EXHIBIT 2.1
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AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
INKTOMI CORPORATION
IC ACQUISITION CORP.
AND
IMPULSE BUY NETWORK, INC.
DATED AS OF APRIL 21, 1999
INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
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Exhibit A Form of Voting Agreement
Exhibit B Form of Company Affiliate Agreement
Exhibit C Form of Employment and Non-Competition Agreement
Exhibit D Form of Agreement of Merger
Exhibit E Form of Declaration of Registration Rights
Exhibit F Form of Parent Affiliate Agreement
Exhibit G Form of Secured Promissory Note
Exhibit H Form of Security Agreement
Exhibit I Form of Legal Opinion of Counsel to Parent
Exhibit J Form of Legal Opinion of Counsel to the Company
INDEX OF SCHEDULES
SCHEDULE DESCRIPTION
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2.3(a) Shareholder List
2.3(b) Option and Warrant Holder List
2.5 Conflicts
2.6 Governmental and Third Party Consents
2.7 Company Financials
2.8 Undisclosed Liabilities
2.9 No Changes
2.10 Tax Returns and Audits
2.12(a) Leased Real Property
2.12(b) Liens on Property
2.12(c) Equipment
2.13 Government Authorizations
2.14(a) Registered Intellectual Property
2.14(b) Intellectual Property Out-Licenses
2.14(c) Intellectual Property In-Licenses
2.16 Product Warranties and Standard Forms of Agreements
2.17(a) Agreements, Contracts and Commitments
2.17(b) Breaches
2.18 Change of Control Payments
2.19 Interested Party Transactions
2.21 Litigation
2.25 Brokers/Finders Fees
2.26(b) Employee Benefit Plans and Employees
2.26(d) Employee Plan Compliance
2.26(g) Post-Employment Obligations
2.26(i)(i) Effect of Transaction
2.26(i)(ii) Excess Parachute Payments
2.26(j) Officers, Directors and Employees
2.26(k) Labor
2.27 Bank Accounts
6.14 Company Affiliate List
6.17 Company Shareholders to Sign Voting Agreement
6.18 Employees to Sign Employment and Non-Competition Agreement
SCHEDULE 6.18
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Employees to Sign Employment and Non-Competition Agreement
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TABLE OF CONTENTS
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ARTICLE I
THE MERGER.................................................................... 1
1.1 The Merger........................................................... 1
1.2 Effective Time....................................................... 2
1.3 Effect of the Merger................................................. 2
1.4 Articles of Incorporation; Bylaws.................................... 2
1.5 Directors and Officers............................................... 2
1.6 Maximum Aggregate Merger Consideration; Effect on Capital Stock...... 2
1.7 Dissenters' Rights................................................... 7
1.8 Surrender of Certificates............................................ 7
1.9 No Further Ownership Rights in Company Common Stock.................. 9
1.10 Lost, Stolen or Destroyed Certificates............................... 9
1.11 Tax and Accounting Consequences...................................... 9
1.12 Taking of Necessary Action; Further Action........................... 9
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................. 10
2.1 Organization of the Company.......................................... 10
2.2 Subsidiaries......................................................... 10
2.3 Company Capital Structure............................................ 10
2.4 Authority............................................................ 11
2.5 No Conflict.......................................................... 11
2.6 Consents............................................................. 12
2.7 Company Financial Statements......................................... 12
2.8 No Undisclosed Liabilities........................................... 12
2.9 No Changes........................................................... 12
2.10 Tax and Other Returns and Reports.................................... 14
2.11 Restrictions on Business Activities.................................. 16
2.12 Title to Properties; Absence of Liens and Encumbrances............... 16
2.13 Governmental Authorization........................................... 17
2.14 Intellectual Property................................................ 17
2.15 Year 2000 Compliance................................................. 21
2.16 Product Warranties; Defects; Liabilities............................. 21
2.17 Agreements, Contracts and Commitments................................ 22
2.18 Change of Control Payments........................................... 23
2.19 Interested Party Transactions........................................ 23
2.20 Compliance with Laws................................................. 24
2.21 Litigation........................................................... 24
2.22 Insurance............................................................ 24
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TABLE OF CONTENTS
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2.23 Minute Books......................................................... 24
2.24 Environmental Matters................................................ 24
2.25 Brokers' and Finders' Fee............................................ 25
2.26 Employee Matters and Benefit Plans................................... 25
2.27 Bank Accounts........................................................ 29
2.28 Indemnification Obligations.......................................... 29
2.29 Pooling of Interests................................................. 29
2.30 Representations Complete............................................. 29
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB....................... 30
3.1 Organization of Parent and Merger Sub................................ 30
3.2 Authority............................................................ 30
3.3 Parent Common Stock.................................................. 30
3.4 SEC Filings; Parent Financial Statements............................. 31
3.5 No Material Adverse Change........................................... 31
ARTICLE IV
SECURITIES ACT COMPLIANCE; REGISTRATION....................................... 32
4.1 Securities Act Exemption............................................. 32
4.2 Stock Restrictions................................................... 32
4.3 The Company Shareholders' Restrictions Regarding Securities Law
Matters............................................................ 32
4.4 Registration Rights.................................................. 33
ARTICLE V
CONDUCT PRIOR TO THE EFFECTIVE TIME........................................... 33
5.1 Conduct of Business of the Company................................... 33
ARTICLE VI
ADDITIONAL AGREEMENTS......................................................... 35
6.1 Preparation of Information Statement................................. 35
6.2 Shareholder Approval................................................. 36
6.3 Access to Information................................................ 36
6.4 Confidentiality...................................................... 36
6.5 Public Disclosure.................................................... 36
6.6 Consents............................................................. 37
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TABLE OF CONTENTS
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6.7 FIRPTA Compliance.................................................... 37
6.8 Legal Conditi
Legal Conditions to the Merger....................................... 37
6.9 Best Efforts; Additional Documents and Further Assurances............ 37
6.10 Notification of Certain Matters...................................... 37
6.11 Pooling Accounting................................................... 37
6.12 Reorganization....................................................... 38
6.13 Declaration of Registration Rights................................... 38
6.14 Affiliate Agreements................................................. 38
6.15 Form S-8............................................................. 38
6.16 Nasdaq National Market............................................... 38
6.17 Voting Agreements.................................................... 38
6.18 Employment and Non-Competition Agreements............................ 38
6.19 Blue Sky Laws........................................................ 39
6.20 Indemnification...................................................... 39
6.21 Benefit Arrangements................................................. 39
6.22 Termination of Company Investor Rights............................... 39
6.23 No Solicitation...................................................... 39
6.24 Bridge Loan.......................................................... 40
ARTICLE VII
CONDITIONS TO THE MERGER...................................................... 40
7.1 Conditions to Obligations of Each Party to Effect the Merger......... 40
7.2 Additional Conditions to Obligations of the Company.................. 41
7.3 Additional Conditions to the Obligations of Parent and Merger Sub.... 42
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW............................ 43
8.1 Survival of Representations and Warranties........................... 43
8.2 Escrow Arrangements.................................................. 43
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER............................................. 51
9.1 Termination.......................................................... 51
9.2 Effect of Termination................................................ 52
9.3 Amendment............................................................ 52
9.4 Extension; Waiver.................................................... 52
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TABLE OF CONTENTS
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ARTICLE X
GENERAL PROVISIONS............................................................ 53
10.1 Notices.............................................................. 53
10.2 Expenses............................................................. 54
10.3 Interpretation....................................................... 55
10.4 Counterparts......................................................... 55
10.5 Entire Agreement; Assignment......................................... 55
10.6 Severability......................................................... 55
10.7 Other Remedies....................................................... 55
10.8 Governing Law........................................................ 56
10.9 Rules of Construction................................................ 56
10.10 Specific Performance................................................. 56
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
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entered into as of April 21, 1999 among Inktomi Corporation, a Delaware
corporation ("Parent"), IC Acquisition Corp., a California corporation and a
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wholly-owned subsidiary of Parent ("Merger Sub"), and Impulse Buy Network, Inc.,
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a California corporation (the "Company").
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RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger (the
"Merger") of Merger Sub with and into the Company in accordance with this
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Agreement and the California General Corporation Law ("California Law"). Upon
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consummating of the Merger, Merger Sub will cease to exist, and the Company will
become a wholly-owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For accounting purposes, it is intended that the Merger
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be treated as a "pooling of interests."
C. The Board of Directors of the Company has (i) determined that the
Merger is consistent with and in furtherance of the long-term strategy of the
Company and fair to, and in the best interests of, the Company and its
shareholders, (ii) approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (iii) determined to unanimously
recommend that the shareholders of the Company adopt and approve the principal
terms of this Agreement and approve the Merger.
D. The respective Boards of Directors of Parent and Merger Sub have
approved this Agreement and the Merger.
E. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, each of the
shareholders of the Company listed on Schedule 6.17 hereto is entering into a
Voting Agreement substantially in the form attached hereto as Exhibit A; and as
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a condition and inducement to the Parent's willingness to enter into this
Agreement, each of the affiliate shareholders of the Company listed on Schedule
6.14 hereto is entering into an Affiliate Agreement substantially in the form
attached hereto as Exhibit B.
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NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
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subject to and upon the terms and conditions of this Agreement and California
Law, Merger Sub shall be merged with and
into the Company, the separate corporate existence of Merger Sub shall cease and
the Company shall continue as the surviving corporation and as a wholly-owned
subsidiary of Parent. The Company as the surviving corporation after the Merger
is hereinafter sometimes referred to as the "Surviving Corporation."
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1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
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to Section 9.1, the closing of the Merger (the "Closing") will take place as
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promptly as practicable, but no later than three (3) business days, following
satisfaction or waiver of the conditions set forth in Article VII, at the
offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
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Company. The date upon which the Closing actually occurs is herein referred to
as the "Closing Date." On the Closing Date, the parties hereto shall cause the
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Merger to be consummated by filing an Agreement of Merger, in substantially the
form attached hereto as Exhibit D (the "Agreement of Merger"), with the
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Secretary of State of the State of California, in accordance with the relevant
provisions of California Law (the time of acceptance by the Secretary of State
of California of such filing being referred to herein as the "Effective Time").
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The parties currently intend that the Closing Date will occur on or prior to
April 26, 1999.
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
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shall be as provided in the applicable provisions of California Law. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the rights and property of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts and liabilities of the Company and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Articles of Incorporation; Bylaws.
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(a) Unless otherwise determined by Parent prior to the Effective Time,
at the Effective Time, the Articles of Incorporation of Merger Sub shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by law and such Articles of Incorporation; provided, however, that
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Article I of the Articles of Incorporation of the Surviving Corporation shall be
amended to read as follows: "The name of the corporation is Impulse Buy
Network, Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. The director(s) of Merger Sub immediately
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prior to the Effective Time shall be the initial director(s) of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, each to hold office in accordance with the Bylaws of the
Surviving Corporation.
1.6 Maximum Aggregate Merger Consideration; Effect on Capital Stock. The
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aggregate maximum number of shares of common stock of Parent ("Parent Common
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Stock") to be issued (including Parent Common Stock to be reserved for issuance
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upon exercise of any of the Company's options and stock purchase rights to be
assumed by Parent) in exchange for the acquisition by Parent of all outstanding
capital stock of the Company ("Company Capital Stock") and all outstanding
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unexpired and unexercised options and stock purchase rights to acquire Company
Capital Stock shall be 900,000 (the "Aggregate Share Number"). No adjustment
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shall be made in the number of shares of Parent
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Common Stock issued in the Merger as a result of any cash proceeds received by
the Company from the date hereof to the Closing Date pursuant to the exercise of
options, stock purchase rights or warrants to acquire Company Capital Stock.
Subject to the terms and conditions of this Agreement, as of the Effective Time,
by virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holder of any shares of Company Capital Stock, the holder of any
options, warrants or other rights to acquire or receive shares of Company
Capital Stock, the following shall occur (which is intended to comply fully with
the liquidation preference provisions set forth in Article IV, Section 2 of the
Articles of Incorporation of the Company, as amended through the date hereof):
(a) Conversion of Company Common Stock. Each share of common stock of
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the Company ("Company Common Stock") issued and outstanding immediately prior to
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the Effective Time (other than any shares of Company Common Stock to be canceled
pursuant to Section 1.6(e) and any "Dissenting Shares" (as defined and to the
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extent provided in Section 1.7(a))) will be canceled and extinguished and be
converted automatically into the right to receive that number of shares of
Parent Common Stock equal to the product of (A) one share of Company Common
Stock multiplied by (B) the Common Factor (as defined in Section 1.6(c) below)
(the "Common Exchange Ratio") upon surrender of the certificate representing
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such share of Company Common Stock in the manner provided in Section 1.8.
(b) Conversion of Company Preferred Stock.
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(i) Series A Preferred Stock. Each share of Series A
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Preferred Stock of the Company ("Series A Preferred") issued and outstanding
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immediately prior to the Effective Time (other than any shares of Series A
Preferred to be canceled pursuant to Section 1.6(e) and any Dissenting Shares
(as defined and to the extent provided in Section 1.7(a))) will be canceled and
extinguished and be converted automatically into the right to receive that
number of shares of Parent Common Stock equal to the product of (A) one share of
Series A Preferred multiplied by (B) the Series A Factor (as defined in Section
1.6(c) below) (the "Series A Exchange Ratio") upon surrender of the certificate
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representing such share of Series A Preferred in the manner provided in Section
1.8.
(ii) Series B Preferred Stock. Each share of Series B
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Preferred Stock of the Company ("Series B Preferred") issued and outstanding
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immediately prior to the Effective Time (other than any shares of Series B
Preferred to be canceled pursuant to Section 1.6(e) and any Dissenting Shares
(as defined and to the extent provided in Section 1.7(a))) will be canceled and
extinguished and be converted automatically into the right to receive that
number of shares of Parent Common Stock equal to the product of (A) one share of
Series B Preferred multiplied by (B) Series B Factor (as defined in Section
1.6(c) below) (the "Series B Exchange Ratio") upon surrender of the certificate
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representing such share of Series B Preferred in the manner provided in Section
1.8.
(c) Definitions.
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(i) Common Factor. The "Common Factor" shall be equal to the
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(rounded to the sixth decimal place) computed using the following formula:
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X = N - (A + B)
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F
Where X = the Common Factor
N = the Aggregate Share Number
A = the Series A Liquidation Preference Shares (as defined below)
B = the Series B Liquidation Preference Shares (as defined below)
F = the Fully Diluted Company Shares (as defined below)
(ii) Series A Factor. The "Series A Factor" shall be the number
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(rounded to the sixth decimal place) equal to the sum of (A) the Common Factor
plus (B) the number that is equal to the quotient computed by dividing (1) the
Series A Liquidation Preference Shares by (2) the number of shares of Series A
Preferred outstanding immediately prior to the Effective Time.
(iii) Series B Factor. The "Series B Factor" shall be the number
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(rounded to the sixth decimal place) equal to the sum of (A) the Common Factor
plus (B) the number that is equal to the quotient computed by dividing (1) the
Series B Liquidation Preference Shares by (2) the number of shares of Series B
Preferred outstanding immediately prior to the Effective Time after taking into
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consideration the "net exercise" of the warrant to purchase up to 76,576 shares
of Series B Preferred held by Yahoo! Inc. (the "Series B Warrant") to the extent
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such warrant remains outstanding immediately prior to the Effective Time.
(iv) Series A Liquidation Preference Shares. The "Series A
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Liquidation Preference Shares" shall be the number (rounded down to the nearest
whole number) equal to the quotient computed by dividing (A) the product of (1)
the number of shares of Series A Preferred outstanding immediately prior to the
Effective Time and (2) 0.83 by (B) the average of the closing sale price of
Parent Common Stock as reported on the Nasdaq National Market over the 30-day
period ending three (3) days prior to the Closing Date.
(v) Series B Liquidation Preference Shares. The "Series B
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Liquidation Preference Shares" shall be the number (rounded down to the nearest
whole share) equal to the quotient computed by dividing (A) the product of (1)
the number of shares of Series B Preferred outstanding immediately prior to the
Effective Time after taking into consideration any "net exercise" of the Series
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B Warrant and (▇) ▇.▇▇▇▇▇▇ by (B) the average of the closing sale price of
Parent Common Stock as reported on the Nasdaq National Market over the 30-day
period ending three (3) days prior to the Closing Date.
(vi) Fully Diluted Shares. The "Fully Diluted Shares" shall mean
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that number equal to the sum of (A) the number of shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time (regardless of
whether such shares are unvested, subject to any right of repurchase, risk of
forfeiture or other condition in favor of the Company at such time); plus (B)
the number of shares of Company Common Stock issuable upon conversion of the
shares of Series A and Series B Preferred immediately prior to the Effective
Time; plus (C) the number of shares of Company Common stock issuable upon
exercise of the Company Options or Stock Purchase Rights (as such terms
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are defined in Section 1.6(f)) outstanding at the Effective Time (regardless of
whether such Company Options or Stock Purchase Rights are vested); plus (D) the
number of shares of Company Common Stock issuable upon conversion of the shares
of Series B Preferred which shares of Series B Preferred are themselves issuable
upon "net exercise" of the Series B Warrant to the extent such warrant remains
exercisable immediately prior to the Effective Time; plus (E) the number of
shares of Company Common Stock issuable in connection with any other options,
warrants, calls, rights, exchangeable or convertible securities, commitments or
agreements of any character, written or oral, to which the Company is a party or
by which it is bound obligating the Company to issue, deliver, sell or cause to
be issued, delivered or sold any Company Capital Stock immediately prior to the
Effective Time.
(d) Escrow. Ten percent (10%) of the number shares of Parent Common
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Stock to be issued at the Effective Time pursuant to Section 1.6(a) and (b)
hereof (none of which shares of Parent Common Stock shall be unvested, subject
to any right of repurchase, risk of forfeiture or other condition in favor of
the Surviving Corporation) shall be held in escrow (the "Escrow Amount")
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pursuant to Article VIII of this Agreement to compensate Parent and its
affiliates (including the Surviving Corporation) for any "Losses" (as defined in
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Section 8.2 hereof) incurred in connection with this Agreement and the
transactions contemplated hereby.
(e) Cancellation of Parent-Owned and Company-Owned Stock. Each share
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of Company Capital Stock owned by Merger Sub, Parent, the Company or any direct
or indirect wholly-owned subsidiary of Parent or of the Company immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(f) Stock Options. At the Effective Time, all options to purchase
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Company Common Stock (each a "Company Option") and all rights to purchase
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Company Common Stock (each a "Stock Purchase Right") then outstanding (whether
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or not exercisable and whether or not vested at such time) under the Company's
1997 Stock Plan, as amended (the "Option Plan"), or otherwise, shall remain
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outstanding following the Effective Time and shall be assumed by Parent in
accordance with provisions described below.
(i) Each Company Option or Stock Purchase Right so assumed by
Parent under this Agreement shall continue to have, and be subject to, the same
terms and conditions set forth in the Option Plan and/or as provided in the
respective option or stock purchase agreements governing such Company Option or
Stock Purchase Rights immediately prior to the Effective Time, except that (A)
such Company Option or Stock Purchase Right shall be exercisable for that number
of whole shares of Parent Common Stock equal to the product of the number of
shares of Company Common Stock that were issuable upon exercise of such Company
Option or Stock Purchase Right immediately prior to the Effective Time
multiplied by the Common Exchange Ratio, rounded to the nearest whole number of
shares of Parent Common Stock (with 0.5 shares being rouned up) and (B) the per
share exercise price for the shares of Parent Common Stock issuable upon
exercise of such assumed Company Option or Stock Purchase Right shall be equal
to the quotient determined by dividing the exercise price per share of Company
Common Stock at which such Company Option or Stock Purchase Right was
exercisable immediately prior to the Effective Time by the Common Exchange
Ratio, rounded to the nearest whole cent (with $0.005 being rounded up).
(ii) It is the intention of the parties that the Company Options
assumed by Parent qualify following the Effective Time as incentive stock
options as defined in Section 422 of the
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Code to the extent the Company Options qualified as incentive stock options
immediately prior to the Effective Time.
(iii) Promptly following the Effective Time, Parent will issue to
each holder of an outstanding Company Option or Stock Purchase Right a document
evidencing the foregoing assumption of such Company Option or Stock Purchase
Right by Parent.
(iv) Notwithstanding anything to the contrary in this Section
1.6, in lieu of assuming outstanding Company Options or Stock Purchase Rights in
accordance with this Section 1.6(f), Parent may, at its election, cause such
outstanding Company Options or Stock Purchase Rights to be replaced by issuing
substantially equivalent replacement stock options in substitution therefor.
(g) Warrants.
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(i) Series A Preferred Warrant. To the extent the warrant to
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purchase up to an aggregate of 120,482 shares of Series A Preferred held by
Interactive Minds Ventures, L.P. (the "Series A Warrant") remains exercisable
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immediately prior to the Effective Time, the Series A warrant shall, in
connection with the Merger and pursuant to its terms, be terminated and shall
not be assumed by Parent. After the Effective Time, any unexercised portion of
the Series A Warrant shall not represent any right to purchase any Company
Capital Stock or any Parent Common Stock.
(ii) Series B Preferred Warrant. To the extent the Series B
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Warrant remains exercisable immediately prior to the Effective Time, the Series
B Warrant shall, in connection with the Merger and pursuant to its terms, be
"net exercised" into shares of Series B Preferred, which shares of Series B
Preferred shall then be converted into shares of Parent Common Stock in the
manner set forth in Section 1.6(b)(ii) above.
(h) Capital Stock of Merger Sub. Each share of common stock of
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Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares shall continue
to evidence ownership of such shares of capital stock of the Surviving
Corporation.
(i) Adjustments to Exchange Ratios. The Common, Series A and Series
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B Exchange Ratios shall be adjusted to reflect fully the effect of any stock
split, reverse split, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock or Company Capital Stock),
reorganization, recapitalization or other like change with respect to Parent
Common Stock or Company Capital Stock occurring after the date hereof and prior
to the Effective Time.
(j) Fractional Shares. No fraction of a share of Parent Common Stock
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will be issued at the Effective Time, but in lieu thereof, each holder of shares
of Company Capital Stock who would otherwise be entitled to a fraction of a
share of Parent Common Stock (after aggregating all fractional shares of Parent
Common Stock to be received by such holder) shall be entitled to receive from
Parent an amount of cash (rounded to the nearest whole cent) equal to the
product of (i) such fraction, multiplied by (ii) the average closing price of a
share of Parent Common Stock for the five (5) consecutive trading days ending on
the trading day immediately prior to the Closing Date, as reported on the Nasdaq
National Market.
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1.7 Dissenters' Rights.
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(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Capital Stock held by a holder who has demanded and
perfected dissenters' rights for such shares in accordance with Chapter 13 of
California Law and who, as of the Effective Time, has not effectively withdrawn
or lost such appraisal or dissenters' rights ("Dissenting Shares"), shall not be
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converted into or represent a right to receive Parent Common Stock pursuant to
Section 1.6, but the holder thereof shall only be entitled to such rights as are
granted by California Law. From and after the Effective Time, a holder of
Dissenting Shares shall not be entitled to exercise any of the voting rights or
other rights of a shareholder of the Surviving Corporation.
(b) Notwithstanding the provisions of Sections 1.6(a) and (b) hereof,
if any holder of shares of Company Capital Stock who demands appraisal of such
shares under California Law shall effectively withdraw or lose (through failure
to perfect or otherwise) the right to appraisal, then, as of the later of the
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Parent
Common Stock and fractional shares as provided in Section 1.6(a) or (b), as the
case may be, without interest thereon, upon surrender of the certificate
representing such shares.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal of any shares of Company Capital Stock, withdrawals of
such demands, and any other instruments served pursuant to California Law and
received by the Company and (ii) the opportunity to participate in all
negotiations and proceedings with respect to demands for appraisal under
California Law. The Company shall not, except with the prior written consent of
Parent, voluntarily make any payment with respect to any demands for appraisal
of capital stock of the Company or offer to settle or settle any such demands.
1.8 Surrender of Certificates.
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(a) Exchange Agent. Prior to the Effective Time, Parent shall
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designate Norwest Shareholder Services to act as exchange agent (the "Exchange
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Agent") in the Merger.
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(b) Parent to Provide Common Stock. Promptly after the Effective
------------------------------
Time, Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I, the aggregate number of shares of Parent Common
Stock issuable pursuant to Section 1.6 in exchange for outstanding shares of
Company Capital Stock; provided, however, that, on behalf of the holders of
-------- -------
Company Capital Stock, and pursuant to Article VIII hereof, Parent shall deposit
into an escrow account a number of shares of Parent Common Stock equal to the
Escrow Amount out of the aggregate number of shares of Parent Common Stock
otherwise issuable pursuant to Section 1.6. The portion of the Escrow Amount
contributed on behalf of each holder of Company Capital Stock shall be in
proportion to the aggregate number of shares of Parent Common Stock which such
holder would otherwise be entitled to receive under Section 1.6 by virtue of
ownership of outstanding shares of Company Capital Stock.
-7-
(c) Exchange Procedures. Promptly after the Effective Time, the
-------------------
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
------------
Effective Time represented outstanding shares of Company Capital Stock whose
shares were converted into the right to receive shares of Parent Common Stock
pursuant to Section 1.6, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of Parent Common Stock (less the number of shares of Parent Common Stock,
if any, to be deposited in the Escrow Fund on such holder's behalf pursuant to
Article VIII hereof), plus cash in lieu of fractional shares in accordance with
Section 1.6, to which such holder is entitled pursuant to Section 1.6, and the
Certificate so surrendered shall forthwith be canceled. As soon as practicable
after the Effective Time, and subject to and in accordance with the provisions
of Article VIII hereof, Parent shall cause to be distributed to the Escrow Agent
(as defined in Article VIII) a certificate or certificates representing that
number of shares of Parent Common Stock equal to the Escrow Amount which shall
be registered in the name of the Escrow Agent. Such shares shall be owned by
the holders on whose behalf such shares were deposited in the Escrow Fund as set
forth in Section 8.2(c)(iii) and shall be available to compensate Parent as
provided in Article VIII. Until so surrendered, each outstanding Certificate
that, prior to the Effective Time, represented shares of Company Capital Stock
will be deemed from and after the Effective Time, for all corporate purposes,
other than the payment of dividends, to evidence the ownership of the number of
full shares of Parent Common Stock into which such shares of Company Capital
Stock shall have been so converted and the right to receive an amount in cash in
lieu of the issuance of any fractional shares in accordance with Section 1.6.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
------------------------------------------------
other distributions declared or made after the Effective Time with respect to
Parent Common Stock with a record date after the Effective Time will be paid to
the holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock represented thereby until the holder of record of such Certificate
shall surrender such Certificate. Subject to applicable law, following
surrender of any such Certificate, there shall be paid to the record holder of
the certificates representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, at the time of such surrender, the amount
of dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of Parent
----------------------
Common Stock is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
certificate surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
-8-
(f) No Liability. Notwithstanding anything to the contrary in this
------------
Section 1.8, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to a holder of shares of Parent Common Stock or Company
Capital Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.9 No Further Ownership Rights in Company Common Stock. All shares of
---------------------------------------------------
Parent Common Stock issued upon the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof (including any cash paid in
respect thereof) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Capital Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Company Capital Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any certificates
--------------------------------------
evidencing shares of Company Capital Stock shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed certificates, upon the making of an affidavit of that fact by the
holder thereof, such shares of Parent Common Stock and cash for fractional
shares, if any, as may be required pursuant to Section 1.6; provided, however,
-------- -------
that Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent or the Exchange Agent with respect to the
certificates alleged to have been lost, stolen or destroyed.
1.11 Tax and Accounting Consequences. It is intended by the parties hereto
-------------------------------
that the Merger shall (i) constitute a reorganization within the meaning of
Section 368 of the Code (and this Agreement is intended to constitute a plan of
reorganization for purposes of Section 368 of the Code) and (ii) qualify for
accounting treatment as a "pooling of interests."
1.12 Taking of Necessary Action; Further Action. If, at any time after the
------------------------------------------
Effective Time, any such further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
-9-
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub,
subject to such exceptions as are clearly disclosed in the disclosure schedules
supplied by the Company to Parent and attached hereto (the "Company Schedules")
-----------------
and dated as of the date hereof, as follows:
2.1 Organization of the Company. The Company is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
California. The Company has the corporate power to own, lease and operate its
properties and to carry on its business as now being conducted and as proposed
to be conducted. The Company is duly qualified or licensed to do business and
is in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified or licensed would have a material adverse effect on
the business, assets (including intangible assets), financial condition, results
of operations or prospects of the Company (hereinafter referred to as a
"Material Adverse Effect"). The Company has delivered a true and correct copy
-----------------------
of its Articles of Incorporation and Bylaws, each as amended to date, to Parent.
2.2 Subsidiaries. The Company does not have and has never had any
------------
subsidiaries or affiliated companies and does not otherwise own and has never
otherwise owned any shares of capital stock or any equity or debt interest in,
or control, directly or indirectly, any other corporation, partnership,
association, joint venture or other business entity.
2.3 Company Capital Structure.
-------------------------
(a) The authorized capital stock of the Company consists of 15,000,000
shares of authorized Common Stock, of which 3,416,477 shares are issued and
outstanding and 4,041,174 shares of authorized Preferred Stock (the "Preferred
---------
Stock"). The authorized Preferred Stock consists of 1,162,652 shares of
-----
authorized Series A Preferred, of which 1,042,170 shares are issued and
outstanding, and 2,878,522 shares of authorized Series B Preferred, of which
2,801,946 shares are issued and outstanding. The Company Capital Stock,
including all shares subject to the Company's right of repurchase, is held of
record by the persons, with the addresses of record and in the amounts set forth
on Schedule 2.3(a). Schedule 2.3(a) also indicates for each Company shareholder
whether any shares of Company Capital Stock held by such shareholder are subject
to a repurchase right in favor of the Company, the lapsing schedule for any such
restricted shares, including the extent to which any such repurchase right has
lapsed as of the date of this Agreement and whether (and to what extent) the
lapsing will be accelerated by the transactions contemplated by this Agreement.
All outstanding shares of Company Capital Stock are duly authorized, validly
issued, fully paid and non-assessable and not subject to preemptive rights
created by statute, the Articles of Incorporation or Bylaws of the Company or
any agreement to which the Company is a party or by which it is bound. All
preferential rights of the Preferred Stock in connection with the sale of
substantially all of the assets of the Company or a merger involving the Company
are set forth in the Articles of Incorporation or the Company. All issued and
outstanding shares of Company Capital Stock have been offered, sold and
delivered by the Company in compliance with applicable federal and state
securities laws.
-10-
(b) The Company has reserved 1,066,987 shares of Common Stock for
issuance to employees and consultants pursuant to the Option Plan, of which
780,725 shares are subject to outstanding, unexercised options, none of the
shares are subject to outstanding unexercised stock purchase rights and 219,785
shares remain available for future grant. Schedule 2.3(b) sets forth each
outstanding Company Option and Stock Purchase Right, including the name of the
holder of such option or right, the domicile address of such holder, an
indication of whether such holder is an employee of the Company, the date of
grant or issuance of such option or right, the number of shares of Common Stock
subject to such option or right, the exercise price of such option or right and
the vesting schedule for such option or right, including the extent vested to
the date of this Agreement and whether and to what extent the exercisability of
such option or right will be accelerated and become exercisable by the
transactions contemplated by this Agreement. The Company has reserved 120,482
shares of Series A Preferred and 76,576 shares of Series B Preferred for
issuance upon exercise of outstanding warrants (collectively, the "Warrants").
