however that Parent may not repurchase any
Option Shares hereunder prior to the date that is one calendar year following
the date on which the Merger Agreement is terminated. The closing of the
repurchase of the Option Shares shall take place at the principal offices of
Parent upon such specified date. Upon exercise of Parent's right to repurchase
all outstanding Option Shares and full payment therefor to Company pursuant to
this Section 9, any and all right of Company to future exercises of the Option
shall be terminated. Notwithstanding anything to the contrary herein, if
application of the Adjusted Profit Cap formula below yields a number that is
less than zero, Parent may exercise its Repurchase Right as provided in this
Section 9, and upon such exercise, Company shall deliver all Option Shares it
holds to Parent for cancellation, and neither Company nor Parent shall pay each
other any amount in connection with such exercise of the Repurchase Right.
For the purposes of this Agreement, the "Adjusted Profit Cap" means the
difference of (i) the Profit Cap minus (ii) the sum of (A) any Termination Fee
received by Company under Section 7.3(c) of the Merger Agreement plus (B) the
proceeds received by Company for any sales or other dispositions of Option
Shares (including pursuant to Parent's exercise of its rights to purchase Option
Shares under Section 7(a) hereof) or the Option, and any dividends or
distributions received by Company declared on Option Shares, in each case,
through the date of the closing of the repurchase under this Section 9; provided
that the Adjusted Profit Cap shall never be less than zero.
9
10. Restrictive Legends. Each certificate representing Option Shares
-------------------
issued to Company hereunder (other than certificates representing shares sold in
a registered public offering pursuant to Section 7) shall include a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD
ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
11. Listing. The Parent, upon the request of Company, shall promptly file
-------
an application to list the Parent Shares to be acquired upon exercise of the
Option for quotation on the Nasdaq Stock Market and shall use its reasonable
efforts to obtain approval of such listing as soon as practicable.
12. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties hereto and their respective successors and permitted
assigns. Except as set forth in Section 7, nothing contained in this Agreement,
express or implied, is intended to confer upon any person other than the parties
hereto and their respective successors and permitted assigns any rights or
remedies of any nature whatsoever by reason of this Agreement.
13. Specific Performance; Fees.
--------------------------
(a) The parties hereto recognize and agree that if for any reason any
of the provisions of this Agreement are not performed in accordance with their
specific terms or are otherwise breached, immediate and irreparable harm or
injury would be caused for which money damages would not be an adequate remedy.
Accordingly, each party agrees that in addition to other remedies the other
party shall be entitled to an injunction restraining any violation or threatened
violation of the provisions of this Agreement or the right to enforce any of the
covenants or agreements set forth herein by specific performance. In the event
that any action shall be brought in equity to enforce the provisions of the
Agreement, neither party will allege, and each party hereby waives the defense,
that there is an adequate remedy at law.
(b) If any action, suit or other proceeding (whether at law, in equity
or otherwise) is instituted concerning or arising out of this Agreement or any
transaction contemplated hereunder, the prevailing party shall recover, in
addition to any other remedy granted to such party therein, all such party's
costs and attorneys fees incurred in connection with the prosecution or defense
of such action, suit or other proceeding.
14. Entire Agreement. This Agreement and the Merger Agreement (including
----------------
the appendices and exhibits thereto) constitute the entire agreement between the
parties with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
10
15. Further Assurances. Each party will execute and deliver all such
------------------
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
16. 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.
17. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given upon delivery either personally or by
commercial delivery service, or sent via telecopy (receipt confirmed) to the
parties at the following addresses or telecopy numbers (or at such other address
or telecopy numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Kana Communications, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP
Two Embarcadero Place
▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Company, to:
Broadbase Software, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ Bay
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
11
with a copy to:
Fenwick & West LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
18. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
19. 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.
20. Expenses. Except as otherwise expressly provided herein or in the
--------
Merger Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
21. Amendments; Waiver. This Agreement may be amended by the parties
------------------
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
22. Assignment. Neither of the parties hereto may sell, transfer, assign
----------
or otherwise dispose of any of its rights or obligations under this Agreement or
the Option created hereunder to any other person, without the express written
consent of the other party, except that the rights and obligations hereunder
shall inure to the benefit of and be binding upon any successor or permitted
assign of a party hereto. No consent shall be required in connection with a
merger, consolidation, reorganization, sale of substantially all assets or
similar transaction with respect to a party hereto. Any purported assignment in
violation of this Section shall be void.
23. Public Announcement. Parent shall consult with Company and Company
-------------------
shall consult with Parent before issuing any press release with respect to the
initial announcement of this Agreement or the transactions contemplated hereby
and neither party shall issue any such press release prior to such consultation
except as may be required by law.
24. Waiver Of Jury Trial. EACH OF PARENT AND COMPANY HEREBY IRREVOCABLY
--------------------
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE
12
ACTIONS OF PARENT OR COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT HEREOF.
* * * * *
13
Exhibit D
---------
In Witness Whereof, the parties hereto have caused this Stock Option
Agreement to be executed by their duly authorized respective officers as of the
date first written above.
Broadbase Software, Inc
By:
-----------------------------
Name: ▇▇▇▇▇ Bay
Title: Chief Executive Officer
Kana Communications, Inc.
By:
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Executive Officer
14
EXHIBIT E
Distribution and License Agreement
This Software Distribution License Agreement ("License Agreement") is made
effective as of April 8, 2001 ("Effective Date"), and is made by and between:
Kana Communications, Inc., a Delaware corporation ("Kana") and Broadbase
Software, Inc., a Delaware corporation ("Broadbase").
WHEREAS the parties wish to enter into a License Agreement to permit each of the
parties to distribute and otherwise exploit the Licensed Products of the other
(as hereinafter defined), the parties agree as follows:
1. Definitions. As used in this License Agreement, the following terms
-----------
shall have the following meanings:
"Broadbase Products" means all software owned by Broadbase, and such
software, products and services offered to third parties by Broadbase as of the
Effective Date, and any Updates or Upgrades to such software, products and
services, and new software, products and services offered for sale by Broadbase,
and all documentation associated therewith.
"Broadbase Trademarks" means all trademarks and service marks
registered to Broadbase and all trademarks and service marks for which Broadbase
has applied for registration.
"Derivative Work" means any modification, translation, port,
adaptation, extension, improvement, compilation, abridgment or other form in
which the Licensor's Licensed Products may be recast, transformed or adapted for
use, including but not limited to any form which would infringe any copyright to
the Licensor's Licensed Products but for the license granted herein.
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all patents and
applications therefor and all reissues, divisions, renewals, extensions,
provisionals, continuations and continuations-in-part thereof; (ii) all
inventions (whether patentable or not), invention disclosures, improvements,
trade secrets, proprietary information, know how, ideas and information,
designs, formulas, algorithms, processes, schematics, technology, technical
data, and all documentation relating to any of the foregoing; (iii) all
copyrights, copyrights registrations and applications therefor, and all other
rights corresponding thereto throughout the world; (iv) all industrial designs
and any registrations and applications therefor throughout the world; (v) all
trade names, URLs, logos, common law trademarks and service marks, trademark and
service ▇▇▇▇ registrations and applications therefor throughout the world; (vi)
all databases and data collections and all rights therein throughout the world;
(vii) all moral and economic rights of authors and
1
inventors, however denominated, throughout the world, and (viii) any similar or
equivalent rights to any of the foregoing anywhere in the world.
"Kana Products" means all software owned by Kana, and such software,
products and services offered to third parties by Kana as of the Effective Date,
and any Updates or Upgrades to such software, products and services, and new
software, products and services offered for sale by Kana during the term of this
License Agreement, and all documentation associated therewith.
"Kana Trademarks" means all trademarks and service marks registered to
Kana and all trademarks and service marks for which Kana has applied for
registration.
"Licensed Products" means the Broadbase Products and the Kana
Products, as the context requires.
"Licensed Trademarks" means the Broadbase Trademarks and the Kana
Trademarks, as the context requires.
"Merger Agreement" means the Agreement and Plan of Merger entered into
as of April 9, 2001, among Kana, Arrow Acquisition Corporation, and Broadbase.
"Net Revenue" means each of Broadbase and Kana's invoiced license fees
for the other's Licensed Products less actual returns and applicable taxes or
similar charges imposed by governmental authorities.
"Updates" means bug fixes, modifications, variations, or enhancements
made to the Licensor's Licensed Products without a significant change in the
functionality of the Licensor's Licensed Products, the packaging (other than to
indicate a change in the version number to the right of the decimal point).
"Upgrades" means new releases and versions of the Licensor's Licensed
Products that include significant changes to functionality, new functionality,
new packaging or a change in the version number to the left of the decimal
point.
2. Object Code License. Subject to the terms of this License Agreement,
-------------------
each party (the "Licensor") hereby grants to the other (the "Licensee"), a
world-wide, nontransferable, nonexclusive, royalty-bearing license under all the
Licensor's Intellectual Property to use, copy, distribute, display and perform
the Licensor's Licensed Products, including but not limited to the right to
sublicense the Licensor's Licensed Products to the Licensee's affiliates, or
sublicense or distribute the Licensor's Licensed Products through multiple
layers of distribution on a stand-alone basis or as integrated or bundled with
their own products or technology or the products or technology of others. Each
Licensee may sublicense the Licensor's Licensed Products by permitting bona fide
distributors and resellers to sell user licenses for the Licensor's Licensed
Products, by permitting duplication and distribution of the Licensor's Licensed
Products by OEMs, and by permitting users to duplicate the Licensor's Licensed
Products in connection with
2
site licenses and similar transactions, provided that each sublicense is made
only pursuant to a valid sublicense agreement that provides substantially
similar protections to Licensor as Licensor's standard license agreement. Each
Licensee shall consult in advance with its respective Licensor in the event that
it wishes to enter into site licenses, OEM License Agreements or other
arrangements or license agreements that provide for unlimited numbers of seats
of the Licensor's Licensed Products to be distributed or sold for a single price
or otherwise allow any third party to create copies of the Licensor's Licensed
Products, and shall not enter into any such arrangements without the Licensor's
concurrence, which concurrence will not be unreasonably withheld or delayed.
Failure to object to any request for concurrence for such arrangement within ten
(10) business days of such request shall be deemed concurrence. Licensee may
modify and may authorize its licensees to modify the documentation for the
Licensor's Licensed Products and distribute such modified documentation with the
Licensor's Licensed Products, provided that each party or its licensees must
retain all the other party's copyright, trademark and similar notices in such
documentation, provided that notwithstanding the terms of this Agreement,
Licensor shall have no liability to Licensee or any third party with respect to
any such modified documentation.
