EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
INKTOMI CORPORATION
WS ACQUISITION CORPORATION
AND
WEBSPECTIVE SOFTWARE, INC.
Dated as of September 15, 1999
TABLE OF CONTENTS
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ARTICLE I - THE MERGER..................................................... 2
1.1 The Merger.................................................... 2
1.2 Effective Time................................................ 2
1.3 Effect of the Merger.......................................... 2
1.4 Certificate of Incorporation; Bylaws.......................... 2
1.5 Directors and Officers........................................ 2
1.6 Merger Consideration; Effect on Capital Stock................. 3
1.7 Dissenting Shares............................................. 5
1.8 Surrender of Certificates; Exchange Agent..................... 5
1.9 No Further Ownership Rights in Company Common Stock........... 7
1.10 Lost, Stolen or Destroyed Certificates........................ 7
1.11 Tax and Accounting Consequences............................... 7
1.12 Taking of Necessary Action; Further Action.................... 7
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY................. 8
2.1 Organization of the Company................................... 8
2.2 Subsidiaries.................................................. 8
2.3 Company Capital Structure..................................... 8
2.4 Authority..................................................... 9
2.5 No Conflict................................................... 10
2.6 Consents...................................................... 10
2.7 Company Financial Statements.................................. 10
2.8 No Undisclosed Liabilities.................................... 10
2.9 No Changes.................................................... 11
2.10 Tax and Other Returns and Reports............................. 13
2.11 Restrictions on Business Activities........................... 14
2.12 Title to Properties; Absence of Liens and Encumbrances........ 14
2.13 Governmental Authorization.................................... 15
2.14 Intellectual Property......................................... 15
2.15 Year 2000 Compliance.......................................... 19
2.16 Product Warranties; Defects; Liabilities...................... 19
2.17 Agreements, Contracts and Commitments......................... 20
2.18 Change of Control Payments.................................... 21
2.19 Interested Party Transactions................................. 21
2.20 Compliance with Laws.......................................... 22
2.21 Litigation.................................................... 22
2.22 Insurance..................................................... 22
2.23 Minute Books.................................................. 22
2.24 Environmental Matters......................................... 22
2.25 Brokers' and Finders' Fees.................................... 23
2.26 Employee Matters and Benefit Plans............................ 23
2.27 Bank Accounts................................................. 27
2.28 Indemnification Obligations................................... 27
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TABLE OF CONTENTS
(continued)
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2.29 Pooling of Interests.......................................... 27
2.30 Cisco Systems................................................. 27
2.31 FMR Corp...................................................... 28
2.32 Digital Island, Inc........................................... 28
2.33 Accounts Receivable........................................... 28
2.34 Representations Complete...................................... 28
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...... 29
3.1 Organization of Parent and Merger Sub......................... 29
3.2 Authority..................................................... 29
3.3 Parent Common Stock........................................... 29
3.4 SEC Filings; Parent Financial Statements...................... 30
3.5 No Material Adverse Change.................................... 30
ARTICLE IV - SECURITIES ACT COMPLIANCE; REGISTRATION....................... 30
4.1 Securities Act Exemption...................................... 30
4.2 Stock Restrictions............................................ 31
4.3 The Company Stockholders' Restrictions Regarding
Securities Law Matters........................................ 31
4.4 Registration Rights........................................... 31
ARTICLE V - CONDUCT PRIOR TO THE EFFECTIVE TIME............................ 32
5.1 Conduct of Business of the Company............................ 32
ARTICLE VI - ADDITIONAL AGREEMENTS......................................... 34
6.1 Preparation of Information Statement.......................... 34
6.2 Stockholder Approval.......................................... 35
6.3 Access to Information......................................... 35
6.4 Confidentiality............................................... 35
6.5 Public Disclosure............................................. 35
6.6 Consents...................................................... 35
6.7 FIRPTA Compliance............................................. 36
6.8 Legal Conditions to the Merger................................ 36
6.9 Best Efforts; Additional Documents and Further Assurances..... 36
6.10 Notification of Certain Matters............................... 36
6.11 Pooling Accounting............................................ 36
6.12 Reorganization................................................ 37
6.13 Declaration of Registration Rights............................ 37
6.14 Affiliate Agreements.......................................... 37
6.15 Form S-8...................................................... 37