--------
Schedule 2.3(b) sets forth for each of the Warrants the name of the holder and
exercise price of such Warrants. Except for the Company Options, Stock Purchase
Rights and warrants described in Schedule 2.3(b), there are no options,
warrants, calls, rights, exchangeable or convertible securities, commitments or
agreements of any character, written or oral, to which the Company is a party or
by which it is bound obligating the Company to (i) issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any Company Capital Stock or (ii) grant, extend, accelerate the
vesting of, change the price of, otherwise amend or enter into any such option,
warrant, call, right, exchangeable or convertible securities, commitment or
agreement. All issued and outstanding Company Options, Stock Purchase Rights
and Warrants have been offered, issued and delivered in compliance with
applicable federal and state securities laws. The holders of Company Options,
Stock Purchase Rights and Warrants have been or will be given, or shall have
properly waived, any required notice prior to the Merger. As a result of the
Merger, Parent will be the record and sole beneficial owner of all Company
Capital Stock and rights to acquire or receive Company Capital Stock.
2.4 Authority. Subject only to the requisite approval of the Merger and
---------
the principal terms of this Agreement by the Company's shareholders, the Company
has all requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated hereby. The vote required of the
Company's shareholders to duly approve the Merger and the principal terms of
this Agreement is that number of shares as would constitute a majority of the
outstanding shares of (a) the Company Common Stock and Preferred Stock, voting
together as a single class, and (b) the Preferred Stock voting separately as a
single class (in each case with each share of Preferred Stock being entitled to
a number of votes equal to the number of whole shares of Common Stock into which
such share of Preferred Stock could be converted on the record date for the
vote). The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval of the
Merger and the principal terms of this Agreement by the Company's shareholders.
The Company's Board of Directors has unanimously approved the Merger and this
Agreement. This Agreement has been duly executed and delivered by the Company
and constitutes the valid and binding obligation of the Company, enforceable in
accordance with its terms.
2.5 No Conflict. Except as set forth on Schedule 2.5, subject only to the
-----------
approval of the Merger and the principal terms of this Agreement by the
Company's shareholders, the execution and delivery of this Agreement by the
Company does not, and, as of the Effective Time, the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation
-11-
or acceleration of any obligation or loss of any benefit under (any such event,
a "Conflict") (i) any provision of the Articles of Incorporation or Bylaws of
--------
the Company or (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or its properties or assets.
2.6 Consents. No consent, waiver, approval, order or authorization of, or
--------
registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") or any
-------------------
third party (so as not to trigger any Conflict), is required by or with respect
to the Company in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby, except for (i) the
filing of the Agreement of Merger with the California Secretary of State, (ii)
such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws and (iii) such other consents, waivers, authorizations, filings,
approvals and registrations which are set forth on Schedule 2.6.
2.7 Company Financial Statements. Schedule 2.7 sets forth true and correct
----------------------------
copies of the Company's unaudited balance sheet as of February 28, 1999 and the
related unaudited statement of income for the respective 2-month period then
ended (the "Company Unaudited Financials," which will be superseded prior to the
----------------------------
Closing by the Company's audited balance sheet as of February 28, 1999 and the
related audited statement of income for the respective 3-month period then ended
(the "Company Audited Financials") and the Company's unaudited balance sheet as
--------------------------
of March 31, 1999 and the related unaudited statement of income for the one-
month period then ended (the "Company Interim Financials"), the Company Audited
--------------------------
Financials and the Company Interim Financials shall be collectively referred to
as the "Company Financials"). The Company Audited Financials and the Company
------------------
Interim Financials are complete and correct in all material respects and have
been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods indicated and
----
consistent with each other, except for the absence of footnotes in the case of
the Company Interim Financials. The Company Audited Financials and Company
Interim Financials present fairly the financial condition and operating results
of the Company as of the dates and during the period indicated therein. The
Company's unaudited Balance Sheet as of February 28, 1999, as superseded prior
to Closing by the Company's audited balance sheet as of February 28, 1999, shall
be referred to herein as the "Current Company Balance Sheet."
-----------------------------
2.8 No Undisclosed Liabilities. Except as set forth in Schedule 2.8, the
--------------------------
Company does not have any liability, indebtedness, obligation, expense, claim,
deficiency, guaranty or endorsement of any type, whether accrued, absolute,
contingent, matured, unmatured or other (whether or not required to be reflected
in financial statements in accordance with GAAP), which individually or in the
aggregate, (i) has not been reflected in the Current Company Balance Sheet and
(ii) has not arisen in the ordinary course of the Company's business since
February 28, 1999, consistent with past practices.
2.9 No Changes. Except as set forth in Schedule 2.9, since February 28,
----------
1999 and through the date of this Agreement, there has not been, occurred or
arisen any:
(a) transaction by the Company except in the ordinary course of
business as conducted on that date and consistent with past practices;
-12-
(b) amendments or changes to the Articles of Incorporation or Bylaws
of the Company;
(c) capital expenditure or capital commitment by the Company of
$25,000 in any individual case or $50,000 in the aggregate (other than
commitments to pay expenses incurred in connection with this transaction);
(d) destruction of, damage to or loss of any material assets, business
or customer of the Company (whether or not covered by insurance);
(e) work stoppage, labor strike or other labor trouble, or any action,
suit, claim, labor dispute or grievance relating to any labor, safety or
discrimination matter involving the Company, including, without limitation,
charges of wrongful discharge or other unlawful labor practices or actions;
(f) change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by the Company;
(g) revaluation by the Company of any of its assets;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to any Company Capital Stock, or any direct or
indirect redemption, purchase or other acquisition by the Company of any Company
Capital Stock, other than repurchases of Common Stock from employees,
consultants or other persons performing services for the Company pursuant to
agreements under which the Company has the option to repurchase such shares at
cost upon the termination of employment or other services;
(i) increase in the salary or other compensation payable or to become
payable by the Company to any of its officers, directors, employees or advisors,
including, but not limited to, the modification of any existing compensation or
equity arrangements with such individuals (which modification may include the
amendment of any vesting terms related to Company Options or Stock Purchase
Rights held by such individuals), or the declaration, payment or commitment or
obligation of any kind for the payment, by the Company, of a bonus or other
additional salary or compensation to any such person;
(j) agreement, contract, covenant, instrument, lease, license or
commitment to which the Company is a party or by which it or any of its assets
is bound or any termination, extension, amendment or modification of the terms
of any agreement, contract, covenant, instrument, lease, license or commitment
to which the Company is a party or by which it or any of its assets is bound
except in the ordinary course of business and consistent with past practices;
(k) sale, lease, license or other disposition of any of the assets or
properties of the Company, or creation of any lien or security interest in such
assets or properties except in the ordinary course of business and consistent
with past practices;
-13-
(l) loan by the Company to any person or entity, incurring by the
Company of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others except for advances to employees for travel and
business expenses in the ordinary course of business, consistent with past
practices;
(m) waiver or release of any right or claim of the Company, including
any write-off or other compromise of any account receivable of the Company
except in the ordinary course of business and consistent with past practices;
(n) commencement or notice or threat of commencement of any lawsuit or
proceeding against or investigation of the Company or its affairs;
(o) (i) sale by the Company of any "Company Intellectual Property" (as
-----------------------------
defined in Section 2.15 below) or the entering into of any license agreement
(other than end-user license agreements entered into by the Company in the
ordinary course of business consistent with past practice), distribution
agreement, reseller agreement, security agreement, assignment or other
conveyance or option for the foregoing, with respect to the Company Intellectual
Property with any person or entity or with respect to the "Intellectual
------------
Property" (as defined in Section 2.14 below) of any person or entity, (ii) the
--------
purchase or other acquisition of any Intellectual Property or the entering into
of any license agreement, distribution agreement, reseller agreement, security
agreement, assignment or other conveyance or option for the foregoing, with
respect to the Intellectual Property of any person or entity or (iii) the change
in pricing or royalties set or charged by the Company to its customers or
licensees or in pricing or royalties set or charged by persons who have licensed
Intellectual Property to Company;
(p) except as set forth on Schedule 2.3(b), issuance or sale by the
Company of any Company Capital Stock, or securities exchangeable, convertible or
exercisable therefor, or any securities, warrants, options or rights to purchase
any of the foregoing or any amendment of any existing equity arrangement;
(q) event or condition of any character that has or reasonably would
be expected to have a Material Adverse Effect on the Company; or
(r) agreement by the Company or any officer or employees thereof to do
any of the things described in the preceding clauses (a) through (q) (other than
negotiations with Parent and its representatives regarding the transactions
contemplated by this Agreement).
2.10 Tax and Other Returns and Reports.
---------------------------------
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
------------------- ---
or, collectively, "Taxes", means any and all federal, state, local and foreign
-----
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
-14-
(b) Tax Returns and Audits. Except as set forth in Schedule 2.10:
----------------------
(i) The Company has prepared and filed all required
federal, state, local and foreign returns, estimates, information statements and
reports "Returns") relating to any and all Taxes concerning or attributable to
-------
the Company or its operations and such Returns are true and correct and have
been completed in accordance with applicable law.
(ii) The Company: (A) has paid or accrued all Taxes it is
required to pay or accrue and (B) has withheld with respect to its employees all
federal and state income taxes, FICA, FUTA and other Taxes required to be
withheld.
(iii) The Company has not been delinquent in the payment of
any Tax nor is there any Tax deficiency outstanding, proposed or assessed
against the Company, nor has the Company executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(iv) No audit or other examination of any Return of the
Company is presently in progress, nor has the Company been notified of any
request for such an audit or other examination.
(v) The Company has no liabilities for unpaid federal,
state, local and foreign Taxes which have not been accrued or reserved against
in the Company Financials, whether asserted or unasserted, contingent or
otherwise, and the Company has not incurred any liability for Taxes since the
date of the Current Company Balance Sheet other than in the ordinary course of
business consistent with past practice.
(vi) The Company has provided to Parent copies of all
federal and state income and all state sales and use Returns for all periods
since the date of Company's incorporation.
(vii) There are (and as of immediately following the
Closing there will be) no liens, pledges, charges, claims, restrictions on
transfer, mortgages, security interests or other encumbrances of any sort
(collectively, Liens") on the assets of the Company relating to or attributable
-----
to Taxes, other than Liens for Taxes not yet due and payable as of such time.
(viii) There is no basis for the assertion of any claim
relating or attributable to Taxes which, if adversely determined, would result
in any Lien on the assets of the Company.
(ix) None of the Company's assets are treated as "tax-
exempt use property" within the meaning of Section 168(h) of the Code.
(x) There is no contract, agreement, plan or arrangement
to which the Company is a party, including but not limited to the provisions of
this Agreement, covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to Section 280G, 404 or 162(m) of the Code.
-15-
(xi) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company.
(xii) The Company is not a party to a tax sharing or
allocation agreement nor does the Company owe any amount under any such
agreement.
(xiii) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(xiv) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income Tax
deductions is accurately reflected on the Company's tax books and records.
(xv) No adjustment relating to any Return filed by the
Company has been proposed formally or informally by any tax authority to the
Company or any representative thereof.
(xvi) The Company utilizes the accrued method of accounting
for U.S. federal income tax purposes.
2.11 Restrictions on Business Activities. There is no agreement
-----------------------------------
(noncompete or otherwise), judgment, injunction, order or decree to which the
Company is a party or otherwise binding upon the Company which has or reasonably
would be expected to have the effect of prohibiting or impairing any business
practice of the Company, any acquisition of property (tangible or intangible) by
the Company or the conduct of business by the Company. Without limiting the
foregoing, the Company has not entered into any agreement under which the
Company is restricted from selling, licensing or otherwise distributing any of
its products or services to any class of customers, in any geographic area,
during any period of time or in any segment of the market.
2.12 Title to Properties; Absence of Liens and Encumbrances.
------------------------------------------------------
(a) The Company does not own any real property, nor has it ever owned
any real property. Schedule 2.12(a) sets forth a list of all real property
currently leased by the Company, the name of the lessor and the date of the
lease and each amendment thereto and with respect to any current lease, the
aggregate annual rent. All such current leases are in full force and effect,
are valid and effective in accordance with their respective terms, and there is
not, under any of such leases, any existing default or event of default as
defined in such leases (or event which with notice or lapse of time, or both,
would constitute a default). The operations of the Company on such real
property do not, and to the knowledge of the Company, such real property,
including improvements thereon, does not violate any applicable building code,
zoning requirement, or classification, or pollution control ordinance or statute
relating to the particular property or such operations, and such non-violation
is not dependent, in any instance, on so-called non-conforming use exceptions.
(b) The Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens (as defined in Section 2.10(b)(vii)),
except as reflected in the Company Financials or in Schedule 2.12(b) and except
for liens for taxes not yet due and
-16-
payable and such imperfections of title and encumbrances, if any, which are not
material in character, amount or extent, and which do not materially detract
from the value, or materially interfere with the present use, of the property
subject thereto or affected thereby.
(c) Schedule 2.12(c) lists all items of equipment (the "Equipment")
---------
owned or leased by the Company. All facilities, machinery, equipment, fixtures,
vehicles, and other properties owned, leased or used by the Company are (i)
adequate for the conduct of the business of the Company as currently conducted
and (ii) in good operating condition, regularly and properly maintained, subject
to normal wear and tear and reasonably fit and usable for the purposes for which
they are being used, except where a failure to be in such condition would not
have a Material Adverse Effect on the Company.
(d) The Company has not sold or otherwise released for distribution
any of its customer files and other customer information relating to the
Company's current and former customers (the "Company Customer Information").
----------------------------
Except for information as provided to sales representatives (which information
is subject to a customary non-disclosure agreement), no person other than the
Company possesses any claims or rights with respect to use of the Company
Customer Information.
2.13 Governmental Authorization. Schedule 2.13 accurately lists each
--------------------------
material consent, license, permit, grant or other authorization issued to the
Company by a Governmental Entity (i) pursuant to which the Company currently
operates or holds any interest in any of its properties or (ii) which is
required for the operation of its business or the holding of any such interest
(herein collectively called "Company Authorizations"). The Company
----------------------
Authorizations are in full force and effect and constitute all Company
Authorizations required to permit the Company to operate or conduct its business
or hold any interest in its properties or assets except for Company
Authorizations the absence or invalidity of which would not have a Material
Adverse Effect on the Company.
2.14 Intellectual Property. For the purposes of this Agreement, the
---------------------
following terms have the following definitions:
"Intellectual Property" shall mean any or all of the following and all
---------------------
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether or not
patentable), invention disclosures, improvements, trade secrets,
proprietary information, know how, computer software programs (in both
source code and object code form), technology, technical data and customer
lists, tangible or intangible proprietary information, 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, 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 inventors,
however denominated, throughout the world; (viii) all Web addresses, sites
and domain names; and (ix) any similar or equivalent rights to any of the
foregoing anywhere in the world.
-17-
"Commercial Software Rights" shall mean packaged commercially available
--------------------------
software programs generally available to the public through retail dealers
in computer software which have been licensed to the Company pursuant to
end-user licenses and which are used in the business of the Company but are
in no way a component of or incorporated in any products of the Company or
any related Company Intellectual Property.
"Company Intellectual Property" shall mean any Intellectual Property that
-----------------------------
is used in the business of the Company as currently conducted and as
proposed to be conducted.
"Registered Intellectual Property" shall mean all United States,
--------------------------------
international and foreign: (i) patents and patent applications (including
provisional applications); (ii) registered trademarks, applications to
register trademarks, intent-to-use applications, or other registrations or
applications related to trademarks; (iii) registered copyrights and
applications for copyright registration; and (iv) any other Intellectual
Property that is the subject of an application, certificate, filing,
registration or other document issued, filed with, or recorded by any
state, government or other public legal authority.
"Company Registered Intellectual Property" means all of the Registered
----------------------------------------
Intellectual Property owned by, or filed in the name of, the Company.
(a) Schedule 2.14(a) sets forth a complete list of all Company
Registered Intellectual Property and all material Company Intellectual Property
and specifies the jurisdictions in which such Company Registered Intellectual
Property has been issued or registered or in which an application for such
issuance and registration has been filed, including the respective registration
or application numbers and the names of all registered owners, together with a
list of all software products currently marketed by the Company and an
indication as to which, if any, of such software products have been registered
for copyright protection with the United States Copyright Office and any foreign
offices and by whom such items have been registered. Schedule 2.14(a) also sets
forth a complete list of any requests the Company has received to make any such
registration, including the identity of the requestor and the item requested to
be so registered and the jurisdiction for which such request has been made.
(b) Schedule 2.14(b) sets forth a complete list of all licenses,
sublicenses and other agreements to which the Company is a party and pursuant to
which the Company or any other person is authorized to use any Company
Intellectual Property, and includes the date thereof and identity of all parties
thereto (other than standard customer, distributor, and reseller software
license agreements entered into by the Company in the ordinary course of
business).
(c) Schedule 2.14(c) sets forth any agreement pursuant to which a
third party has licensed or transferred any Intellectual Property to the Company
(other than licenses of Commercial Software Rights) and includes the date
thereof and identity of all parties thereto.
(d) The execution and delivery of this Agreement by the Company, and
the consummation of the transactions contemplated hereby, will not cause the
Company to be in violation or default under any license, sublicense or agreement
listed on Schedule 2.14(b) or Schedule 2.14(c), nor entitle any other party to
any such license, sublicense or agreement to terminate or modify such license,
sublicense or agreement.
-18-
(e) The Company has not been sued or charged as a defendant in any
claim, suit, action, or proceeding which involves a claim of infringement of any
Intellectual Property of any third party and which has not been finally
terminated prior to the date hereof nor does the Company have any knowledge of
any such charge or claim. No Company Intellectual Property or product of the
Company is subject to any outstanding decree, order, judgment or stipulation
restricting in any manner the licensing of products by the Company.
(f) Each item of Company Registered Intellectual Property is valid and
subsisting. All necessary registration, maintenance and renewal fees currently
due in connection with such Company Registered Intellectual Property have been
made and all necessary documents, recordations and certificates in connection
with such Company Registered Intellectual Property have been filed with the
relevant patent, copyright, trademark or other authorities in the United States
or foreign jurisdictions, as the case may be, for the purposes of maintaining
such Company Registered Intellectual Property.
(g) The Company is the sole and exclusive owner or licensee of, with
all right, title, and interest in and to each item of Company Intellectual
Property, free and clear of any Lien, and has sole and exclusive rights (and is
not contractually obligated to pay any compensation (other than licensing fees
and royalties set forth in the applicable license) to any third party in respect
thereof) to the use thereof or the material covered thereby in connection with
the services or products in respect of which the Company Intellectual Property
is being used. The Company does not use nor is it licensed to use, and none of
its products include or incorporate, (i) any software distributed free of charge
on a trial basis for which a paid license would be required for commercial
distribution, (ii) any software whose ownership has been retained by a third
party who controls its distribution or (iii) any other code obtained from the
public domain.
(h) To the extent that any material Intellectual Property has been
developed or created by a third party for the Company, the Company has a written
agreement with such third party with respect thereto, and the Company thereby
either (i) has obtained ownership of, and is the exclusive owner of, or (ii) has
obtained a license (sufficient for the conduct of its business as currently
conducted and as proposed to be conducted) to all such third party's
Intellectual Property in such work, material or invention by operation of law or
by valid assignment, to the fullest extent it is legally possible to do so.
(i) The Company has not transferred ownership of, or granted any
exclusive license with respect to, any Intellectual Property that is or was
material Company Intellectual Property, to any third party.
(j) All contracts, licenses and agreements relating to the Company
Intellectual Property are in full force and effect. The Company is in
compliance with, and has not breached any material term of such contracts,
licenses and agreements and, to the knowledge of the Company, all other parties
to such contracts, licenses and agreements are in compliance with, and have not
breached any material term of, such contracts, licenses and agreements.
Following the Closing Date, the Surviving Corporation will be permitted to
exercise all of the Company's rights under such contracts, licenses and
agreements to the same extent the Company would have been able to had the
transactions contemplated by this Agreement not occurred and without the payment
of any additional amounts or consideration other than ongoing fees, royalties or
payments which the Company would otherwise be required to pay.
-19-
(k) No claims with respect to Company Intellectual Property have been
asserted or, to the Company's knowledge, are threatened by any person, nor, to
the Company's knowledge, are there any valid grounds for any bona fide claims,
or infringement liability (i) to the effect that the manufacture, sale,
licensing or use of any of the products of the Company infringes on or
misappropriates any Intellectual Property or constitutes unfair competition or
trade practices under the laws of any jurisdiction; (ii) against the use by the
Company of any Intellectual Property used in the business of the Company as
currently conducted or as proposed to be conducted; or (iii) challenging the
ownership by the Company, validity or effectiveness of any Company Intellectual
Property. To the Company's knowledge, there is no unauthorized use,
infringement or misappropriation of any Company Intellectual Property by any
third party, including any employee or former employee of the Company.
(l) The Company has taken reasonable steps to protect the Company's
rights in the Company's confidential information and trade secrets that it
wishes to protect or any trade secrets or confidential information of third
parties provided to the Company, and, without limiting the foregoing, the
Company has and enforces a policy requiring each employee and contractor to
execute a proprietary information/confidentiality agreement substantially in the
form provided to Parent and all current and former employees and contractors of
the Company have executed such an agreement.
(m) None of the Company's professional services agreements with its
customers, its agreements with merchants, its agreements with outside
consultants for the performance of professional services on the Company's or
customers' behalf, nor any agreement or license with any end user or reseller of
the Company's products, confers upon any party other than the Company any
ownership right with respect to any Intellectual Property developed in
connection with such agreement or license.
(n) To the Company's knowledge, the Company has not breached or
violated the terms of its license, sublicense, or other agreement relating to
any Commercial Software Rights, and the Company has a valid right to use such
Commercial Software Rights under such licenses and agreements. The Company is
not or will not be as a result of the execution and delivery of this Agreement
or the performance of the Company's obligations hereunder, in violation of any
license, sublicense, or agreement relating to Commercial Software Rights. No
claims with respect to the Commercial Software Rights have been asserted or, to
the knowledge of the Company, are threatened by any person against the Company,
nor to the knowledge of the Company are there any valid grounds for any bona
fide claims (i) to the effect that the use of any product as now used or
proposed for use by the Company infringes on any Intellectual Property, (ii)
against the use by the Company of any Company Intellectual Property or (iii)
challenging the validity or effectiveness of any of the rights of the Company to
use Commercial Software Rights. To the knowledge of the Company, there is no
unauthorized use, infringement, or misappropriation of any of the Commercial
Software Rights by the Company or any employee or former employee of the
Company. To the knowledge of the Company, no Commercial Software Right is
subject to any outstanding order, judgment, decree, stipulation, or agreement
restricting in any manner the use thereof by the Company.
2.15 Year 2000 Compliance.
--------------------
(a) Company Products. Each product manufactured, sold, licensed,
----------------
leased or delivered by the Company or used in connection with operations of the
Company's business as presently conducted (the "Company Products") is designed
----------------
to be used without defect prior to, during, and after the calendar year 2000
A.D. The Company Products will operate during each such time period without
error
-20-
relating to date data, specifically including any error relating to, or the
product of, date data which represents or references different centuries or more
than a century. Without limiting the generality of the foregoing, the Company
further represents and warrants that the Company Products (i) will not
abnormally end or provide invalid or incorrect results as a result of date data,
specifically including date data which represents or references different
centuries or more than one century; (ii) have been designed to ensure year 2000
compatibility, including, but not limited to, date data century recognition,
calculations which accommodate same century and multi-century formulas and date
values, and date data interface values that reflect the century; and (iii)
include Year 2000 Capabilities. For purposes of this Section 2.15, "Year 2000
---------
Capabilities" means that (i) the Company Products will manage, calculate,
------------
sequence, compare and manipulate data involving dates, including single century
formulas and multi-century formulas and including leap years, and will not cause
an abnormally ending scenario within the application or generate incorrect
values or invalid results involving such dates; (ii) all date-related user
interface functionalities and data fields associated with the Company Products
include the indication of century; and (iii) all date-related data interface
functionalities associated with the Company Products include the indication of
century.
(b) Internal Operating Systems and Licensed Third Party Software. The
------------------------------------------------------------
Company has audited its internal operating systems and licensed third party
software and, to its knowledge, those systems and licensed third party software
include Year 2000 Capabilities.
2.16 Product Warranties; Defects; Liabilities. Each Company Product has
----------------------------------------
been in all material respects in conformity with all applicable contractual
commitments and all applicable express and implied warranties. The Company does
not have any liability or obligation (and to the Company's knowledge, there is
no current reasonable basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand against the Company
giving rise to any liability or obligation) for replacement or repair thereof or
other damages in connection therewith except liabilities or obligations incurred
in the ordinary course of business consistent with past practice which do not
have a Material Adverse Effect on the Company. No Company Product is subject to
any guaranty, warranty, or other indemnity beyond the applicable standard terms
and conditions of sale, license or lease or beyond that implied or imposed by
applicable law. Schedule 2.16 includes a copy of the standard terms and
conditions of sale, license, or lease for each of the Company Products and
copies of the Company's standard forms of merchant agreements, portal agreements
and professional services agreements.
2.17 Agreements, Contracts and Commitments. Except as set forth on
-------------------------------------
Schedule 2.17(a), the Company does not have, is not a party to nor is it bound
by:
(i) any collective bargaining agreements,
(ii) any employment or consulting agreement, contract or
commitment with any officer, director, employee or member of the Company's Board
of Directors, other than those that are terminable by the Company,
(iii) any bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or arrangements,
-21-
(iv) any employment or consulting agreement with an employee or
individual consultant or salesperson or consulting or sales agreement, under
which a firm or other organization provides services to the Company,
(v) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value individually
in excess of $10,000,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement containing any covenant limiting the freedom
of the Company to engage in any line of business or to compete with any person,
(x) any agreement relating to capital expenditures and
involving future payments in excess of $25,000,
(xi) any agreement relating to the disposition or acquisition
of assets or any interest in any business enterprise outside the ordinary course
of the Company's business,
(xii) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit, including guaranties referred to in clause
(viii) hereof,
(xiii) any purchase order or contract involving $25,000 or more,
(xiv) any construction contracts,
(xv) any dealer, distribution, joint marketing (including any
pilot program), development, content provider, destination site or merchant
agreement,
(xvi) any agreement pursuant to which the Company has granted or
may be obligated to grant in the future, to any party a source-code license or
option or other right to use or acquire source-code, including any agreements
which provide for source code escrow arrangements,
(xvii) any sales representative, original equipment manufacturer,
value added, remarketer or other agreement for distribution of the Company's
products or services, or the products or services of any other person or entity,
-22-
(xviii) any agreement pursuant to which the Company has advanced
or loaned any amount to any shareholder of the Company or any director, officer,
employee, or consultant other than business travel advances in the ordinary
course of business consistent with past practice, or
(xix) any other agreement that involves $25,000 or more or is
not cancelable without penalty within ninety (90) days.
Except for such alleged breaches, violations and defaults, and events that
would constitute a breach, violation or default with the lapse of time, giving
of notice, or both, as are all noted in Schedule 2.17(b), the Company has not
breached, violated or defaulted under in any material respect, or received
notice that it has breached, violated or defaulted under, any of the terms or
conditions of any agreement, contract or commitment required to be set forth on
Schedule 2.17(a), Schedule 2.14(b) or Schedule 2.14(c) (any such agreement,
contract or commitment, a "Contract"). Each Contract is in full force and
--------
effect and, except as otherwise disclosed in Schedule 2.17(b), is not subject to
any default thereunder of which the Company has knowledge by any party obligated
to the Company pursuant thereto.
2.18 Change of Control Payments. Schedule 2.18 sets forth each plan or
--------------------------
agreement pursuant to which any amounts may become payable (whether currently or
in the future) to current or former officers, directors or employees of the
Company as a result of or in connection with the Merger.
2.19 Interested Party Transactions. Except as set forth on Schedule 2.19,
-----------------------------
to the Company's knowledge, no officer, director or affiliate (as defined under
Regulation C under the Securities Act) of the Company (nor any ancestor,
sibling, descendant or spouse of any of such persons, or any trust, partnership
or corporation in which any of such persons has or has had an economic
interest), has or has had, directly or indirectly, (i) an economic interest in
any entity which furnished or sold, or furnishes or sells, services or products
that the Company furnishes or sells, or proposes to furnish or sell, or (ii) an
economic interest in any entity that purchases from or sells or furnishes to,
the Company, any goods or services or (iii) a beneficial interest in any
contract or agreement set forth in Schedule 2.17(a), Schedule 2.14(b) or
Schedule 2.14(c); provided, that ownership of no more than one percent (1%) of
the outstanding voting stock of a publicly traded corporation shall not be
deemed an "economic interest in any entity" for purposes of this Section 2.19 or
ten percent (10%) of the outstanding equity interest of a venture capital or
investment fund that holds Capital Stock of any entity described in clauses (i),
(ii) or (iii) above. There are no receivables of the Company owing by any
director, officer, employee, or consultant to the Company (or any ancestor,
sibling, descendant, or spouse of any such persons, or any trust, partnership,
or corporation in which any of such persons has an economic interest), other
than advances in the ordinary and usual course of business for reimbursable
business expenses (as determined in accordance with the Company's established
employee reimbursement policies and consistent with past practice). None of the
Company shareholders has agreed to, or assumed, any obligation or duty to
guaranty or otherwise assume or incur any obligation or liability of the
Company.
2.20 Compliance with Laws. The Company has complied in all material
--------------------
respects with, is not in material violation of, and has not received any notices
of violation with respect to, any foreign, federal, state or local statute, law
or regulation.
-23-
2.21 Litigation. There is no action, suit or proceeding of any nature
----------
pending or to the Company's knowledge threatened against the Company, its
properties or any of its officers, directors or employees, nor, to the knowledge
of the Company, is there any reasonable basis therefor. There is no
investigation pending or, to the Company's knowledge, threatened against the
Company, its properties or any of its officers, directors or employees by or
before any Governmental Entity. Schedule 2.21 sets forth, with respect to any
pending or threatened action, suit, proceeding or investigation, the forum, the
parties thereto, the subject matter thereof and the amount of damages claimed or
other remedy requested. No Governmental Entity has at any time challenged or
questioned the legal right of the Company to conduct its operations as presently
or previously conducted.
2.22 Insurance. With respect to the insurance policies and fidelity bonds
---------
covering the assets, business, equipment, properties, operations, employees,
officers and directors of the Company, there is no claim by the Company pending
under any of such policies or bonds as to which coverage has been denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and the Company is
otherwise in material compliance with the terms of such policies and bonds (or
other policies and bonds providing substantially similar insurance coverage).
The Company has no knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies.
2.23 Minute Books. The minute books of the Company made available to
------------
counsel for Parent are the only minute books of the Company and contain an
accurate summary of all meetings of directors (or committees thereof) and
shareholders or actions by written consent since the time of incorporation of
the Company.