3. Delivery. Within five (5) days of the Effective Date, the Licensor
--------
shall deliver to the Licensee, in a form or medium agreed by the parties, a
reproducible form of the master versions of the then current version of the
Licensor's Licensed Products.
4. Source Code License. Each Licensor shall place the source code for the
-------------------
Licensor's Licensed Products in escrow with such escrow agent as agreed by the
parties, pursuant to the terms of an escrow agreement, a form of which is
attached as Exhibit A. A party's source code shall be released from escrow (the
-------
"Releasing Party") to the other party (the "Beneficiary") upon the occurrence of
one of the following release conditions with respect to the Releasing Party:
(i) if the Releasing Party:
(a) becomes the debtor in a voluntary petition under the United
States Bankruptcy Code;
(b) commences any proceeding for relief from or adjustment of its
debts (including without limitation by consenting to or
otherwise permitting the entry of an order for relief in an
involuntary case under the United States Bankruptcy Code);
(c) requests, consents to or permits the appointment of a receiver
for all or substantially all of its assets; or
(d) files any court proceeding seeking its liquidation and the
winding up of its affairs;
3
(ii) if the Releasing Party:
(a) becomes the alleged debtor in an involuntary petition under the
United States Bankruptcy Code if such petition or proceeding is
not dismissed within ninety (90) days of filing;
(b) has filed against it any involuntary proceeding for relief from
or adjustment of its debts, or requesting the appointment of a
receiver for all or substantially all of its assets; or
(c) becomes the subject of any involuntary proceeding for the
liquidation of the party and the winding up of its affairs if
such petition or proceeding, in each case, is not dismissed
within ninety (90) days of filing;
(iii) if the Releasing Party makes a general assignment for the benefit of
its creditors, or enters into a composition of creditors; or
(iv) if the Releasing Party adopts necessary board and, if required,
stockholder resolutions for dissolution, liquidation and winding up of its
affairs.
(v) if the Releasing Party ceases to operate or do business, without
there being a successor; or
(vi) if the Releasing Party fails to provide maintenance or support of
its Licensed Products in accordance with the standard terms and conditions for
such support, where such failure renders the Licensed Products materially
unusable causing a substantial adverse impact to the business of the Beneficiary
and which failure is not cured within forty-five (45) days of written notice
from the Beneficiary of such failure.
Subject to the terms of this License Agreement, the Licensor hereby grants to
the Licensee, a world-wide, nontransferable, nonexclusive, royalty-free license
under all Intellectual Property to use, modify, or copy the source code for
Licensor's Licensed Products, create Derivative Works and improvements from the
source code for the Licensor's Licensed Products, and/or distribute such
Derivative Works in object code form.
5. Restrictions. Each Licensee agrees that under no circumstance shall
------------
it, or shall it cause or permit any third party to, (a) distribute or allow
others to distribute the Licensor's Licensed Products except as contemplated by
this License Agreement, (b) reproduce, modify or copy the Licensor's Licensed
Products and associated documentation except as contemplated by this License
Agreement, or as permitted by the Licensor in writing, or (c) reverse assemble,
reverse compile or reverse engineer the Licensor's Licensed Products, or
otherwise attempt to discover any of the Licensor's Licensed Products source
code or underlying Confidential Information, except as contemplated in Section 4
of this License Agreement. The parties reserve all rights not expressly granted
in this License Agreement.
4
6. Ownership of Licensed Products and Derivative Works. As between the
---------------------------------------------------
parties, title to and ownership of the Licensor's Licensed Products, and all
Intellectual Property therein, any accompanying printed materials and all copies
and portions thereof shall be and at all times remain in the Licensor. As
between the parties, title to and ownership of the Derivative Works of the
Licensor's Licensed Products created by or on behalf of the Licensee, and all
Intellectual Property therein, any accompanying printed materials and all copies
and portions thereof shall be and at all times remain in the Licensee creating
such Derivative Works, subject to the Licensor's rights to the Licensor's
Licensed Products. Notwithstanding the foregoing, nothing herein shall restrict
Licensor's rights with respect to such Derivative Works to the extent that they
are retained in the memory of Licensor's employees or agents.
7. Trademark License. Subject to the terms of this Agreement, each
-----------------
Licensor hereby grants to the Licensee a world-wide, nontransferable,
nonexclusive, royalty-free license to use, copy, distribute and display the
Licensor's Licensed Trademarks, including the right to sublicense the use of
such trademarks through the multiple layers of distribution, solely in
connection with the licensing or other distribution of the Licensor's Licensed
Products, and in accordance with the Licensor's trademark usage guidelines
provided to the Licensee from time to time.
8. Updates and Upgrades. At no cost to either party, other than as
--------------------
provided in Section 9, each Licensor shall provide the Licensee with all Updates
and Upgrades as soon as such Updates and Upgrades are made generally available.
9. Maintenance and Support. Each Licensor shall provide to the Licensee
-----------------------
all maintenance and support related to the Licensor's Licensed Products that is
offered to others on terms consistent with those generally offered to any other
person with respect to such maintenance and support.
10. Royalties. Each Licensee shall pay to the Licensor royalties equal to
---------
ten percent (10%) of Net Revenue from the distribution or other commercial
exploitation of the Licensor's Licensed Products on a stand-alone basis, and to
the extent that the Licensor's Licensed Products are bundled with the Licensee's
own products, Licensee shall pay to Licensor royalties equal to ten percent
(10%) of that portion of the Net Revenue for such bundled product that is
reasonably attributable to the Licensor's Licensed Products. No royalties
shall be payable with respect to Licensed Products that are used internally by
the Licensee or Beneficiary or its affiliates for non-revenue generating
activities, or made available to third parties for evaluation or promotional
purposes, provided that any such evaluation or promotional use shall not be for
a period more than thirty (30) days without Licensor's prior written consent.
Royalties payable pursuant to this Section 10 shall be calculated and paid, on a
quarterly basis, not more than thirty (30) days after the last day of the fiscal
quarter in which the Net Revenue giving rise to such royalties are recognized.
5
11. Audit. Each party shall deliver to the other along with its payment of
-----
royalties due for each quarter, a written report showing, in detail, its
calculation of royalties payable with respect to such quarter. Each party shall
keep, maintain and preserve for at least two (2) years following the quarter in
which the Net Revenue giving rise to royalties is recognized by such party,
accurate records relating to such royalties. Such records shall be Confidential
Information, but shall be available for inspection and audit as provided herein.
Each party shall have the right no more than once per calendar year to have an
independent public accountant, reasonably acceptable to the other, examine the
other party's relevant books, records and accounts for the purpose of verifying
the accuracy of payments made as required under this License Agreement. Each
party acknowledges and agrees that such accountant shall not have access to the
books, records, and accounts relating to other products or services except as
such books, records and accounts also directly relate to the payments due
hereunder. Each audit will be conducted at the audited party's place of
business, or other place agreed to by the parties, during the audited party's
normal business hours and with at least five (5) business days prior written
notice. Each party shall pay the fees and expenses of its auditor for the
examination; provided that should any examination disclose a greater than five
percent (5%) shortfall in the payments due for the period being audited, the
audited party shall pay the reasonable fees and expenses of the auditor for that
examination.
12. Confidentiality.
---------------
a. Each party ("Receiving Party") agrees to keep confidential and not
disclose or use except as contemplated by this License Agreement, confidential
information related to the other party's ("Disclosing Party") technology or
business that is provided to the Receiving Party in connection with this License
Agreement, the source code of any Kana Products and any other information
received from the Disclosing Party that is stamped or marked as Confidential by
the Disclosing Party, including without limitation, any information disclosed
orally that the Disclosing Party identifies as confidential by written notice to
the Receiving Party within thirty (30) days of such disclosure, or information
that would reasonably be expected to be confidential from its context
("Confidential Information").
b. "Confidential Information" shall not include information the
Receiving Party can document (a) is in or (through no improper action or
inaction by the Receiving Party or any affiliate, agent or employee) enters the
public domain, or (b) was rightfully in the Receiving Party's possession or
known by it prior to receipt from the Disclosing Party, or (c) was rightfully
disclosed to the Receiving Party by another person without restriction, or (d)
was independently developed by the Receiving Party by persons without access to
such information and without use of any Confidential Information of the
Disclosing Party.
c. Each party, with prior written notice to the Disclosing Party, may
disclose such Confidential Information required to be disclosed to a
governmental entity or agency, or pursuant to the lawful requirement or order of
a governmental entity or agency, provided that reasonable measures are taken to
guard against further disclosure,
6
including without limitation, seeking appropriate confidential treatment or a
protective order, or assisting the other party to do so.
d. The Receiving Party acknowledges and agrees that due to the unique
nature of the Disclosing Party's Confidential Information, there can be no
adequate remedy at law for any breach of its obligations hereunder, that any
such breach may allow the Receiving Party or third parties to unfairly compete
with the Disclosing Party resulting in irreparable harm to the Disclosing Party,
and therefore, that upon any such breach or any threat thereof, the Disclosing
Party shall be entitled to seek appropriate equitable relief in addition to
whatever remedies it might have at law. The Receiving Party will notify the
Disclosing Party in writing immediately upon the occurrence of any such
unauthorized release or other breach. Any breach of this Section 12 will
constitute a material breach of this License Agreement.
13. Limited Warranty and Disclaimer. Each Licensor warrants that, for a
-------------------------------
period of ninety (90) days from the date of delivery of the Licensor Licensed
Products, (a) the Licensor's Licensed Products shall perform substantially in
accordance with the documentation therefor, and (b) the media upon which the
Licensor's Licensed Products are provided to the Licensee shall be free from
defects in material and workmanship under normal use. This warranty covers only
problems reported to the Licensor during the warranty period. WARRANTY
DISCLAIMER: EXCEPT AS EXPRESSLY STATED HEREIN, EACH LICENSOR'S LICENSED PRODUCTS
ARE PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF PERFORMANCE OR MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT. EACH LICENSEE BEARS ALL
RISK RELATING TO QUALITY AND PERFORMANCE OF THE LICENSOR'S LICENSED PRODUCTS.
The performance of each Licensor's Licensed Products varies with various
manufacturers' equipment with which it is used. Each Licensor does not warrant
that the Licensor's Licensed Products or the functions contained in the
Licensor's Licensed Products will meet the Licensee's requirements, operate
without interruption or be error free. The exclusive remedy for breach by each
Licensor of its limited warranty set forth above shall be replacement of any
defective Licensor's Licensed Product or medium upon its return to the Licensor
within the warranty period.