6.16 Nasdaq National Market........................................ 37
6.17 Voting Agreements............................................. 37
6.18 Employment and Non-Competition Agreements..................... 37
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TABLE OF CONTENTS
(continued)
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6.19 Blue Sky Laws................................................. 37
6.20 Indemnification............................................... 38
6.21 Benefit Arrangements.......................................... 38
6.22 Termination of Company Investor Rights........................ 38
6.23 No Solicitation............................................... 38
6.24 Options....................................................... 39
6.25 Severance..................................................... 39
6.26 Termination of Advisory Board................................. 39
ARTICLE VII - CONDITIONS TO THE MERGER..................................... 39
7.1 Conditions to Obligations of Each Party to Effect the
Merger........................................................ 39
7.2 Additional Conditions to Obligations of the Company........... 40
7.3 Additional Conditions to the Obligations of Parent and
Merger Sub.................................................... 41
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
ARTICLE X - GENERAL PROVISIONS............................................. 53
10.1 Notices....................................................... 53
10.2 Expenses...................................................... 54
10.3 Interpretation................................................ 54
10.4 Counterparts.................................................. 55
10.5 Entire Agreement; Assignment.................................. 55
10.6 Severability.................................................. 55
10.7 Other Remedies................................................ 55
10.8 Governing Law................................................. 55
10.9 Rules of Construction......................................... 55
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 September 15, 1999 among Inktomi Corporation, a Delaware
corporation ("Parent"), WS Acquisition Corporation, a Delaware corporation and a
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wholly-owned subsidiary of Parent ("Merger Sub"), and WebSpective Software,
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Inc., a Delaware 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 Delaware General Corporation Law ("Delaware Law"). Upon
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consummation 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 be
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treated as a "pooling of interests."
C. The Board of Directors of the Company has (i) determined that the
Merger is fair and in the best interests of the Company and its stockholders,
(ii) approved this Agreement, the Merger and the other transactions contemplated
by this Agreement and (iii) determined to unanimously recommend that the
stockholders 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
stockholders of the Company listed on Schedule 6.17 hereto is entering into a
Voting Agreement substantially in the form attached hereto as Exhibit A; as a
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condition and inducement to the Parent's willingness to enter into this
Agreement, each of the affiliate stockholders of the Company listed on Schedule
6.14 hereto is entering into an Affiliate Agreement substantially in the form
attached hereto as Exhibit B; as a condition and inducement to the Parent's
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willingness to enter into this Agreement, certain employees listed on Schedule
6.18 hereto are entering into an Employment Agreement substantially in the form
attached hereto as Exhibit C; and as a condition and inducement to the Company's
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willingness to enter into this Agreement, each of the affiliate stockholders of
Parent is entering into an Affiliate Agreement substantially in the form
attached hereto as Exhibit F.
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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 Delaware Law,
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation and as a wholly-owned subsidiary of Parent. The Company as
the surviving corporation after the Merger is hereinafter sometimes referred to
as the "Surviving Corporation."
1.2 Effective Time. 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 Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., 000 Xxxx Xxxx Xxxx, Xxxx
Xxxx, Xxxxxxxxxx, unless another place or time is agreed to by Parent and the
Company. The date upon which the Closing actually occurs is herein referred to
as the "Closing Date." On the Closing Date, the parties hereto shall cause the
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Merger to be consummated by filing a Certificate of Merger, in substantially the
form attached hereto as Exhibit D (the "Certificate of Merger"), with the
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Secretary of State of the State of Delaware, in accordance with the relevant
provisions of Delaware Law (the time of acceptance by the Secretary of State of
Delaware of such filing being referred to herein as the "Effective Time"). The
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parties currently intend that the Closing Date will occur on or prior to
October 1, 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 Delaware Law. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the rights and property of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts and liabilities of the Company and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificate of Incorporation; Bylaws.