2.24 Environmental Matters.
---------------------
(a) Hazardous Material. The Company has not: (i) operated any
------------------
underground storage tanks at any property that the Company has at any time
owned, operated, occupied or leased; or (ii) illegally released any material
amount of any substance that has been designated by any Governmental Entity or
by applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including, without limitation,
PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws, (a
"Hazardous Material"), but excluding office and janitorial supplies properly and
------------------
safely maintained. No Hazardous Materials are present, as a result of the
deliberate actions of the Company, or, to the Company's knowledge, as a result
of any actions of any third party or otherwise, in, on or under any property,
including the land and the improvements, ground water and surface water thereof,
that the Company has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not transported,
------------------------------
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law, nor has the Company
disposed of, transported, sold, or manufactured any product containing a
Hazardous Material (any or all of the foregoing being collectively referred to
as "Hazardous Materials Activities") in violation of any rule, regulation,
------------------------------
treaty or statute promulgated by any
-24-
Governmental Entity to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental approvals,
-------
permits, licenses, clearances and consents (the "Environmental Permits")
---------------------
necessary for the conduct of the Company's Hazardous Material Activities and
other businesses of the Company as such activities and businesses are currently
being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
-------------------------
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Company's knowledge, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of the Company. The Company is not
aware of any fact or circumstance which could involve the Company in any
environmental litigation or impose upon the Company any environmental liability.
2.25 Brokers' and Finders' Fees. Except as set forth on Schedule 2.25, the
--------------------------
Company has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby. Attached to Schedule 2.25 are copies of any written agreements and the
summary of terms for any oral agreements with respect to such fees.
2.26 Employee Matters and Benefit Plans.
----------------------------------
(a) Definitions. With the exception of the definition of "Affiliate"
-----------
set forth in Section 2.26(a)(i) below (such definition shall only apply to this
Section 2.26), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity
---------
under common control with the Company within the meaning of Section 414(b), (c),
(m) or (o) of the Code and the regulations thereunder;
(ii) "COBRA" shall mean the Consolidated Omnibus Budget
-----
Reconciliation Act of 1985, as amended;
(iii) "Company Employee Plan" shall refer to any plan,
---------------------
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether formal or informal, funded or unfunded, including without
limitation, each "employee benefit plan", within the meaning of Section 3(3) of
ERISA which is or has been maintained, contributed to, or required to be
contributed to, by the Company or for the benefit of any "Employee" (as defined
--------
below), and pursuant to which the Company has or may have any material liability
contingent or otherwise;
(iv) "DOL" shall mean the United States Department of
---
Labor.
(v) "Employee" shall mean any current, former, or retired
--------
employee, officer, or director of the Company or any Affiliate;
-25-
(vi) "Employee Agreement" shall refer to each management,
------------------
employment, severance, consulting, relocation, repatriation, expatriation, visa,
work permit or similar agreement or contract between the Company or any
Affiliate and any Employee or consultant;
(vii) "ERISA" shall mean the Employee Retirement Income
-----
Security Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of
----
1993, as amended;
(ix) "IRS" shall mean the Internal Revenue Service;
---
(x) "Multiemployer Plan" shall mean any "Pension Plan"
------------------
(as defined below) which is a "multiemployer plan", as defined in Section 3(37)
of ERISA; and
(xi) "Pension Plan" shall refer to each Company Employee
------------
Plan which is an "employee pension benefit plan", within the meaning of Section
3(2) of ERISA.
(b) Schedule. Schedule 2.26(b) contains an accurate and complete list
--------
of each Company Employee Plan and each Employee Agreement. The Company does not
have any stated plan or commitment to establish any new Company Employee Plan or
Employee Agreement, to modify any Company Employee Plan or Employee Agreement
(except to the extent required by law or to conform any such Company Employee
Plan or Employee Agreement to the requirements of any applicable law, in each
case as previously disclosed to Parent in writing, or as required by this
Agreement), or to enter into any Company Employee Plan or Employee Agreement.
(c) Documents. The Company has provided to Parent (i) correct and
---------
complete copies of all documents embodying or relating to each Company Employee
Plan and each Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Company Employee Plan; (iii) the three most recent annual
reports (Series 5500 and all schedules thereto), if any, required under ERISA or
the Code in connection with each Company Employee Plan or related trust; (iv) if
the Company Employee Plan is funded, the most recent annual and periodic
accounting of Company Employee Plan assets; (v) the most recent summary plan
description together with the most recent summary of material modifications, if
any, required under ERISA with respect to each Company Employee Plan; (vi) all
IRS determination, opinion, notification and advisory letters and rulings
relating to Company Employee Plans and copies of all applications and
correspondence to or from the IRS, DOL or any other governmental agency with
respect to any Company Employee Plan, including, but not limited to,
administrative service agreements, group annuity contracts and group insurance
contracts; (vii) all material written agreements and contracts relating to each
Company Employee Plan; (viii) all communications material to any Employee or
Employees relating to any Company Employee Plan and any proposed Company
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to the Company; (ix) all correspondence to or from any governmental agency
relating to any Company Employee Plan; (x) all COBRA forms and related notices;
(xi) all policies pertaining to fiduciary liability insurance covering the
fiduciaries of for each Company Employee Plan; (xii) all discrimination tests,
if any, for each Company Employee Plan for the most recent plan year; and (xiii)
all registration statements, annual
-26-
reports (Form 11-K and all attachments thereto) and prospectuses prepared in
connection with each Company Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule
------------------------
2.26(d), (i) the Company has performed in all material respects all obligations
required to be performed by it under each Company Employee Plan and each Company
Employee Plan has been established and maintained in all material respects in
accordance with its terms and in compliance with all applicable laws, statutes,
orders, rules and regulations, including but not limited to ERISA or the Code;
(ii) each Company Employee Plan intended to qualify under Section 401(a) of the
Code and each trust intended to qualify under Section 501(a) of the Code has
either received a favorable determination, opinion, notification or advisory
letter from the IRS with respect to each such Company Employee Plan as to its
qualified status under the Code, including all amendments to the Code effected
by the Tax Reform Act of 1986 and subsequent legislation, or has a period of
time remaining under applicable Treasury regulations or IRS pronouncements in
which to apply for and obtain such a letter; (iii) no "prohibited transaction",
within the meaning of Section 4975 of the Code or Section 406 of ERISA, has
occurred with respect to any Company Employee Plan; (iv) there are no actions,
suits or claims pending, or, to the knowledge of the Company, threatened or
anticipated (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan; and (v) each
Company Employee Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance with its terms, without liability to the
Company, Parent or any of its Affiliates and its (other than ordinary
administration expenses typically incurred in a termination event); (vi) there
are no audits, inquiries or proceedings pending or, to the knowledge of the
Company or any affiliates, threatened by the IRS or DOL with respect to any
Company Employee Plan; and (vii) neither the Company nor any Affiliate is
subject to any penalty or tax with respect to any Company Employee Plan under
Section 501(i) of ERISA or Section 4975 through 4980 of the Code.
(e) Pension Plans. The Company does not now, nor has it ever,
-------------
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company contributed to or
-------------------
been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. Except as set forth in Schedule
------------------------------
2.26(g), no Company Employee Plan provides, or has any liability to provide,
life insurance, medical or other employee benefits to any Employee upon his or
her retirement or termination of employment for any reason, except as may be
required by statute, and the Company has never represented, promised or
contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) that such Employee(s) would be provided
with life insurance, medical or other employee welfare benefits upon their
retirement or termination of employment, except to the extent required by
statute.
(h) COBRA. Neither the Company nor any Affiliate has, prior to the
-----
Closing Date, violated any of the health care continuation requirements of
COBRA, the requirements of FMLA or any similar provisions of the California
Family Rights Act applicable to its Employees.
(i) Effect of Transaction.
---------------------
-27-
(i) Except as provided in Section 1.6 of this Agreement or
as set forth on Schedule 2.26(i)(i), the execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Company Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
(ii) Except as set forth on Schedule 2.26(i)(ii), no payment
or benefit which will or may be made by the Company or Parent or any of their
respective affiliates with respect to any Employee resulting from this
transaction will be characterized as an "excess parachute payment", within the
meaning of Section 280G(b)(2) of the Code.
(j) Employment Matters. Schedule 2.26(j) lists all current officers,
------------------
directors and employees of the Company. The Company (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees (including any immigration laws with respect to the same); (ii) has
withheld all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to Employees; (iii) is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing; and (iv) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice). There are no pending, threatened
or reasonably anticipated claims or actions against the Company under any
workers compensation policy or long-term disability policy. Each person who is
acting or has acted as a consultant to the Company is acting or acted as an
"independent contractor" and could not, based on the facts and circumstances of
his consultancy, reasonably be deemed to be or have been "employed" with the
Company. Schedule 2.26(j) also sets forth all outstanding offers of employment,
whether written or oral, made to any employee or prospective employee, which
offer has not been rejected by the offeree.
(k) Labor. No work stoppage or labor strike against the Company is
-----
pending or, to the best knowledge of the Company, threatened. Except as set
forth in Schedule 2.26(k), the Company is not involved in or, to the knowledge
of the Company, threatened with, any labor dispute, grievance, or litigation
relating to labor, safety or discrimination matters involving any Employee,
including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in any liability to the Company. The Company has
not engaged in any unfair labor practices within the meaning of the National
Labor Relations Act which would, individually or in the aggregate, directly or
indirectly result in any liability to the Company. The Company does not know of
any activities or proceedings of any labor union to organize any Employees.
Except as set forth in Schedule 2.26(k), the Company is not presently, nor has
it been in the past, a party to, or bound by, any collective bargaining
agreement or union contract with respect to Employees and no collective
bargaining agreement is being negotiated by the Company.
(l) No Interference or Conflict. To the knowledge of the Company, no
---------------------------
shareholder, officer, employee or consultant of the Company is obligated under
any contract or agreement subject to any judgement, decree or order of any court
or administrative agency that would interfere with such
-28-
person's efforts to promote the interests of the Company or that would interfere
with the Company's business. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's business as presently conducted
nor any activity of such officers, directors, employees or consultants in
connection with the carrying on of the Company's business as presently
conducted, will conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract or agreement under
which any of such officers, directors, employees or consultants is now bound.
2.27 Bank Accounts. Schedule 2.27 constitutes a full and complete list of
-------------
all the bank accounts and safe deposit boxes of the Company, the number of each
such account or box, and the names of the persons authorized to draw on such
accounts or to access such boxes. All cash in such accounts is held in demand
deposits and is not subject to any restriction or documentation as to
withdrawal.
2.28 Indemnification Obligations. The Company has no knowledge of any
---------------------------
action, proceeding or other event pending or threatened against any officer or
director of the Company which would give rise to any indemnification obligation
of Company to its officers and directors under its Articles of Incorporation,
Bylaws or any agreement between the Company and any of its officers or
directors.
2.29 Pooling of Interests. Neither the Company nor any of its Affiliates
--------------------
(as defined in Section 6.14) has taken or agreed to take any action which, to
the Company's knowledge, could materially affect the ability of Parent to
account for the business combination to be effected by the Merger as a "pooling
of interests."
2.30 Representations Complete. None of the representations or warranties
------------------------
made by the Company (as modified by the Company Schedules), nor any statement
made in any Schedule or certificate furnished by the Company pursuant to this
Agreement, or furnished in or in connection with documents mailed or delivered
to the shareholders of the Company in connection with soliciting their consent
to the principal terms of this Agreement and the Merger (to the extent that such
documents were prepared by or include information provided by the Company),
contains or will contain at the Effective Time, any untrue statement of a
material fact, or omits or will omit at the Effective Time to state any material
fact necessary in order to make the statements contained herein or therein, in
the light of the circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 Organization of Parent and Merger Sub. Parent is a corporation duly
-------------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. Each of Parent and
Merger Sub has the corporate power to own its properties and to carry on its
business as now being conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified would
have a material adverse effect on Parent or Merger Sub or the ability of either
to consummate the transactions contemplated hereby.
-29-
3.2 Authority. Parent and Merger Sub have all requisite corporate power
---------
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub. This
Agreement has been duly executed and delivered by Parent and Merger Sub and
constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable in accordance with its terms. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated hereby
and thereby will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
benefit under (i) any provision of the Certificate of Incorporation or Bylaws of
Parent or the Articles of Incorporation or Bylaws of Merger Sub or (ii) any
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or representation applicable to Parent or on which Parent's
business, financial condition, operations or prospects is substantially
dependent, the breach, violation, default, termination or forfeiture of which
would result in a material adverse effect upon the ability of Parent or Merger
Sub to consummate the Merger, or a material adverse effect on Parent or Merger
Sub. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required by or with
respect to Parent or Merger Sub in connection with the execution and delivery of
this Agreement by Parent and Merger Sub or the consummation by Parent and Merger
Sub of the transactions contemplated hereby except for (i) the filing of the
Agreement of Merger with the Secretary of State of the State of California or
(ii) such consents, approvals, order, authorizations, registrations,
declarations and filings as may be required under applicable state and federal
securities laws.
3.3 Parent Common Stock. The shares of Parent Common Stock to be issued
-------------------
pursuant to the Merger and upon exercise of Company Options and Stock Purchase
Rights assumed by Parent hereunder will, when issued and delivered in accordance
with this Agreement, be duly authorized, validly issued, fully paid, and non-
assessable; provided, however, that the Parent Common Stock to be issued
-------- -------
hereunder will be subject to restrictions on transfer under applicable federal
and state securities laws.
3.4 SEC Filings; Parent Financial Statements.
----------------------------------------
(a) Parent has filed all forms, reports, and documents required to be
filed by Parent with the SEC and has made available to the Company such forms,
reports, and documents in the form filed with the SEC. All such required forms,
reports and documents (including those that Parent may file subsequent to the
date hereof until the closing) are referred to herein as the "Parent SEC
----------
Reports." As of their respective filing dates, the Parent SEC Reports (i)
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Parent SEC Reports 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.
(b) Each of the consolidated financial statements of Parent
(including, in each case, the notes thereto), included in the Parent SEC Reports
(the "Parent Financial Statements"), including each Parent SEC Report filed
---------------------------
after the date hereof until the Closing, (i) complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto; (ii) was
-30-
prepared in accordance with GAAP applied on a consistent basis throughout the
periods indicated (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as may be permitted by the SEC on Form 10-Q under
the Exchange Act); and (iii) fairly presented the consolidated financial
position of Parent and its subsidiaries as at the respective dates thereof and
the consolidated results of Parent's operations and cash flows for the periods
indicated (subject, in the case of unaudited financial statements, to normal
audit adjustments). There has been no change in Parent's accounting policies
except as described in the notes to the Parent Financial Statements.
3.5 No Material Adverse Change. Since the date of the balance sheet
--------------------------
included in the Parent's most recently filed report on Form 10-Q, Parent has
conducted its business in the ordinary course and there has not occurred: (a)
any material adverse change in the financial condition, liabilities, assets or
business of Parent; (b) any amendment or change in the Certificate of
Incorporation or Bylaws of Parent other than the anticipated amendment to the
Certificate of Incorporation of Parent to increase the authorized number of
shares of Parent Common Stock; or (c) any damage to, destruction or loss of any
assets of the Parent, (whether or not covered by insurance) that materially and
adversely affects the financial condition or business of Parent. For purposes
of this section, a reduction in the trading price of Parent's Common Stock, as
reported by the Nasdaq National Market or any other automated quotation system
or exchange, changes in economic conditions or changes in the industry and
markets in which the Parent competes shall not constitute a material adverse
change, whether occurring at any time or from time to time.
-31-
ARTICLE IV
SECURITIES ACT COMPLIANCE; REGISTRATION
4.1 Securities Act Exemption. The Parent Common Stock to be issued
------------------------
pursuant to this Agreement initially will not be registered under the Securities
Act in reliance on the exemptions from the registration requirements of Section
5 of the Securities Act set forth in Section 4(2) thereof. Prior to the Closing
Date, each of the Company's shareholders shall have provided Parent such
representations, warranties, certifications and additional information as Parent
may reasonably request to ensure the availability of such exemptions from the
registration requirements of the Securities Act.
4.2 Stock Restrictions. In addition to any legend imposed by applicable
------------------
state securities laws or by any contract which continues in effect after the
Effective Time, the certificates representing the shares of Parent Common Stock
issued pursuant to this Agreement shall bear a restrictive legend (and stop
transfer orders shall be placed against the transfer thereof with Parent=s
transfer agent), stating substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, OR HYPOTHECATED EXCEPT IN COMPLIANCE WITH RULE 144
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO, OR AN OPINION OF COUNSEL, SATISFACTORY TO
THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE ACT, OR A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION.
4.3 The Company Shareholders' Restrictions Regarding Securities Law
---------------------------------------------------------------
Matters. Each shareholder of the Company, by virtue of the Merger and the
-------
conversion into Parent Common Stock of the Company Capital Stock held by such
shareholder, shall be bound by the following provisions:
(a) Such shareholder will not offer, sell, or otherwise dispose of any
shares of Parent Common Stock except in compliance with the Securities Act and
the rules and regulations thereunder.
(b) Such shareholder will not sell, transfer or otherwise dispose of
any shares of Parent Common Stock unless (i) such sale, transfer or other
disposition is within the limitations of and in compliance with Rule 144
promulgated by the SEC under the Securities Act and the Shareholder furnishes
Parent with reasonable proof of compliance with such Rule, (ii) in the opinion
of counsel, reasonably satisfactory to Parent and its counsel, some other
exemption from registration under the Securities Act is available with respect
to any such proposed sale, transfer, or other disposition of Parent Common Stock
or (iii) the offer and sale of Parent Common Stock is registered under the
Securities Act.
4.4 Registration Rights. Parent agrees that the shareholders of the
-------------------
Company receiving Parent Common Stock in the Merger shall be entitled to the
registration rights set forth in the Declaration of Registration Rights to be
delivered by Parent at Closing in substantially the form attached hereto as
Exhibit D (the "Declaration of Registration Rights").
--------- ----------------------------------
-32-
ARTICLE V
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1 Conduct of Business of the Company. During the period from the date
----------------------------------
of this Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, the Company agrees (except to the extent that
Parent shall otherwise consent in writing) to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay its debts and Taxes when due, to pay or perform
other obligations when due, and, to the extent consistent with such business, to
use all reasonable efforts consistent with past practice and policies to
preserve intact its present business organization, keep available the services
of its present officers and key employees and preserve their relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it, all with the goal of preserving unimpaired its
goodwill and ongoing businesses at the Effective Time. The Company shall
promptly notify Parent of any materially negative event involving or adversely
affecting the Company or its business. Except as expressly contemplated by this
Agreement, the Company shall not, without the prior written consent of Parent:
(a) Waive any stock repurchase rights, accelerate, amend, or change
the period of exercisability of any outstanding Company Options or Stock
Purchase Rights or Company Common Stock subject to vesting, or reprice Company
Options or Stock Purchase Rights granted under the Option Plan or authorize cash
payments in exchange for any such outstanding options;
(b) Make any payments or enter into any commitment or transaction
outside of the ordinary course of business in excess of $10,000;
(c) Except in the ordinary course of business, modify, amend or
terminate any material contract or agreement to which the Company is a party or
waive, release or assign any material rights or claims thereunder;
(d) Transfer to any person or entity any rights to the Company
Intellectual Property Rights (other than pursuant to end-user licenses granted
to customers of the Company in the ordinary course of business);
(e) Enter into or amend any agreements pursuant to which any other
party is granted marketing, distribution or similar rights of any type or scope
with respect to any products of the Company;
(f) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the Contracts;
(g) Commence any litigation except to enforce its rights hereunder or
under any agreements related hereto;
-33-
(h) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any Company
Capital Stock, or split, combine or reclassify any Company Capital Stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for any Company Capital Stock;
(i) Purchase, redeem or otherwise acquire, directly or indirectly, any
Company Capital Stock, except repurchases of unvested shares at cost in
connection with the termination of the employment relationship with any employee
or consultant pursuant to stock option or purchase agreements in effect on the
date hereof;
(j) Issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any Company Capital Stock or securities convertible into, or subscriptions,
rights, warrants or options to acquire, or other agreements or commitments of
any character obligating it to issue any such shares or other convertible
securities (except for the issuance of any Company Capital Stock upon exercise
or conversion of presently outstanding Company Options, Stock Purchase Rights,
warrants or Preferred Stock, or the grant of stock options to new employees
pursuant to the outstanding written offers of employment);
(k) Cause or permit any amendments to its Articles of Incorporation or
Bylaws;
(l) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire
outside of the ordinary course of business any assets in any amount, or in the
ordinary course of business in an amount in excess of $25,000 in the case of a
single transaction or in excess of $50,000 in the aggregate in any 30-day
period;
(m) Sell, lease, license or otherwise dispose of any of its properties
or assets, except in the ordinary course of business;
(n) Other than the Bridge Note and the Security Agreement (as defined
in Section 6.24), incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities of the Company or
guarantee any debt securities of others;
(o) Grant any severance or termination pay (i) to any director or
officer or (ii) to any other employee except payments made pursuant to written
agreements outstanding on the date hereof and as disclosed in the Company
Schedules, or adopt any new severance plan;
(p) Adopt or amend any employee benefit plan, or enter into any
employment contract, extend employment offers, pay or agree to pay any special
bonus or special remuneration to any director or employee, or increase the
salaries or wage rates of its employees, except as consistent with the ordinary
course of the Company consistent with past practice (provided that the price per
share of any equity participation in the Company shall be agreed in advance by
Parent);
(q) Effect or agree to effect, including by way of hiring or
involuntary termination, any change in the Company's directors, officers or key
employees;
-34-
(r) Revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business;
(s) Pay, discharge or satisfy, in an amount in excess of $10,000 (in
any one case) or $25,000 (in the aggregate), any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in the Company Financial Statements
(or the notes thereto) or that arose in the ordinary course of business
subsequent to February 28, 1999 or expenses consistent with the provisions of
this Agreement incurred in connection with any transaction contemplated hereby;
(t) Make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(u) Enter into any strategic alliance, joint development or joint
marketing agreement;
(v) Engage in any action with the intent to directly or indirectly
adversely impact any of the transactions contemplated by this Agreement;
(w) Take or agree to take any action which would preclude the ability
of Parent to account for the business combination to be effected by the Merger
as a "pooling of interests;" or
(x) Take, or agree in writing or otherwise to take, any of the actions
described in Sections 5.1(a) through (w) above, or any other action that would
prevent the Company from performing or cause the Company not to perform its
covenants hereunder.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Preparation of Information Statement. As soon as practicable after
------------------------------------
the execution of this Agreement, the Company shall prepare, with the cooperation
of Parent, an Information Statement for the shareholders of the Company to
approve the principal terms of this Agreement, the Merger and the transactions
contemplated hereby. The Information Statement shall constitute a disclosure
document for the offer and issuance of the shares of Parent Common Stock to be
received by the holders of Company Capital Stock in the Merger. Parent and the
Company shall each use its best efforts to cause the Information Statement to
comply in all material respects with applicable federal and state securities
laws requirements. Each of Parent and the Company agrees to provide promptly to
the other such information concerning its business and financial statements and
affairs as, in the reasonable judgment of the providing party or its counsel,
may be required or appropriate for inclusion in the Information Statement, or in
any amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and auditors in the preparation of the
Information Statement. The Company will promptly advise Parent and Parent will
promptly advise the Company, in writing if at any time prior to the Effective
Time either the Company or Parent shall obtain knowledge of any facts that might
make
-35-
it necessary or appropriate to amend or supplement the Information Statement in
order to make the statements contained or incorporated by reference therein not
misleading or to comply with applicable law. The Information Statement shall
contain the unanimous recommendation of the Board of Directors of the Company
that the Company shareholders approve the principal terms of this Agreement, the
Merger and the other transactions contemplated hereby and the conclusion of the
Board of Directors that the terms and conditions of the Merger are fair and
reasonable to the shareholders of the Company. Anything to the contrary
contained herein notwithstanding, the Company shall not include in the
Information Statement any information with respect to Parent or its affiliates
or associates, the form and content of which information shall not have been
approved by Parent prior to such inclusion.
6.2 Shareholder Approval. The Company shall promptly after the date
--------------------
hereof and in accordance with California Law and the Company's Articles of
Incorporation and Bylaws to obtain the approval by the Company's shareholders of
the Merger, the principal terms of this Agreement and the transactions
contemplated hereby. The Company shall ensure that the shareholder approval is
solicited in compliance with California Law, the Articles of Incorporation and
Bylaws of the Company and all other applicable legal requirements. The Company
agrees to use its best efforts and to take all action necessary or advisable to
secure the necessary votes required by California Law to effect the Merger.
Parent will make a representative available to shareholders to answer any
questions Company shareholders may have regarding the Parent's business,
management and financial affairs.
6.3 Access to Information. The Company shall afford Parent and its
---------------------
accountants, legal counsel, and other representatives reasonable access during
normal business hours during the period prior to the Effective Time to (a) all
of the properties, books, contracts, commitments and records of the Company and
(b) all other information concerning the business, properties, and personnel of
the Company as Parent may reasonably request. The Company agrees to provide
Parent and its accountants, legal counsel, and other representatives copies of
internal financial statements promptly upon request. No information or knowledge
obtained in any investigation pursuant to this Section 6.3 shall affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger.
6.4 Confidentiality. The parties acknowledge that the Company and Parent
---------------
have previously executed a Mutual Confidentiality Agreement, dated as of
February 12, 1999 (the "Confidentiality Agreement"), which Confidentiality
-------------------------
Agreement will continue in full force and effect in accordance with its terms.
6.5 Public Disclosure. Unless otherwise required by law (including,
-----------------
without limitation, securities laws) or, as to Parent, by the rules and
regulations of the Nasdaq National Market, prior to the Effective Time, no
disclosure (whether or not in response to an inquiry) of the subject matter of
this Agreement shall be made by any party hereto (other than disclosures to
Company shareholders pursuant to Section 6.2) unless approved by Parent and the
Company prior to release, provided that such approval shall not be unreasonably
withheld.
6.6 Consents. The Company shall promptly apply for or otherwise seek and
--------
use commercially reasonable efforts to obtain all consents and approvals
required to be obtained by it for the consummation of the Merger, including all
consents, waivers, or approvals under any of the Contracts in order to preserve
the benefits thereunder for the Surviving Corporation and otherwise in
connection with the Merger. All of such consents and approvals are set forth in
Schedule 2.6.
-36-
6.7 FIRPTA Compliance. On the Closing Date, the Company shall deliver to
-----------------
Parent a properly executed statement in a form reasonably acceptable to Parent
for purposes of satisfying Parent's obligations under Treasury Regulation
Section 1.1445-2(c)(3).
6.8 Legal Conditions to the Merger. Each of Parent, Merger Sub and the
------------------------------
Company will take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on such party with respect to the Merger
and will promptly cooperate with and furnish information to any other party
hereto in connection with any such requirements imposed upon such other party in
connection with the Merger. Each party will take all reasonable actions to
obtain (and will cooperate with the other parties in obtaining) any consent,
authorization, order or approval of, or any registration, declaration, or filing
with, or an exemption by, any Governmental Entity, or other third party,
required to be obtained or made by such party or its subsidiaries in connection
with the Merger or the taking of any action contemplated thereby or by this
Agreement.
6.9 Best Efforts; Additional Documents and Further Assurances. Each of
---------------------------------------------------------
the parties to this Agreement shall use its best efforts to effectuate the
transactions contemplated hereby and to fulfill and cause to be fulfilled the
conditions to closing under this Agreement. Each party hereto, at the request
of another party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be reasonably necessary or
desirable for effecting completely the consummation of this Agreement, and the
transactions contemplated hereby.
6.10 Notification of Certain Matters. The Company shall give prompt notice
-------------------------------
to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event which is likely to cause any
representation or warranty of the Company and Parent or Merger Sub,
respectively, contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Effective Time except as contemplated by
this Agreement (including the Company Schedules) and (ii) any failure of the
Company or Parent, as the case may be, to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
-------- -------
this Section 6.10 shall not limit or otherwise affect any remedies available to
the party receiving such notice.
6.11 Pooling Accounting. Parent and the Company shall each use its best
------------------
efforts to cause the business combination to be effected by the Merger to be
accounted for as a pooling of interests. Each of Parent and the Company shall
use its best efforts to cause its respective employees, directors, shareholders
and affiliates not to take any action that would adversely affect the ability of
Parent to account for the business combination to be effected by the Merger as a
pooling of interests. Except for any agreements in effect as of the date
hereof, neither Parent nor the Company shall take any action, either before or
after consummation of the Merger, including the acceleration of vesting of any
options, stock purchase rights, warrants, restricted stock or other rights to
acquire shares of the capital stock of the Company, which reasonably would be
expected to interfere with Parent's ability to account for the Merger as a
pooling of interests.
6.12 Reorganization. It is the intent of the Company, Parent and the
--------------
Surviving Corporation that this Merger qualifies as a tax-free reorganization
under Section 368(a) of the Code, and the Company, Parent and the Surviving
Corporation covenant and agree not to take any actions inconsistent with such
intent.
-37-
6.13 Declaration of Registration Rights. Parent agrees that the
----------------------------------
shareholders of the Company receiving Parent Common Stock in the Merger pursuant
to Sections 1.6(a) and (b) hereto shall be entitled to the registration rights
set forth in the Declaration of Registration Rights which are hereby
incorporated by reference.
6.14 Affiliate Agreements. Schedule 6.14 sets forth those persons who, in
--------------------
the Company's reasonable judgment, are "affiliates" of the Company within the
meaning of Regulation C under the Securities Act (each such person an
"Affiliate"). The Company shall provide Parent such information and documents
---------
as Parent shall reasonably request for purposes of reviewing such list. Each of
Parent and the Company has delivered or shall cause to be delivered to the
other, concurrently with the execution of this Agreement, from each of their
respective Affiliates, an executed Affiliate Agreement in the form attached
hereto as Exhibit B (for Affiliates of the Company) or Exhibit F (for Affiliates
--------- ---------
of Parent). Parent and Merger Sub shall be entitled to place appropriate
legends on the certificates evidencing any Parent Common Stock to be received by
Affiliates of the Company pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for Parent Common
Stock, consistent with the terms of the Affiliate Agreements.
6.15 Form S-8. Parent shall file a Registration Statement on Form S-8 with
--------
the SEC covering the shares of Parent Common Stock issuable with respect to
assumed Company Options or Stock Purchase Rights no later than 30 days after the
Closing Date.
6.16 Nasdaq National Market. Parent shall authorize for listing on the
----------------------
Nasdaq National Market the shares of Parent Common Stock issuable, in connection
with the Merger, upon official notice of issuance and shall take all other acts
as necessary or appropriate to cause such shares to become and remain so listed.
6.17 Voting Agreements. Concurrently with the execution of this Agreement,
-----------------
the Company will cause the persons and entities listed on Schedule 6.17 hereto
to execute Voting Agreements in the form attached hereto as Exhibit A (the
---------
"Voting Agreements"), agreeing, among other things, to vote in favor of the
-----------------
Merger and against any competing proposals.
6.18 Employment and Non-Competition Agreements. On or before the Closing,
-----------------------------------------
the Company will use its best efforts to cause the employees listed on Schedule
6.18 to execute Employment and Non-Competition Agreements in the form attached
hereto as Exhibit C (the "Employment and Non-Competition Agreements").