14. Limitation of Remedies and Damages. EXCEPT FOR BREACHES OF SECTION
----------------------------------
12 PERTAINING TO CONFIDENTIALITY AND THE INDEMNITY OBLIGATIONS IN SECTION 15,
NEITHER PARTY SHALL BE RESPONSIBLE OR LIABLE WITH RESPECT TO ANY SUBJECT MATTER
OF THIS LICENSE AGREEMENT OR TERMS AND CONDITIONS RELATED THERETO UNDER ANY
CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY (A) FOR LOSS OR
INACCURACY OF DATA OR COST OF PROCUREMENT OF SUBSTITUTE GOODS, SERVICES OR
TECHNOLOGY, OR (B) FOR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES
INCLUDING, BUT NOT LIMITED TO LOSS OF REVENUES, LOSS OF PROFITS, BUSINESS
INTERRUPTION, LOSS OR INACCURACY OF DATA OR COST OF
7
PROCUREMENT OF SUBSTITUTE GOODS, ARISING OUT OF THE USE OF OR INABILITY TO USE
THE LICENSED PRODUCTS, EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES. EXCEPT FOR BREACHES OF SECTION 12 PERTAINING TO CONFIDENTIALITY
AND INDEMNITY OBLIGATIONS IN SECTION 15, IN NO EVENT WILL A PARTY'S LIABILITY
EXCEED THE TOTAL ROYALTIES PAID BY THE PARTIES PURSUANT TO THIS AGREEMENT.
NEITHER PARTY SHALL BE RESPONSIBLE FOR ANY MATTER BEYOND ITS REASONABLE CONTROL.
Because some jurisdictions do not allow the exclusion or limitation of liability
of consequential or incidental damages, the above limitation may not apply.
15. Indemnity.
---------
a. Each party (the "Indemnifying Party") shall defend, indemnify and
save harmless the other, their respective affiliates, directors, officers,
employees, agents and independent contractors (the Indemnified Parties") from
any and all claims, costs, damages, and expenses (including but not limited to
reasonable attorney's fees) incurred by the Indemnified Parties that are
attributable to any claim, demand or cause of action asserting that any
Indemnifying Party's Licensed Product infringes any U.S. patent, copyright,
trademark or trade secret, provided that the Indemnified Parties tender sole
control of the defense and settlement of such claim to the Indemnifying Party
and reasonably cooperates in the defense thereof, provided that the Licensor
shall have no obligation hereunder to the extent that any such claim, cost,
damage or expense is based upon Licensee's use of a modified or superseded
Licensed Product.
b. In the event of an occurrence of a Release Condition, and
Beneficiary's creation of any Derivative Works pursuant to the license granted
in Section 4, the Beneficiary shall defend, indemnify and save harmless the
Releasing Party, its affiliates, and their respective directors, officers,
employees, agents and independent contractors from any and all claims, costs,
damages, and expenses (including but not limited to reasonable attorney's fees)
incurred by the Releasing Party that are attributable to any claim, demand or
cause of action asserting that any Derivative Work created by the Beneficiary
pursuant to the license granted in Section 4 infringes any U.S. patent,
copyright, trademark or trade secret, provided that the Releasing Party tenders
sole control of the defense and settlement of such claim to the Beneficiary and
reasonably cooperates in the defense thereof.
16. Termination. This License Agreement shall continue in effect for five
-----------
(5) years from the Effective Date ("Initial Term"), and shall renew
automatically for additional one year terms ("Renewal Term") unless either party
provides the other party with notice of termination of the Agreement at least
sixty (60) days prior to the end of the applicable Initial Term or Renewal Term.
A party not in default under this Agreement may terminate this Agreement upon a
material breach of this Agreement by the other party that is not cured within
thirty (30) days of the breaching party's receipt of notice of such breach.
8
17. Nonassignability. Unless otherwise provided in this License
----------------
Agreement, neither the rights nor the obligations arising under this License
Agreement are assignable or transferable by either party without the other
party's prior written consent, and any such attempted assignment or transfer
shall be deemed an uncurable breach, permitting the non-breaching party to
immediately terminate the licenses and rights granted to the breaching party
hereunder. For the purposes of this Section 17, any change of control of a
party shall be deemed an assignment by such party.
18. Execution of License Agreement, Controlling Law, Attorneys' Fee. This
---------------------------------------------------------------
License Agreement shall become effective as of the Effective Date and only upon
its execution by both Kana and Broadbase. This License Agreement shall be
governed by and construed in accordance with the laws of the State of California
without regard to the conflicts of law provisions thereof and without regard to
the United Nations Convention on the International Sales of Goods. In any
action to enforce this License Agreement the prevailing party will be entitled
to costs and attorneys' fees.
19. Equitable Relief. The parties acknowledges and agrees that due to the
----------------
unique nature of Confidential Information, there can be no adequate remedy at
law for any breach of its obligations hereunder, that any such breach may allow
Receiving Party or third parties to unfairly compete with the Disclosing Party
resulting in irreparable harm to the Disclosing Party and, therefore, that upon
any such breach or threat thereof, the Disclosing Party shall be entitled to
seek injunctions and other appropriate equitable relief, in addition to whatever
remedies it may have at law.
20. Notice. Any notice, report, approval or consent required or permitted
------
hereunder shall be in writing and will be deemed to have been effectively given:
(i) immediately upon personal delivery or facsimile transmission to the parties
to be notified, (ii) one (1) day after deposit with a commercial overnight
courier with tracking capabilities, or (iii) three (3) days after deposit with
the United States Postal Service, by registered or certified mail, postage
prepaid to the respective addresses of the parties as set forth above.
21. Waiver. The waiver by either party of a breach of this License
------
Agreement or any right hereunder shall not constitute a waiver of any subsequent
breach of this License Agreement; nor shall any delay by either party to
exercise any right under this License Agreement operate as a waiver of any such
right. If any provision of this License Agreement shall be adjudged by any
court of competent jurisdiction to be unenforceable or invalid, that provision
shall be limited or eliminated to the minimum extent necessary so that this
License Agreement shall otherwise remain in full force and effect and
enforceable.
22. BASIS OF BARGAIN. EACH PARTY RECOGNIZES AND AGREES THAT THE WARRANTY
----------------
DISCLAIMERS AND LIABILITY AND REMEDY LIMITATIONS IN THIS LICENSE AGREEMENT ARE
MATERIAL BARGAINED FOR BASES OF THIS LICENSE AGREEMENT AND THAT THEY HAVE BEEN
TAKEN INTO ACCOUNT AND REFLECTED IN DETERMINING THE
9
CONSIDERATION TO BE GIVEN BY EACH PARTY UNDER THIS LICENSE AGREEMENT AND IN THE
DECISION BY EACH PARTY TO ENTER INTO THIS LICENSE AGREEMENT.
23. Entire License Agreement. This License Agreement constitutes the
------------------------
entire License Agreement between the parties hereto related to the subject
matter hereof. Any modifications of this License Agreement must be in writing
and signed by both parties hereto.
24. Independent Contractors. The parties to this Agreement are
-----------------------
independent contractors. There is no relationship of partnership, joint
venture, employment, franchise, or agency between the parties. Neither party
will have the power to bind the other or incur obligations on the other's behalf
without the other's prior written consent.
25. Survival. Sections 5, 6, 10, 11, 12, 14, 13, 15, 18, 19, 20, 21, 22,
--------
23, 24, and 25 shall survive any termination or expiration of this License
Agreement.
26. Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10
IN WITNESS WHEREOF, the parties hereto have executed this License Agreement as
of the Effective Date.
KANA COMMUNICATIONS, INC. BROADBASE SOFTWARE, INC.
----------------------------------- -----------------------------------
By
▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇ Bay
----------------------------------- -----------------------------------
Name (Print) Name (Print)
Chief Executive Officer Chief Executive Officer
----------------------------------- -----------------------------------
Title Title
11
EXHIBIT A - FORM OF ESCROW AGREEMENT
------------------------------------
COMPREHENSIVE PREFERRED ESCROW AGREEMENT
Account Number
This Agreement is effective __________________, 2001 among __________ ("Escrow
Agent"), _________ ("Depositor") and __________ ("Preferred Beneficiary"), who
collectively may be referred to in this Agreement as "the parties."
A. Depositor and Preferred Beneficiary have entered or will enter into a
distribution and license agreement regarding certain proprietary technology of
Depositor (referred to in this Agreement as "the License Agreement").
B. Depositor desires to avoid disclosure of its proprietary technology except
under certain limited circumstances.
C. The availability of the proprietary technology of Depositor is critical to
Preferred Beneficiary in the conduct of its business and, therefore, Preferred
Beneficiary needs access to the proprietary technology under certain limited
circumstances.
D. Depositor and Preferred Beneficiary desire to establish an escrow with
Escrow Agent to provide for the retention, administration and controlled access
of the proprietary technology materials of Depositor.
E. The parties desire this Agreement to be supplementary to the License
Agreement pursuant to ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ [Bankruptcy] Code, Section 365(n).
ARTICLE 1 -- DEPOSITS
1.1 Obligation to Make Deposit. Upon the signing of this Agreement by the
--------------------------
parties, Depositor shall deliver to Escrow Agent the proprietary technology and
other materials ("Deposit Materials") required to be deposited by the License
Agreement or, if the License Agreement does not identify the materials to be
deposited with Escrow Agent, then such materials will be identified on an
Exhibit B1. If Exhibit B1 is applicable, it is to be prepared and signed by
Depositor and Preferred Beneficiary. Escrow Agent shall have no obligation with
respect to the preparation, signing or delivery of Exhibit B1.
1.2 Identification of Tangible Media. Prior to the delivery of the Deposit
--------------------------------
Materials to Escrow Agent, Depositor shall conspicuously label for
identification each document, magnetic tape, disk, or other tangible media upon
which the Deposit Materials are written or stored. Additionally, Depositor
shall complete Exhibit B2 to this Agreement by listing each such tangible media
by the item label description, the type of media and the quantity. The
1
Exhibit B2 must be signed by Depositor and delivered to Escrow Agent with the
Deposit Materials. Unless and until Depositor makes the initial deposit with
Escrow Agent, Escrow Agent shall have no obligation with respect to this
Agreement, except the obligation to notify the parties regarding the status of
the deposit account as required in Section 2.2 below.