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(a) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time, the Certificate of Incorporation of Merger Sub
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Certificate of Incorporation;
provided, however, that Article I of the Certificate of Incorporation of the
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Surviving Corporation shall be amended to read as follows: "The name of the
corporation is WebSpective Software, 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 Certificate of
Incorporation and Bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the initial officers of the
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Surviving Corporation, each to hold office in accordance with the Bylaws of the
Surviving Corporation.
1.6 Merger Consideration; Effect on Capital Stock. The aggregate number of
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shares of common stock of Parent ("Parent Common Stock") to be issued (including
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Parent Common Stock to be reserved for issuance upon exercise of any of the
Company's outstanding 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 unexpired and
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unexercised options, warrants and stock purchase rights to acquire Company
Capital Stock ("Company Capital Stock Number") shall be the result of
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$105,854,000 divided by the average last reported sale price of Parent's Common
Stock on The Nasdaq National Market as reported on The Wall Street Journal over
the fifteen (15) trading day period ending on the trading day immediately
preceding the Closing Date ("Aggregate Share Number"). No adjustment shall be
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made in the number of shares of Parent Common Stock issued in the Merger as a
result of any cash proceeds received by the Company from the date hereof to the
Closing Date pursuant to the exercise of options, 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 Certificate 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(c) and any "Dissenting Shares" (as defined and to the
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extent provided in Section 1.7)) 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 result of the Aggregate Share Number divided by the
Company Capital Stock Number (the "Exchange Ratio") upon surrender of the
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certificate representing such share of Company Capital Stock in the manner
provided in Section 1.8.
(b) Escrow. Ten percent (10%) of the number of shares of Parent
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Common Stock to be issued at the Effective Time pursuant to Section 1.6(a) which
are not subject to any right of repurchase, risk of forfeiture or other
condition in favor of the Surviving Corporation ("Repurchase Right") shall be
held in escrow (the "Escrow Amount") pursuant to Article VIII of this Agreement
to compensate Parent and its affiliates (including the Surviving Corporation)
for any "Losses" (as defined in Section 8.2 hereof) incurred in connection with
this Agreement and the transactions contemplated hereby. To the extent that any
shares of Parent Common Stock are subject to any Repurchase Right, then the
escrow amount for such stockholder shall be determined on the basis of shares of
Parent Common Stock not subject to any Repurchase Right.
(c) Cancellation of Parent-Owned and Company-Owned Stock. Each share
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of Company Capital Stock owned by Merger Sub, Parent, the Company or any direct
or indirect
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wholly-owned subsidiary of Parent or of the Company immediately prior to the
Effective Time shall be canceled and extinguished without any conversion
thereof.
(d) Stock Options. At the Effective Time, all options to purchase
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Company Common Stock then outstanding under the Company's 1997 Stock Option
Plan, as amended (the "Option Plan"), or otherwise, shall be assumed by Parent
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in accordance with provisions described below.
(i) At the Effective Time, each outstanding option to purchase
shares of Company Common Stock (each a "Company Option") under the Option Plan
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or otherwise, whether vested or unvested, shall be, in connection with the
Merger, assumed by Parent. Each Company Option so assumed by Parent under this
Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the Option Plan and/or as provided in the respective
option agreements governing such Company Option immediately prior to the
Effective Time, except that (A) such Company Option shall be exercisable for
that number of whole shares of Parent Common Stock equal to the product of the
number of shares of Company Common Stock that were reserved for issuance upon
exercise of such Company Option immediately prior to the Effective Time
multiplied by the Common Exchange Ratio, rounded down (in the case of Company
Options granted under the Option Plan) to the nearest whole number of shares of
Parent Common Stock and (B) the per share exercise price for the shares of
Parent Common Stock issuable upon exercise of such assumed Company Option shall
be equal to the quotient determined by dividing the exercise price per share of
Company Common Stock at which such Company Option was exercisable immediately
prior to the Effective Time by the Exchange Ratio, rounded up to the nearest
whole cent.
(ii) It is the intention of the parties that the Company
Options assumed by Parent qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Code to the extent the Company
Options qualified as incentive stock options immediately prior to the Effective
Time.