--------- -----------------------------------------
6.19 Blue Sky Laws. Parent shall take such steps as may be necessary to
-------------
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Common Stock pursuant hereto. The
Company shall use its best efforts to assist Parent as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable in connection with the issuance of Parent Common Stock pursuant
hereto.
6.20 Indemnification.
---------------
(a) From and after the Effective Time, Parent will, and will cause the
Surviving Corporation to fulfill and honor in all respects the obligations of
the Company pursuant to any indemnification provisions under the indemnification
agreements identified in Schedule 6.20 of the
-38-
Company Disclosure Schedule, and Company's Articles of Incorporation or Bylaws
as each is in effect on the date hereof (the persons to be indemnified pursuant
to the provisions referred to in this Section 6.20 shall be referred to herein
as, collectively, the "Indemnified Parties"). The Articles of Incorporation
-------------------
and Bylaws of the Surviving Corporation shall contain provisions with respect to
indemnification and exculpation from liability set forth in the Company's
Articles of Incorporation and Bylaws as in effect on the date of this Agreement,
which provisions shall not be amended, repealed or otherwise modified for a
period of six (6) years after the Effective Time in any manner that would
adversely affect the rights thereunder of any Indemnified Party.
(b) This Section 6.20 shall survive consummation of the Merger at the
Effective Time, is intended to be for the benefit of, and enforceable by, the
Company, Parent, the Surviving Corporation and each Indemnified Party and such
Indemnified Party's heirs and representatives, and shall be binding on all
successors and assigns of Parent and the Surviving Corporation.
6.21 Benefit Arrangements. Parent covenants and agrees that to the extent
--------------------
permitted by applicable law and to the extent the existing benefit plans and
arrangements provided by Company to its employees are terminated on or after the
Effective Time, such employees shall be entitled to benefits which are available
or subsequently become available to Parent's employees, and on a basis which is
on parity with Parent's employees. For purposes of satisfying the terms and
conditions of such plans, Parent shall give full credit for eligibility, vesting
or benefit accrual for each participant's period of service at the Company prior
to the Effective Time.
6.22 Termination of Company Investor Rights. The Company shall take such
--------------------------------------
steps as may be necessary to provide for the termination as of the Closing of
all Company investor rights granted by the Company to its shareholders and in
effect prior to the Closing, including but not limited to rights of co-sale,
voting, registration, first refusal, board observation or information or
operational covenants.
6.23 No Solicitation. From and after the date of this Agreement until the
---------------
earlier to occur of the Effective Time or termination of this Agreement pursuant
to its terms, the Company will not, and the Company will instruct its directors,
officers, employees, representatives, investment bankers, agents, and affiliates
not to, directly or indirectly (i) solicit or encourage submission of any
"Acquisition Proposal" (as defined herein) by any person, entity, or group
--------------------
(other than Parent and its affiliates, agents, and representatives) or (ii)
participate in any discussions or negotiations with, or disclose any non-public
information concerning the Company to, or afford access to the properties,
books, or records of the Company, or otherwise assist or facilitate, or enter
into any agreement or understanding with, any person, entity, or group (other
than Parent and its affiliates, agents, and representatives) in connection with
any Acquisition Proposal with respect to the Company. For purposes of this
Agreement, an "Acquisition Proposal" means any proposal or offer relating to (i)
--------------------
any merger, consolidation, sale or license of substantial assets or similar
transactions involving the Company (other than sales or licenses of assets or
inventory in the ordinary course of business or as permitted by this Agreement)
or (ii) sales by the Company of any Company Capital Stock (including, without
limitation, by way of a tender offer or an exchange offer) other than pursuant
to Company Options or Stock Purchase Rights otherwise disclosed in this
Agreement. The Company, will immediately cease any and all existing activities,
discussion, or negotiations with any parties conducted heretofore with respect
to any of the foregoing. The Company will promptly (i) notify Parent if, after
the date of this Agreement, it receives any proposal or written inquiry or
written request for information in connection with an Acquisition Proposal or
potential Acquisition Proposal and (ii) notify Parent of the significant terms
and conditions of any such
-39-
Acquisition Proposal including the identity of the party making an Acquisition
Proposal. In addition, from and after the date of this Agreement, until the
earlier to occur of the Effective Time or termination of this Agreement pursuant
to its terms, the Company will not, and will instruct its directors, officers,
employees, representatives, investment bankers, agents, and affiliates not to,
directly or indirectly, make or authorize any public statement, recommendation,
or solicitation in support of any Acquisition Proposal made by any person,
entity or group (other than Parent).
6.24 Bridge Loan. If this Agreement shall be terminated by the Company
-----------
pursuant to Section 9.1(e), Parent shall promptly loan the Company an aggregate
of $1,000,000 which shall be evidenced by the Secured Promissory Note issued by
the Company, dated as of the date of such issuance, substantially in the form
attached hereto as Exhibit G (the "Bridge Note"). The Note, when issued, will
--------- -----------
be secured pursuant to the Security Agreement between the Company and Parent,
substantially in the form attached hereto as Exhibit H (the "Security
--------- --------
Agreement").
---------
ARTICLE VII
CONDITIONS TO THE MERGER
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Shareholder Approval. The principal terms of this Agreement and
--------------------
the Merger shall have been approved and adopted by the shareholders of the
Company by the requisite vote under applicable law and the Company's Articles of
Incorporation.
(b) No Injunctions or Restraints; Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect.
(c) Opinion of Accountants. PricewaterhouseCoopers LLP shall have
----------------------
delivered a letter to Parent and the Company affirming that firm's written
concurrence, delivered concurrently with the Closing, with Parent management's
and the Company management's conclusions, respectively, as to the
appropriateness of pooling of interests accounting for the Merger under
Accounting Principles Board Opinion No. 16, if consummated in accordance with
this Agreement.
(d) Tax Opinions. Parent and the Company shall each have received
------------
written opinions from their counsel, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., and
Pillsbury Madison & Sutro, LLP, respectively, in form and substance reasonably
satisfactory to them, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code. The parties to
this Agreement agree to make reasonable representations as requested by such
counsel for the purpose of rendering such opinion.
(e) Closing Date Payment Schedule. Parent and the Company shall each
-----------------------------
have reviewed and approved a schedule (the "Closing Date Payment Schedule")
-----------------------------
reflecting, as of the Effective Time (i) for each holder of Company Capital
Stock, the number of shares of Company Capital Stock
-40-
held, the aggregate number of shares of Parent Common Stock payable to such
holder in the Merger, the number of such shares payable promptly after the
Effective Time (in accordance with Section 1.6) and payable into the Escrow Fund
(as defined in Section 8.2(a)), and the amount of cash payable to such holder
for any fractional shares, and (ii) for each holder of Company Options or Stock
Purchase Rights, the number of shares of Company Common Stock issuable upon
exercise thereof immediately prior to the Effective Time, the number of shares
of Parent Common Stock issuable upon exercise thereof following their assumption
by Parent (in accordance with Section 1.6(f)), and the per share exercise price
thereof upon such assumption.
(f) Company Audited Financials and Company Interim Financials. The
---------------------------------------------------------
Company Audited Financials and the Company Interim Financials delivered by the
Company as an amendment to Schedule 2.7 shall have been completed and delivered.
7.2 Additional Conditions to Obligations of the Company. The obligations
---------------------------------------------------
of the Company to consummate the Merger and the transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct on and as of the Closing Date, except for changes contemplated by
this Agreement and except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such date), with the same force and effect as if made on and as of the Closing
Date, and the Company shall have received a certificate to such effect signed on
behalf of Parent by a duly authorized officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
------------------------
performed or complied (which performance or compliance shall be subject to
Parent's or Merger Sub's ability to cure as provided in Section 9.1(e) below) in
all material respects with all covenants, obligations and conditions of this
Agreement required to be performed or complied with by them on or prior to the
Closing Date, and the Company shall have received a certificate to such effect
signed by a duly authorized officer of Parent.
(c) Legal Opinion. The Company shall have received a legal opinion
-------------
from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., counsel to Parent, in substantially
the form attached hereto as Exhibit I.
---------
(d) No Material Adverse Change. There shall not have occurred any
--------------------------
material adverse change in the business, assets (including intangible assets),
financial condition or results of operations of Parent. For purposes of this
condition, a reduction in the trading price of Parent's Common Stock, as
reported on the Nasdaq National Market, shall not constitute a material adverse
change, whether occurring at any time or from time to time.
(e) Declaration of Registration Rights. Parent shall have executed
----------------------------------
and delivered the Declaration of Registration Rights.
7.3 Additional Conditions to the Obligations of Parent and Merger Sub.
-----------------------------------------------------------------
The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement
-41-
shall be subject to the satisfaction at or prior to the Closing of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in this Agreement (including the Company
Schedules) shall be true and correct on and as of the Effective Time, except for
changes contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as if
made on and as of the Closing Date; and Parent and Merger Sub shall have
received a certificate to such effect signed on behalf of the Company by a duly
authorized officer of the Company;
(b) Agreements and Covenants. The Company shall have performed or
------------------------
complied (which performance or compliance shall be subject to the Company's
ability to cure as provided in Section 9.1(d) below) in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Closing Date, and Parent and Merger Sub
shall have received a certificate to such effect signed by a duly authorized
officer of the Company;
(c) Third Party Consents. Parent shall have been furnished with
--------------------
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Schedule 2.6.
(d) Legal Opinion. Parent shall have received a legal opinion from
-------------
Pillsbury Madison & Sutro, LLP, legal counsel to the Company, in substantially
the form attached hereto as Exhibit J.
---------
(e) No Material Adverse Change. There shall not have occurred any
--------------------------
material adverse change in the business, assets (including intangible assets)
financial condition, results of operations or prospects of the Company.
(f) Dissenters' Rights. Holders of not more than 3% of the
------------------
outstanding shares of Company Capital Stock shall have exercised, nor shall they
have any rights or continued right to exercise, dissenters' rights under
California Law with respect to the transactions contemplated by this Agreement.
(g) Termination of Company Investor Rights. Parent shall have been
--------------------------------------
furnished evidence satisfactory to it that all investor rights granted by the
Company to its shareholders and in effect prior to the Closing, including but
not limited to rights of co-sale, voting, registration, first refusal, board
observation or information or operational covenants, shall have terminated as of
the Closing.
(h) Escrow Schedule. The Company shall have executed and delivered to
---------------
Parent the Escrow Schedule (as defined in Section 8.2 hereof).
(i) Employment and Non-Competition Agreements. The Employment and
-----------------------------------------
Non-Competition Agreements as required by Section 6.18 hereof shall have been
duly executed and delivered to Parent.
-42-
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
8.1 Survival of Representations and Warranties. All of the Company's
------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement (each as modified by the Company Schedules) shall
survive the Merger and continue until 5:00 p.m., California time, on the date
which is one year following the Closing Date (the "Expiration Date").
---------------
8.2 Escrow Arrangements.
-------------------
(a) Escrow Fund. At the Effective Time the Company's shareholders
-----------
will be deemed to have received and deposited with the Escrow Agent (as defined
below) the Escrow Amount (plus any additional shares as may be issued upon any
stock split, stock dividend or recapitalization effected by Parent after the
Effective Time) without any act of any shareholder. As soon as practicable
after the Effective Time, the Escrow Amount, without any act of any Company
shareholder, will be deposited with U.S. Bank Trust NA (or other institution
acceptable to Parent and the Securityholder Agent (as defined in Section 8.2(g)
below)) as Escrow Agent (the "Escrow Agent"), such deposit to constitute an
------------
escrow fund (the "Escrow Fund") to be governed by the terms set forth herein.
-----------
The portion of the Escrow Amount contributed on behalf of each shareholder of
the Company shall be in proportion to the aggregate Parent Common Stock which
such holder would otherwise be entitled under Sections 1.6(a) and (b) and shall
be in the respective share amounts and percentages listed opposite each
Company's shareholder's names listed in a schedule to be executed by the Company
and delivered to Parent at Closing (the "Escrow Schedule"). All shares of
---------------
Parent Common Stock contributed to the Escrow Fund shall not be unvested or
subject to any right of repurchase, risk of forfeiture or other condition in
favor of the Surviving Corporation. The Escrow Fund shall be available to
compensate Parent and its affiliates (including the Surviving Corporation) for
any claims, losses, liabilities, damages, deficiencies, costs and expenses,
including reasonable attorneys' fees and expenses, and expenses of investigation
and defense (hereinafter individually a "Loss" and collectively "Losses")
---- ------
incurred by Parent, its officers, directors, or affiliates (including the
Surviving Corporation) directly or indirectly as a result of (i) any inaccuracy
or breach of a representation or warranty of the Company contained herein (or in
any certificate, instrument, schedule or document attached to this Agreement and
delivered by the Company in connection with the Merger) or (ii) any failure by
the Company to perform or comply with any covenant contained herein; provided
that claims arising out of an inaccuracy or breach of any representations and
warranties and any covenant of the Company contained in this Agreement and in
any certificate, instrument, schedule or document delivered by the Company at
the Closing in connection with this Agreement or the Merger must be asserted on
or before 5:00 p.m. (California Time) on the Expiration Date. Except as
otherwise provided herein, Parent may not receive any shares from the Escrow
Fund unless and until Officer's Certificates (as defined in Section 8.2 below)
identifying Losses, the aggregate amount of which exceed $100,000, have been
delivered to the Escrow Agent as provided in paragraph (e) and such amount is
determined pursuant to this Article VIII to be payable; in such case, Parent may
recover shares from the Escrow Fund equal in value to all indemnified Losses
(including any Losses within the $100,000 threshold) for which there is no
objection or any objection had been resolved in accordance with the provisions
of this Article VIII; provided, however, that to the extent legal fees incurred
-------- -------
by the Company in connection with this Agreement and the Merger exceed $125,000,
such excess shall be deemed a Loss for purposes of Article VIII and shall be
immediately reimbursable to
-43-
Parent in accordance with this Article VIII (without regard to the $100,000
minimum threshold for Losses and without counting toward the $100,000
threshold).
(b) Escrow Period; Distribution upon Termination of Escrow Periods.
--------------------------------------------------------------
Subject to the following requirements, the Escrow Fund shall be in existence
immediately following the Effective Time and shall terminate at 5:00 p.m.,
California time, on the Expiration Date (the "Escrow Period"); provided,
------------- --------
however, that the Escrow Period shall not terminate with respect to such amount
-------
(or some portion thereof), that together with the aggregate amount remaining in
the Escrow Fund is necessary in the reasonable judgment of Parent, subject to
the objection of the Securityholder Agent and the subsequent arbitration of the
matter in the manner provided in Section 8.2(f) hereof, to satisfy any
unsatisfied claims concerning facts and circumstances existing prior to the
termination of such Escrow Period specified in any Officer's Certificate
delivered to the Escrow Agent prior to termination of such Escrow Period. As
soon as all such claims have been resolved, as evidenced by written memorandum
of the Securityholder Agent and Parent, the Escrow Agent shall deliver to the
shareholders of the Company the remaining portion of the Escrow Fund not
required to satisfy such claims. Deliveries of Escrow Amounts to the
shareholders of the Company pursuant to this Section 8.2(b) shall be made in
proportion to their respective original contributions to the Escrow Fund (as set
forth on the Escrow Schedule). At all times during the Escrow Period, the
Company shareholders shall be deemed to be the record holders of their
respective amounts of the Parent Common Stock comprising the Escrow Amount.
(c) Protection of Escrow Fund.
-------------------------
(i) The Escrow Agent shall hold and safeguard the Escrow
Fund during the Escrow Period, shall treat such fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Parent
and shall hold and dispose of the Escrow Fund only in accordance with the terms
hereof.
(ii) Any shares of Parent Common Stock or other equity
securities issued or distributed by Parent (including shares issued upon a stock
split or stock dividend) ("New Shares") in respect of Parent Common Stock in the
----------
Escrow Fund which have not been released from the Escrow Fund shall be added to
the Escrow Fund and become a part thereof. New Shares issued in respect of
shares of Parent Common Stock which have been released from the Escrow Fund
shall not be added to the Escrow Fund but shall be distributed to the
recordholders thereof. Cash dividends on Parent Common Stock shall not be added
to the Escrow Fund but shall be distributed to the recordholders thereof.
(iii) Each Company shareholder shall be deemed the record
holder of, and shall have voting, dividend, distribution and all other rights
with respect to the shares of Parent Common Stock contributed to the Escrow Fund
by such shareholder (and on any voting securities and other equity securities
added to the Escrow Fund in respect of such shares of Parent Common Stock).
(d) Claims Upon Escrow Fund.
-----------------------
(i) Upon receipt by the Escrow Agent at any time on or
before the Expiration Date of a certificate signed by any officer of Parent (an
"Officer's Certificate"): (A) stating that Parent has paid or properly accrued
---------------------
or reasonably anticipates that it will have to pay or accrue Losses, and (B)
specifying in reasonable detail the individual items of Losses included in the
amount so
-44-
stated, the date each such item was paid or properly accrued, or the basis for
such anticipated liability, and the nature of the misrepresentation, breach of
warranty or covenant to which such item is related, the Escrow Agent shall,
subject to the provisions of Section 8.2(e) hereof, deliver to Parent out of the
Escrow Fund, as promptly as practicable, shares of Parent Common Stock held in
the Escrow Fund in an amount equal to such Losses.
(ii) For the purposes of determining the number of shares
of Parent Common Stock to be delivered to Parent out of the Escrow Fund pursuant
to Section 8.2(d)(i) hereof, the shares of Parent Common Stock shall be valued
at the average of the closing prices of Parent's Common Stock on the Nasdaq
Stock Market for the five (5) consecutive trading days ending on the day
preceding the Closing Date. Parent and the Securityholder Agent shall certify
such determined value in a certificate signed by both Parent and the
Securityholder Agent, and shall deliver such certificate to the Escrow Agent.
(e) Objections to Claims. At the time of delivery of any Officer's
--------------------
Certificate to the Escrow Agent, a duplicate copy of such certificate shall be
delivered to the Securityholder Agent and for a period of thirty (30) days after
such delivery, the Escrow Agent shall make no delivery to Parent of any Escrow
Amounts pursuant to Section 8.2(d) hereof unless the Escrow Agent shall have
received written authorization from the Securityholder Agent to make such
delivery. After the expiration of such thirty (30) day period, the Escrow Agent
shall make delivery of shares of Parent Common Stock from the Escrow Fund in
accordance with Section 8.2(d) hereof, provided that no such payment or delivery
may be made if the Securityholder Agent shall object in a written statement to
the claim made in the Officer's Certificate, and such statement shall have been
delivered to the Escrow Agent prior to the expiration of such thirty (30) day
period.
(f) Resolution of Conflicts; Arbitration.
------------------------------------
(i) In case the Securityholder Agent shall so object in
writing to any claim or claims made in any Officer's Certificate, the
Securityholder Agent and Parent shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the
Securityholder Agent and Parent should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and shall be furnished to
the Escrow Agent. The Escrow Agent shall be entitled to rely on any such
memorandum and distribute shares of Parent Common Stock from the Escrow Fund in
accordance with the terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation, and in any event not later than sixty (60) days after receipt of
the written objection of the Securityholder Agent, either Parent or the
Securityholder Agent may demand arbitration of the matter unless the amount of
the damage or loss is at issue in pending litigation with a third party, in
which event arbitration shall not be commenced until such amount is ascertained
or both parties agree to arbitration; and in either such event the matter shall
be settled by arbitration conducted by three arbitrators. Parent and the
Securityholder Agent shall each select one arbitrator, and the two arbitrators
so selected shall select a third arbitrator, each of which arbitrators shall be
independent and have at least ten years relevant experience. The arbitrators
shall set a limited time period and establish procedures designed to reduce the
cost and time for discovery while allowing the parties an opportunity, adequate
in the sole judgment of the arbitrators, to discover relevant information from
the opposing parties about the subject matter of the dispute. The arbitrators
shall rule upon motions to compel or limit discovery and shall have the
-45-
authority to impose sanctions, including attorneys fees and costs, to the extent
as a court of competent law or equity, should the arbitrators determine that
discovery was sought without substantial justification or that discovery was
refused or objected to without substantial justification. The decision of a
majority of the three arbitrators as to the validity and amount of any claim in
such Officer's Certificate shall be binding and conclusive upon the parties to
this Agreement, and notwithstanding anything in Section 8.2(e) hereof, the
Escrow Agent shall be entitled to act in accordance with such decision and make
or withhold payments out of the Escrow Fund in accordance therewith. Such
decision shall be written and shall be supported by written findings of fact and
conclusions which shall set forth the award, judgment, decree or order awarded
by the arbitrators.
(iii) Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such arbitration shall be
held in San Mateo or Santa ▇▇▇▇▇ Counties, California under the rules then in
effect of the Judicial Arbitration and Mediation Services, Inc. For purposes of
this Section 8.2(f), in any arbitration hereunder in which any claim or the
amount thereof stated in the Officer's Certificate is at issue, Parent shall be
deemed to be the Non-Prevailing Party in the event that the arbitrators award
Parent the sum of one-half ( 1/2) or less of the disputed amount plus any
amounts not in dispute; otherwise, the shareholders of the Company as
represented by the Securityholder Agent shall be deemed to be the Non-Prevailing
Party. The Non-Prevailing Party to an arbitration shall pay its own expenses,
the fees of each arbitrator, the administrative costs of the arbitration, and
the expenses, including without limitation, reasonable attorneys' fees and
costs, incurred by the other party to the arbitration, independent of the escrow
fund.
(g) Securityholder Agent of the Shareholders; Power of Attorney.
-----------------------------------------------------------
(i) In the event that the Merger is approved, effective
upon such vote, and without further act of any shareholder, ▇▇▇▇▇▇ ▇▇▇▇▇ shall
be appointed as agent and attorney-in-fact (the "Securityholder Agent") for each
--------------------
shareholder of the Company (except such shareholders, if any, as shall have
perfected their dissenters' rights under California Law), for and on behalf of
shareholders of the Company, to give and receive notices and communications, to
authorize delivery to Parent of shares of Parent Common Stock from the Escrow
Fund in satisfaction of claims by Parent, to object to such deliveries, to agree
to, negotiate, enter into settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of
Securityholder Agent for the accomplishment of the foregoing. Such agency may be
changed by the shareholders of the Company from time to time upon not less than
thirty (30) days prior written notice to Parent; provided that the
Securityholder Agent may not be removed unless holders of a two-thirds interest
of the Escrow Fund agree to such removal and to the identity of the substituted
agent. Any vacancy in the position of Securityholder Agent may be filled by
approval of the holders of a majority in interest of the Escrow Fund. No bond
shall be required of the Securityholder Agent, and the Securityholder Agent
shall not receive compensation for his or her services. Notices or
communications to or from the Securityholder Agent shall constitute notice to or
from each of the shareholders of the Company.
(ii) The Securityholder Agent shall not be liable for any
act done or omitted hereunder as Securityholder Agent while acting in good faith
and in the exercise of reasonable judgment. The shareholders of the Company on
whose behalf the Escrow Amount was contributed to the Escrow Fund shall jointly
and severally indemnify the Securityholder Agent and hold the Securityholder
Agent harmless against any loss, liability or expense incurred without gross
negligence
-46-
or bad faith on the part of the Securityholder Agent and arising out of or in
connection with the acceptance or administration of the Securityholder Agent's
duties hereunder, including the reasonable fees and expenses of any legal
counsel retained by the Securityholder Agent.
(h) Actions of the Securityholder Agent. A decision, act, consent or
-----------------------------------
instruction of the Securityholder Agent shall constitute a decision of all the
shareholders for whom a portion of the Escrow Amount otherwise issuable to them
are deposited in the Escrow Fund and shall be final, binding and conclusive upon
each of such shareholders, and the Escrow Agent and Parent may rely upon any
such written decision, consent or instruction of the Securityholder Agent as
being the decision, consent or instruction of each every such shareholder of the
Company. The Escrow Agent and Parent are hereby relieved from any liability to
any person for any acts done by them in accordance with such decision, consent
or instruction of the Securityholder Agent.
(i) Third-Party Claims.
------------------
(i) If any third party shall notify Parent or its affiliates
hereto with respect to any matter (hereinafter referred to as a "Third Party
-----------
Claim"), which may give rise to a claim by Parent against the Escrow Fund, then
-----
Parent shall give notice to the Securityholder Agent within 30 days of Parent
becoming aware of any such Third Party Claim or of facts upon which any such
Third Party Claim will be based setting forth such material information with
respect to the Third party Claim as is reasonably available to Parent; provided,
--------
however, that no delay or failure on the part of Parent in notifying the
-------
Securityholder Agent shall relieve the Securityholder Agent and the Company
shareholders from any obligation hereunder unless the Securityholder Agent and
the Company shareholders are thereby materially prejudiced (and then solely to
the extent of such prejudice). The Securityholder Agent and the Company
shareholders shall not be liable for any attorneys fees and expenses incurred by
Parent prior to Parent's giving notice to the Securityholder Agent of a Third
Party Claim. The notice from Parent to the Securityholder Agent shall set forth
such material information with respect to the Third Party Claim as is then
reasonably available to Parent.
(ii) In case any Third Party Claim is asserted against Parent or
its affiliates, and Parent notifies the Securityholder Agent thereof pursuant to
Section 8.2(i)(a) hereinabove, the Securityholder Agent and the Company
shareholders will be entitled, if the Securityholder Agent so elects by written
notice delivered to Parent within 30 days after receiving Parent's notice, to
assume the defense thereof, at the expense of the Company shareholders
independent of the Escrow Fund, with counsel reasonably satisfactory to Parent
so long as:
a) Parent has reasonably determined that Losses which may
be incurred as a result of the Third Party Claim do not exceed either
individually, or when aggregated with all other Third Party Claims, the total
dollar value of the Escrow Fund determined in accordance with Section 8.2(d)(ii)
hereof;
b) the Third Party Claim involves only money damages and
does not seek an injunction or other equitable relief;
c) settlement of, or an adverse judgment with respect to,
the Third Party Claim is not, in the good faith judgment of Parent, likely to
establish a precedential custom or practice materially adverse to the continuing
business interests of Parent; and
-47-
d) counsel selected by the Securityholder Agent is
reasonably acceptable to Parent.
If the Securityholder Agent and the Company shareholders so assume any such
defense, the Securityholder Agent and the Company shareholders shall conduct the
defense of the Third Party Claim actively and diligently. The Securityholder
Agent and the Company shareholders shall not compromise or settle such Third
Party Claim or consent to entry of any judgment in respect thereof without the
prior written consent of Parent and/or its affiliates, as applicable.
(iii) In the event that the Securityholder Agent assumes the
defense of the Third Party Claim in accordance with Section 8.2(i)(ii) above,
Parent or its affiliates may retain separate counsel and participate in the
defense of the Third Party Claim, but the fees and expenses of such counsel
shall be at the expense of Parent unless Parent or its affiliates shall
reasonably determine that there is a material conflict of interest between or
among Parent or its affiliates and the Securityholder Agent and the Company
shareholders with respect to such Third Party Claim, in which case the
reasonable fees and expenses of such counsel will be borne by the Securityholder
Agent and the Company shareholders out of the Escrow Fund. Parent or its
affiliates will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior written
consent of the Securityholder Agent. Parent will cooperate in the defense of the
Third Party Claim and will provide full access to documents, assets, properties,
books and records reasonably requested by Securityholder Agent and material to
the claim and will make available all officers, directors and employees
reasonably requested by Securityholder Agent for investigation, depositions and
trial.
(iv) In the event that the Securityholder Agent fails or elects
not to assume the defense of Parent or its affiliates against such Third Party
Claim, which Securityholder Agent had the right to assume under Section
8.2(i)(ii) above, Parent or its affiliates shall have the right to undertake the
defense and Parent shall not compromise or settle such Third Party Claim or
consent to entry of any judgment in respect thereof without the prior written
consent of Securityholder Agent. In the event that the Securityholder Agent is
not entitled to assume the defense of Parent or its affiliates against such
Third Party Claim pursuant to Section 8.2(i)(ii) above, Parent or its affiliates
shall have the right to undertake the defense, consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim in
any manner it may deem appropriate (and Parent or its affiliates need not
consult with, or obtain any consent from, the Securityholder Agent in connection
therewith); provided, however, that except with the written consent of the
-------- -------
Securityholder Agent, no settlement of any such claim or consent to the entry of
any judgment with respect to such Third Party Claim shall alone be determinative
of the validity of the claim against the Escrow Fund. In each case, Parent or
its affiliates shall conduct the defense of the Third Party Claim actively and
diligently, and the Securityholder Agent and the Company shareholders will
cooperate with Parent or its affiliates in the defense of that claim and will
provide full access to documents, assets, properties, books and records
reasonably requested by Parent and material to the claim and will make available
all individuals reasonably requested by Parent for investigation, depositions
and trial.
(j) Escrow Agent's Duties.
---------------------
(i) The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth herein, and as set forth in any
additional written escrow instructions which the Escrow Agent may receive after
the date of this Agreement which are signed by an officer of Parent and
-48-
the Securityholder Agent, and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed to be genuine and
to have been signed or presented by the proper party or parties. The Escrow
Agent shall not be liable for any act done or omitted hereunder as Escrow Agent
while acting in good faith and in the exercise of reasonable judgment, and any
act done or omitted pursuant to the advice of counsel shall be conclusive
evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to disregard any
and all warnings given by any of the parties hereto or by any other person,
excepting only orders or process of courts of law, and is hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case the Escrow Agent obeys or complies with any such order, judgment or
decree of any court, the Escrow Agent shall not be liable to any of the parties
hereto or to any other person by reason of such compliance, notwithstanding any
such order, judgment or decree being subsequently reversed, modified, annulled,
set aside, vacated or found to have been entered without jurisdiction.
(iii) The Escrow Agent shall not be liable in any respect on account
of the identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the expiration of any
rights under any statute of limitations with respect to this Agreement or any
documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement, the Escrow Agent
shall not be liable to any party for damages, losses, or expenses, except for
gross negligence or willful misconduct on the part of the Escrow Agent. The
Escrow Agent shall not incur any such liability for (A) any act or failure to
act made or omitted in good faith, or (B) any action taken or omitted in
reliance upon any written instrument, including any written statement or
affidavit provided for in this Agreement that the Escrow Agent shall in good
faith believe to be genuine, nor will the Escrow Agent be liable or responsible
for forgeries, fraud, impersonations, or determining the scope of any
representative authority. In addition, the Escrow Agent may consult with the
legal counsel in connection with Escrow Agent's duties under this Agreement and
shall be fully protected in any act taken, suffered, or permitted by him/her in
good faith in accordance with the advice of counsel. The Escrow Agent is not
responsible for determining and verifying the authority of any person acting or
purporting to act on behalf of any party to this Agreement.
(vi) If any controversy arises between the parties to this Agreement,
or with any other party, concerning the subject matter of this Agreement, its
terms or conditions, the Escrow Agent will not be required to determine the
controversy or to take any action regarding it. The Escrow Agent may hold all
documents and shares of Parent Common Stock and may wait for settlement of any
such controversy by final appropriate legal proceedings or other means as, in
the Escrow Agent's discretion, the Escrow Agent may be required, despite what
may be set forth elsewhere in this Agreement. In such event, the Escrow Agent
will not be liable for damage. Furthermore, the Escrow Agent may at its option,
file an action of interpleader requiring the parties to answer and litigate any
claims and rights among themselves. The Escrow Agent is authorized to deposit
with the clerk of the court all documents and shares of Parent Common Stock held
in escrow, except all cost, expenses, charges and reasonable attorney fees
incurred by the Escrow Agent due to the interpleader action and which the
parties jointly and severally agree to pay. Upon initiating such action, the
Escrow Agent shall be fully released and discharged of and from all obligations
and liability imposed by the terms of this Agreement.