1.3 Deposit Inspection. When Escrow Agent receives the Deposit Materials and
------------------
the Exhibit B2, Escrow Agent will conduct a deposit inspection by visually
matching the labeling of the tangible media containing the Deposit Materials to
the item descriptions and quantity listed on the Exhibit B2. In addition to the
deposit inspection, Preferred Beneficiary may elect to cause a verification of
the Deposit Materials in accordance with Section 1.6 below.
1.4 Acceptance of Deposit. At completion of the deposit inspection, if Escrow
---------------------
Agent determines that the labeling of the tangible media matches the item
descriptions and quantity on Exhibit B2, Escrow Agent will date and sign the
Exhibit B2 and mail a copy thereof to Depositor and Preferred Beneficiary. If
Escrow Agent determines that the labeling does not match the item descriptions
or quantity on the Exhibit B2, Escrow Agent will (a) note the discrepancies in
writing on the Exhibit B2; (b) date and sign the Exhibit B2 with the exceptions
noted; and (c) mail a copy of the Exhibit B2 to Depositor and Preferred
Beneficiary. Escrow Agent's acceptance of the deposit occurs upon the signing
of the Exhibit B2 by Escrow Agent. Delivery of the signed Exhibit B2 to
Preferred Beneficiary is Preferred Beneficiary's notice that the Deposit
Materials have been received and accepted by Escrow Agent.
1.5 Depositor's Representations. Depositor represents as follows:
---------------------------
a. Depositor lawfully possesses all of the Deposit Materials deposited
with Escrow Agent;
b. With respect to all of the Deposit Materials, Depositor has the right
and authority to grant to Escrow Agent and Preferred Beneficiary the
rights as provided in this Agreement;
c. The Deposit Materials are not subject to any lien or other
encumbrance;
d. The Deposit Materials consist of the proprietary technology and other
materials identified either in the License Agreement or Exhibit B1, as
the case may be; and
e. The Deposit Materials are readable and useable in their current form
or, if any portion of the Deposit Materials is encrypted, the
decryption tools and decryption keys have also been deposited.
1.6 Verification. Escrow Agent shall perform a Level I verification of the
------------
Deposit Materials upon the initial deposit and for each update. A verification
determines, in
2
different levels of detail, the accuracy, completeness, sufficiency and quality
of the Deposit Materials. A Level I verification is defined as follows: Escrow
Agent will cause a technically qualified Escrow Agent employee to evaluate the
Deposit Materials in order to identify (a) the hardware and software
configurations reasonably necessary to maintain the Deposit Materials; (b) the
hardware and software configurations reasonably necessary to compile the Deposit
Materials; and (c) the compilation instructions. Escrow Agent will then prepare
and deliver to Depositor and Preferred Beneficiary a report describing the
information so identified. It shall be the responsibility of the Depositor, and
not Escrow Agent, to ensure that the Deposit Materials contain the information
so identified in Escrow Agent's report, as well as any other information that
may be required in the License Agreement.
Preferred Beneficiary shall have the right, at Preferred Beneficiary's expense,
to cause higher levels of verification of any Deposit Materials. Preferred
Beneficiary shall notify Depositor and Escrow Agent of Preferred Beneficiary's
request for verification. Depositor shall have the right to be present at the
verification. If a verification is elected after the Deposit Materials have
been delivered to Escrow Agent, then only Escrow Agent, or at Escrow Agent's
election an independent person or company selected and supervised by Escrow
Agent, may perform the verification.
1.7 Deposit Updates. Unless otherwise provided by the License Agreement,
---------------
Depositor shall update the Deposit Materials within 10 days of each release of a
new version of the product which is subject to the License Agreement. Such
updates will be added to the existing deposit. All deposit updates shall be
listed on a new Exhibit B2 and the new Exhibit B2 shall be signed by Depositor.
Each Exhibit B2 will be held and maintained separately within the escrow
account. An independent record will be created which will document the activity
for each Exhibit B2. The processing of all deposit updates shall be in
accordance with Sections 1.2 through 1.6 above. All references in this
Agreement to the Deposit Materials shall include the initial Deposit Materials
and any updates.
Escrow Agent shall notify Depositor in writing semi-annually of Depositor's
obligation to make updated deposits. Within 30 days of receipt of each such
notice, Depositor shall certify in writing to Escrow Agent that (a) it has made
the updated deposits as required in the immediately preceding paragraph; or (b)
there has not been a release of a new version of the product since the last
deposit. After the 30 days, Escrow Agent shall notify Preferred Beneficiary
that Escrow Agent has received (a) an updated deposit from Depositor; (b) a
statement from Depositor advising there has not been a release of a new version
of the product since the last deposit; or (c) no response from Depositor.
Unlimited deposit updates and two storage units are included in the fees for
this Agreement.
1.8 Removal of Deposit Materials. The Deposit Materials may be removed and/or
----------------------------
exchanged only on written instructions signed by Depositor and Preferred
Beneficiary, or as otherwise provided in this Agreement.
ARTICLE 2 -- CONFIDENTIALITY AND RECORD KEEPING
3
2.1 Confidentiality. Escrow Agent shall maintain the Deposit Materials in a
---------------
secure, environmentally safe, locked facility which is accessible only to
authorized representatives of Escrow Agent. Escrow Agent shall have the
obligation to reasonably protect the confidentiality of the Deposit Materials.
Except as provided in this Agreement, Escrow Agent shall not disclose, transfer,
make available, or use the Deposit Materials. Escrow Agent shall not disclose
the content of this Agreement to any third party. If Escrow Agent receives a
subpoena or other order of a court or other judicial tribunal pertaining to the
disclosure or release of the Deposit Materials, Escrow Agent will immediately
notify the parties to this Agreement unless prohibited by law. It shall be the
responsibility of Depositor and/or Preferred Beneficiary to challenge any such
order; provided, however, that Escrow Agent does not waive its rights to present
its position with respect to any such order. Escrow Agent will not be required
to disobey any court or other judicial tribunal order. (See Section 7.5 below
for notices of requested orders.)
2.2 Status Reports. Escrow Agent will issue to Depositor and Preferred
--------------
Beneficiary a report profiling the account history at least semi-annually.
Escrow Agent may provide copies of the account history pertaining to this
Agreement upon the request of any party to this Agreement.
2.3 Audit Rights. During the term of this Agreement, Depositor and Preferred
------------
Beneficiary shall each have the right to inspect the written records of Escrow
Agent pertaining to this Agreement. Any inspection shall be held during normal
business hours and following reasonable prior notice.
ARTICLE 3 -- GRANT OF RIGHTS TO ESCROW AGENT
3.1 Title to Media. Depositor hereby transfers to Escrow Agent the title to
--------------
the media upon which the proprietary technology and materials are written or
stored. However, this transfer does not include the ownership of the
proprietary technology and materials contained on the media such as any
copyright, trade secret, patent or other intellectual property rights.
3.2 Right to Make Copies. Escrow Agent shall have the right to make copies of
--------------------
the Deposit Materials as reasonably necessary to perform this Agreement. Escrow
Agent shall copy all copyright, nondisclosure, and other proprietary notices and
titles contained on the Deposit Materials onto any copies made by Escrow Agent.
With all Deposit Materials submitted to Escrow Agent, Depositor shall provide
any and all instructions as may be necessary to duplicate the Deposit Materials
including but not limited to the hardware and/or software needed.
3.3 Right to Transfer Upon Release. Depositor hereby grants to Escrow Agent the
------------------------------
right to transfer the Deposit Materials to Preferred Beneficiary upon any
release of the Deposit Materials for use by Preferred Beneficiary in accordance
with Section 4.5. Except upon such a release or as otherwise provided in this
Agreement, Escrow Agent shall not transfer the Deposit Materials.
4
ARTICLE 4 -- RELEASE OF DEPOSIT
Escrow Agent shall release the Deposit Materials in accordance with the
procedures set forth in this agreement on the occurrence on any one of the
following:
(i) if the Releasing Party:
(a) becomes the debtor in a voluntary petition under the United States
Bankruptcy Code;
(b) commences any proceeding for relief from or adjustment of its
debts (including without limitation by consenting to or otherwise
permitting the entry of an order for relief in an involuntary case
under the United States Bankruptcy Code);
(c) requests, consents to or permits the appointment of a receiver for
all or substantially all of its assets; or
(d) files any court proceeding seeking its liquidation and the winding
up of its affairs;
(ii) if the Releasing Party:
(a) becomes the alleged debtor in an involuntary petition under the
United States Bankruptcy Code if such petition or proceeding is
not dismissed within ninety (90) days of filing;
(b) has filed against it any involuntary proceeding for relief from or
adjustment of its debts, or requesting the appointment of a
receiver for all or substantially all of its assets; or
(c) becomes the subject of any involuntary proceeding for the
liquidation of the party and the winding up of its affairs if such
petition or proceeding, in each case, is not dismissed within
ninety (90) days of filing;
(iii) if the Releasing Party makes a general assignment for the benefit of
its creditors, or enters into a composition of creditors; or
(iv) if the Releasing Party adopts necessary board and, if required,
stockholder resolutions for dissolution, liquidation and winding up of its
affairs.
(v) if the Releasing Party ceases to operate or do business, without there
being a successor; or
5
(vi) if the Releasing Party fails to provide maintenance or support of its
Licensed Products in accordance with the standard terms and conditions for such
support, where such failure renders the Licensed Products materially unusable
causing a substantial adverse impact to the business of the Beneficiary and
which failure is not cured within forty-five (45) days of written notice from
the Beneficiary of such failure (collectively, "Release Conditions").
4.2 Filing For Release. If Preferred Beneficiary believes in good faith that a
------------------
Release Condition has occurred, Preferred Beneficiary may provide to Escrow
Agent written notice of the occurrence of the Release Condition and a request
for the release of the Deposit Materials. Upon receipt of such notice, Escrow
Agent shall provide a copy of the notice to Depositor by commercial express
mail.
4.3 Contrary Instructions. From the date Escrow Agent mails the notice
---------------------
requesting release of the Deposit Materials, Depositor shall have five business
days to deliver to Escrow Agent contrary instructions. "Contrary Instructions"
shall mean the written representation by Depositor that a Release Condition has
not occurred or has been cured. Upon receipt of Contrary Instructions, Escrow
Agent shall send a copy to Preferred Beneficiary by commercial express mail.