(iii) Promptly following the Effective Time, and in any event
within 15 days, Parent will issue to each holder of an outstanding Company
Option a document evidencing the foregoing assumption of such Company Option by
Parent.
(e) Comdisco Warrant. The Comdisco warrant to purchase shares of
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Company Preferred Stock outstanding at the Effective Time shall be, in
connection with the Merger, assumed by Parent. This warrant so assumed by Parent
under this Agreement shall continue to have, and be subject to, the same terms
and conditions set forth in the respective warrant agreements governing such
warrant immediately prior to the Effective Time, except that each such warrant
shall, following the Effective Time, be exercisable only for shares of Parent
Common Stock, in such number, and at such exercise price as is determined by
applying the Exchange Ratio in accordance with the terms of the applicable
warrant agreement.
(f) Capital Stock of Merger Sub. Each share of Common Stock of
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Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such
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shares shall continue to evidence ownership of such shares of capital stock of
the Surviving Corporation.
(g) Adjustments to Exchange Ratio. The Exchange Ratio shall be
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adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or Company Capital Stock), reorganization, recapitalization
or other like change with respect to Parent Common Stock or Company Capital
Stock occurring after the date hereof and prior to the Effective Time.
(h) Fractional Shares. No fraction of a share of Parent Common Stock
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will be issued, but in lieu thereof, each holder of shares of Company Capital
Stock who would otherwise be entitled to a fraction of a share of Parent Common
Stock (after aggregating all fractional shares of Parent Common Stock to be
received by such holder) shall be entitled to receive from Parent an amount of
cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the average closing price of a share of Parent
Common Stock for the fifteen (15) consecutive trading days ending on the trading
day immediately prior to the Closing Date, as reported on the Nasdaq National
Market.
1.7 Dissenting Shares.
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(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Capital Stock held by a holder who has demanded and
perfected appraisal or dissenters' rights for such shares in accordance with
Delaware Law and who, as of the Effective Time, has not effectively withdrawn or
lost such appraisal or dissenters' rights ("Dissenting Shares"), shall not be
converted into or represent a right to receive Parent Common Stock pursuant to
Section 1.6, but the holder thereof shall only be entitled to such rights as are
granted by Delaware Law.
(b) Notwithstanding the provisions of this Section 1.7(a), if any
holder of shares of Company Capital Stock who demands appraisal of such shares
under Delaware Law shall effectively withdraw or lose (through failure to
perfect or otherwise) the right to appraisal, then, as of the later of the
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Parent
Common Stock and fractional shares as provided in Section 1.6, without interest
thereon, upon surrender of the certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal of any shares of Company Capital Stock, withdrawals of
such demands, and any other instruments served pursuant to Delaware Law and
received by the Company and (ii) the opportunity to participate in all
negotiations and proceedings with respect to demands for appraisal under
Delaware Law. The Company shall not, except with the prior written consent of
Parent, voluntarily make any payment with respect to any demands for appraisal
of capital stock of the Company or offer to settle or settle any such demands.
1.8 Surrender of Certificates; Exchange Agent.
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(a) Exchange Agent. Prior to the Effective Time, Parent shall
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designate Norwest Bank Minnesota N.A. 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
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Time (but in any event within three (3) days thereafter), 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
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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(a) by virtue of ownership of outstanding shares of
Company Capital Stock.
(c) Exchange Procedures. Promptly after the Effective Time, the
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Corporation shall cause to be mailed to each holder of record of a certificate
or certificates (the "Certificates") which immediately prior to the Effective
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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
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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
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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
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Common Stock is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
certificate surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
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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
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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
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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,
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however, that Parent may, in its discretion and as a condition precedent to the
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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
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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
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the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to
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vest the Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of the Company and
Merger Sub, the officers and directors of the Company and Merger Sub are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub,
subject to such exceptions as are explicitly disclosed in the disclosure letter
supplied by the Company to Parent on the date hereof (the "Company Schedules")
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and dated as of the date hereof, as follows:
2.1 Organization of the Company. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Delaware. 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
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its Certificate of Incorporation and Bylaws, each as amended to date, to Parent.
2.2 Subsidiaries. The Company does not have and has never had any
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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.