-49-
(vii) Parent and the Surviving Corporation agree jointly and
severally to indemnify and hold Escrow Agent harmless against any and all
losses, claims, damages, liabilities, and expenses, including reasonable costs
of investigation, counsel fees, and disbursements that may be imposed on Escrow
Agent or incurred by Escrow Agent in connection with the performance of his/her
duties under this Agreement, including but not limited to any litigation arising
from this Agreement or involving its subject matter; provided, however, that in
-------- -------
the event the Securityholder Agent shall be the Non-Prevailing Party in
connection with any claim or action initiated by a Company shareholder or
Company shareholders, then such Company shareholder or Company shareholders
shall be responsible for the indemnification of the Escrow Agent to the full
extent provided by this paragraph.
(viii) The Escrow Agent may resign at any time upon giving at least
thirty (30) days written notice to the parties; provided, however, that no such
resignation shall become effective until the appointment of a successor escrow
agent which shall be accomplished as follows: the parties shall use their best
efforts to mutually agree on a successor escrow agent within thirty (30) days
after receiving such notice. If the parties fail to agree upon a successor
escrow agent within such time, the Escrow Agent shall have the right to appoint
a successor escrow agent authorized to do business in the state of California.
The successor escrow agent shall execute and deliver an instrument accepting
such appointment and it shall, without further acts, be vested with all the
estates, properties, rights, powers, and duties of the predecessor escrow agent
as if originally named as escrow agent. The Escrow Agent shall be discharged
from any further duties and liability under this Agreement.
(k) Fees. All fees of the Escrow Agent for performance of its duties
----
hereunder shall be paid by Parent. It is understood that the fees and usual
charges agreed upon for services of the Escrow Agent shall be considered
compensation for ordinary services as contemplated by this Agreement. In the
event that the conditions of this Agreement are not promptly fulfilled, or if
the Escrow Agent renders any service not provided for in this Agreement, or if
the parties request a substantial modification of its terms, or if any
controversy arises, or if the Escrow Agent is made a party to, or intervenes in,
any litigation pertaining to this escrow or its subject matter, the Escrow Agent
shall be reasonably compensated for such extraordinary services and reimbursed
for all costs, attorneys' fees, and expenses occasioned by such default, delay,
controversy or litigation. Parent promises to pay these sums upon demand.
(l) Maximum Liability and Remedies. Except for intentional fraud and
------------------------------
willful misconduct, the rights of Parent to make claims upon the Escrow Fund in
accordance with this Article VIII shall be the sole and exclusive remedy of
Parent and the Surviving Corporation after the Closing with respect to any
representation, warranty, covenant or agreement made by Company under this
Agreement and no former shareholder, option holder, warrant holder, director,
officer, employee or agent of Company shall have any personal liability to
Parent or the Surviving Corporation after the Closing in connection with the
Merger.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. Except as provided in Section 9.2 below, this Agreement
-----------
may be terminated and the Merger abandoned at any time prior to the Closing
Date:
-50-
(a) by mutual written consent duly authorized by the Board of
Directors of the Company and Parent;
(b) by either Parent or the Company if: (i) the Closing Date has not
occurred by April 30, 1999 (provided that the right to terminate this Agreement
under this clause 9.1(b)(i) shall not be available to any party whose willful
failure to fulfill any obligation hereunder has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before such date and such
action or failure constitutes a breach of this Agreement); (ii) there shall be a
final nonappealable order of a federal or state court in effect preventing
consummation of the Merger; or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger by any Governmental Entity that would make consummation of the Merger
illegal;
(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger, by any Governmental Entity, which would: (i) prohibit Parent's or
the Company's ownership or operation of any portion of the business of the
Company or (ii) compel Parent or the Company to dispose of or hold separate, as
a result of the Merger, any portion of the business or assets of the Company or
Parent;
(d) by Parent if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Company and as a result of such breach the conditions set forth in Section
7.3(a) or 7.3(b), as the case may be, would not then be satisfied; provided,
--------
however, that if such breach is curable by the Company prior to April 30, 1999
-------
through the exercise of its reasonable best efforts, then for so long as the
Company continues to exercise such reasonable best efforts Parent may not
terminate this Agreement under this Section 9.1(d) unless such breach is not
cured prior to April 30, 1999 (but no cure period shall be required for a breach
which by its nature cannot be cured);
(e) by the Company if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Parent or Merger Sub and as a result of such breach the conditions set forth in
Section 7.2(a) or 7.2(b), as the case may be, would not then be satisfied;
provided, however, that if such breach is curable by Parent or Merger Sub prior
-------- -------
to April 30, 1999 through the exercise of its reasonable best efforts, then for
so long as Parent or Merger Sub continues to exercise such reasonable best
efforts the Company may not terminate this Agreement under this Section 9.1(e)
unless such breach is not cured prior to April 30, 1999 (but no cure period
shall be required for a breach which by its nature cannot be cured).
Where action is taken to terminate this Agreement pursuant to Section 9.1,
it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
9.2 Effect of Termination. Except as set forth in Section 10.2, any
---------------------
termination of this Agreement under Section 9.1 above will be effective
immediately upon the delivery of written notice of the terminating party to the
other parties hereto. In the event of the termination of this Agreement as
provided in Section 9.1, this Agreement shall be of no further force or effect,
except (i) as set forth in this Section 9.2 and Article X (general provisions,
including expenses), each of which shall survive the termination of this
Agreement, and (ii) nothing herein shall relieve any party from liability for
any breach
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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.
9.3 Amendment. Except as is otherwise required by applicable law, prior
---------
to the Closing, this Agreement may be amended by the parties hereto at any time
by execution of an instrument in writing signed by Parent and the Company.
Except as is otherwise required by applicable law, after the Closing, this
Agreement may be amended by the parties hereto at any time by execution of an
instrument in writing signed by Parent and by Company shareholders who receive
more than 50% of the Parent Common Stock issued or to be issued pursuant to
Section 1.6, or by all of the Company shareholders in the case of an amendment
to Articles VIII.
9.4 Extension; Waiver. At any time prior to the Effective Time, Parent
-----------------
and Merger Sub, on the one hand, and the Company, on the other, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE X
GENERAL PROVISIONS
10.1 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Inktomi Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Vice President, General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to:
Impulse Buy Network, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (650)
with a copy to:
Pillsbury Madison & Sutro, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
L. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to the Securityholder Agent:
▇▇▇▇▇▇ ▇▇▇▇▇
c/o Canaan Partners
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
(d) if to the Escrow Agent:
U.S. Bank Trust NA
Global Escrow Depository Services
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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10.2 Expenses.
--------
(a) In the event the Merger is not consummated, all fees and expenses
incurred in connection with the Merger including, without limitation, all legal,
accounting, financial advisory, consulting and all other fees and expenses of
third parties ("Third Party Expenses") incurred by a party in connection with
--------------------
the negotiation and effectuation of the terms and conditions of this Agreement
and the transactions contemplated hereby, shall be the obligation of the
respective party incurring such fees and expenses; provided, however, that if
-------- -------
the Merger is not consummated prior to May 15, 1999 for reasons other than the
failure of the closing conditions specified in Section 7.1(a) hereof or any of
the closing conditions specified in Section 7.3 and provided that the Company is
not in default under the Bridge Note or in material breach of its obligations
under this Agreement, Parent will reimburse the Company for all reasonable
accounting and up to an aggregate maximum of $25,000 for attorneys' fees
incurred in connection with this Agreement and the transactions contemplated
hereby.
(b) Subject to the provisions of Section 8.2, in the event the Merger
is consummated, the Surviving Corporation shall be responsible for the payment
of all Third Party Expenses, including Third Party Expenses incurred by the
Company. Without limiting the forgoing, on the Closing Date the Surviving
Corporation (or Parent on behalf of Surviving Corporation) shall pay to
Pillsbury, Madison & Sutro, LLP, Company counsel, the aggregate amount of
Company attorneys' fees and expenses payable thereto in connection with this
Agreement and the transactions contemplated hereby, provided that Parent
receives a written invoice for such fees and expenses at least three (3) days
prior to the Closing Date;
10.3 Interpretation. The words "include," "includes" and "including" when
--------------
used herein shall be deemed in each case to be followed by the words "without
limitation." The word "agreement" when used herein shall be deemed in each case
to mean any contract, commitment or other agreement, whether oral or written,
that is legally binding. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.4 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.5 Entire Agreement; Assignment. Except for the Confidentiality
----------------------------
Agreement, this Agreement, the schedules and Exhibits hereto, and the documents
and instruments and other agreements among the parties hereto referenced herein:
(a) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof; (b) are not intended to confer upon any other person any rights or
remedies hereunder; and (c) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided, except that Parent and
Merger Sub may assign their respective rights and delegate their respective
obligations hereunder to their respective affiliates.
10.6 Severability. In the event that any provision of this Agreement or
------------
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision
-54-
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.
10.7 Other Remedies. Except as otherwise provided herein (including as
--------------
set forth in Section 8.2(l)), any and all remedies herein expressly conferred
upon a party will be deemed 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.
10.8 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto agrees that process may be served upon them in any
manner authorized by the laws of the State of California for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
10.9 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
10.10 Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
-55-
IN WITNESS WHEREOF, Parent, Merger Sub, the Company the Securityholder
Agent (as to Article VIII only) and the Escrow Agent (as to matters set forth in
Article VIII only) have caused this Agreement to be signed by their duly
authorized respective officers, all as of the date first written above.
IMPULSE BUY NETWORK, INC. INKTOMI CORPORATION
a California Corporation a Delaware Corporation
By_______________________________ By__________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer President and Chief Executive Officer
By_______________________________
▇▇▇▇▇▇▇ ▇▇▇▇
Vice President of Product
SECURITYHOLDER AGENTS: IC ACQUISITION CORP.
a California Corporation
_________________________________ By__________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
_________________________________
ESCROW AGENT
U.S. BANK TRUST NA
By_______________________________
Name: ▇▇▇ ▇▇▇▇▇▇
Title:
EXHIBIT A
-
IMPULSE BUY NETWORK, INC.
VOTING AGREEMENT
This Voting Agreement ("Agreement") is made and entered into as of April
---------
21, 1999, between Inktomi Corporation, a Delaware corporation ("Parent"), and
------
the undersigned shareholder ("Shareholder") of Impulse Buy Network, Inc., a
-----------
California corporation ("Company").
-------
RECITALS
A. Concurrently with the execution of this Agreement, Parent, Company and
IC Acquisition Corp., a California corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), have entered into an Agreement and Plan of Reorganization
----------
(the "Reorganization Agreement") which provides for the merger (the "Merger") of
------------------------ ------
Merger Sub with and into the Company. Pursuant to the Merger, shares of capital
stock of the Company will be converted into Common Stock of Parent on the basis
described in the Reorganization Agreement.
B. The Shareholder is the record holder and beneficial owner (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of such number of shares of the outstanding Common Stock and/or
-------------
Preferred Stock of the Company as is indicated on the final page of this
Agreement (the "Shares").
------
C. Parent desires the Shareholder to agree, and the Shareholder is willing
to agree, not to transfer or otherwise dispose of any of the Shares, or any
other shares of capital stock of the Company acquired hereafter and prior to the
Expiration Date (as defined in Section 1.1 below, except as otherwise permitted
hereby), and to vote the Shares and any other such shares of capital stock of
the Company so as to facilitate consummation of the Merger.
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Agreement to Retain Shares.
--------------------------
1.1 Transfer and Encumbrance. Shareholder agrees not to transfer
------------------------
(except as may be specifically required by court order), sell, exchange, pledge
or otherwise dispose of or encumber any of the Shares or any New Shares as
defined in Section 1.2 below, or to make any offer or agreement relating
thereto, at any time prior to the Expiration Date. As used herein, the term
"Expiration Date" shall mean the earlier to occur of (i) such date and time as
the Merger shall become effective in accordance with the terms and provisions of
the Reorganization Agreement (provided, that if Shareholder is a signatory to
the Company's Affiliate Agreement, nothing contained herein shall release such
Shareholder of any of its obligations set forth under such Affiliate Agreement)
and (ii) such date and time as the Reorganization Agreement shall be terminated
pursuant to Article IX thereof.
1.2 Additional Purchases. Shareholder agrees that any shares of
--------------------
capital stock of the Company that Shareholder purchases or with respect to which
Shareholder otherwise acquires beneficial ownership after the execution of this
Agreement and prior to the Expiration Date ("New
Shares") shall be subject to the terms and conditions of this Agreement to the
same extent as if they constituted Shares.
2. Agreement to Vote Shares. At every meeting of the shareholders of the
------------------------
Company called with respect to any of the following, and at every adjournment
thereof, and on every action or approval by written consent of the shareholders
of the Company with respect to any of the following, Shareholder shall vote the
Shares and any New Shares: (i) in favor of approval of the principal terms of
the Reorganization Agreement and the Merger and any matter that could reasonably
be expected to facilitate the Merger; and (ii) against approval of any proposal
made in opposition to or competition with consummation of the Merger and against
any merger, consolidation, sale of assets, reorganization or recapitalization,
with any party other than with Parent and its affiliates and against any
liquidation or winding up of the Company (each of the foregoing is hereinafter
referred to as an "Opposing Proposal"). Shareholder agrees not to take any
actions contrary to Shareholder's obligations under this Agreement.
3. Irrevocable Proxy. Concurrently with the execution of this Agreement,
-----------------
Shareholder agrees to deliver to Parent a proxy in the form attached hereto as
Exhibit A (the "Proxy"), which shall be irrevocable, with the total number of
---------
shares of capital stock of the Company beneficially owned (as such term is
defined in Rule 13d-3 under the Exchange Act) by Shareholder and subject to the
Proxy set forth therein.
4. Representations, Warranties and Covenants of the Shareholder.
------------------------------------------------------------
Shareholder hereby represents, warrants and covenants to Parent as follows:
4.1 Ownership of Shares. Shareholder (i) is the beneficial owner of
-------------------
the Shares, which at the date hereof and at all times up until the Expiration
Date will be free and clear of any liens, claims, options, charges or other
encumbrances; (ii) does not beneficially own any shares of capital stock of the
Company other than the Shares (excluding shares as to which Shareholder
currently disclaims beneficial ownership in accordance with applicable law); and
(iii) has full power and authority to make, enter into and carry out the terms
of this Agreement and the Proxy.
4.2 No Proxy Solicitations. Shareholder, in his or her capacity as a
----------------------
Shareholder of the Company, will not, and will not permit any entity under
Shareholder's control to: (i) solicit proxies with respect to an Opposing
Proposal or otherwise encourage or assist any party in taking or planning any
action that would compete with, restrain or otherwise serve to interfere with or
inhibit the timely consummation of the Merger in accordance with the terms of
the Reorganization Agreement; (ii) initiate a shareholders' vote or action by
consent of the Company shareholders with respect to an Opposing Proposal; or
(iii) become a member of a "group" (as such term is used in Section 13(d) of the
Exchange Act) with respect to any voting securities of the Company with respect
to an Opposing Proposal.
5. Additional Documents. Shareholder hereby covenants and agrees to
--------------------
execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Parent or Shareholder, as the case may be, to carry out
the intent of this Agreement.
6. Consent and Waiver. Shareholder hereby gives any consents or waivers
------------------
that are reasonably required for the consummation of the Merger under the terms
of any agreements to which
-2-
Shareholder is a party as a shareholder or pursuant to any rights Shareholder
may have as a shareholder.
7. Termination. This Agreement and the Proxy delivered in connection
-----------
herewith shall terminate and shall have no further force or effect as of the
Expiration Date.
8. Miscellaneous.
-------------
8.1 Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
8.2 Binding Effect and Assignment. This Agreement and all of the
-----------------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
of the parties without prior written consent of the other.
8.3 Amendments and Modification. This Agreement may not be modified,
---------------------------
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
8.4 Specific Performance; Injunctive Relief. The parties hereto
---------------------------------------
acknowledge that Parent will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreement of
Shareholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Parent upon any such violation, Parent
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Parent at law
or in equity.
8.5 Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and sufficient if delivered in
person, by cable, telegram or telex, or sent by mail (registered or certified
mail, postage prepaid, return receipt requested) or overnight courier (prepaid)
to the respective parties as follows:
If to Parent: Inktomi Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to the Shareholder: To the address for notice set forth on the last
page hereof.
-3-
With a copy to: Pillsbury Madison & Sutro, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
L. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall only be
effective upon receipt.
8.6 Governing Law. This Agreement shall be governed by, and
-------------
construed and enforced in accordance with, the laws of the State of California
without giving effect to the conflict of laws provision thereof.
8.7 Entire Agreement. This Agreement contains the entire
----------------
understanding of the parties in respect of the subject matter hereof, and
supersedes all prior negotiations and understandings between the parties with
respect to such subject matter.
8.8 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
8.9 Effect of Headings. The section headings herein are for
------------------
convenience only and shall not affect the construction of interpretation of this
Agreement.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
IN WITNESS WHEREOF, the parties have caused this Voting Agreement to be
duly executed on the date and year first above written.
INKTOMI CORPORATION
By:____________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
SHAREHOLDER:
By:____________________________________
Print
Name:__________________________________
Shareholder's Address for Notice:
_______________________________________
_______________________________________
_______________________________________
Shares beneficially owned:
_____________ shares of Common Stock
_____________ shares of Series A Preferred Stock
_____________ shares of Series B Preferred Stock
EXHIBIT A
---------
IRREVOCABLE PROXY
The undersigned shareholder of Impulse Buy Network, Inc., a California
corporation ("Company"), hereby irrevocably appoints ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ and
-------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ of Inktomi Corporation, a Delaware corporation ("Parent"),
------
and each of them, as the sole and exclusive attorneys and proxies of the
undersigned, with full power of substitution and resubstitution, to the full
extent of the undersigned's rights with respect to the shares of capital stock
of the Company beneficially owned by the undersigned, which shares are listed on
the final page of this Proxy (the "Shares"), and any and all other shares or
------
securities issued or issuable in respect thereof on or after the date hereof,
until such time as that certain Agreement of Merger and Plan of Reorganization
dated as of April 21, 1999 (the "Reorganization Agreement"), among Parent, IC
------------------------
Acquisition Corp., a California corporation and a wholly-owned subsidiary of
Parent ("Merger Sub"), and Company, shall be terminated in accordance with its
----------
terms or the Merger (as defined in the Reorganization Agreement) is effective,
whichever first occurs. Upon the execution hereof, all prior proxies given by
the undersigned with respect to the Shares and any and all other shares or
securities issued or issuable in respect thereof on or after the date hereof are
hereby revoked and no subsequent proxies will be given.
This proxy is irrevocable, is granted pursuant to the Voting Agreement
dated as of April 21, 1999 between Parent and the undersigned shareholder (the
"Voting Agreement"), and is granted in consideration of Parent entering into the
-----------------
Reorganization Agreement. The attorneys and proxies named above will be
empowered at any time prior to termination of the Reorganization Agreement to
exercise all voting and other rights (including, without limitation, the power
to execute and deliver written consents with respect to the Shares) of the
undersigned at every annual, special or adjourned meeting of Company
shareholders, and in every written consent in lieu of such a meeting, or
otherwise, in favor of approval of the Merger and the Reorganization Agreement
and any matter that could reasonably be expected to facilitate the Merger
(including without limitation the conversion of any shares of Preferred Stock of
the Company into Common Stock of the Company immediately prior to or at the
effective time of the Merger, consistent with the provisions of the Company's
Certificate of Incorporation and with the requirements necessary to account for
the Merger as a "pooling-of-interests"), and against any proposal made in
opposition to or competition with the consummation of the Merger and against any
merger, consolidation, sale of assets, reorganization or recapitalization of the
Company with any party other than Parent and its affiliates and against any
liquidation or winding up of the Company.
The attorneys and proxies named above may only exercise this proxy to vote
the Shares subject hereto at any time prior to termination of the Reorganization
Agreement at every annual, special or adjourned meeting of the shareholders of
Company and in every written consent in lieu of such meeting, in favor of
approval of the Merger and the Reorganization Agreement and any matter that
could reasonably be expected to facilitate the Merger (including without
limitation the conversion of any shares of Preferred Stock of the Company into
Common Stock of the Company immediately prior to or at the effective time of the
Merger, consistent with the provisions of the
Company's Certificate of Incorporation and with the requirements necessary to
account for the Merger as a "pooling-of-interests"), and against any merger,
consolidation, sale of assets, reorganization or recapitalization of Company
with any party other than Parent and its affiliates, and against any liquidation
or winding up of the Company, and may not exercise this proxy on any other
matter. The undersigned shareholder may vote the Shares on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
This proxy is irrevocable.
Dated: April 21, 1999
Signature of Shareholder: ___________________________________
Print Name of Shareholder: ___________________________________
Shares beneficially owned:
__________ shares of Common Stock
__________ shares of Series A Preferred Stock
__________ shares of Series B Preferred Stock
-2-
EXHIBIT B
-
IMPULSE BUY NETWORK, INC.
AFFILIATE AGREEMENT
This AFFILIATE AGREEMENT (this "Agreement") is made and entered into as of
---------
April 19, 1999, between Inktomi Corporation, a Delaware corporation ("Parent")
------
and the undersigned affiliate ("Affiliate") of Impulse Buy Network, Inc., a
---------
California corporation ("Company").
-------
WHEREAS, Parent and Company propose to enter into an Agreement and Plan of
Reorganization ("Reorganization Agreement") pursuant to which a subsidiary of
------------------------
Parent will merge into Company ("Merger"), and Company will become a subsidiary
------
of Parent (capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Reorganization Agreement);
WHEREAS, pursuant to the Merger, at the Effective Time outstanding shares
of Company Capital Stock, including any shares owned by Affiliate, will be
converted into the right to receive shares of Common Stock of Parent;
WHEREAS, it will be a condition to effectiveness of the Merger that the
independent accounting firms that audit the annual financial statements of
Company and Parent will have delivered their written concurrences to the effect
that the Merger will be accounted for as a pooling of interests;
WHEREAS, the execution and delivery of this Agreement by Affiliate is a
material inducement to Parent to enter into the Reorganization Agreement;
WHEREAS, Affiliate has been advised that Affiliate may be deemed to be an
"affiliate" of Company, as the term "affiliate" is used in Accounting Series
Releases 130 and 135, as amended, although nothing contained herein shall be
construed as an admission by Affiliate that Affiliate is in fact an affiliate of
Company.
NOW, THEREFORE, intending to be legally bound, the parties hereby agree as
follows:
1. Acknowledgments by Affiliate. Affiliate acknowledges and
----------------------------
understands that the representations, warranties and covenants by Affiliate set
forth herein will be relied upon by Parent, Company, and their respective
affiliates, counsel and accounting firms, and that substantial losses and
damages may be incurred by these persons if Affiliate's representations,
warranties or covenants are breached. Affiliate has carefully read this
Agreement and the Reorganization Agreement and has discussed the requirements of
this Agreement with his or her professional advisors, who are qualified to
advise Affiliate with regard to such matters.
2. Covenants Related to Pooling of Interests. During the period
-----------------------------------------
beginning from the date hereof and ending on the second day after the day that
Parent publicly announces financial results covering at least 30 days of
combined operations of Parent and Company, Affiliate will not sell, exchange,
transfer, pledge, distribute, or otherwise dispose of or grant any option,
establish any
"short" or put-equivalent position with respect to or enter into any similar
transaction (through derivatives or otherwise) intended or having the effect,
directly or indirectly, to reduce its risk relative to any securities of the
Company (including any securities of the Company which may be acquired after the
date of this Agreement), or shares of Parent Common Stock received by Affiliate
in connection with the Merger. Parent may, at its discretion, cause a
restrictive legend to the foregoing effect to be placed on Parent Common Stock
certificates issued to Affiliate in the Merger and place a stock transfer notice
consistent with the foregoing with its transfer agent with respect to the
certificates.
3. Representation Related to Beneficial Ownership of Stock. Except for
-------------------------------------------------------
the Company Common Stock, Series A Preferred Stock, Series B Preferred Stock,
options to purchase shares of Company Common Stock and warrants to purchase
shares of Company Capital Stock set forth in Appendix A hereto, Affiliate does
----------
not beneficially own any equity securities of the Company or any options,
warrants or other rights to acquire any equity securities of the Company.
4. Covenants of Parent. Parent hereby covenants and agrees that it shall
-------------------
publicly announce financial results covering at least thirty (30) days of
combined operations of Parent and Company not later than July 31, 1999.
5. Miscellaneous.
-------------
(a) For the convenience of the parties hereto, this Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same document.
(b) This Agreement shall be enforceable by, and shall inure to the
benefit of and be binding upon, the parties hereto and their respective
successors and assigns. As used herein, the term "successors and assigns" shall
mean, where the context so permits, heirs, executors, administrators, trustees
and successor trustees, and personal and other representatives.
(c) This Agreement shall be governed by and construed, interpreted
and enforced in accordance with the laws of the State of California without
giving effect to the conflicts of law provisions thereof.
(d) If a court of competent jurisdiction determines that any
provision of this Agreement is not enforceable or enforceable only if limited in
time and/or scope, this Agreement shall continue in full force and effect with
such provision stricken or so limited.
(e) Counsel to and accountants for the parties to the Agreement shall
be entitled to rely upon this Agreement as needed.
(f) This Agreement shall not be modified or amended, or any right
hereunder waived or any obligation excused, except by a written agreement signed
by both parties.
-2-
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first written above.
INKTOMI CORPORATION
By: _________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
AFFILIATE
By: __________________________________________
Name of Affiliate:____________________________
Name of Signatory (if different from name of
Affiliate):___________________________________
Title of Signatory
(if applicable):______________________________
APPENDIX A
----------
Affiliate:______________________________________________________________________
Total Number of shares of Company
Common Stock owned on the date hereof:__________________________________________
Total Number of shares of Company
Series A Preferred Stock owned on the date hereof:______________________________
Total Number of shares of Company
Series B Preferred Stock owned on the date hereof:______________________________
Total Number of options to purchase Company Common Stock and Warrants to
purchase Company Capital Stock owned on the date hereof (including the dates of
grant, vesting, exercise prices and expiration dates):
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
EXHIBIT C
-
EMPLOYMENT AND
NON-COMPETITION AGREEMENT
This Employment and Non-Competition Agreement is entered into by and
between Inktomi Corporation ("Inktomi"), Impulse Buy Network, Inc. ("Impulse")
and ________________________ ("Employee") as of _______________, 1999.
RECITALS
A. Pursuant to that certain Agreement and Plan of Reorganization (the
"Merger Agreement") dated as of April 21, 1999 by and between Inktomi, IC
Acquisition Corp. ("Sub") and Impulse, Sub will merge with and into Impulse (the
"Merger") and any shares of Impulse capital stock owned by Employee will be
exchanged for Inktomi Common Stock and any options to acquire Impulse Common
Stock will be assumed by Inktomi and become options to acquire Inktomi Common
Stock;
B. Employee owns an equity interest in Impulse (whether through
outstanding capital stock or options to purchase capital stock), has served as a
______________________________ at Impulse and has gained substantial knowledge
and expertise in connection with Impulse's products, organization and customers;
C. Inktomi desires to provide for the continued services of Employee
following the Merger;
D. Inktomi and Employee acknowledge that it would be detrimental to
Inktomi if Employee would compete with Inktomi following the Merger;
E. Impulse is engaged in the development, manufacturing, distributing and
licensing of merchandising tools that help online merchants acquire customers
from third party web sites (the "Business");
F. It is a condition to the obligation of Inktomi to consummate the Merger
that certain key employees of Impulse, including Employee, enter into this
Agreement;
G. As inducement to Inktomi to consummate the Merger, and in consideration
of the amounts paid to stockholders of Impulse under the Merger Agreement,
Employee desires to agree with Inktomi as further provided herein;
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
Employment
----------
1.1 Period of Employment. Inktomi hereby employs Employee to render
--------------------
services to Inktomi in the position and with the duties and responsibilities
described in Section 2 for the period (the "Period of Employment") commencing on
the Closing (as defined in the Merger Agreement) and ending upon the earlier of
(i) one (1) year from such date (the "Term Date"), and (ii) the date the Period
of Employment is terminated in accordance with Section 1.4. After the initial
one-year Period of Employment, the employment relationship between Inktomi and
Employee shall be at will.
1.2 Position, Duties, Responsibilities.
----------------------------------
(a) Position. Employee hereby accepts employment with Inktomi as
--------
indicated on Exhibit A (or in such other position(s) as may be designated from
---------
time to time by Employee's supervisor and shall initially report to the person
indicated on Exhibit A. Employee agrees to devote his entire time, attention,
---------
energies and skills during usual business hours (and outside those hours when
reasonably necessary to the performance of his duties hereunder) to the business
and interests of Inktomi during the Period of Employment. However, Employee may
devote a reasonable amount of his time to civic, community, or charitable
activities and, with the prior written approval of the Board of Directors, to
serve as a director of other corporations and to other types of business or
public activities not expressly mentioned in this paragraph.
(b) Other Services. Employee may be required in pursuance of his
--------------
duties hereunder to perform services for any affiliated company but shall not be
entitled to any additional compensation for such services. Employee shall obey
all reasonable policies of Inktomi and reasonable applicable policies of its
affiliated companies.
1.3 Compensation, Benefits, Expenses.
--------------------------------
(a) Compensation. In consideration of the services to be rendered
------------
hereunder, including, without limitation, services to any affiliated company,
Employee shall be paid the compensation set forth on Exhibit A (the
---------
"Compensation"), payable at the time and pursuant to the procedures regularly
established, and as such time and procedures may be amended, by Inktomi during
the Period of Employment. Inktomi shall review annually the Compensation and in
light of such review may, in its discretion, increase the Compensation, taking
into account Employee's responsibilities, inflation in the cost of living,
performance by Employee and other pertinent factors.
(b) Benefits; Expenses. Employee shall be entitled to such expense
------------------
accounts, vacation time, sick leave, perquisites of office, fringe benefits,
insurance coverage and other terms and conditions of employment as Inktomi
generally provides to its employees having rank and seniority at Inktomi
comparable to Employee, as the same may be changed from time to time.
-2-
1.4 Termination of Employment.
-------------------------
(a) By Death. The Period of Employment shall terminate
--------
automatically upon the death of Employee. Inktomi shall pay to Employee's
beneficiaries or estate, as appropriate, the Compensation to which he is
entitled through the end of the month in which death occurs. Thereafter,
Inktomi's obligations hereunder shall terminate. Nothing in this subsection (a)
shall affect any entitlement of Employee's heirs to the benefits of any life
insurance plan.