Additionally, Escrow Agent shall notify both Depositor and Preferred Beneficiary
that there is a dispute to be resolved pursuant to the Dispute Resolution
section (Section 7.3) of this Agreement. Subject to Section 5.2, Escrow Agent
will continue to store the Deposit Materials without release pending (a) joint
instructions from Depositor and Preferred Beneficiary; (b) resolution pursuant
to the Dispute Resolution provisions; or (c) order of a court.
4.4 Release of Deposit. If Escrow Agent does not receive Contrary Instructions
------------------
from the Depositor, Escrow Agent is authorized to release the Deposit Materials
to the Preferred Beneficiary or, if more than one beneficiary is registered to
the deposit, to release a copy of the Deposit Materials to the Preferred
Beneficiary. However, Escrow Agent is entitled to receive any fees due Escrow
Agent before making the release. Any copying expense in excess of $300 will be
chargeable to Preferred Beneficiary. This Agreement will terminate upon the
release of the Deposit Materials held by Escrow Agent.
4.5 Right to Use Following Release. Unless otherwise provided in the License
------------------------------
Agreement, upon release of the Deposit Materials in accordance with this Article
4, Preferred Beneficiary shall have the right to use the Deposit Materials for
the sole purpose of exercising its rights pursuant to the License Agreement.
Preferred Beneficiary shall be obligated to maintain the confidentiality of the
released Deposit Materials.
ARTICLE 5 -- TERM AND TERMINATION
5.1 Term of Agreement. The initial term of this Agreement is for a period of
-----------------
years from the effective date of the License Agreement. Thereafter, this
Agreement shall automatically renew from year-to-year unless (a) Depositor and
Preferred Beneficiary
6
jointly instruct Escrow Agent in writing that the Agreement is terminated; or
(b) the Agreement is terminated by Escrow Agent for nonpayment in accordance
with Section 5.2.
5.2 Termination for Nonpayment. In the event of the nonpayment of fees owed to
--------------------------
Escrow Agent, Escrow Agent shall provide written notice of delinquency to all
parties to this Agreement. Any party to this Agreement shall have the right to
make the payment to Escrow Agent to cure the default. If the past due payment
is not received in full by Escrow Agent within one month of the date of such
notice, then Escrow Agent shall have the right to terminate this Agreement at
any time thereafter by sending written notice of termination to all parties.
Escrow Agent shall have no obligation to take any action under this Agreement so
long as any payment due to Escrow Agent remains unpaid.
5.3 Disposition of Deposit Materials Upon Termination. Upon termination of
-------------------------------------------------
this Agreement, Escrow Agent shall destroy, return, or otherwise deliver the
Deposit Materials in accordance with Depositor's instructions. If there are no
instructions, Escrow Agent may, at its sole discretion, destroy the Deposit
Materials or return them to Depositor. Escrow Agent shall have no obligation to
return or destroy the Deposit Materials if the Deposit Materials are subject to
another escrow agreement with Escrow Agent.
5.4 Survival of Terms Following Termination. Upon termination of this
---------------------------------------
Agreement, the following provisions of this Agreement shall survive:
a. Depositor's Representations (Section 1.5);
b. The obligations of confidentiality with respect to the Deposit
Materials;
c. The rights granted in the sections entitled Right to Transfer Upon
Release (Section 3.3) and Right to Use Following Release (Section
4.5), if a release of the Deposit Materials has occurred prior to
termination;
d. The obligation to pay Escrow Agent any fees and expenses due;
e. The provisions of Article 7; and
f. Any provisions in this Agreement which specifically state they survive
the termination or expiration of this Agreement.
ARTICLE 6 -- ESCROW AGENT'S FEES
6.1 Fee Schedule. Escrow Agent is entitled to be paid its standard fees and
------------
expenses applicable to the services provided. Escrow Agent shall notify the
party responsible for payment of Escrow Agent's fees at least 60 days prior to
any increase in fees. For any service not listed on Escrow Agent's standard fee
schedule, Escrow Agent will provide a quote prior to rendering the service, if
requested.
7
6.2 Payment Terms. Escrow Agent shall not be required to perform any service
-------------
unless the payment for such service and any outstanding balances owed to Escrow
Agent are paid in full. Fees are due upon receipt of a signed contract or
receipt of the Deposit Materials whichever is earliest. If invoiced fees are
not paid, Escrow Agent may terminate this Agreement in accordance with Section
5.2. Late fees on past due amounts shall accrue interest at the rate of one and
one-half percent per month (18% per annum) from the date of the invoice.
ARTICLE 7 -- LIABILITY AND DISPUTES
7.1 Right to Rely on Instructions. Escrow Agent may act in reliance upon any
-----------------------------
instruction, instrument, or signature reasonably believed by Escrow Agent to be
genuine. Escrow Agent may assume that any employee of a party to this Agreement
who gives any written notice, request, or instruction has the authority to do
so. Escrow Agent will not be required to inquire into the truth or evaluate the
merit of any statement or representation contained in any notice or document.
Escrow Agent shall not be responsible for failure to act as a result of causes
beyond the reasonable control of Escrow Agent.
7.2 Indemnification. Depositor and Preferred Beneficiary each agree to
---------------
indemnify, defend and hold harmless Escrow Agent from any and all claims,
actions, damages, arbitration fees and expenses, costs, attorney's fees and
other liabilities ("Liabilities") incurred by Escrow Agent relating in any way
to this escrow arrangement unless such Liabilities were caused solely by the
negligence or willful misconduct of Escrow Agent.
7.3 Dispute Resolution. Any dispute relating to or arising from this Agreement
------------------
shall be resolved by arbitration under the Commercial Rules of the American
Arbitration Association. Three arbitrators shall be selected. The Depositor
and Preferred Beneficiary shall each select one arbitrator and the two chosen
arbitrators shall select the third arbitrator, or failing agreement on the
selection of the third arbitrator, the American Arbitration Association shall
select the third arbitrator. However, if Escrow Agent is a party to the
arbitration, Escrow Agent shall select the third arbitrator. Unless otherwise
agreed by Depositor and Preferred Beneficiary, arbitration will take place in
Santa ▇▇▇▇▇ County, California, U.S.A. Any court having jurisdiction over the
matter may enter judgment on the award of the arbitrator(s). Service of a
petition to confirm the arbitration award may be made by First Class mail or by
commercial express mail, to the attorney for the party or, if unrepresented, to
the party at the last known business address.
7.4 Controlling Law. This Agreement is to be governed and construed in
---------------
accordance with the laws of the State of California, without regard to its
conflict of law provisions.
7.5 Notice of Requested Order. If any party intends to obtain an order from
-------------------------
the arbitrator or any court of competent jurisdiction which may direct Escrow
Agent to take, or refrain from taking any action, that party shall:
8
a. Give Escrow Agent at least two business days' prior notice of the
hearing;
b. Include in any such order that, as a precondition to Escrow Agent's
obligation, Escrow Agent be paid in full for any past due fees and be paid for
the reasonable value of the services to be rendered pursuant to such order; and
c. Ensure that Escrow Agent not be required to deliver the original (as
opposed to a copy) of the Deposit Materials if Escrow Agent may need to retain
the original in its possession to fulfill any of its other duties.
ARTICLE 8 -- GENERAL PROVISIONS
8.1 Entire Agreement. This Agreement, which includes the Exhibits described
----------------
herein, embodies the entire understanding among the parties with respect to its
subject matter and supersedes all previous communications, representations or
understandings, either oral or written. Escrow Agent is not a party to the
License Agreement between Depositor and Preferred Beneficiary and has no
knowledge of any of the terms or provisions of any such Webpay Agreements.
Escrow Agent's only obligations to Depositor or Preferred Beneficiary are as set
forth in this Agreement. No amendment or modification of this Agreement shall
be valid or binding unless signed by all the parties hereto, except that Exhibit
B1 need not be signed by Escrow Agent, Exhibit B2 need not be signed by
Preferred Beneficiary and Exhibit B3 need not be signed.
8.2 Notices. All notices, invoices, payments, deposits and other documents and
-------
communications shall be given to the parties at the addresses specified in the
attached Exhibit B3. It shall be the responsibility of the parties to notify
each other as provided in this Section in the event of a change of address. The
parties shall have the right to rely on the last known address of the other
parties. Unless otherwise provided in this Agreement, all documents and
communications may be delivered by First Class mail.
8.3 Severability. In the event any provision of this Agreement is found to be
------------
invalid, voidable or unenforceable, the parties agree that unless it materially
affects the entire intent and purpose of this Agreement, such invalidity,
voidability or unenforceability shall affect neither the validity of this
Agreement nor the remaining provisions herein, and the provision in question
shall be deemed to be replaced with a valid and enforceable provision most
closely reflecting the intent and purpose of the original provision.
8.4 Successors. This Agreement shall be binding upon and shall inure to the
----------
benefit of the successors and assigns of the parties. However, Escrow Agent
shall have no obligation in performing this Agreement to recognize any successor
or assign of Depositor or Preferred
9
Beneficiary unless Escrow Agent receives clear, authoritative and conclusive
written evidence of the change of parties.
8.5 Regulations. Depositor and Preferred Beneficiary are responsible for and
-----------
warrant compliance with all applicable laws, rules and regulations, including
but not limited to customs laws, import, export, and re-export laws and
government regulations of any country from or to which the Deposit Materials may
be delivered in accordance with the provisions of this Agreement.
_____________________________ ___________________________
Depositor Preferred Beneficiary
By:__________________________ By:_________________________
Name:________________________ Name:_______________________
Title:_______________________ Title:______________________
Date:________________________ Date:_______________________
Escrow Agent
By:_____________________________
Name:___________________________
Title:__________________________
Date:___________________________
10
EXHIBIT B1
MATERIALS TO BE DEPOSITED
Account Number
Depositor represents to Preferred Beneficiary that Deposit Materials delivered
to Escrow Agent shall consist of the following:
______________________________ ______________________________
Depositor Preferred Beneficiary
By:___________________________ By:___________________________
Name:_________________________ Name:_________________________
Title:________________________ Title:________________________
Date:_________________________ Date:_________________________
11
EXHIBIT B2
DESCRIPTION OF DEPOSIT MATERIALS
Depositor Company Name________________________________________________________
Account Number________________________________________________________________
Product Name____________________________________Version_______________________
(Product Name will appear as the Exhibit B2 Name on Account History report)
DEPOSIT MATERIAL DESCRIPTION:
Quantity Media Type & Size Label Description of Each Separate Item
_______ Disk 3.5" or ____
_______ DAT tape ____mm
_______ CD-ROM
_______ Data cartridge tape ____
_______ TK 70 or ____ tape
_______ Magnetic tape ____
_______ Documentation
_______ Other ______________________
PRODUCT DESCRIPTION:
Environment___________________________________________________________________
DEPOSIT MATERIAL INFORMATION:
Is the media or are any of the files encrypted? Yes / No If yes, please
include any passwords and the decryption tools.