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(a) The authorized capital stock of the Company consists of
13,380,660 shares of authorized Common Stock, of which 3,526,039 shares are
issued and outstanding as of the date hereof and 6,940,984 shares of authorized
Preferred Stock (the "Preferred Stock"). The authorized Preferred Stock consists
of 3,035,000 shares of authorized Series A Preferred, of which 3,028,333 shares
are issued and outstanding as of the date hereof, and 3,905,984 shares of
authorized Series B Preferred, of which 3,545,324 shares are issued and
outstanding as of the date hereof. As of the date of this Agreement, the Company
Capital Stock, including all shares subject to the Company's right of
repurchase, is held of record by the persons, with the addresses of record and
in the amounts set forth on Schedule 2.3(a). Schedule 2.3(a) also indicates for
each Company stockholder whether any shares of Company Capital Stock held by
such stockholder as of the date hereof 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 (assuming the
Merger is consummated on October 1, 1999). Except as set forth on Schedule
2.3(a), 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
-8-
Certificate of Incorporation or Bylaws of the Company or any agreement to which
the Company is a party or by which it is bound. All 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
Certificate 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.
(b) The Company has reserved 21,351,667 shares of Common Stock for
issuance to employees, directors and consultants pursuant to the Option Plan, of
which 411,961 shares, as of the date hereof, are subject to outstanding,
unexercised options, none of the shares are subject to outstanding unexercised
stock purchase rights and, as of the date hereof, 413,667 shares remain
available for future grant. Schedule 2.3(b) sets forth each outstanding Company
Option and stock purchase right as of the date hereof, 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 (assuming the Merger is consummated
on October 1, 1999). As of the date hereof the Company has reserved 506,540
shares of Common Stock and 180,660 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), as of the date hereof, 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
---------
this Agreement by the Company's stockholders, the Company has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The vote required of the Company's
stockholders to duly approve the Merger and this Agreement is that number of
shares as would constitute a majority of the outstanding shares of (a) the
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
-9-
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 this Agreement by the
Company's stockholders. The Company's Board of Directors has unanimously
approved the Merger and this Agreement. This Agreement has been duly executed
and delivered by the Company and constitutes the valid and binding obligation of
the Company, enforceable in accordance with its terms.
2.5 No Conflict. Except as set forth on Schedule 2.5, subject only to the
-----------
approval of the Merger and this Agreement by the Company's stockholders, the
execution and delivery of this Agreement by the Company does not, and, as of the
Effective Time, the consummation of the transactions contemplated hereby will
not, conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (any such event, a "Conflict") (i) any provision of the
--------
Certificate of Incorporation or Bylaws of the Company or (ii) any 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 Certificate of Merger with the Delaware Secretary of State, (ii)
such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws and (iii) such other consents, waivers, authorizations, filings,
approvals and registrations which are set forth on Schedule 2.6.
2.7 Company Financial Statements. Schedule 2.7 sets forth (i) the
----------------------------
Company's audited balance sheets as of December 31, 1998 and 1997 and the
related statements of operations, changes in redeemable convertible preferred
stock and stockholder's equity, and cash flows for the year ended December 31,
1998 and for the period from inception (March 7, 1997) through December 31, 1997
and (ii) the Company's unaudited balance sheet as of August 31, 1999 (the
"Current Company Balance Sheet") and the related unaudited statements of
-----------------------------
operations and cash flows for the eight month period then ended (collectively,
the "Company Financials"). The Company Financials have been prepared in have
------------------
been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a basis consistent throughout the periods indicated and
consistent with each other, except for the absence of footnotes in the case of
unaudited Company Financials. The Company Financials present fairly the
financial condition and operating results of the Company as of the dates and
during the periods indicated therein, subject, in the case of the unaudited
financial statements, to normal year-end adjustments, which will not be material
in amount or significance and, also in the case of the unaudited financial
statements, to the adjustment set forth on Schedule 2.7.
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
-10-
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 or (ii) has not arisen in the ordinary
course of the Company's business since August 31, 1999, consistent with past
practices.