(b) By Disability. If, during the term of this Agreement, Employee
-------------
should become Totally Disabled (as hereinafter defined), Inktomi shall have the
right, to the extent permitted by law, in its sole discretion, to terminate this
Agreement and Employee's employment with Inktomi, in which case Employee's
Compensation shall be paid up through the last day of the month in which it has
been determined that Employee has become Totally Disabled. Nothing in this
subsection (b) shall affect Employee's rights under any disability plan in which
he is a participant. For purposes hereof, Employee shall be considered "Totally
Disabled" if (i) Employee is entitled to benefits under any long-term disability
income plan applicable to Employee or (ii) Employee's physical and/or mental
condition is such that Employee is unable to perform those duties Employee would
otherwise be expected to continue to perform as an employee of Inktomi, and
Employee's non-performance of such duties can reasonably be expected to continue
or does continue for not less than six (6) months. The determination that
Employee is Totally Disabled shall be made in good faith by Inktomi, whose
determination shall be final and binding on Employee.
(c) By Inktomi for Cause. Inktomi may terminate, without liability,
--------------------
the Period of Employment for Cause (as defined below) at any time and upon
written notice to Employee. Inktomi shall pay Employee his Compensation through
the date of such notice and thereafter Inktomi's obligations hereunder shall
terminate. Termination shall be for "Cause" if (i) Employee commits an act of
fraud or embezzlement, which is to the material detriment of Inktomi, Parent or
any affiliated company; (ii) Employee is convicted of a felony or other criminal
act involving moral turpitude; (iii) Employee willfully fails to perform his
reasonable employment duties for a period of 30 days or more (other than any
such failure resulting from Employee's incapacity due to physical or mental
illness) after a written demand for substantial performance is delivered to
Employee by Inktomi, which demand specifically identifies the manner in which
Inktomi believes that Employee has not substantially performed his duties; or
(iv) Employee breaches any material term of this Agreement or the Employee
Confidentiality Agreement (as defined in Section 3.7 below), which breach causes
or is reasonably expected to cause material harm to Inktomi, and, as to any such
breach which is subject to cure, such failure or breach continues for a period
of ten (10) days after Employee receives written notice of such breach from
Inktomi.
(d) At Will. At any time, Inktomi may terminate, without liability,
-------
the Period of Employment for any reason, with or without cause. Employee hereby
agrees that Inktomi may dismiss him under this subsection (d) without regard to
(i) any general or specific policies (whether written or oral) of Inktomi
relating to the employment or termination of its employees or (ii) any
statements made to Employee, whether made orally or contained in any document,
pertaining to Employee's relationship with Inktomi.
-3-
(e) Resignation for Cause. Employee may resign and thereby
---------------------
terminate the Period of Employment, without liability, by giving 15 days notice
to Inktomi in the case that (i) without Employee's written consent, Inktomi
significantly reduces Employee's duties and responsibilities; (ii) Inktomi
reduces Employee's Compensation; or (iii) Inktomi relocates Employee to a
facility or location more than 35 miles from Inktomi's principal offices,
without Employee's written consent.
ARTICLE II
Non-Competition
---------------
2.1 Non-Competition.
---------------
(a) Employee acknowledges that the promises and restrictive covenants
that Employee is providing in this Agreement are reasonable and necessary to the
protection of Inktomi's business and Inktomi's legitimate interests in its
acquisition of Impulse (including the Impulse's goodwill) pursuant to the Merger
Agreement.
(b) The parties understand and agree that this Agreement is entered
into in connection with the Merger. The parties further understand and agree
that Employee is a key and significant member of Impulse, owns a significant
number of shares of Impulse and that the Merger is contingent upon Employee
entering into this Agreement, including this non-competition provision. In
addition, the parties understand that prior to the Merger, Impulse was engaged
in business that, due to the nature of the Internet, is global in scope. The
parties further understand that Inktomi is currently engaged in business that,
due to the nature of the Internet, is global in scope. (All the nations of the
world shall hereafter be referred to as the "Geographic Scope of the Business".)
Employee further acknowledges that Impulse and Inktomi following the Merger will
continue conducting such business in all parts of the Geographic Scope of the
Business. The parties expressly acknowledge and agree that the non-competition
provisions contained in this Agreement are permissible and enforceable pursuant
to the provisions of applicable law.
(c) During the period commencing on the closing date of the Merger
(the "Merger") and ending one year thereafter, without the prior written consent
of the Chief Executive Officer of Inktomi, Employee shall not either as an
individual or as an employee, agent, consultant, advisor, independent
contractor, general partner, officer, director, shareholder or investor of any
person, firm, corporation, partnership or other entity:
(i) participate or engage in the design, development,
manufacture, production, marketing, sale or servicing of any product, or the
provision of any service, that directly or indirectly competes with the Impulse
Business;
(ii) induce or attempt to induce any person who at the time of
such inducement is an employee of Impulse or Inktomi to perform work or services
for any other person or entity other than Impulse or Inktomi; or
-4-
(iii) permit the name of Employee to be used in connection with
a competitive Business.
Notwithstanding the foregoing, Employee may own, directly or
indirectly, solely as passive investment, up to 4.9% of any class of "publicly
traded securities" of any person or entity which owns a competitive Business,
and up to 10% of the outstanding securities that are not "publicly traded
securities" of any person or entity which owns a competitive Business. For the
purposes of this Section 1.1, the term "publicly traded securities" shall mean
securities that are traded on a national securities exchange or listed on the
Nasdaq National Market, and the term "passive investment" shall include an
investment through a mutual fund, limited partnership or other investment
vehicle which is engaged in the business of portfolio investments.
2.2 Savings Clause. If any restriction set forth in Section 2.1 above
--------------
is held to be unreasonable or unenforceable, then Employee agrees, and hereby
submits, to the reduction and limitation of such prohibition to such area or
period as shall be deemed reasonable.
ARTICLE III
Miscellaneous
-------------
3.1 Successors, Assigns, Merger. This Agreement shall be binding upon and
---------------------------
shall inure to the benefit of Inktomi and its successors and assigns. This
Agreement shall be binding upon Employee and shall inure to his benefit and to
the benefit of his heirs, executors, administrators and legal representatives,
but shall not be assignable by Employee.
3.2 Independence of Obligations. The covenants and obligations of
---------------------------
Employee set forth in this Agreement shall be construed as independent of any
other agreement or arrangement between Employee, on the one hand, and Impulse or
Inktomi, on the other.
3.3 Specific Performance. Employee agrees that in the event of any
--------------------
breach by Employee of any covenant, obligation or other provision contained in
this Agreement, Inktomi and Employee shall be entitled (in addition to any other
remedy that may be available to them) to the extent permitted by applicable law
(a) a decree or order of specific performance to enforce the observance and
performance of such covenant, obligation or other provision, and (b) an
injunction restraining such breach or threatened breach.
3.4 Non-Exclusivity. The rights and remedies of Inktomi and Impulse
---------------
hereunder are not exclusive of or limited by any other rights or remedies which
Inktomi or Impulse may have, whether at law, in equity, by contract or
otherwise, all of which shall be cumulative (and not alternative). Without
limiting the generality of the foregoing, the rights and remedies of Inktomi and
Impulse hereunder, and the obligations and liabilities of Employee hereunder,
are in addition to their respective rights, remedies, obligations and
liabilities under the law of unfair competition, misappropriation of trade
secrets and the like.
-5-
3.5 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between Inktomi and Employee relating to his employment and the additional
matters herein provided for. This Agreement supersedes and replaces any prior
verbal or written agreements between the parties. This Agreement may be amended
or altered only in a writing signed by the President of Inktomi and Employee.
3.6 Applicable Law; Severability. This Agreement shall be construed and
----------------------------
interpreted in accordance with the laws of the State of Delaware without regard
to conflicts of laws and principles. Each provision of this Agreement is
severable from the others, and if any provision hereof shall be to any extent
unenforceable it and the other provisions hereof shall continue to be
enforceable to the full extent allowable, as if such offending provision had not
been a part of this Agreement.
3.7 Proprietary Information and Inventions Agreement. Employee shall
------------------------------------------------
execute Inktomi's Proprietary Information and Inventions Agreement in the form
attached hereto as Exhibit B concurrent with his execution of this Agreement.
---------
3.8 Effectiveness. This Agreement shall become effective upon the
-------------
Closing, and, if the Closing does not occur prior to ___________, 1999, this
Agreement shall immediately terminate and be of no further force or effect.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
-6-
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first written above.
INKTOMI CORPORATION
By: ______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
IMPULSE BUY NETWORK, INC.
By: ______________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
EMPLOYEE:
By: ______________________________________
Print Name: ______________________________
EMPLOYMENT AND NON-COMPETITION AGREEMENT
EXHIBIT A
---------
Description of Employment
EXHIBIT B
---------
Inktomi Proprietary Information and Inventions Agreement
EXHIBIT D
-
AGREEMENT OF MERGER
This Agreement of Merger, dated as of April 29, 1999 (this "Agreement"), is
---------
made and entered into by IC Acquisition Corp., a California corporation (being
herein referred to as "Merger Sub"), and Impulse Buy Network, Inc., a California
----------
corporation ("Impulse Buy" or the "Surviving Corporation"). Impulse Buy and
----------- ---------------------
Merger Sub are herein collectively referred to as the "Constituent
-----------
Corporations."
------------
RECITALS
A. Inktomi Corporation, a Delaware corporation ("Inktomi"), directly owns
-------
all of the outstanding shares of capital stock of Merger Sub.
B. Concurrently with the execution of this Agreement, the Constituent
Corporations and Inktomi have entered into an Agreement and Plan of
Reorganization, dated as of April 21, 1999 (the "Reorganization Agreement"),
------------------------
providing for certain representations, warranties and covenants in connection
with the transactions contemplated thereby.
C. The Boards of Directors of the Constituent Corporations deem it
advisable and in the best interests of the Constituent Corporations and in the
best interests of the shareholders of the Constituent Corporations that Impulse
Buy be acquired by Inktomi through a merger of Merger Sub with and into Impulse
Buy (the "Merger").
------
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
THE CONSTITUENT CORPORATIONS
1.1 Capitalization of Impulse Buy. Impulse Buy was incorporated under the
-----------------------------
laws of the State of California on August 5, 1997.
(a) Impulse Buy Capital Stock. The authorized capital stock of
-------------------------
Impulse Buy (the "Impulse Buy Capital Stock") consists of 15,000,000 shares of
-------------------------
authorized Common Stock, of which 3,417,477 shares are issued and outstanding
(the "Impulse Buy Common") and 3,764,458 shares of authorized Preferred Stock
------------------
(the "Impulse Buy Preferred"). The authorized Impulse Buy Preferred consists of
---------------------
1,162,652 shares of authorized Series A Preferred (the "Impulse Buy Series A
--------------------
Preferred"), of which 1,042,170 shares are issued and outstanding, and 2,878,522
---------
shares of authorized Series B Preferred (the "Impulse Buy Series B Preferred"),
------------------------------
of which 2,801,946 shares are issued and outstanding.
(b) Impulse Buy Options and Stock Purchase Rights. Impulse Buy has
---------------------------------------------
reserved 1,066,987 shares of Impulse Buy Common for issuance upon exercise of
outstanding options (the "Impulse Buy Options") and additional shares of Impulse
Buy Common for issuance upon exercise of outstanding rights to purchase Impulse
Buy Common (the "Impulse Buy Stock Purchase Rights").
(c) Impulse Buy Warrants. Impulse Buy has reserved 120,482 shares of
--------------------
Impulse Buy Series A Preferred for issuance upon exercise of an outstanding
warrant to purchase shares of Impulse
Buy Series A Preferred (the "Impulse Buy Series A Warrant") and 76,576 shares
---------------------------
of Series B Preferred for issuance upon exercise of an outstanding warrant to
purchase shares of Impulse Buy Series B Preferred (the "Impulse Buy Series B
--------------------
Warrant").
--------
1.2 Capitalization of Merger Sub. Merger Sub was incorporated under the
----------------------------
laws of the State of California on March 30, 1999. Merger Sub is authorized to
issue an aggregate of 1,000 shares of its capital stock (the "Sub Common"). On
----------
the date hereof, an aggregate of 1,000 shares of Sub Common were issued and
outstanding.
ARTICLE II
THE MERGER
2.1 Effective Time. The Merger shall become effective on April 30, 1999
--------------
(the "Effective Time").
--------------
2.2 The Merger. At the Effective Time, Merger Sub shall be merged with
----------
and into Impulse Buy and the separate corporate existence of Merger Sub shall
thereupon cease. Impulse Buy shall be the Surviving Corporation in the Merger
and the separate corporate existence of Impulse Buy, with all of its rights and
property, shall continue unaffected and unimpaired by the Merger.
2.3 Effect of the Merger. At the Effective Time, the effect of the Merger
--------------------
shall be as provided in the applicable provisions of the California General
Corporation Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the rights and property of the Company and
Merger Sub shall vest in the Surviving Corporation, and all debts and
liabilities of the Company and Merger Sub shall become the debts, liabilities
and duties of the Surviving Corporation.
ARTICLE III
ARTICLES OF INCORPORATION, BYLAWS AND
DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
3.1 Articles of Surviving Corporation. At the Effective Time, the
---------------------------------
Articles of Incorporation of Impulse Buy shall be the Articles of Incorporation
of the Surviving Corporation; provided, however, that at the Effective Time, the
-------- -------
Articles of Incorporation of Impulse Buy shall be restated in their entirety as
set forth in Exhibit A attached hereto.
---------
3.2 Bylaws of Surviving Corporation. 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.
3.3 Directors and Officers. The director(s) of Merger Sub immediately
----------------------
prior to the Effective Time shall be the director(s) of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation. The officers of
Merger Sub
-2-
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation, each to hold office in accordance with the Bylaws of the Surviving
Corporation.
ARTICLE IV
MANNER AND BASIS OF CONVERTING SHARES
OF THE CONSTITUENT CORPORATIONS
4.1 Effect on Capital Stock. The aggregate maximum number of shares of
-----------------------
common stock of Parent ("Inktomi Common Stock") to be issued (including Inktomi
--------------------
Common Stock to be reserved for issuance upon exercise of any of Impulse Buy's
options and stock purchase rights to be assumed by Inktomi) in exchange for the
acquisition by Inktomi of all outstanding Impulse Buy Capital Stock and all
outstanding unexpired and unexercised options and stock purchase rights to
acquire Impulse Buy Capital Stock shall be 900,000 (the "Aggregate Share
Number"). As of the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, Impulse Buy or the holder of any shares of
Impulse Buy Capital Stock, the holder of any options, warrants or other rights
to acquire or receive shares of Impulse Buy Capital Stock, the following shall
occur (which complies fully with the liquidation preference provisions set forth
in Article IV, Section 2 of the Articles of Incorporation of Impulse Buy, as
amended through the date hereof):
(a) Conversion of Impulse Buy Common Stock. Each share of Impulse Buy
--------------------------------------
Common issued and outstanding immediately prior to the Effective Time (other
than any shares of Impulse Buy Common to be canceled pursuant to Section 4.1(e)
and any "Dissenting Shares" (as defined and to the extent provided in Section
-----------------
4.2(a))) will be canceled and extinguished and be converted automatically into
the right to receive that number of shares of Inktomi Common Stock equal to the
product of (i) one share of Impulse Buy Common multiplied by (B) the Common
Factor (as defined in Section 4.1(c) below) (the "Common Exchange Ratio") upon
---------------------
surrender of the certificate representing such share of Impulse Buy Common in
the manner provided in Section 4.3.
(b) Conversion of Impulse Buy Preferred Stock.
-----------------------------------------
(i) Impulse Buy Series A Preferred. Each share of Impulse Buy
------------------------------
Series A Preferred issued and outstanding immediately prior to the Effective
Time (other than any shares of Impulse Buy Series A Preferred to be canceled
pursuant to Section 4.1(e) and any Dissenting Shares (as defined and to the
extent provided in Section 4.2(a))) will be canceled and extinguished and be
converted automatically into the right to receive that number of shares of
Inktomi Common Stock equal to the product of (A) one share of Impulse Buy Series
A Preferred multiplied by (B) the Series A Factor (as defined in Section 4.1(d)
below) (the "Series A Exchange Ratio") upon surrender of the certificate
-----------------------
representing such share of Impulse Buy Series A Preferred in the manner provided
in Section 4.3.
(ii) Series B Preferred. Each share of Impulse Buy Series B
------------------
Preferred issued and outstanding immediately prior to the Effective Time (other
than any shares of Series B Preferred to be canceled pursuant to Section 4.1(e)
and any Dissenting Shares (as defined and to the extent provided in Section
4.2(a))) will be canceled and extinguished and be converted automatically into
the right to
-3-
receive that number of shares of Inktomi Common Stock equal to the product of
(A) one share of Impulse Buy Series B Preferred multiplied by (B) Series B
Factor (as defined in Section 4.1(d) below) (the "Series B Exchange Ratio") upon
-----------------------
surrender of the certificate representing such share of Impulse Buy Series B
Preferred in the manner provided in Section 4.3.
(c) Definitions.
------------
(i) Common Factor. The "Common Factor" shall be equal to the
-------------
number (rounded to the sixth decimal place) computed using the following
formula:
X = N - (A + B)
-----------
F
Where X = the Common Factor
N = the Aggregate Share Number
A = the Series A Liquidation Preference Shares (as defined
below)
B = the Series B Liquidation Preference Shares (as defined
below)
F = the Fully Diluted Impulse Buy Shares (as defined below)
(ii) Series A Factor. The "Series A Factor" shall be the
---------------
number (rounded to the sixth decimal place) equal to the sum of (A) the Common
Factor plus (B) the number that is equal to the quotient computed by dividing
(1) the Series A Liquidation Preference Shares by (2) the number of shares of
Impulse Buy Series A Preferred outstanding immediately prior to the Effective
Time.
(iii) Series B Factor. The "Series B Factor" shall be the
---------------
number (rounded to the sixth decimal place) equal to the sum of (A) the Common
Factor plus (B) the number that is equal to the quotient computed by dividing
(1) the Series B Liquidation Preference Shares by (2) the number of shares of
Impulse Buy Series B Preferred outstanding immediately prior to the Effective
Time after taking into consideration the "net exercise" of the Series B Warrant
-----
to the extent such warrant remains outstanding immediately prior to the
Effective Time.
(iv) Series A Liquidation Preference Shares. The "Series A
--------------------------------------
Liquidation Preference Shares" shall be the number (rounded down to the nearest
whole number) equal to the quotient computed by dividing (A) the product of (1)
the number of shares of Impulse Buy Series A Preferred outstanding immediately
prior to the Effective Time and (2) 0.83 by (B) the average of the closing sale
price of Inktomi Common Stock as reported on the Nasdaq National Market over the
30-day period ending three (3) days prior to the Closing Date.
-4-
(v) Series B Liquidation Preference Shares. The "Series B
--------------------------------------
Liquidation Preference Shares" shall be the number (rounded down to the nearest
whole share) equal to the quotient computed by dividing (A) the product of (1)
the number of shares of Impulse Buy Series B Preferred outstanding immediately
prior to the Effective Time after taking into consideration any "net exercise"
-----
of the Impulse Buy Series B Warrant and (▇) ▇.▇▇▇▇▇▇ by (B) the average of the
closing sale price of Inktomi Common Stock as reported on the Nasdaq National
Market over the 30-day period ending three (3) days prior to the Closing Date.
(vi) Fully Diluted Shares. The "Fully Diluted Shares" shall mean that
--------------------
number equal to the sum of (A) the number of shares of Impulse Buy Common issued
and outstanding immediately prior to the Effective Time (regardless of whether
such shares are unvested, subject to any right of repurchase, risk of forfeiture
or other condition in favor of the Impulse Buy at such time); plus (B) the
number of shares of Impulse Buy Common issuable upon conversion of the shares of
Impulse Buy Series A Preferred and Impulse Buy Series B Preferred immediately
prior to the Effective Time; plus (C) the number of shares of Impulse Buy Common
issuable upon exercise of the Impulse Buy Options or Stock Purchase Rights
outstanding at the Effective Time (regardless of whether such Impulse Buy
Options or Stock Purchase Rights are vested); plus (D) the number of shares of
Impulse Buy Common issuable upon conversion of the shares of Impulse Buy Series
B Preferred which shares of Impulse Buy Series B Preferred are themselves
issuable upon "net exercise" of the Impulse Buy Series B Warrant to the extent
such warrant remains exercisable immediately prior to the Effective Time; plus
(E) the number of shares of Impulse Buy Common issuable in connection with any
other options, warrants, calls, rights, exchangeable or convertible securities,
commitments or agreements of any character, written or oral, to which Impulse
Buy is a party or by which it is bound obligating Impulse Buy to issue, deliver,
sell or cause to be issued, delivered or sold any Impulse Buy Capital Stock
immediately prior to the Effective Time.
(d) Escrow. Ten percent (10%) of the number shares of Inktomi Common
------
Stock to be issued at the Effective Time pursuant to Section 4.1(a) and (b)
hereof (none of which shares of Inktomi Common Stock shall be unvested, subject
to any right of repurchase, risk of forfeiture or other condition in favor of
the Surviving Corporation) shall be held in escrow (the "Escrow Amount")
-------------
pursuant to Article VIII of the Reorganization Agreement to compensate Inktomi
and its affiliates (including the Surviving Corporation) for any "Losses" (as
------
defined in Section 8.2 of the Reorganization Agreement) incurred in connection
with the Reorganization Agreement and the transactions contemplated thereby.
(e) Cancellation of Inktomi-Owned and Impulse Buy-Owned Stock. Each
---------------------------------------------------------
share of Impulse Buy Capital Stock owned by Merger Sub, Inktomi, Impulse Buy or
any direct or indirect wholly-owned subsidiary of Inktomi or of Impulse Buy
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(f) Impulse Buy Stock Options and Stock Repurchase Rights. At the
-----------------------------------------------------
Effective Time, all Impulse Buy Options and Stock Purchase Rights under Impulse
Buy's 1997 Stock Plan shall remain outstanding following the Effective Time and
shall be assumed by Inktomi in accordance with provisions described below.
-5-
(i) Each Impulse Buy Option or Stock Purchase Right so assumed by
Inktomi shall continue to have, and be subject to, the same terms and conditions
set forth in the Impulse Buy 1997 Stock Plan and/or as provided in the
respective option or stock purchase agreements governing such Impulse Buy Option
or Stock Purchase Right immediately prior to the Effective Time, except that (A)
such Impulse Buy Option or Stock Purchase Right shall be exercisable for that
number of whole shares of Inktomi Common Stock equal to the product of the
number of shares of Impulse Buy Common that were issuable upon exercise of such
Impulse Option or Stock Purchase Right immediately prior to the Effective Time
multiplied by the Common Exchange Ratio, rounded to the nearest whole number of
shares of Inktomi Common Stock (with 0.5 shares being rounded up) and (B) the
per share exercise price for the shares of Inktomi Common Stock issuable upon
exercise of such assumed Impulse Buy Option or Stock Purchase Right shall be
equal to the quotient determined by dividing the exercise price per share of
Impulse Buy Common at which such Impulse Buy Option or Stock Purchase Right was
exercisable immediately prior to the Effective Time by the Common Exchange
Ratio, rounded to the nearest whole cent (with $0.005 being rounded up).
(ii) Notwithstanding anything to the contrary in this Article IV,
in lieu of assuming outstanding Impulse Buy Options or Stock Purchase Rights in
accordance with this Section 4.1(f), Inktomi may, at its election, cause such
outstanding Impulse Buy Options or Stock Purchase Rights to be replaced by
issuing substantially equivalent replacement stock options in substitution
therefor.
(g) Impulse Buy Warrants.
--------------------
(i) Impulse Buy Series A Warrant. To the extent the Impulse Buy
----------------------------
Series A Warrant remains exercisable immediately prior to the Effective Time,
the Impulse Buy Series A Warrant shall, in connection with the Merger and
pursuant to its terms, be terminated and shall not be assumed by Inktomi. After
the Effective Time, any unexercised portion of the Impulse Buy Series A Warrant
shall not represent any right to purchase any Impulse Buy Capital Stock or any
Inktomi Common Stock.
(ii) Impulse Buy Series B Warrant. To the extent the Impulse Buy
----------------------------
Series B Warrant remains exercisable immediately prior to the Effective Time,
the Impulse Buy Series B Warrant shall, in connection with the Merger and
pursuant to its terms, be "net exercised" into shares of Impulse Buy Series B
Preferred, which shares of Impulse Buy Series B Preferred shall then be
converted into shares of Inktomi Common Stock in the manner set forth in Section
4.1(b)(ii) above.
(h) Capital Stock of Merger Sub. Each share of Sub Common issued and
---------------------------
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of Common
Stock of the Surviving Corporation. Each stock certificate of Merger Sub
evidencing ownership of any such shares shall thereafter evidence ownership of
such shares of capital stock of the Surviving Corporation.
-6-
(i) Adjustments to Exchange Ratios. The Common, Series A and
------------------------------
Series B Exchange Ratios shall be adjusted to reflect fully the effect of any
stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Inktomi Common Stock or Impulse Buy
Capital Stock), reorganization, recapitalization or other like change with
respect to Inktomi Common Stock or Impulse Buy Capital Stock occurring after the
date hereof and prior to the Effective Time.
(j) Fractional Shares. No fraction of a share of Inktomi Common
-----------------
Stock will be issued at the Effective Time, but in lieu thereof, each holder of
shares of Impulse Buy Capital Stock who would otherwise be entitled to a
fraction of a share of Inktomi Common Stock (after aggregating all fractional
shares of Inktomi Common Stock to be received by such holder) shall be entitled
to receive from Inktomi an amount of cash (rounded to the nearest whole cent)
equal to the product of (i) such fraction, multiplied by (ii) the average
closing price of a share of Inktomi Common Stock for the five (5) consecutive
trading days ending on the trading day immediately prior to the date of this
Agreement, as reported on the Nasdaq National Market.
4.2 Dissenters' Rights.
------------------
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Impulse Buy Capital Stock held by a holder who has demanded and
perfected dissenters' rights for such shares in accordance with Chapter 13 of
the California General Corporation Law and who, as of the Effective Time, has
not effectively withdrawn or lost such appraisal or dissenters' rights
("Dissenting Shares"), shall not be converted into or represent a right to
-----------------
receive Inktomi Common Stock pursuant to Section 1.6, but the holder thereof
shall only be entitled to such rights as are granted by the California General
Corporation Law. From and after the Effective Time, a holder of Dissenting
Shares shall not be entitled to exercise any of the voting rights or other
rights of a shareholder of the Surviving Corporation.
(b) Notwithstanding the provisions of Sections 4.1(a) and (b) hereof,
if any holder of shares of Impulse Buy Capital Stock who demands appraisal of
such shares under the California General Corporation Law shall effectively
withdraw or lose (through failure to perfect or otherwise) the right to
appraisal, then, as of the later of the Effective Time and the occurrence of
such event, such holder's shares shall automatically be converted into and
represent only the right to receive Inktomi Common Stock and fractional shares
as provided in Section 4.1(a) or (b), as the case may be, without interest
thereon, upon surrender of the certificate representing such shares.
4.3 Surrender of Certificates.
-------------------------
(a) Exchange Agent. Prior to the Effective Time, Inktomi shall
--------------
designate Norwest Shareholder Services to act as exchange agent (the "Exchange
--------
Agent") in the Merger.
-----
(b) Inktomi to Provide Common Stock. Promptly after the Effective
-------------------------------
Time, Inktomi shall make available to the Exchange Agent for exchange in
accordance with this Article IV, the aggregate number of shares of Inktomi
Common Stock issuable pursuant to Section 4.1 in exchange for
-7-
outstanding shares of Impulse Buy Capital Stock; provided, however, that, on
-------- -------
behalf of the holders of Impulse Buy Capital Stock, and pursuant to Article VIII
of the Reorganization Agreement, Inktomi shall deposit into an escrow account a
number of shares of Inktomi Common Stock equal to the Escrow Amount out of the
aggregate number of shares of Inktomi Common Stock otherwise issuable pursuant
to Section 4.1. The portion of the Escrow Amount contributed on behalf of each
holder of Impulse Buy Capital Stock shall be in proportion to the aggregate
number of shares of Inktomi Common Stock which such holder would otherwise be
entitled to receive under Section 4.1 by virtue of ownership of outstanding
shares of Impulse Buy Capital Stock.
(c) Exchange Procedures. Promptly after the Effective Time, the
-------------------
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
------------
Effective Time represented outstanding shares of Impulse Buy Capital Stock whose
shares were converted into the right to receive shares of Inktomi Common Stock
pursuant to Section 4.1, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Inktomi Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Inktomi, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of Inktomi Common Stock (less the number of shares of Parent Common
Stock, if any, to be deposited in the Escrow Fund on such holder's behalf
pursuant to Article VIII of the Reorganization Agreement), plus cash in lieu of
fractional shares in accordance with Section 4.1, to which such holder is
entitled pursuant to Section 4.1, and the Certificate so surrendered shall
forthwith be canceled. As soon as practicable after the Effective Time, and
subject to and in accordance with the provisions of Article VIII of the
Reorganization Agreement, Parent shall cause to be distributed to the Escrow
Agent (as defined in Article VIII of the Reorganization Agreement) a certificate
or certificates representing that number of shares of Inktomi Common Stock equal
to the Escrow Amount which shall be registered in the name of the Escrow Agent.
Such shares shall be owned by the holders on whose behalf such shares were
deposited in the Escrow Fund as set forth in Section 8.2(c)(iii) of the
Reorganization Agreement and shall be available to compensate Parent as provided
in Article VIII of the Reorganization Agreement. Until so surrendered, each
outstanding Certificate that, prior to the Effective Time, represented shares of
Impulse Buy Capital Stock will be deemed from and after the Effective Time, for
all corporate purposes, other than the payment of dividends, to evidence the
ownership of the number of full shares of Inktomi Common Stock into which such
shares of Impulse Buy Capital Stock shall have been so converted and the right
to receive an amount in cash in lieu of the issuance of any fractional shares in
accordance with Section 4.1.
(d) Distributions With Respect to Unexchanged Shares. No dividends
------------------------------------------------
or other distributions declared or made after the Effective Time with respect to
Inktomi Common Stock with a record date after the Effective Time will be paid to
the holder of any unsurrendered Certificate with respect to the shares of
Inktomi Common Stock represented thereby until the holder of record of such
Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such
-8-
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Inktomi Common Stock issued in exchange therefor,
without interest, at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Inktomi Common Stock.
(e) Transfers of Ownership. If any certificate for shares of Inktomi
----------------------
Common Stock is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Inktomi or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Inktomi Common Stock in any name other than that of the registered holder of the
certificate surrendered, or established to the satisfaction of Inktomi or any
agent designated by it that such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
------------
Section 4.3, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to a holder of shares of Inktomi Common Stock or Impulse
Buy Capital Stock for any amount properly paid to a public official pursuant to
any applicable abandoned property, escheat or similar law.
4.4 No Further Ownership Rights in Impulse Buy Common Stock. All shares
-------------------------------------------------------
of Inktomi Common Stock issued upon the surrender for exchange of shares of
Impulse Buy Capital Stock in accordance with the terms hereof (including any
cash paid in respect thereof) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Impulse Buy Capital
Stock, and there shall be no further registration of transfers on the records of
the Surviving Corporation of shares of Impulse Buy Capital Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article IV.
4.5 Lost, Stolen or Destroyed Certificates. In the event any certificates
--------------------------------------
evidencing shares of Impulse Buy Capital Stock shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed certificates, upon the making of an affidavit of that fact by the
holder thereof, such shares of Inktomi Common Stock and cash for fractional
shares, if any, as may be required pursuant to Section 4.1; provided, however,
-------- -------
that Inktomi may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Inktomi or the Exchange Agent with respect to the
certificates alleged to have been lost, stolen or destroyed.