Encryption tool name____________________________________ Version______________
Hardware required_____________________________________________________________
Software required_____________________________________________________________
Other required information____________________________________________________
I certify for Depositor that the above described Escrow Agent has inspected and
accepted the above
Deposit Materials have been transmitted to Escrow Agent:______________________
materials (any exceptions are noted above):
Signature_________________________ Signature___________________________
Print Name________________________ Print Name__________________________
Date______________________________ Date Accepted_______________________
Exhibit B2#_________________________
Send materials to: Escrow Agent
12
EXHIBIT B3
DESIGNATED CONTACT
Account Number
Notices, deposit material returns and
communications to Depositor Invoices to Depositor should be
should be addressed to: addressed to:
Company Name:________________________ ___________________________________
Address:_____________________________ ___________________________________
_____________________________ ___________________________________
_____________________________ ___________________________________
Contact:_____________________________ Contact:___________________________
Telephone:___________________________ ___________________________________
Facsimile:___________________________ P.O.#, if required:________________
Pursuant to Section 1.6
Verification Contact:________________ Telephone:_________________________
Notices and communications to Preferred Invoices to Preferred Beneficiary
Beneficiary should be addressed to: should be addressed to:
Company Name:________________________ ___________________________________
Address:_____________________________ ___________________________________
_____________________________ ___________________________________
_____________________________ ___________________________________
Contact:_____________________________ Contact:___________________________
Telephone:___________________________ ___________________________________
Facsimile:___________________________ P.O.#, if required:________________
Requests from Depositor or Preferred Beneficiary to change the designated
contact should be given in writing by the designated contact or an authorized
employee of Depositor or Preferred Beneficiary.
Contracts, Deposit Materials and Invoice inquiries and fee remittances
notices to Escrow Agent should be to Escrow Agent should be addressed to:
addressed to:
Escrow Agent Escrow Agent
13
Exhibit F
---------
REVOLVING LOAN AGREEMENT
THIS REVOLVING LOAN AREEMENT (this "Agreement"), dated as of April 9, 2001,
by and between KANA COMMUNICATIONS, INC., a Delaware corporation ("Borrower"),
and BROADBASE SOFTWARE, INC., a Delaware corporation ("Lender");
W I T N E S S E T H :
A. Concurrently with the execution of this Agreement, Borrower, Lender
and Arrow Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Borrower ("Merger Sub"), are entering into an Agreement and Plan
of Merger of even date herewith (the "Merger Agreement") that provides for the
merger of Merger Sub with and into Lender (the "Merger"). Pursuant to the
Merger, shares of common stock of Lender, $0.001 par value per share, will be
converted into shares of common stock of Borrower, $0.001 par value per share,
subject to the terms and conditions set forth in the Merger Agreement.
Capitalized terms used but not defined herein shall have the meanings set forth
in the Merger Agreement.
B. As a material inducement to enter into the Merger Agreement, Borrower
desires Lender to make available, and Lender is willing to make available, a
revolving credit facility to Borrower of up to an aggregate principal amount of
Twenty Million Dollars ($20,000,000) (the "Facility").
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and to induce Lender to extend credit to Borrower,
the parties agree as follows:
1. Definitions.
-----------
1.1 Defined Terms. As used in this Agreement, the following terms have the
-------------
meanings specified below:
"Advance" means an advance of funds to Borrower pursuant to this Agreement;
provided that the aggregate principal amount of all outstanding Advances
shall not exceed at any one time Twenty Million Dollars ($20,000,000).
"Advance Date" means the date on which an Advance is made.
"Authority" means the government of the United States of America, any other
nation or any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central
bank or other entity exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to
government.
"Business Day" means a weekday on which commercial banks are open for
business in San Francisco, California.
1
"Default" or "default" means any of the events specified in Section 5.1.
"Default Rate" means the "default rate" of interest per annum specified in
the Note.
"Effective Date" means the date of this Agreement.
"GAAP" means generally accepted accounting principles as in effect in the
United States from time to time.
"Loan" means an Advance under this Agreement.
"Loan Documents" means this Agreement, the Notes, the Advance requests, and
all other documents and instruments now or hereafter evidencing,
describing, guaranteeing or securing the Obligations contemplated hereby or
delivered in connection herewith, as they may be modified.
"Maturity Date" means the first anniversary of the date of this Agreement,
provided, that (i) if prior to such date the Merger Agreement is terminated
by Borrower pursuant to Section 7.1(i) thereof as a result of a willful
breach by Lender, or pursuant to Section 7.1(f) thereof, then the Maturity
Date shall be the first anniversary of the date of such termination, (ii)
if prior to such first anniversary the Merger Agreement is terminated by
either Borrower or Lender pursuant to Section 7.1(a) or (e) or (g) or (h),
then the Maturity Date shall be the date 30 days after the effective date
of such termination, and (iii) if Borrower shall execute a definitive
agreement for a Parent Acquisition then the Maturity Date shall be 30 days
after the date of such agreement.
"Note" has the meaning given the term in Section 2.4.
"Obligations" means all obligations and liabilities of Borrower to Lender
under the Loan Documents, including, without limitation, the Loans,
together with all interest accruing thereon.
"Person" means any natural person, corporation, unincorporated
organization, trust, joint-stock company, joint venture, association,
company, limited or general partnership, limited liability company, any
government or any agency or political subdivision of any government, or any
other entity or organization.
"Prime Rate" means, for any day, the rate of interest per annum quoted by
the Wall Street Journal on that date as the prime rate in effect; each
change in the Prime Rate shall be effective from and including the date
such change is quoted by the Wall Street Journal as being effective.
"Subsidiary" means any corporation, partnership or other entity in which a
Person, directly or indirectly, owns more than fifty percent (50%) of the
stock, capital or income interests, or other beneficial interests, or which
is effectively controlled by such Person.
2
"Termination Date" means the earlier to occur of (i) the Effective Time of
the Merger, or (ii) the effective date of any termination of the Merger
Agreement.
1.2 Financial Terms. All financial terms used herein shall have the
---------------
meanings assigned to them under U.S. GAAP unless another meaning shall be
specified.
1.3 Construction. Capitalized terms used and not otherwise defined herein
-------------
shall have the meanings set forth in the Merger Agreement. Reference to Sections
and Schedules herein shall be construed as referring to the Sections and
Schedules of this Agreement, unless otherwise stated.
2. The Revolving Loan Credit Facility.
----------------------------------
2.1 Availability Period. Subject to the terms of this Agreement the
--------------------
Lender grants to the Borrower a committed revolving credit facility made
available for Advances from the Effective Date until the earlier of (i) the
Termination Date and (ii) the Maturity Date. The Lender shall deposit
$20,000,000 representing the Facility into an escrow account (the "Escrow").
The Lender and the Borrowers shall use their commercially reasonable efforts
to appoint the escrow agent and to finalize the terms governing the Escrow and
providing for the funding of Advances from such Escrow in accordance with the
terms of this Agreement, within two weeks from the date of this Agreement.
2.2 Advances. Lender shall make each Advance to Borrower on the Advance
---------
Date and in the amount as set forth in the borrowing request delivered in
accordance with Section 2.3; provided that (a) no more than one Advance shall
be made in any week, (b) unless otherwise agreed in writing between the chief
executive officers of the Borrower and Lender, the aggregate principal amount
of Advances (including the Advance to be made pursuant to any such borrowing
request) shall not exceed in any week the sum of (i) the aggregate amount of
cash payroll expense of Borrower and related withholding in such week plus
(ii) up to $2.5 million to fund additional expenses to be paid in such week
and which are identified in reasonable detail in the related borrowing
request, less (iii) the excess of Borrower's and its Subsidiaries' cash and
cash equivalents at the time of such borrowing request (as determined under
GAAP) over $1,000,000; and (d) in no event shall the aggregate principal
amount of all outstanding Advances exceed $20,000,000.
In the event that a Company Triggering Event shall have occurred the
Borrower shall be entitled, notwithstanding anything to the contrary in this
section, to drawdown the entire amount of the Facility and to request the
release of all remaining funds in the Escrow.
2.3 Advance Requests. To obtain an Advance, Borrower shall submit a
----------------
borrowing request in writing, to the attention of Lender's Treasurer or Chief
Financial Officer, which request must be received by Lender no later than
12:00 noon Pacific time on a Business Day that is at least one (1) Business
Day before the Advance Date.
3
2.4 Promissory Note. The Advances shall be evidenced by and payable in
---------------
accordance with the terms of the promissory note, in the form attached hereto as
Exhibit A, dated the date of this Agreement from Borrower to Lender (as amended,
---------
modified, supplemented, restated or renewed from time to time, the "Note") and
shall be repayable in accordance with the terms of the Note and this Agreement.
2.5 Interest; Repayment of Advances.
-------------------------------
(a) Each Advance shall accrue interest on the outstanding principal
balance of such Advance at a rate equal to the higher of (i) a rate per annum
equal to Prime Rate plus two per cent (2%) and (ii) the Applicable Federal
Reserve Rate as published by the United States Treasury Department, from the
date of such Advance until such Advance has been paid in full.
(b) Each Advance shall mature, and the principal amount thereof and all
interest and other amounts payable under the Loan Documents shall be due and
payable, on the Maturity Date.
(c) At the option of the Borrower, on delivering 10 days' prior written
notice of prepayment to the Lender, the principal amount of any Advance may be
prepaid in whole at any time, or in part from time to time, without penalty or
premium, together with interest thereon accrued through the date of such
prepayment. Each partial prepayment of any Advance shall first be applied to
interest accrued through the date of prepayment and then to principal. Any
Advance voluntarily prepaid by the Borrower hereunder may be reborrowed
subject to the terms and conditions of this Agreement.
(d) Borrower unconditionally promises to make each required payment of
principal of and interest on the Loans in lawful money of the United States by
wire transfer in immediately available funds to an account designated in
writing by Lender. Whenever any payment of principal of, or interest on, the
Loans shall be due on a day which is not a Business Day, the date for payment
thereof shall be extended to the next succeeding Business Day, and such
extension of time shall be included in the computation of interest or fees, as
the case may be.