2.9 No Changes. Except as set forth in Schedule 2.9, since August 31,
----------
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;
(b) amendments or changes to the Certificate 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) material 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;
-11-
(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;
(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 2.14 below) or the entering into of any license agreement
(other than sales made end-user license agreements entered into by the Company
in the ordinary course of business consistent with past practices), 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; provided, however,
that the following shall not constitute a Material Adverse Effect: (i) changes
in economic conditions or changes in the industry in which the Company competes;
(ii) the loss of one or more customers, potential customers, distribution
partners or potential distribution partners; (iii) continued operating losses
incurred by the Company in the ordinary course of business; or (iv) the failure
of the Company's financial results
-12-
(i.e. revenue, operating loss or loss) for the quarter ended September 30, 1999
(or any period within such quarter) to meet or exceed the Company's internal
projections; 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.
(b) Tax Returns and Audits. Except as set forth in Schedule 2.10:
----------------------
(i) The Company has prepared and filed all federal, state,
local and foreign returns, estimates, information statements and reports
relating to Taxes that are required to be filed by the Company ("Returns") 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 extended the period for the assessment or collection of any
Tax.
(iv) No audit or other examination of any Return of the Company
is presently in progress, nor has the Company been notified of any request for
such an audit or other examination.
(v) As of the respective dates of the Company Financials, the
Company has had no liabilities for unpaid federal, state, local and foreign
Taxes which were 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 or made available 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.
-13-
(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) None of the Company's assets are treated as "tax-exempt
use property" within the meaning of Section 168(h) of the Code.
(ix) 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.
(x) The Company is not a party to a tax sharing or allocation
agreement nor does the Company owe any amount under any such agreement. The
Company has not been a member of an affiliated group (within the meaning of
Section 1504(a) of the Code) filing a consolidated federal income tax return.
(xi) 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.
(xii) 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.
(xiii) The Company utilizes the accrual method of accounting for
U.S. federal income tax purposes.
(xiv) The Company has not distributed the stock of any
corporation in a transaction satisfying the requirements of Section 355 of the
Code since April 16, 1997. No Company stock has been distributed in a
transaction satisfying the requirements of Section 355 of the Code since April
16, 1997.
2.11 Restrictions on Business Activities. Except as set forth on Schedule
-----------------------------------
2.11, 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
-14-
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 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:
-15-
"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 xxxx 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.
"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.
"Registered Intellectual Property" shall mean all non-abandoned 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 request 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.
-16-
(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) Except as set forth on Schedule 2.14(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.
(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, and there is not any infringement liability with
respect to, or infringement or violation by, the Company of any Intellectual
Property of another. 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) Except as set forth on Schedule 2.14(f), all necessary
registrations and renewal fees currently due in connection with the Company
Registered Intellectual Property have been made. In addition, all recordations
and certificates in connection with such Company Registered Intellectual
Property to the extent due 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 of or has obtained a
license (sufficient for the conduct of its business as currently conducted and
as proposed to be conducted), 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. Except as set forth on Schedule
2.14(g), none of the Company's 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
-17-
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.
(i) Except as set forth on Schedule 2.14(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) Except as set forth on Schedule 2.14(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 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 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.
(k) No claims with respect to Company Intellectual Property have been
asserted or, to the Company's knowledge, are threatened by any person, nor, 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 (iii)
challenging the ownership or right to use by the Company, validity or
effectiveness of any Company Intellectual Property (excluding items of Company
Intellectual Property that the Company has licensed from third parties). 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) Except as set forth on Schedule 2.10(m), none of the Company's
professional services agreements with its customers, 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) 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
-18-
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. 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 (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
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 used commercially reasonable efforts to perform an audit of its
internal operating systems and licensed third party software to the same extent
as similarly situated companies of comparable size and with comparable resources
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
-19-
Company's knowledge, there is no 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. Except as set forth on Schedule 2.16, no Company Product is subject to
any guaranty, warranty, or other indemnity beyond the applicable standard terms
and conditions of sale, license or lease. 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 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,
(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 obligating the Company to
make annual payments in excess of $10,000,
(viii) any agreement of indemnification or guaranty (other than
as set forth in end-user license agreements),
(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,
-20-
(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 open 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,
(xviii) any agreement pursuant to which the Company has advanced
or loaned any amount to any stockholder of the Company or any director, officer,
employee, or consultant other than business travel advances in the ordinary
course of business consistent with past practice, or
(xix) any other agreement that involves $25,000 or more in
future payments and 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 spouse of any of
such persons, or any trust, partnership or corporation in which any of such
persons has or has had a material economic interest), has or has had, directly
or indirectly, (i) an economic interest in any entity which furnished or sold,
or furnishes
-21-
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. There are no receivables of the Company owing by
any director, officer, employee, or consultant to the Company (or any spouse of
any such persons, or any trust, partnership, or corporation in which any of such
persons has a material 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 stockholders has agreed to,
or assumed, any obligation or duty to guaranty or otherwise assume or incur any
obligation or liability of the Company.