4.6 Taking of Necessary Action; Further Action. If, at any time after the
------------------------------------------
Effective Time, any such further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Impulse Buy and Merger Sub, the officers and directors of
the Impulse Buy and Merger Sub are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful and
necessary action.
-9-
ARTICLE V
TERMINATION AND AMENDMENT
5.1 Termination. Notwithstanding the approval of this Agreement by the
-----------
shareholders of Merger Sub and Impulse Buy, this Agreement may be terminated at
any time prior to the Effective Time by mutual agreement of the Boards of
Directors of Merger Sub and Impulse Buy.
5.2 Effects of Termination. In the event of the termination of this
----------------------
Agreement as provided above, this Agreement shall forthwith become void and
there shall be no liability on the part of either Impulse Buy or Merger Sub or
their respective officers or directors, except as otherwise provided in the
Reorganization Agreement.
5.3 Amendment. This Agreement may be amended by the parties hereto at any
---------
time before or after approval hereof by the shareholders of either Impulse Buy
or Merger Sub, but, after any such approval, no amendment shall be made which by
law requires the further approval of the shareholders of either Impulse Buy or
Merger Sub without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-10-
IN WITNESS WHEREOF, the parties have duly executed this Agreement of Merger
as of the date first written above.
IMPULSE BUY NETWORK, INC.
By:______________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
By:______________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Secretary
IC ACQUISITION CORP.
By:______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, President
By:______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Secretary
-11-
IC ACQUISITION CORP.
OFFICERS' CERTIFICATE OF APPROVAL OF MERGER
The undersigned, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, and each of
them, do hereby certify that:
1. They are the President and Secretary, respectively, of IC Acquisition
Corp., a California corporation and a wholly-owned subsidiary of Inktomi
Corporation, a Delaware corporation ("Parent").
------
2. The Agreement of Merger attached to this Officers' Certificate
providing for the merger of this corporation with and into Impulse Buy Network,
Inc., a California corporation (the "Merger"), was duly approved by the Board of
------
Directors and the sole shareholder of this corporation and by the Board of
Directors of Parent.
3. This corporation has one authorized class of capital stock, designated
Common Stock, and the number of shares of such Common Stock outstanding as of
the date hereof and entitled to vote upon the Merger is 1,000 shares.
4. The principal terms of the Agreement of Merger were approved by this
corporation by the vote of the sole shareholder owning 100% of the outstanding
shares of the Common Stock of this corporation. The percentage vote required
for such approval was more than 50%.
5. Pursuant to the Delaware General Corporation Law, no vote of the
shareholders of Parent was required in connection with the Merger, despite the
issuance of securities of Parent in connection with the Merger.
Each of the undersigned declares under penalty of perjury that he has read
the foregoing Officers' Certificate and knows the contents thereof and that the
same is true of his own knowledge.
Executed at San Mateo, California, on April 29, 1999.
______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇, President
______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Secretary
IMPULSE BUY NETWORK, INC.
OFFICERS' CERTIFICATE OF APPROVAL OF MERGER
The undersigned, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, hereby certifies that:
1. He is the President and Secretary of Impulse Buy Network, Inc., a
California corporation.
2. The Agreement of Merger attached to this Officers' Certificate
providing for the merger of this corporation with IC Acquisition Corp., a
California corporation and a wholly-owned subsidiary of Inktomi Corporation, a
California corporation (the "Merger"), was duly approved by the Board of
------
Directors and shareholders of this corporation.
3. The authorized number of shares of Common Stock is 15,000,000, of
which 3,416,477 are issued and outstanding. The authorized number of shares of
Preferred Stock is 3,764,458. Of this number, 1,162,652 shares are designated
Series A Preferred, 1,042,170 of which are issued and outstanding, and 2,878,522
shares are designated as Series B Preferred, 2,801,946 of which are issued and
outstanding. The number of shares voting in favor of the amendment equaled or
exceeded the vote required.
4. The principal terms of the Agreement of Merger were approved by this
corporation by the vote of shareholders owning (a) ___% of the outstanding
shares of the Common Stock and (b) ___% of the outstanding shares of Series A
Preferred and Series B Preferred voting together as a single class. The
percentage vote required for such approval was more than 50% of both groups,
each voting separately as a class.
Each of the undersigned declares under penalty of perjury that he has read
the foregoing Officers' Certificate and knows the contents thereof and that the
same is true of his own knowledge.
Executed at Burlingame, California, on April 29, 1999.
______________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
______________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Secretary
EXHIBIT A
---------
RESTATED ARTICLES OF INCORPORATION
OF
IMPULSE BUY NETWORK, INC.
First: The name of this corporation is: Impulse Buy Network, Inc.
-----
Second: The purpose of this corporation is to engage in any lawful act or
------
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
Third: This corporation is authorized to issue one class of stock,
-----
designated "Common Stock." The total number of shares that this corporation is
authorized to issue is 1,000 shares.
Fourth: (A) Limitation of Directors' Liability. The liability of
------ ----------------------------------
the directors of this corporation for monetary damages shall be eliminated to
the fullest extent permissible under California law.
(B) Indemnification of Corporate Agents. This
-----------------------------------
corporation is authorized to provide indemnification of agents (as defined in
Section 317 of the California Corporations Code) through bylaw provisions,
agreements with agents, vote of shareholders or disinterested directors or
otherwise, in excess of the indemnification otherwise permitted by Section 317
of the California Corporations Code, subject only to the applicable limits set
forth in Section 204 of the California Corporations Code with respect to actions
for breach of duty to the corporation and its shareholders.
(C) Repeal or Modification. Any repeal or modification
----------------------
of the foregoing provisions of this Article Fourth by the shareholders of this
corporation shall not adversely affect any right of indemnification or
limitation of liability of a director or officer of this corporation relating to
acts or omissions occurring prior to such repeal or modification.
EXHIBIT E
-
INKTOMI CORPORATION
DECLARATION OF REGISTRATION RIGHTS
This Declaration of Registration Rights ("Declaration") is made as of April
-----------
21, 1999, by Inktomi Corporation, a Delaware corporation ("Parent"), for the
------
benefit of shareholders of Impulse Buy Networks, Inc., a California corporation
(the "Company"), acquiring shares of Parent Common Stock pursuant to that
-------
Agreement and Plan of Reorganization dated as of April 21, 1999 (the
"Reorganization Agreement"), among the Company, Parent and IC Acquisition Corp.,
-------------------------
a California corporation and wholly-owned subsidiary of Parent ("Merger Sub"),
----------
and pursuant to the related Agreement of Merger (the "Agreement of Merger")
-------------------
between the Company and Merger Sub and in consideration of such shareholders'
approving the principal terms of the Reorganization Agreement and the
transactions contemplated thereby.
1. Definitions. As used in this Declaration:
-----------
(a) "Effective Time" means the time of acceptance by the California
--------------
Secretary of State of the Agreement of Merger.
(b) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(c) "Holder" means: (i) a shareholder of the Company to whom shares
------
of Common Stock of Parent are issued pursuant to the Reorganization Agreement
and the Agreement of Merger, or (ii) the Escrow Agent (as defined in the
Reorganization Agreement), or (iii) a transferee to whom registration rights
granted under this Declaration are assigned pursuant to Section 7 of this
Declaration.
(d) "Registrable Securities" means for each Holder the number of
----------------------
shares of Parent Common Stock issued to such Holder pursuant to the
Reorganization Agreement, and for all Holders the sum of the Registrable
Securities held by them; provided, however, that such shares of Parent Common
-------- -------
Stock held by a particular Holder shall cease to be Registrable Securities at
such time as such Holder is able to sell such shares (including all Registrable
Securities held by Affiliates of such Holder, as defined pursuant to Rule 144 of
the Securities Act) in their entirety within a single 90 day period under Rule
144 of the Securities Act.
(e) "Securities Act" means the Securities Act of 1933, as amended.
--------------
(f) "SEC" means the United States Securities and Exchange Commission.
---
Terms not otherwise defined herein have the meanings given to them in the
Reorganization Agreement.
2. Holder Registration.
-------------------
(a) Parent shall use its best efforts to cause the Registrable
Securities then held by each Holder to be registered under the Securities Act so
as to permit the sale thereof, and in connection therewith shall prepare and
file with the SEC by June 15, 1999, a registration statement in such form as is
then available under the Securities Act covering all Registrable Securities not
previously registered pursuant to Section 3 hereof; provided, however, that the
-------- -------
obligation of Parent to use its best efforts to cause the registration of the
Registrable Securities shall not include any obligation of Parent to request
acceleration of such registration statement prior to the date that 30 days of
combined operations of Parent and the Company have been reported in accordance
with APB Opinion No.16 (the timing for which report Parent shall be permitted to
choose in its discretion); and provided, further that each Holder shall provide
all such information and materials and take all such action as may be required
in order to permit Parent to comply with all applicable requirements of the
Securities Act and the Exchange Act and to obtain any desired acceleration of
the effective date of such registration statement, such provision of information
and materials to be a condition precedent to the obligations of Parent pursuant
to this Declaration to register the Registrable Securities held by each such
Holder. The offerings made pursuant to such registration shall not be
underwritten.
(b) Parent shall (i) prepare and file with the SEC the registration
statement in accordance with Section 2 hereof with respect to the Registrable
Securities and shall use its best efforts to cause such registration statement
to become effective as promptly as practicable after filing and to keep such
registration statement effective until the sooner to occur of (A) the date on
which all Registrable Securities included within such registration statement
have been sold or (B) the expiration of 180 days after the day on which such
registration statement has been declared effective; (ii) prepare and file with
the SEC such amendments to such registration statement and amendments or
supplements to the prospectus used in connection therewith as may be necessary
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all securities registered by such registration statement
(including such amendments as may be necessary to reflect different or
additional selling stockholders as a result of any distribution of Registrable
Securities by the Holders to the beneficial owners of such Registrable
Securities); (iii) furnish to each Holder such number of copies of any
prospectus (including any preliminary prospectus and any amended or supplemented
prospectus) in conformity with the requirements of the Securities Act, and such
other documents, as each Holder may reasonably request in order to effect the
offering and sale of the Registrable Securities to be offered and sold, but only
while Parent shall be required under the provisions hereof to cause the
registration statement to remain effective; (iv) use its reasonable best efforts
to register or qualify the Registrable Securities covered by such registration
statement under the securities or blue sky laws of such jurisdictions as each
Holder shall reasonably request (provided that Parent shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such jurisdiction where it
has not been qualified), and do any and all other acts or things which may be
necessary or advisable to enable each Holder to consummate the public sale or
other disposition of such Registrable Securities in such jurisdictions; (v)
notify each Holder, promptly after it shall receive notice thereof, of the date
and time the registration statement and each post-effective amendment
-2-
thereto has become effective or a supplement to any prospectus forming a part of
such registration statement has been filed; and (vi) promptly reissue, or
promptly authorize and instruct its transfer agent to reissue, unlegended
certificates at the request of any Holder thereof upon such Holder's delivery of
original certificates representing Registrable Securities tendered for sale
pursuant to such effective registration statement, and to promptly respond to
broker's inquiries made of the Company in connection with such sales, in each
case with a view to reasonably assisting the Holder to complete such sale during
such period of effectiveness.
(c) Notwithstanding the foregoing obligation of Parent under this
Section 2, if Parent shall furnish to the Holder or Holders requesting a
registration statement pursuant to this Section 2 a certificate signed by the
President of Parent stating that in the good faith judgment of Parent, it would
be seriously detrimental to Parent and its stockholders for such registration
statement to be filed at such time and it is therefore essential to defer the
filing of such registration statement, Parent shall have the right to defer such
filing for a period of not more than 30 days beyond the June 15, 1999 dated
specified under Section 2(a) above.
3. Piggyback Registration.
----------------------
(a) Prior to the first anniversary of the Closing Date, Parent may
determine to provide for the firmly underwritten sale of Parent Common Stock for
its own account and/or the account of other shareholders, and in connection with
such determination, shall file with the SEC a registration statement to register
such Common Stock (an "Underwritten Sale"). In the event of such determination,
-----------------
Parent will give to each Holder written notice thereof at least 15 days prior to
the filing of such registration statement, and will include in the Underwritten
Sale (and any related qualification under blue sky laws or other related
compliance) all the Registrable Securities specified by the Holders in their
written request or requests to Parent, made within 10 days after receipt of such
written notice from Parent, subject, however, to the marketing limitation set
forth in Section 3(b) below; provided, however, that no shares of Registrable
-------- -------
Securities included in a registration statement filed with the SEC pursuant to
Section 2 hereof shall be included in a registration under this Section 3. An
Underwritten Sale, including the form of underwriting agreement to be entered
into by Parent, the underwriter(s) and any selling shareholders, shall be on
customary terms. The underwriter(s) for an Underwritten Sale shall be selected
by Parent in its sole discretion.
(b) The right of any Holder to registration pursuant to this Section
3 shall be conditioned upon such Holder's participation in the Underwritten Sale
and the inclusion of Registrable Securities in the Underwritten Sale to the
extent provided herein. All Holders shall (together with Parent and the other
holders distributing their securities through the Underwritten Sale) enter into
an underwriting agreement in customary form with the managing underwriter.
Notwithstanding any other provision of this Section 3, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter may limit the Registrable
Securities to be included in such registration and underwriting (or exclude the
Registrable Securities altogether), allocated among the Holders in proportion,
as nearly as practicable, to the respective amounts of Registrable Securities
requested to be included by
-3-
such Holders in accordance with Section 3(a) above. To facilitate the allocation
of shares in accordance with the above provision, Parent or the underwriters may
round the number of shares allocated to any Holder to the nearest 100 shares. If
any Holder disapproves of the terms of the Underwritten Sale, he or she may
elect to withdraw therefrom by written notice to Parent and the managing
underwriter.
(c) The completion by Parent of an Underwritten Sale in accordance
with the provisions of this Section 3 shall be in lieu of the registration
requirements under Section 2 above and shall relieve Parent of its obligation
under Section 2, provided that the registration statement for the Underwritten
Sale has been filed on or before the date Parent is required to file the
registration statement provided in Section 2 hereof (taking into account any
extension of such date as a result of Parent's exercise of its deferral right
under Section 2(c) above), and includes all Registrable Securities requested to
be included by the Holders in accordance with Section 3(a) above. In addition,
any withdrawal from or failure to participate in the Underwritten Sale by a
Holder or Holders shall also relieve Parent of its obligations under Section 2
with respect to such withdrawing Holder. In the event of a determination by
Parent to proceed with an Underwritten Sale and such Underwritten Sale for any
reason shall not be completed, the obligations of Parent to the Holders under
Section 2 above shall be unaffected, with the exception that Parent after the
date Parent determines not to proceed with the Underwritten Sale shall have an
additional ten (10) days to complete the preparation and filing of the
registration statement required thereby. In addition, in the event any
Registrable Securities are excluded from the Underwritten Sale pursuant to
Section 3(b) above, the obligations of Parent to the Holders of such excluded
Registrable Securities under Section 2 above shall be unaffected, with the
exception that, if the exclusion of such Registrable Securities occurs
subsequent to the date that Parent is required to file the registration
statement provided in Section 2 hereof (taking into account any extension of
such date as a result of Parent's exercise of its deferral right under Section
2(c) above), then Parent shall have an additional ten (10) days to complete the
preparation and filing of the registration statement required thereby.
4. Suspension of Prospectus. Under any registration statement filed
------------------------
pursuant to Section 2 hereof, Parent may restrict disposition of Registrable
Securities, and a Holder will not be able to dispose of such Registrable
Securities, if Parent shall have delivered a notice in writing to such Holder
stating that a delay in the disposition of such Registrable Securities is
necessary because Parent, in its reasonable judgment, has determined in good
faith that such sales would require public disclosure by Parent of material
nonpublic information that is not included in such registration statement and
that immediate disclosure of such information would be seriously detrimental to
the Company. In the event of the delivery of the notice described above by
Parent, Parent shall use its best efforts to amend such registration statement
and/or amend or supplement the related prospectus if necessary and to take all
other actions necessary to allow the proposed sale to take place as promptly as
possible, subject, however, to the right of Parent to delay further sales of
Registrable Securities until the conditions or circumstances referred to in the
notice have ceased to exist or have been disclosed. Such right to delay sales of
Registrable Securities shall not exceed 75 days in the aggregate and no longer
than 30 days as to any single delay (any such period of delay herein referred to
as a "blackout period"); after the registration statement is declared effective,
no blackout period may be imposed during the 15-day period following the date of
effectiveness or the termination date
-4-
of the last blackout period; and in the event of any delay by Parent of sales of
Registrable Securities as permitted by this Section 4, there shall be a
corresponding day for day extension of the 180-day period set forth in clause
(B) in the first sentence of Section 2(b) above.
5. Expenses. All of the out-of-pocket expenses incurred in connection
--------
with any registration of Registrable Securities pursuant to this Declaration,
including, without limitation, all SEC, Nasdaq National Market and blue sky
registration and filing fees, printing expenses, transfer agents' and
registrars' fees, and the reasonable fees and disbursements of Parent's outside
counsel and independent accountants shall be paid by Parent. Parent shall not be
responsible to pay any legal fees for any Holder or any selling expenses of any
Holder (including, without limitation, any broker's fees or commissions,
including underwriter commissions).
6. Indemnification. In the event of any offering registered pursuant
---------------
to this Declaration:
(a) Parent will indemnify each Holder, each of its officers,
directors and partners and such Holder's legal counsel and independent
accountants, and each person controlling such Holder within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Declaration, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages and liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on 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, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they are made, not misleading, or any
violation by Parent of any rule or regulation promulgated under the Securities
Act, or state securities laws, or common law, applicable to Parent in connection
with any such registration, qualification or compliance, and will reimburse (and
advance the same to) each such Holder, each of its officers, directors and
partners and such Holder's legal counsel and independent accountants, and each
person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, provided that Parent will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based in any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to Parent in an instrument duly
executed by such Holder or underwriter and stated to be specifically for use
therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify Parent, each of its directors and
officers and its legal counsel and independent accountants, each underwriter, if
any, of Parent's securities covered by such a registration statement, each
person who controls Parent or such underwriter within the meaning of Section 15
of the Securities Act, and each
-5-
other such Holder, each of its officers and directors and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse
Parent, such Holders, such directors, officers, legal counsel, independent
accountants, underwriters or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to Parent by an instrument duly
executed by such Holder and stated to be specifically for use therein; provided,
however, that the obligations of such Holders hereunder shall be limited to an
amount equal to the net proceeds received by each such Holder of Registrable
Securities actually sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
-----------------
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
------------------
has written notice of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Declaration; provided that if the Indemnified Party
has claims against the Indemnifying Party or otherwise has claims or defenses
different from or in addition to those of the Indemnifying Party, the
Indemnified Party may retain counsel of its own choice for all Holders, and the
reasonable fees and expenses of such counsel shall be paid by the Indemnifying
Party. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to the Indemnified Party of
a release from all liability in respect to such claim or litigation.
(d) The obligations of Parent and each Holder under this Section 7
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Declaration and otherwise.
(e) Notwithstanding the foregoing, to the extent the provisions of
this Section 7 are inconsistent with or conflict with the terms of any
underwriting, indemnification, selling or similar agreement entered into by a
Holder in connection with the offer and sale of Registrable Securities pursuant
to a registration effected pursuant to this Declaration, the terms of such
agreement shall govern and shall supersede the provisions of this Declaration.
-6-
7. Limitation on Assignment of Registration Rights. The rights to
-----------------------------------------------
cause Parent to register Registrable Securities pursuant to this Declaration may
not be assigned by a Holder unless such a transfer is to shareholders, partners
or retired partners, or members or retired members of a Holder (including
spouses and ancestors, lineal descendants, and siblings of such shareholders,
partners, members or spouses who acquire Registrable Securities by right, will,
or intestate succession) and all such transferees or assignees agree in writing
to appoint a single representative as their attorney-in-fact for the purpose of
receiving any notices and exercising their rights under this Declaration. Prior
to a permitted transfer of registration rights under this Declaration, Holder
must furnish Parent with written notice of the name and address of such
transferee and the Registrable Securities with respect to which such
registration rights are being assigned and a copy of a duly executed written
instrument in form reasonably satisfactory to Parent by which such transferee
assumes all of the obligations and liabilities of its transferor hereunder and
agrees itself to be bound hereby. No transfer of registration rights under this
Declaration shall be permitted if immediately following such transfer the
disposition of such Registrable Securities by the transferee is not restricted
under the Securities Act.
8. Amendment of Registration Rights. Holders of a majority of the
--------------------------------
Registrable Securities from time to time outstanding may, with the consent of
Parent, amend the registration rights granted hereunder.
-7-
9. Governing Law. This Declaration shall be governed in all respects by
-------------
and construed in accordance with the laws of the State of California.
INKTOMI CORPORATION
By: _________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
EXHIBIT F
-
INKTOMI CORPORATION
AFFILIATE AGREEMENT
This AFFILIATE AGREEMENT (this "Agreement") is made and entered into as of
---------
__________, 1999, between Inktomi Corporation, a Delaware corporation
("Inktomi") and the undersigned affiliate ("Affiliate") of Inktomi.
------- ---------
WHEREAS, Inktomi and Impulse Buy Network, Inc., a California corporation
("Impulse") propose to enter into an Agreement and Plan of Reorganization (the
---------
"Reorganization Agreement") pursuant to which a subsidiary of Inktomi will merge
-------------------------
into Impulse ("Merger"), and Impulse will become a subsidiary of Inktomi;
------
WHEREAS, it will be a condition to effectiveness of the Merger that the
independent accounting firms that audit the annual financial statements of
Impulse and Inktomi will have delivered their written concurrences to the effect
that the Merger will be accounted for as a pooling of interests;
WHEREAS, the execution and delivery of this Agreement by Affiliate is a
material inducement to Inktomi to enter into the Reorganization Agreement;
WHEREAS, Affiliate has been advised that Affiliate may be deemed to be an
"affiliate" of Inktomi, as the term "affiliate" is used in Accounting Series
Releases 130 and 135, as amended, although nothing contained herein shall be
construed as an admission by Affiliate that Affiliate is in fact an affiliate of
Inktomi.
NOW, THEREFORE, intending to be legally bound, the parties hereby agree as
follows:
1. Acknowledgments by Affiliate. Affiliate acknowledges and understands
----------------------------
that the representations, warranties and covenants by Affiliate set forth herein
will be relied upon by Inktomi, Impulse, and their respective affiliates,
counsel and accounting firms, and that substantial losses and damages may be
incurred by these persons if Affiliate's representations, warranties or
covenants are breached. Affiliate has carefully read this Agreement and the
Reorganization Agreement and has discussed the requirements of this Agreement
with his or her professional advisors, who are qualified to advise Affiliate
with regard to such matters.
2. Covenants Related to Pooling of Interests. During the period beginning
-----------------------------------------
from the date hereof and ending on the second day after the day that Inktomi
publicly announces financial results covering at least 30 days of combined
operations of Inktomi and Impulse, Affiliate will not sell, exchange, transfer,
pledge, distribute, make any gift or otherwise dispose of or grant any option,
establish any "short" or put-equivalent position with respect to or enter into
any similar transaction (through derivatives or otherwise) intended or having
the effect, directly or indirectly, to reduce his risk relative to any shares of
Inktomi Common Stock (including any shares of Inktomi Common Stock which may be
acquired by Affiliate after the date of this Agreement). Inktomi may, at its
discretion, place a stock transfer notice consistent with the foregoing with its
transfer agent with respect to Affiliate's shares. Notwithstanding the
foregoing, Affiliate will not be prohibited by the foregoing from selling or
disposing of shares so long as such sale or disposition is in accordance with
the "de minimis" test set forth in SEC Staff Accounting Bulletin No. 76,
provided Affiliate has received prior written authorization from General Counsel
to Inktomi.
3. Beneficial Ownership of Stock. Except for the Inktomi Common Stock and
-----------------------------
options to purchase Inktomi Common Stock set forth in Appendix A hereto,
----------
Affiliate does not beneficially own any shares of Inktomi Common Stock or any
other equity securities of Inktomi or any options, warrants or other rights to
acquire any equity securities of Inktomi.
4. Miscellaneous.
-------------
(a) For the convenience of the parties hereto, this Agreement may be
executed in one or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same document.
(b) This Agreement shall be enforceable by, and shall inure to the
benefit of and be binding upon, the parties hereto and their respective
successors and assigns. As used herein, the term "successors and assigns" shall
mean, where the context so permits, heirs, executors, administrators, trustees
and successor trustees, and personal and other representatives.
(c) This Agreement shall be governed by and construed, interpreted and
enforced in accordance with the internal laws of the State of California.
(d) If a court of competent jurisdiction determines that any provision
of this Agreement is not enforceable or enforceable only if limited in time
and/or scope, this Agreement shall continue in full force and effect with such
provision stricken or so limited.
(e) Counsel to and accountants for the parties to the Agreement shall
be entitled to rely upon this Agreement as needed.
(f) This Agreement shall not be modified or amended, or any right
hereunder waived or any obligation excused, except by a written agreement signed
by both parties.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
-2-
IN WITNESS WHEREOF, the parties have caused this Affiliate Agreement to be
duly executed on the date and year first above written.
INKTOMI CORPORATION
By: _______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
AFFILIATE
Name of Affiliate:__________________________
By: _______________________________________
_______________________________________
Name of Signatory (if different from name of
Affiliate)
_______________________________________
Title of Signatory (if applicable)
INKTOMI CORPORATION AFFILIATE AGREEMENT
APPENDIX A
----------
Affiliate: _____________________________________________________________________
Total Number of shares of Inktomi Common Stock owned on the date hereof:________
Total Number of options to purchase Inktomi Common Stock owned on the date
hereof (including the dates of grant, vesting, exercise prices and expiration
dates):
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
EXHIBIT G
-
THE SECURITY EVIDENCED BY THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). NO SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY OR WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR
THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION.
IMPULSE BUY NETWORK, INC.
a California corporation
SECURED PROMISSORY NOTE
$1,000,000 April __, 1999
1. Principal and Interest. Impulse Buy Network, Inc., a California
----------------------
corporation (the "Company"), for value received, hereby promises to pay to
-------
Inktomi Corporation, a Delaware corporation (the "Holder"), the principal amount
------
of One Million Dollars ($1,000,000) in lawful money of the United States,
together with simple interest at a rate equal to an annual rate of [prime]
percent (__%). This Note shall become due and payable as to both accrued
interest and principal on December 31, 1999. In the event the Company fails to
pay any amount of principal or interest when due, the Holder shall thereafter be
entitled to pursue its remedies under the Security Agreement and the California
Commercial Code. All payments hereon, including any prepayment, shall be applied
first to accrued interest and second to the reduction of the principal. This
Note shall be secured by a lien on certain assets of the Company as provided
herein.
2. Security Interest. This Note is secured by a security interest and
-----------------
assignment created under a Security Agreement executed concurrently herewith
(the "Security Agreement") by the Company, as debtor, and Holder, as a secured
------------------
party, with respect to the Collateral described and defined in the Security
Agreement.
3. Prepayment. The Company may prepay this Note in whole or in part and
----------
without penalty or premium, upon five (5) days prior written notice to the
Holder.
4. Transfer of Note. This Note may be transferred only upon surrender of
----------------
the original Note for registration of transfer, duly endorsed, or accompanied by
a duly executed written instrument of transfer in form satisfactory to the
Company. Holder shall provide the Company with prompt notice of any transfer of
this Note; provided, however, that failure to provide such notice shall not void
-------- -------
the transfer. Thereupon, a new Note for like principal amount will be issued
to, and registered in the name of, the transferee. Principal is payable only to
the registered holder of the Note.
5. Waiver of Notice, Etc. The Company waives presentment for payment,
---------------------
protest, notice of protest and notice of nonpayment of this Note.
6. Failure to Pay Principal or Interest When Due. Upon the failure of
---------------------------------------------
the Company to pay any amount of principal or interest hereunder when due as set
forth in Section 1 above, Holder may proceed to protect and enforce its rights
either by suit in equity and/or by action at law, whether for the specific
performance of any covenant or agreement contained in this Note or in aid of the
exercise of any power granted in this Note, or Holder may proceed to enforce the
payment of all sums due under this Note or to enforce any other legal or
equitable right of Holder. No remedy herein conferred upon Holder is intended
to be exclusive of any other remedy and each and every such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise.
7. No Waiver. No course of dealing between the Company and Holder or any
---------
delay on the part of Holder in exercising any rights hereunder shall operate as
a waiver of any rights of Holder.
8. Miscellaneous.
-------------
a. Expenses. Following any failure of the Company to pay any amount
--------
of principal or interest hereunder when due, The Company shall pay to Holder
(and any other holder of this Note) all reasonable fees and expenses incurred by
Holder (or any other holder of this Note) in enforcing its rights under this
Note, whether or not litigation is commenced, including without limitation all
reasonable fees and expenses of attorneys and expert witnesses.
b. Governing Law. This Note shall be governed by and construed in
-------------
accordance with the laws of the State of California as applied to agreements
between California residents entered and to be performed entirely within
California.
c. Amendment. This Note and its terms may be changed, waived, or
---------
amended by the written consent of the Company and Holder.
d. Severability. In case any provision contained herein (or part
------------
thereof) shall for any reason be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or other unenforceability shall not
affect any other provision (or the remaining part of the affected provision)
hereof, but this Note shall be construed as if such invalid, illegal, or
unenforceable provision (or part thereof) had never been contained herein but
only to the extent that such provision is invalid, illegal, or unenforceable.
e. Notices. Any notices, other communication or payment required or
-------
permitted hereunder shall be in writing and shall be deemed given if delivered
personally or by commercial delivery service, or mailed by registered or
certified mail (return receipt requested) or sent via facsimile (with
acknowledgment of complete transmission) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
-2-
If to Holder: Inktomi Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Vice President, General Counsel
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company: Impulse Buy Network, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
President and Chief Executive
Officer
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (650)
-3-
This Secured Promissory Note is executed as of the date first above
written.
"COMPANY"
IMPULSE BUY NETWORK, INC.
By: _______________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
President and Chief Executive Officer
Acknowledged and Agreed:
"HOLDER"
INKTOMI CORPORATION
_______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
IMPULSE BUY NETWORK, INC.
SECURED PROMISSORY NOTE
EXHIBIT H
-
SECURITY AGREEMENT
------------------
This SECURITY AGREEMENT, dated as of April __, 1999, is executed by Impulse
Buy Network, Inc., a California corporation (the "Company" or "Debtor"), in
------- ------
favor of Inktomi Corporation, a Delaware corporation ("Secured Party").
-------------
RECITALS
--------
A. Debtor and Secured Party have entered into that certain Secured
Promissory Note (the "Note"), dated as of even date hereof, in favor of Secured
----
Party in the principal amount of One Million Dollars ($1,000,000) in lawful
money of the United States.
B. In order to induce Secured Party to extend the credit evidenced by the
Note, Debtor has agreed to enter into this Security Agreement and to grant the
security interest in the "Collateral" as defined and described below.