(e) All amounts payable by Borrower pursuant to the Loan Documents shall
be payable without notice or demand and without set-off or counterclaim.
2.6 Overdue Amounts. Any payments required pursuant to any Loan
---------------
Document not made as and when due shall bear interest from the date due until
paid to Lender at the Default Rate, in Lender's discretion.
2.7 Calculation of Interest. All interest under the Notes or hereunder
-----------------------
shall be calculated on the basis of a 365/366-day year for the actual days
during which such amounts are outstanding.
4
2.8 Taxes. Any and all payments by or on account of any Obligation of
-----
Borrower hereunder or under any other Loan Document shall be made free and
clear of and without deduction for any Taxes (excluding franchise Taxes and
Taxes on net income and foreign Taxes); provided that if Borrower shall be
required to deduct any such Taxes from such payments, then (a) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Section), Lender receives an amount equal to the sum it would have received
had no such deductions been made, (b) Borrower shall make such deductions and
(c) Borrower shall pay the full amount deducted to the relevant Authority in
accordance with applicable law.
2.9 Term. This Agreement shall become effective upon acceptance by
----
Lender and shall continue in full force and effect so long as any Obligation
(other than inchoate Obligations) is outstanding.
2.10 Conditions Precedent to Borrowing. In addition to any other
---------------------------------
requirement set forth in this Agreement, Lender will not be required to make
any Advances under this Agreement unless and until the following conditions
shall have been satisfied:
(a) Loan Documents. Borrower shall have executed and delivered this
--------------
Agreement and the Note.
(b) SVB Facility. The Borrower shall have delivered to Lender a written
------------
waiver and consent letter and, if required by Silicon Valley Bank, an
intercreditor agreement, each in a form reasonably satisfactory to the Lender
executed by Silicon Valley Bank consenting to the Borrower incurring the
indebtedness hereunder. The Lender shall use its commercially reasonable efforts
to conclude any such intercreditor agreement which is required by Silicon Valley
Bank as soon as practicable.
3. Representations and Warranties. In order to induce Lender to enter into
------------------------------
this Agreement and to make the Loans provided for herein, Borrower hereby
represents and warrants (all of which shall survive the execution and delivery
of the Loan Documents and all of which shall be deemed made as of the date
hereof and as of each Advance Date) that:
3.1 Valid Existence and Power. Borrower is duly organized, validly
-------------------------
existing and in good standing under the laws of the jurisdiction of its
organization and is duly qualified or licensed to transact business in all
places where the failure to be so qualified could reasonably be expected to
have a Material Adverse Effect on Borrower; and Borrower and each other Person
which is a party to any Loan Document (other than Lender) has the corporate
power and authority to conduct its business and to make and perform the Loan
Documents executed by it and the transactions contemplated thereby, and all
such documents will constitute the legal, valid and binding obligations of
Borrower, enforceable in accordance with their respective terms, subject only
to bankruptcy and similar laws affecting creditors' rights generally and
general principals of equity.
5
3.2 Authority. The execution, delivery and performance thereof by the
---------
Borrower of any Loan Document and the consummation of the transactions
contemplated thereby have been duly authorized by all necessary corporate
action of the Borrower, and do not and will not conflict with or violate any
provision of law or regulation, or any writ, order or decree of any court or
Authority or any provision of the governing instruments of the Borrower, and
(except with respect to the Borrowers existing credit facilities) do not and
will not, with the passage of time or the giving of notice, result in a breach
of, or constitute a default or require any consent under, or impair the
Borrower's rights under, or result in the creation of any Lien upon any
property or assets of Borrower pursuant to, any law, regulation, or any
material instrument, document or agreement to which any of Borrower is a party
or by which any of Borrower or its respective properties may be subject, bound
or affected
3.3 Compliance with Covenants; No Default. No Default has occurred and is
-------------------------------------
continuing, and the execution, delivery and performance of the Loan Documents
and the transactions contemplated thereby, and the funding of the Loan will not
cause a Default.
4. Covenants of Borrower. Borrower covenants and agrees that from the date of
---------------------
the initial Advance and until payment in full of the Obligations (except
inchoate Obligations), except as otherwise set forth in the Merger Agreement or
this Agreement, it:
4.1 Use of Loan Proceeds. Shall use the proceeds of Advances to pay cash
--------------------
payroll expense and related withholding, and other expenses that are identified
in reasonable detail in the related borrowing request.
4.2 Inspections. Shall permit inspections, at such times and in such
-----------
manner as may be reasonably requested by Lender and at Borrower's expense, all
records and financial information related thereto and the properties of
Borrower as Lender may deem reasonably necessary or desirable from time to
time. All information obtained pursuant to this section shall be subject to
the Confidentiality Agreement.
4.3 Maintenance of Existence and Rights. Shall preserve and maintain its
-----------------------------------
corporate existence, authorities to transact business and shall use its
commercially reasonable efforts to preserve and maintain its Intellectual
Property necessary to the conduct of its business.
4.4 Fundamental Changes. Shall not, nor shall it permit any Subsidiary
-------------------
to, merge into or consolidate with any other Person (other then Borrower) or
liquidate or dissolve, other than as contemplated by the Merger Agreement.
5. Default/Indemnification.
-----------------------
5.1 Events of Default. Each of the following shall constitute a Default:
-----------------
(a) Borrower shall fail to pay any principal of any Loan when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or otherwise and such failure shall continue
unremedied for a period of five (5) days; or
6
(b) Borrower shall fail to pay any interest on any Loan or any fee or
any other amount payable under this Agreement or any other Loan Document, when
and as the same shall become due and payable, and such failure shall continue
unremedied for a period of five (5) days; or
(c) There shall occur any default by Borrower in any of the covenants
contained in this Agreement which is not cured within thirty (30) days of
notice of such default from Lender; or
(d) Any representation or warranty made by Borrower in any Loan Document
shall prove to have been untrue or incorrect in any material respect when
made; or
(e) Borrower shall voluntarily dissolve, liquidate or terminate
operations or apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee, intervenor, liquidator or
similar official of a substantial part of its assets, admit in writing its
inability, or be generally unable, to pay its debts as the debts become due,
make a general assignment for the benefit of its creditors, commence a
voluntary case under any bankruptcy, insolvency, receivership or similar law
now or hereafter in effect, file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it
in an involuntary case under any bankruptcy, insolvency, receivership or
similar law now or hereafter in effect, or take any corporate action for the
purpose of effecting any of the foregoing; or
(f) An involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of Borrower or its debts, or of a substantial part of its
assets, under any bankruptcy, insolvency, receivership or similar law now or
hereafter in effect, or (ii) the appointment of a receiver, custodian,
trustee, intervenor, liquidator or similar official for Borrower or for a
substantial part of its assets, and, in any such case, such proceeding or
petition shall not have been dismissed within sixty (60) days of the
commencement or filing, as the case may be, thereof; or an order for relief,
judgment or decree shall be entered by any court of competent jurisdiction or
other competent authority approving or ordering any of the foregoing actions.
(g) Remedies. If any Default shall occur and be continuing, Lender shall
--------
have no further obligation to make Advances to Borrower and may, at its
option, without notice and without demand, declare any or all Obligations to
be immediately due and payable (if not earlier demanded), terminate its
obligation to make Advances to Borrower, bring suit against Borrower to
collect the Obligations, exercise any remedy available to Lender hereunder at
law or in equity and take any action or exercise any remedy provided herein or
in any other Loan Document or under applicable law or in equity. No remedy
shall be exclusive of other remedies or impair the right of Lender to exercise
any other remedies.
5.2 Application of Payments. Any payments made by Borrower pursuant to
-----------------------
this Agreement shall be paid to and applied as follows: first, to the costs
and expenses, including reasonable attorneys' fees and expenses, incurred by
Lender in connection with the exercise of
7
Lender's rights and remedies hereunder; secondly, to the interest due upon any
of the Obligations; and thirdly, to the principal amount of the Obligations.
5.3 Indemnification. Borrower shall indemnify Lender, and each Related
---------------
Party (except affiliates) of Lender (each such person being called an
"Indemnitee") against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including the
reasonable fees, charges and disbursements of any counsel for any Indemnitee,
incurred by or asserted against any Indemnitee arising out of, in connection
with, or as a result of (a) any Loan or the use of the proceeds therefrom, (b)
the performance by Borrower of its obligations under any of the Loan Documents
or (c) upon an Event of Default occurring and continuing, the enforcement by
the Lender of its rights and remedies thereunder; excluding Taxes and losses,
claims, damages, liabilities and related expenses arising as a result of the
negligence or willful misconduct of any Indemnitee and excluding consequential
or punitive losses or damages.
6. Miscellaneous.
-------------
6.1 No Waiver, Remedies Cumulative. No failure on the part of Lender or
------------------------------
Borrower to exercise, and no delay in exercising, any right hereunder or under
any other Loan Document shall operate as a waiver thereof, nor shall any single
or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and are in addition to any other remedies provided by
law, in equity, any Loan Document or otherwise.
6.2 Survival of Agreement. All covenants, agreements, representations and
---------------------
warranties made by Borrower herein and in any other Loan Document shall survive
the making of the Loans hereunder and the execution and delivery of the Notes,
regardless of any investigation made by Lender or on its behalf, and shall
continue in full force and effect so long as any Obligation (other than inchoate
Obligations) is outstanding, and there exists any commitment to lend by Lender
to Borrower.
6.3 Notices. Any notice or other communication hereunder or under any
-------
other Loan Document to any party hereto or thereto shall be made in the manner
specified in the Merger Agreement.
6.4 Governing Law. This Agreement and the Loan Documents shall be deemed
-------------
contracts made under the laws of the State of California and shall be governed
by and construed in accordance with the laws of said state (excluding its
conflict of laws provisions if such provisions would require application of the
laws of another jurisdiction).
6.5 Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of Borrower and Lender, and their respective
successors and assigns; provided that no party may assign this Agreement or
any other Loan Document without the express written consent of the other, and
any such assignment made without such consent will be void.
8
6.6 Amendment. 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
Lender and Borrower.
6.7 Entire Agreement. This Agreement, the other Loan Documents and the
----------------
Merger Agreement (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, it being understood that the Confidentiality Agreement
shall continue in full force and effect until the Closing and shall survive
any termination of this Agreement, and (b) are not intended to confer upon any
other person any rights or remedies hereunder.
6.8 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.
6.9 Waiver Of Jury Trial. EACH OF LENDER AND BORROWER HEREBY IRREVOCABLY
--------------------
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF LENDER OR BORROWER IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
6.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original and all of
which when taken together shall constitute but one and the same instrument.