----------
AGREEMENT
---------
THE PARTIES AGREE AS FOLLOWS:
1. Grant of Security Interest. As security for the Company's Obligations
--------------------------
(as defined in Section 3) to the Secured Party, the Company hereby grants to the
Secured Party security interests in the Collateral (as defined in Section 2).
2. Collateral. The collateral covered by this Security Agreement
----------
consists of the following (collectively, the "Collateral"):
----------
2.1 Inventory. All inventory, raw material, work in process, and
---------
materials used or consumed in the Company's business, all warehouse receipts,
bills of lading and other documents evidencing goods now owned or hereinafter
acquired by the Company, and all goods covered thereby including accessions,
additions, improvements and all products thereof whether in possession of the
Company, warehousemen, bailees or any other person (collectively, "Inventory")
---------
and all proceeds of Inventory;
2.2 Accounts. All accounts, contract rights, chattel paper,
--------
instruments, general intangibles and rights to payment of every kind now or at
any time hereafter arising out of the business of the Company (whether arising
from sale, lease or other disposition of Inventory or from performance of
contracts for services, manufacture, storage, marketing or otherwise), including
all securities, guaranties, warranties, indemnity agreements, maintenance
agreements, insurance policies and other agreements pertaining to the same or
the property described therein (collectively, "Accounts") and all proceeds of
--------
Accounts;
2.3 Equipment. All equipment now owned or hereafter acquired by the
---------
Company, and all additions and accessions thereto (collectively "Equipment") and
---------
all the proceeds of Equipment;
2.4 Fixtures. All fixtures of the Company now owned or hereafter
--------
acquired by the Company, and all additions and accessions thereto (collectively,
"Fixtures") and all the proceeds of Fixtures;
--------
2.5 Other Personal Property. All personal property of the Company
-----------------------
not described in Sections 2.1, 2.2, 2.3 or 2.4, including, without limitation,
any source code for computer software developed and owned by the Company;
customer and supplier lists and contracts, books and records, insurance
policies, tax refunds, contracts for the purchase of real or personal property;
all United States, international and foreign patents and applications therefor
and all reissues, divisions, renewals, extensions, provisionals, continuations
and continuations-in-part thereof; all inventions (whether or not patentable),
invention disclosures, improvements, trade secrets, proprietary information,
know how, computer software programs (in both source code and object code form),
technology, technical data and customer lists, tangible or intangible
proprietary information, and all documentation relating to any of the foregoing;
all copyrights, copyrights registrations and applications therefor, and all
other rights corresponding thereto throughout the world; all industrial designs
and any registrations and applications therefor throughout the world; all trade
names, logos, common law trademarks and service marks, trademark and service
▇▇▇▇ registrations and applications therefor throughout the world; all databases
and data collections and all rights therein throughout the world; all moral and
economic rights of authors and inventors, however denominated, throughout the
world; all Web addresses, sites and domain names; all goodwill of the Company;
all deposit accounts, money, certificated securities, uncertificated securities,
instruments and documents; and any similar rights or equivalent rights related
to the foregoing anywhere in the world (collectively, "Other Personal Property")
-----------------------
and all proceeds from any sale, transfer or distribution of Other Personal
Property.
2.6 Proceeds. For purposes of this Security Agreement, "proceeds"
-------- --------
shall include, without limitation, whatever is receivable or received when
Collateral or proceeds is sold, collected, exchanged, returned, substituted or
otherwise disposed of, whether such disposition is voluntary or involuntary,
including rights to payment and return premiums and insurance proceeds under
insurance with respect to any Collateral, and all rights to payment with respect
to any cause of action affecting or relating to the Collateral.
3. Priority. By way of this Agreement, Debtor grants to Secured Party a
--------
first priority interest in the Collateral on the date hereof.
4. The Company's Obligations Secured Hereby. The Company's "Obligations"
---------------------------------------- -----------
to the Secured Party secured hereby are the following:
4.1 Note. Payment of the principal amount and interest evidenced by
----
the Note when such payment becomes due pursuant to Section 1 of the Note.
4.2 Other Sums. Payment of all other sums becoming due and payable
----------
to the Secured Party under this Security Agreement and the Note.
-2-
4.3 Performance. Performance and discharge of each and every
-----------
obligation of the Company under this Security Agreement.
5. The Company's Warranties and Representations. The Company represents
--------------------------------------------
and warrants that:
5.1 Accounts. Each Account is, or will be when it arises, a genuine
--------
Account owned by the Company free from liens, adverse claims, counterclaims,
set-offs, defaults, defenses and conditions precedent, except as otherwise
disclosed in writing to the Secured Party.
5.2 Inventory, Equipment and Other Personal Property. The Company,
------------------------------------------------
has or will have when it comes into existence, good and marketable title to the
Inventory, Equipment and Other Personal Property free and clear of all matured
liens and adverse claims and any type whatsoever except those (a) for taxes,
assessments or governmental charges or levies if the same shall not at the time
be delinquent or thereafter can be paid without penalty, or are being diligently
contested in good faith by the Company provided that the Company has provided
adequate reserves, maintains sufficient availability or has posted a bond to
prevent the enforcement of such lien; (b) those imposed by law, such as
carrier's, warehouseman's and mechanic's liens, and other similar liens arising
in the ordinary course of business which secure payment of obligations not more
than thirty days past due (except to the extent such obligations are diligently
contested in good faith by the Company, provided that the Company has provided
adequate reserves or has posted a bond to prevent the enforcement of such lien);
(c) those arising out of pledges or deposits under workers' compensation laws or
unemployment insurance; (d) leases, subleases, licenses or sublicenses granted
to others not interfering in any material respect with the business of the
Company or with the rights of the Secured Party under this Security Agreement or
the Note; (e) easements, rights of way, rights of use, restrictions, defects or
irregularities in title and other similar changes or encumbrances not
interfering in any material respect with the ordinary conduct of the business of
the Company or with the rights of the Secured Party under this Security
Agreement or the Note; and (f) automatic purchase money liens created by
purchase orders of sellers of goods to the Company in the ordinary course of
business, provided such liens are not perfected by possession or the filing of
any notices or UCC financing statements; (g) those held by banks and other
financial institutions acting as lenders to the Company pursuant to agreements
in effect as of the date hereof; and, (h) those disclosed in the Agreement and
Plan of Reorganization dated April __, 1999 between the Company and the Secured
Party or which may occur hereafter in the ordinary course of business consistent
with past practice (each of the foregoing shall be referred to herein as a
"Permitted Lien").
--------------
6. The Company's Covenants. The Company agrees covenants that:
-----------------------
6.1 No Superior Security Interests. The Company shall not grant a
------------------------------
security interest in any of the Collateral which is superior in right of
repayment to the Company's Obligations to the Secured Party, except for any
Permitted Lien.
6.2 Perfection of Security Interest. The Company shall execute and
-------------------------------
deliver such documents as the Secured Party deem necessary to create, perfect
and continue the security interests in the Collateral contemplated hereby.
-3-
6.3 Use of Collateral. The Collateral will not be used for any
-----------------
unlawful purpose or in any way that will void any insurance required to be
carried in connection therewith. The Company will keep the Collateral free and
clear of liens and adverse claims other than Permitted Liens and, as appropriate
and applicable, will keep it in good condition and repair, and will clean,
shelter, and otherwise handle and maintain the Collateral in all such ways as
are considered good practice by owners of like Collateral.
6.4 Insurance of Collateral. The Collateral will be insured at the
-----------------------
Company's sole cost against all risks commonly insured by owners of like
collateral. The Company agrees to pay when due all premiums for such insurance
and all taxes, license fees and other charges in connection with the Collateral.
6.5 Collection of Accounts. Until the Secured Party elects to do so,
----------------------
the Company shall collect with diligence all of its Accounts and proceeds of
Inventory, Equipment, Fixtures and Other Personal Property.
6.6 Fees and Costs. Upon the breach of the Company's Obligation, the
--------------
Company shall pay all expenses, including reasonable attorneys' fees, incurred
by the Secured Party in the preservation, realization, enforcement or exercise
of any of the Secured Party's rights under this Security Agreement.
7. Remedies on Default. Upon the breach of the Company's Obligations,
-------------------
the Secured Party shall have all rights, privileges, powers and remedies
provided by law for a secured party under the California UCC and this Security
Agreement, which rights, privileges, powers and remedies shall be cumulative,
and no single or partial exercise of any of them shall preclude the further or
other exercise of the same or any of them; provided, however, that the Company
shall not be deemed in breach of its Obligations under Section 4.3 unless and
until such breach remains uncured fifteen (15) days following written notice
thereof by Secured Party. By way of example and not by way of limitation, the
Secured Party may, pursuant to this Section 7, exercise any one or all of the
remedies hereinafter set forth; to the extent consistent with the rights of a
Secured Party under the California UCC:
7.1 Possession of Collateral. The Secured Party may take possession
------------------------
of all Collateral covered hereby (which Collateral the Company will assemble and
make available to the Secured Party) and complete the processing of Inventory
using the employees, facilities, equipment and other property of the Company to
do so, all at the Company's expense and without compensation to the Company.
7.2 Use, Operation and Sale of Collateral by the Secured Party. The
----------------------------------------------------------
Secured Party may use, operate, consume and sell the Collateral in its
possession as appropriate for the purpose of performing the Company's
Obligations with respect thereto. The Company and the Secured Party agree that
public or private sales, for cash or on credit, to a wholesaler or retailer or
user of collateral of the types subject to this Security Agreement, or at public
auction, are all commercially reasonable since differences in the sale prices
generally realized in the different kinds of sale are ordinarily offset by the
differences in the costs and credit risks of such sales.
-4-
7.3 Secured Party's Exercise of Rights. The Secured Party and the
----------------------------------
Company agree that any exercise of the rights, privileges, powers and remedies
conferred upon the Secured Party under this Security Agreement or by law shall
be executed and administered to ensure that Secured Party has a reasonable
opportunity to participate in any such right, privilege, power or remedy, pro
rata based on the outstanding principal of the Note held by Secured Party.
8. Payments After Demand. All payments received and amounts realized by
---------------------
the Secured Party pursuant to Section 7, including all such payments and amounts
received after any amounts of principal and interest outstanding under the Note
becomes due and payable pursuant to Section 1 of the Note, as well as all
payments or amounts then held or thereafter received by the Secured Party as
part of the Collateral while any breach of the Company's Obligations shall be
continuing, shall be promptly applied and distributed by the Secured Party in
the following order of priority:
(i) first, to the payment of all costs and expenses, including legal
expenses and attorneys fees, incurred or made hereunder by the Secured Party,
including any such costs and expenses of foreclosure or suit, if any, and of any
sale or the exercise of any other remedy under Section 7, and of all taxes,
assessments or liens superior to the lien granted under this Security Agreement,
except any taxes, assessments or other superior lien subject to which any said
sale under Section 7 hereof may have been made;
(ii) second, to the payment to the Secured Party the amount then
owing or unpaid on the Note, such application to be made upon presentation of
the Note and the notation thereon of the payment, if partially paid, or the
surrender and cancellation thereof, if fully paid; and
(iii) third, to the payment of the balance or surplus, if any, to
the Company, the Company's successors and assigns, or to whomsoever may be
lawfully entitled to receive the same.
9. The Secured Party's Right to Cure; Reimbursement. In the event the
------------------------------------------------
Company should fail to do any act as herein provided, the Secured Party may,
but without obligation to do so, without notice to or release of the Company
from any obligation hereof, make or do the same in such manner and to such
extent as the Secured Party may deem necessary to protect the Collateral
including, without limitation, the defense of any action purporting to affect
the Collateral, or the rights or powers of the Secured Party hereunder, at the
Company's expense.
10. Assigns and Successors. This Security Agreement, together with the
----------------------
covenants and warranties contained in it, shall inure to the benefit of the
Secured Party, their respective successors and assigns, and shall be binding
upon the Company and its respective successors and assigns.
11. Presentment, etc. Presentment, protest, notice of protest, notice of
-----------------
dishonor, and notice of nonpayment are waived with respect to any proceeds to
which the Secured Party are entitled hereunder and any rights to direct the
application of payments for security for indebtedness of the Company hereunder,
or indebtedness of customers of the Company, and any right to require
proceedings against others or to require exhaustion of security, are waived.
-5-
12. Notices. Any notices, other communication or payment required or
-------
permitted hereunder shall be in writing and shall be deemed given if delivered
personally or by commercial delivery service, or mailed by registered or
certified mail (return receipt requested) or sent via facsimile (with
acknowledgment of complete transmission) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
If to Secured Party: Inktomi Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Vice President, General Counsel
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company: Impulse Buy Network, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
President and Chief Executive
Officer
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (650)
13. Governing Law. This Security Agreement shall be governed by the laws
-------------
of the State of California applicable to contracts entered into and wholly to be
performed in California.
14. Enforcement. If any portion of this Security Agreement is determined
-----------
to be invalid or unenforceable, the remainder shall be valid and enforceable to
the maximum extent possible.
15. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-6-
IN WITNESS WHEREOF, the parties have caused this Security Agreement to be
executed as of the day and year first above written.
"DEBTOR" IMPULSE BUY NETWORK, INC.
a California corporation
___________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
"SECURED PARTY" INKTOMI CORPORATION
a Delaware Corporation
___________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
EXHIBIT I
-
April 30, 1999
Impulse Buy Network, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We have acted as counsel to Inktomi Corporation, a Delaware corporation
("Parent"), in connection with the merger (the "Merger") of IC Acquisition
Corp., a California corporation and a wholly-owned subsidiary of Parent ("Merger
Sub"), with and into Impulse Buy Network, Inc., a California corporation
("Impulse"), pursuant to the Agreement and Plan of Reorganization by and among
Parent, Merger Sub and Impulse dated as of April 21, 1999 (the "Reorganization
Agreement"). This opinion is furnished to you pursuant to Section 7.2(c) of the
Reorganization Agreement. Unless otherwise defined herein, the capitalized
terms used in this opinion have the meanings given to them in the Reorganization
Agreement.
We have acted as counsel for Parent and Merger Sub in connection with the
negotiation of the Reorganization Agreement and the effectuation of the Merger.
As such counsel, we have made such legal and factual examinations and inquiries
as we have deemed advisable or necessary for the purposes of rendering this
opinion. In addition, we have examined originals or copies of documents,
corporate records and other writings which we consider relevant for the purposes
of this opinion. In such examination, we have assumed the genuineness of all
signatures on original documents, the conformity to original documents of all
copies submitted to us and the due execution and delivery of all documents by
any party other than Parent and Merger Sub where due execution and delivery are
a prerequisite to the effectiveness thereof.
As used in this opinion, the expressions "to our knowledge," or "known to
us," or similar language with reference to matters of fact means that, after an
examination of documents made available to us by Parent and Merger Sub, and
after inquiries of officers of Parent and Merger Sub, but without any further
independent factual investigation, we find no reason to believe that the
opinions expressed herein are factually incorrect. Further, the expression "to
our knowledge" with reference to matters of fact refers to the current actual
knowledge of the attorneys of this firm who have worked on matters for Parent
and Merger Sub solely in connection with the Reorganization Agreement and the
transactions contemplated thereby. Except to the extent expressly set forth
herein or as we otherwise believe to be necessary to our opinion, we have not
undertaken any independent investigation to determine the existence or absence
of any fact, and
Impulse Buy Network, Inc.
April 30, 1999
Page 2
no inference as to our knowledge of the existence or absence of any fact should
be drawn from our representation of Parent and Merger Sub or the rendering of
the opinions set forth below.
For purposes of this opinion, we are assuming that you have all requisite
power and authority, and have taken any and all necessary corporate action, to
execute and deliver the Reorganization Agreement and we assume that the
representations and warranties made by you in the Reorganization Agreement and
pursuant thereto are true and correct.
The opinions hereinafter expressed are subject to the following
qualifications:
A. We express no opinion as to the effect of rules of law governing
specific performance, injunctive relief or other equitable remedies (regardless
of whether any such remedy is considered in a proceeding at law or in equity);
B. We express no opinion as to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium and other similar federal or state laws
affecting the rights of creditors;
C. We express no opinion as to compliance with the anti-fraud provisions
of state and federal laws, rules and regulations concerning the issuance of
securities;
D. We express no opinion as to the enforceability of any of the
agreements attached as exhibits to the Reorganization Agreement, other than the
Declaration of Registration Rights;
E. We express no opinion as to the enforceability of the indemnification
provisions of Section 6 of the Declaration of Registration Rights to the extent
the provisions thereof may be subject to limitations of public policy and the
effect of applicable statutes and judicial decisions; and
F. We are members of the Bar of the State of California and we are not
expressing any opinion as to any matter relating to laws of any jurisdiction
other than the laws of the United States of America, the Delaware General
Corporation Law and the laws of the State of California.
Based upon and subject to the foregoing, and as except as set forth in the
Reorganization Agreement, we are of the opinion that:
1. Parent is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware and is duly qualified to do
business as a foreign corporation in the State of California. Merger Sub is a
corporation duly organized, validly
Impulse Buy Network, Inc.
April 30, 1999
Page 3
existing, and in good standing under the laws of the State of California. Each
of Parent and Merger Sub has the corporate power to own its properties and to
carry on its business as now being conducted.
2. Parent and Merger Sub have all requisite corporate power and authority
to enter into the Reorganization Agreement and to consummate the transactions
contemplated thereby and Parent has all requisite corporate power and authority
to enter into the Declaration of Registration Rights. The execution and delivery
of the Reorganization Agreement and the consummation of the transactions
contemplated thereby have been duly authorized by all necessary corporate action
on the part of Parent and Merger Sub and the execution and delivery of the
Declaration of Registration Rights has been duly authorized by all corporate
action on the part of Parent. The Reorganization Agreement has been duly
executed and delivered by Parent and Merger Sub and constitutes the valid and
binding obligation of Parent and Merger Sub, enforceable against them in
accordance with its terms. The Declaration of Registration Rights has been duly
executed and delivered by Parent and constitutes the valid and binding
obligation of Parent, enforceable against it in accordance with its terms. The
execution and delivery of the Reorganization Agreement and the Declaration of
Registration Rights do not, and the consummation of the transactions
contemplated thereby will not, result in any violation of or default (with or
without notice or lapse of time, or both), under any provision of the
Certificate of Incorporation or Bylaws of Parent or the Articles of
Incorporation or Bylaws of Merger Sub or any contract or other agreement filed
as an exhibit to the most recent annual report of Parent on Form 10-K or the
quarterly report of Parent on Form 10-Q for the quarter ended December 31, 1998
or, to our knowledge, any order, decree, statute, law, ordinance, rule or
representation applicable to Parent or Merger Sub, the violation or default of
which would have a material adverse effect upon the ability of Parent or Merger
Sub to consummate the Merger, or a Material Adverse Effect on Parent. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity, is required by or with respect to Parent
or Merger Sub in connection with the execution and delivery of the
Reorganization Agreement by Parent and Merger Sub or the consummation by Parent
and Merger Sub of the transactions contemplated thereby except for (i) the
filing of the Agreement of Merger with the Secretary of State of the State of
California or (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state and federal securities laws.
3. The shares of Parent Common Stock to be issued pursuant to the Merger
will, when issued and delivered in accordance with the Reorganization Agreement,
be duly authorized, validly issued, fully paid and non-assessable, and free of
liens, encumbrances, or preemptive or similar rights contained in the
Certificate of Incorporation or Bylaws of Parent;
Impulse Buy Network, Inc.
April 30, 1999
Page 4
provided, however, that such shares are subject to such restrictions as are
-------- -------
expressly set forth in the Reorganization Agreement and the Declaration of
Registration Rights, and may be subject to restriction on transfer under state
and/or federal securities laws.
4. To our knowledge, there is no action, suit, proceeding, claim,
arbitration or investigation pending, or as to which Parent has received any
notice of assertion against Parent which in any manner challenges or seeks to
prevent, enjoin, alter, or materially delay any of the transactions contemplated
by the Reorganization Agreement.
5. Subject to the accuracy of representations provided by the Impulse
shareholders, the Parent Common Stock to be issued pursuant to the
Reorganization Agreement will be exempt from the registration requirements of
the Securities Act of 1933, as amended.
This opinion is solely for your benefit and is not to be made available to
or relied upon by any other person without our express prior written consent.
Very truly yours,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
EXHIBIT J
-
April 30, 1999
Inktomi Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇. ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Impulse! Buy Network, Inc.
Ladies and Gentlemen:
We have acted as special counsel to Impulse Buy Network, Inc., a California
corporation (the "Company"), in connection with that certain Agreement and Plan
of Reorganization, dated as of April 21, 1999 (the "Agreement"), by and among
the Company, Inktomi Corporation, and IC Acquisition Corp. This opinion letter
is required under Section 7.3(d) of the Agreement. Except as otherwise
indicated, capitalized terms used herein are defined as set forth in the
Agreement.
In connection with this opinion letter, we have examined the Agreement
(including all Schedules and Exhibits thereto) and the documents required to be
delivered by the Company at the Closing (the "Company's Closing Documents"). We
have also examined the organizational documents of the Company and such
corporate records and other documents and have made such examination of law as
we have deemed necessary in connection with this opinion letter.
In rendering this opinion letter, as to questions of fact material to this
opinion letter we have relied, to the extent we have deemed such reliance
appropriate, without investigation, on certificates and other communications
from public officials and others and from directors, officers and employees of,
and accountants for, the Company and on representations of the Company set forth
in the Agreement, including, without limitation, the Certificate of Company
Officers dated April 30, 1999, a copy of which is delivered to you herewith.
Whenever a statement herein is qualified by "known to us," "to our
knowledge," or similar phrase, it indicates that in the course of our
representation of the Company no information that would give us current actual
knowledge of the inaccuracy of such statement has come to the attention of the
attorneys in this firm who have rendered legal services in connection with this
transaction. We have not made any special or independent investigation to
determine
Inktomi Corporation
April 30, 1999
Page 2
the accuracy of such statement, except as expressly described herein. No
inference as to our knowledge of any matters bearing on the accuracy of such
statement should be drawn from the fact of our representation of the Company in
other matters, if any, in which such attorneys are not involved. With respect
to opinions which are qualified by reference to materiality, we have relied to a
large extent upon the opinions of officers and representatives of the Company
and the Shareholders.
In connection with this opinion letter, we have assumed the accuracy and
completeness of all documents and records that we have reviewed, the genuineness
of all signatures other than those on behalf of the Company, the authenticity of
the documents submitted to us as originals and the conformity to authentic
original documents of all documents submitted to us as certified, conformed or
reproduced copies. We have further assumed that:
(a) All parties to the Merger and other transactions contemplated by the
Agreement (collectively, the "Contemplated Transactions") other than
the Company (collectively, the "Other Parties") have legal existence
and all natural persons involved in the Contemplated Transactions have
sufficient legal capacity to enter into and perform their respective
obligations under the Agreement and to carry out their roles in the
Contemplated Transactions;
(b) The Contemplated Transactions have been duly authorized by all
necessary corporate or other action on the part of all Other Parties;
(c) Persons acting on behalf of all Other Parties, including agents and
fiduciaries, were duly authorized so to act;
(d) Each of the Other Parties has complied with all legal requirements
applicable to it that affect the Contemplated Transactions or are
necessary to make the Agreement and the Company's Closing Documents
enforceable against it;
(e) Each of the Other Parties has complied with all legal requirements
pertaining to its status as such status relates to its rights to
enforce the Agreement and the Company's Closing Documents against the
Company;
(f) The Company holds the requisite title and rights to its respective
properties;
(g) There has not been any mutual mistake of fact or misunderstanding,
fraud, duress or undue influence;
(h) The Contemplated Transactions comply with any test of good faith or
fairness required by law; and
(i) All statutes, judicial and administrative decisions, rules and
regulations of governmental agencies or self-regulatory bodies
applicable to this opinion letter
Inktomi Corporation
April 30, 1999
Page 3
are generally available to lawyers practicing in California and are
in a format that makes legal research reasonably feasible.
The opinions set forth herein are subject to the following qualifications:
(i) the effects of bankruptcy, insolvency, reorganization, receivership,
moratorium and other similar laws affecting the rights and remedies
of creditors generally;
(ii) the effects of the rules governing the availability of specific
performance, injunctive relief or other equitable remedies and
general principles of equity, whether applied by a court of law or
equity, with respect to the performance and enforcement of the
Agreement and the Company's Closing Documents;
(iii) the effect of applicable court decisions, invoking statutes or
principles of equity, which have held that certain covenants and
provisions of agreements are unenforceable where the breach of such
covenants or provisions imposes restrictions or burdens upon an
obligor, and it cannot be demonstrated that the enforcement of such
restrictions or burdens is necessary for the protection of the
creditor, or which have held that the creditor's enforcement of such
covenants or provisions under the circumstances would violate the
creditor's covenants of good faith and fair dealing implied under
California law;
(iv) the effect of California statutes and rules of law which cannot be
waived prospectively by a obligor;
(v) we express no opinion as to the enforceability of any covenant not-
to-compete or as to the effect of any anti-trust laws;
(vi) any limitations under applicable law which relate to the
indemnification provisions of the Agreement; and
(vii) with respect to the opinions in paragraph (B) as to outstanding
securities of the Company, we have relied entirely upon a review of
the minute books and shareholder records of the Company, and upon
certificates, statements and representations of representatives of
the Company although we have no reason to believe that such minute
books, shareholder records and certificates are erroneous or
incomplete.
Based upon and subject to the foregoing and to the last paragraph of this
letter, it is our opinion that:
(A) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of California, and is duly
qualified or licensed as a foreign corporation to do business and is
in good standing in each jurisdiction in which the failure to be so
qualified or licensed would have a Material Adverse
Inktomi Corporation
April 30, 1999
Page 4
Effect on the Company. The Company has all requisite corporate power
and authority to own and operate its properties, to lease the
properties it currently operates under lease, and to carry on its
business as now being conducted.
(B) Immediately prior to the Effective Time, the authorized capitalization
of the Company is as follows:
(1) Preferred Stock. 4,041,174 shares of Preferred Stock, no par
---------------
value (the "Preferred Stock"), 1,162,652 of which shares have
been designated Series A Preferred Stock, of which 1,042,170 are
issued and outstanding, and 2,878,522 of which shares have been
designated Series B Preferred Stock, 2,801,946 of which are
issued or outstanding. The outstanding shares of Preferred Stock
have been duly authorized and validly issued, and, to our
knowledge, are fully paid and nonassessable.
(2) Common Stock. 15,000,000 shares of common Stock, no par value
------------
(the "Common Stock"), 3,417,477 of which have been duly
authorized and validly issued, and to our knowledge, are fully
paid and nonassessable.
(3) Rights to Acquire Stock. Except for (i) the conversion
-----------------------
privileges of Preferred Stock; (ii) the rights of first refusal
as set forth in the Company Schedules; (iii) the outstanding
warrant to purchase 120,482 shares of Series A Preferred Stock;
(iv) the outstanding warrant to purchase 76,576 shares of Series
B Preferred Stock; (v) 1,066,987 shares of Common Stock reserved
for issuance to employees, consultants, officers, or directors of
the Company pursuant to stock options, of which, to our
knowledge, 779,725 are currently outstanding, or pursuant to
stock purchase rights, of which, to our knowledge, none are
currently outstanding and (vi) the option commitments set forth
in Schedule 2.3(b) of the Agreement, there are, to our knowledge,
no options, stock purchase rights, warrants, conversion
privileges, commitments or agreements of any character, written
or oral, to which the Company is a party or by which it is bound
obligating the Company to grant, extend, accelerate the vesting
of, change the price of, otherwise amend or enter into any such
option, warrant, call, right, commitment or agreement.
(C) At or before the Effective Time, any rights of any holder or
prospective holder of the Company's securities to cause such
securities to be registered under the Securities Act, and any
information rights, voting rights, rights of co-sale, rights to
maintain equity percentage, rights of first refusal, or management
rights, in each case of granted pursuant to (i) that certain
Registration and Information Rights Agreement dated as of July 27,
1998, as subsequently amended on October 22, 1998, by and between the
Company and each of the persons or entities listed on Exhibit A and
Exhibit A-1 thereto, (ii) that certain Right of First
Inktomi Corporation
April 30, 1999
Page 5
Refusal and Co-Sale Agreement dated as of July 27, 1998 by and among
the Company and those persons or entities listed on Schedule A and
Schedule B thereto, (iii) that certain Voting Agreement dated as of
July 27, 1998, as subsequently amended on October 22, 1998, by and
among the Company and the persons or entities listed on Exhibit A
thereto, and (iv) that certain Management Rights letter from the
Company to Softbank Technology Ventures IV, L.P. dated July 27, 1998
shall have been terminated, except as expressly contemplated by the
Agreement.
(D) The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Agreement. The
execution, delivery and performance of the Agreement have been duly
authorized by all necessary corporate action of the Company, and the
Agreement has been duly executed and delivered by the Company. The
Agreement constitutes a legally valid and binding obligation of the
Company, enforceable against the Company according to its terms.
(E) Subject to the same exceptions as set forth in paragraph (F) below,
the execution, delivery and performance of the obligations of the
Company under the Agreement, do not (i) to our knowledge, violate any
provision of any federal or California law, rule or regulation
applicable to the Company, (ii) violate any provision of the Company's
Articles of Incorporation, as amended, or Bylaws, as amended, or (iii)
to our knowledge, conflict with or constitute a material default under
the provisions of judgments, writs, decrees or orders, if any,
specifically identified in the Company Schedules or the provisions of
any Material Agreement.
(F) The execution, delivery and performance of the obligations of the
Company under the Agreement do not, to our knowledge, require any
consents, approvals, permits, orders or authorizations of, or any
qualifications, registrations, designations, declarations or filings
with, any federal or California state governmental authority on the
part of the Company except (i) as have been obtained and are
effective, (ii) the filing of the Agreement of Merger with the
California Secretary of State, (iii) such consents, waivers,
approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state
securities laws, and (iv) such other consents, waivers, approvals,
orders, authorizations, registrations, declarations and filings which
if not made or obtained would not have a Material Adverse Effect on
the Company.
(G) To our knowledge, except as set forth in the Company Schedules, there
is no action, suit, proceeding or investigation pending against the
Company before any court or administrative agency (i) that questions
the validity of the Agreement or the right of the Company to enter
into the Agreement and the Company's Closing
Inktomi Corporation
April 30, 1999
Page 6
Documents or (ii) that, if determined adversely, would be likely to
result in a Material Adverse Effect on the Company.
Our opinions expressed above are limited to the laws of the State of
California and the laws of the United States of America, and we do not express
any opinion herein concerning any other law. In addition, we express no opinion
herein concerning any statutes, ordinances, administrative decisions, rules or
regulations of any county, town, municipality or special political subdivision
(whether created or enabled through legislative action at the federal, state or
regional level). This opinion letter is given as of the date hereof and we
assume no obligation to advise you of changes that may hereafter be brought to
our attention. We assume that you know of no agreements, understandings or
negotiations between the parties not set forth in the Agreement or the Agreement
of Merger that would modify the terms or rights and obligations of the parties
thereunder. This opinion letter is solely for the information of the addressee
hereof and is not to be quoted in whole or in part or otherwise referred to, nor
is it to be filed with any governmental agency or any other person, without our
prior written consent. No one other than the addressee hereof is entitled to
rely on this opinion letter. This opinion letter is rendered solely for
purposes of the Contemplated Transactions and should not be relied upon for any
other purpose.
Very truly yours,