6.11 No Usury. Regardless of any other provision of this Agreement,
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the Note or in any other Loan Document, if for any reason the effective
interest should exceed the maximum lawful interest, the effective interest
shall be deemed reduced to, and shall be, such maximum lawful interest, and
(a) the amount which would be excessive interest shall be deemed applied to
the reduction of the principal balance of the Note and not to the payment of
interest, and (b) if the Loan evidenced by the Note have been or is thereby
paid in full, the excess shall be returned to the party paying same, such
application to the principal balance of the Note or the refunding of excess to
be a complete settlement and acquittance thereof.
6.12 Representations and Warranties of the Lender. By its execution of
--------------------------------------------
or acceptance of this Agreement, the Lender represents and warrants to the
Borrower that the Lender: (i) has acquired the Note for its own account for
investment and not with a view to any resale or other distribution of the Note
in a transaction constituting a public offering or otherwise requiring
registration under the Securities Act or in a transaction that would result in
9
noncompliance with applicable state securities laws; (ii) has such knowledge
and experience in financial and business matters as to be capable of
evaluating the merits and the risks of its acquisition of this Note and credit
extensions to the Borrower, (iii) is an accredited investor as such term is
defined in Rule 501 of Regulation D under the Securities Act, and (iv)
understands that the Note has not been, and will not be, registered under the
Securities Act or any state securities laws.
10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
LENDER:
BROADBASE SOFTWARE, INC.
By:
---------------------------
Name: ▇▇▇▇▇ Bay
------------------------
Title: Chief Executive Officer
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BORROWER:
KANA COMMUNICATIONS, INC.
By:
---------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------
Title: Chief Executive Officer
------------------------
11
Exhibit A
---------
[Form of Convertible Promissory Note]
THIS CONVERTIBLE PROMISSORY NOTE (THIS "NOTE") HAS NOT BEEN REGISTERED UNDER THE
----
SECURITIES ACT OF 1933 (AS AMENDED THE "SECURITIES ACT") AND MAY NOT BE SOLD,
--------------
OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR,
IF REQUIRED BY THE ISSUER OF THIS NOTE, AN OPINION OF COUNSEL SATISFACTORY TO
THE ISSUER OF THIS NOTE THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT.
KANA COMMUNICATIONS, INC.
CONVERTIBLE PROMISSORY NOTE
---------------------------
April 9, 2001
Palo Alto, California
For value received, the receipt and sufficiency of which are hereby
acknowledged, KANA COMMUNICATIONS, INC., a Delaware corporation ("Borrower"),
hereby promises to pay to the order of BROADBASE SOFTWARE, INC., a Delaware
corporation ("Lender"), the aggregate unpaid sum of all Advances made by the
Lender to the Borrower, together with accrued interest thereon to be computed on
each Advance from the date of its disbursement, pursuant to the terms and
conditions of the Agreement (as defined below).
This Promissory Note (the "Note") is the Note issued under, and entitled to
the benefits of, the Revolving Loan Agreement by and between Borrower and Lender
dated as of April 9, 2001 (said agreement, as the same may be amended, restated
or supplemented from time to time, being herein called the "Agreement"), and the
other Loan Documents, the terms and conditions of which are made a part hereof
to the same extent and with the same effect as if fully set forth herein.
Capitalized terms not defined in this Note shall have the respective meanings
assigned to them in the Agreement. This Note is entitled to the benefit of the
rights provided in the Loan Agreement.
Interest on the outstanding principal balance under this Note is payable at
the rate equal (i) to Prime Rate plus two (2%) per annum (the "Interest Rate"),
or (ii) under the circumstances contemplated by the Agreement, at the Interest
Rate plus two percent (2%) per annum (the "Default Rate"), compounded quarterly,
in immediately available United States Dollars at the time and in the manner
specified in the Agreement. The outstanding principal and interest under
A-1
this Note shall be immediately due and payable on the Maturity Date (unless
this Note shall have been previously converted, at Lender's option, as
provided below). Payments received by Lender shall be applied first to the
payment of accrued, but unpaid interest on this Note and then to the reduction
of the unpaid principal balance of this Note.
The Lender is authorized to endorse the amount and the date on which each
Advance is made, the maturity date therefore, each payment of principal with
respect thereto, and the date and amount of the conversion of any principal or
interest of any Loan that is converted into shares of Borrower's Common Stock,
on Schedule A hereto and made a part hereof, or on continuations thereof which
shall be attached hereto and made a part hereof; which recordation will
constitute prima facie evidence of the accuracy of the information so endorsed
----- -----
on Schedule A; provided, that any failure to endorse such information on such
schedule or continuation thereof shall not in any manner affect any obligation
of the Borrower under the Agreement and this Note.
At the option of Borrower, upon prior notice as provided in the Agreement, the
principal amount of this Note may be prepaid in whole or in part from time to
time, without penalty or premium, together with interest thereon accrued through
the date of such prepayment. Each partial prepayment of this Note shall first
be applied to interest accrued through the date of prepayment and then to
principal.
To the fullest extent permitted by applicable law, Borrower waives: (a)
presentment, demand and protest, and notice of presentment, dishonor, intent to
accelerate, acceleration, protest, default, nonpayment, maturity, release,
compromise, settlement, extension or renewal of any or all of the Obligations,
the Loan Documents or this Note, and (b) any bond or security that might be
required by any court prior to allowing Lender to exercise any of its remedies.
The Lender may elect at any time after the date ninety (90) days after April
17, 2001, at its sole option and effective as of the close of business on the
date of delivery of written notice of conversion to the Borrower, to convert all
or any part of the outstanding principal of and accrued interest on this Note
into that number of fully paid and nonassessable shares of Borrower's Common
Stock that is equal to the dollar amount of the principal and accrued interest
indebtedness being converted, divided by $1.10 (the "Conversion Price");
provided, that the Conversion Price will automatically, equitably and
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proportionally be adjusted to reflect any subdivision (stock split), combination
(reverse stock split), stock dividend or other recapitalization affecting the
Borrower's Common Stock; provided, further, that in no event shall Lender be
-----------------
entitled to convert this Note into a total number of shares of Common Stock that
exceeds that number of shares which is equal to 19.9% of the Borrower's total
issued and outstanding shares of Common Stock as of the date of such conversion,
less such number of shares of Common Stock (if any) that are then held by Lender
and that were (A) purchased by Lender from any officers, directors or
substantial shareholders (as defined by the National Association of Securities
Dealers) of Borrower or (B) acquired by Lender upon exercise of options under
that certain Company Stock Option Agreement dated as of April 9, 2001 between
Lender and Borrower (the "Company Stock Option Agreement"), including any shares
with respect to which Lender has exercised such option but which have not yet
been delivered to
A-2
Lender or (C) otherwise acquired (or other securities convertible into Common
Stock of the Borrower otherwise acquired) by the Lender from the Borrower, or
any officers, directors or substantial shareholders (as defined by the
National Association of Securities Dealers) of Borrower, in connection with
the transactions represented by this Note or the Merger Agreement (as defined
in the Agreement); and provided, further, that Lender shall not be entitled to
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convert this Note at any time upon or following a Change of Control of Lender
(as defined below). In the event that the Lender exercises its options under
the Company Stock Option Agreement (and provided that no Change of Control
shall have occurred) the Lender shall be entitled to satisfy the exercise
price of such options through the cancellation of the principal indebtedness
and accrued interest outstanding hereunder. Any such satisfaction of the
option exercise price shall be made on a dollar for dollar basis with the
amount of the outstanding principal and interest so cancelled.
A "Change of Control" of Lender shall mean any of the following
transactions (other than in a transaction involving Borrower): (i) a merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Lender pursuant to which the stockholders
of the Lender immediately preceding such transaction hold less than 50% of the
aggregate equity interests in the surviving or resulting entity of such
transaction (or the parent thereof), (ii) a sale or other disposition by the
Lender of assets representing in excess of 50% of the aggregate fair market
value of the Lender's business immediately prior to such sale, or (iii) the
acquisition by any person or group (including by way of a tender offer or an
exchange offer or issuance by Lender), directly or indirectly, of beneficial
ownership or a right to acquire beneficial ownership of shares representing in
excess of 50% of the voting power of the then outstanding shares of capital
stock of the Lender.
Lender agrees to surrender this Note to the Borrower for cancellation
following conversion of this Note and/or repayment of all principal and accrued
interest outstanding under this Note.
The Borrower shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of this Note, such number of its Common Stock as shall
from time to time be sufficient to effect the conversion of this Note; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of this Note the Borrower will take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock or other securities issuable upon conversion of this Note
as shall be sufficient for such purpose.
Upon Lender's election to convert any of the outstanding principal of or
accrued interest on this Note, Borrower, at its expense, will as soon as
practicable cause to be issued in the name of and delivered to Lender, a
certificate or certificates for the number of fully paid and nonassessable
shares of Borrower's Common Stock to which Lender is entitled upon such
conversion. No fractional shares will be issued upon any conversion of this
Note or any part hereof. If, upon any conversion of this Note, a fraction of a
share would otherwise result, then Borrower will pay Lender an amount of cash
equal to the fair market value of one share of the type and class of Borrower's
capital stock issuable to Lender upon such conversion (determined
A-3
in accordance with the Conversion Price applicable at the time of such
conversion), multiplied by the fraction of a share of stock to which Lender
would otherwise be entitled.
The Borrower will not, by amendment of its Certificate of Incorporation or
Bylaws, or through reorganization, consolidation, merger, dissolution, issue or
sale of securities, sale of assets or any other voluntary action, willfully
avoid or seek to avoid the observance or performance of any of the terms of this
Note. Without limiting the generality of the foregoing, the Borrower will take
all such action as may be necessary or appropriate in order that the Borrower
may duly and validly issue fully paid and nonassessable shares of Common Stock
upon any conversion of this Note.
This Note and the obligations of Borrower and the rights of Lender shall be
governed by and construed in accordance with the internal substantive laws of
the State of California without giving effect to the choice of laws rules
thereof.
A-4
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first
above written.
KANA COMMUNICATIONS, INC.
By:
--------------------------------
Name:
------------------------------
Title: -----------------------------
A-5
Schedule A to Note
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ADVANCES AND REPAYMENT OF ADVANCES
----------------------------------
(2) (3) (4)
Amount Maturity Amount of Repaid (5)
(1) of Date of or Converted Notation
Date Advance Advance Advance Made By
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