2.20 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.
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 in all material respects of all meetings of directors (or
committees thereof) and stockholders 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;
-22-
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 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 agreements, written or oral, 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:
-23-
(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;
(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 nor does it have any intention or commitment to do any of the
foregoing.
-24-
(c) Documents. The Company has provided or made available to Parent
---------
(i) correct and complete copies of all documents embodying or relating to each
Company Employee Plan and each Employee Agreement including 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 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 non-exempt "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
-25-
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. 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
other than Pension Plan termination) 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.
(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
to the Company's best knowledge, 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
-26-
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 stockholder, 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 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 Certificate 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 negatively affect the ability of
Parent to account for the business combination to be effected by the Merger as a
"pooling of interests."
2.30 Cisco Systems. (i) The Company has complied with all of its
-------------
obligations under the Letter dated June 19, 1998 from Atreve Software, Inc. to
Cisco Systems, Inc. ("Right of First
--------------
-27-
Negotiation") and Cisco Systems, Inc. ("Cisco") has neither pursued nor has
----------- -----
pursued nor has additional rights under the Right of First Negotiation; and (ii)
the Company has complied with all of its delivery obligations under Phase One of
the Development and License Agreement by and between Cisco and the Company
executed on December 30, 1998 ("Development Agreement") and Cisco (a) has
---------------------
accepted the materials delivered by the Company under Phase One of the
Development Agreement; and (ii) is shipping the materials delivered by the
Company under Phase One of the Development Agreement. The Company is
negotiating in good faith with Cisco an amendment to the Phase Two Delivery
Obligations of the Development Agreement.
2.31 FMR Corp. Pursuant to the Software Purchase Agreement entered into
--------
with FMR Corp. dated September 29, 1998 ("Software Purchase Agreement"), the
Company has (i) complied with all of its obligations under the Software Purchase
Agreement; and (ii) fulfilled all of its delivery obligations under Section
4.1(a) of the Software Purchase Agreement such that Fidelity's Repurchase Option
under Section 4.1(b) of the Software Purchase Agreement has not and will not
take effect.
2.32 Digital Island, Inc. The Company has complied with all of its
-------------------
obligations under the United States End Use Software License Agreement by and
between Digital Island, Inc. and the Company dated March 8, 1999 ("Digital
Island Agreement") and complied with all of its delivery obligations under
Article 9 of the Digital Island Agreement.
2.33 Accounts Receivable. The Company's accounts receivable listed on the
-------------------
Current Company Balance Sheet (i) have arisen in the normal course of business,
(ii) represent bona fide indebtedness incurred by the applicable account
debtors, and (iii) are fully collectible, subject to the Company's reasonable
reserve for bad debt, and are not subject to any bona fide defenses or set offs.
2.34 Representations Complete. None of the representations or warranties
------------------------
made by the Company (as modified by the Company Schedules), nor any statement
made in any Schedule or certificate furnished by the Company pursuant to this
Agreement, or furnished in or in connection with documents mailed or delivered
to the stockholders of the Company in connection with soliciting their consent
to 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 and
specifically excluding any information prepared by or relating to Parent or
Merger Sub), 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.
2.35 Reorganization. Neither the Company nor any of its Affiliates (as
--------------
defined in Section 6.14) has taken or agreed to take any action which would
reasonably be expected to cause the Merger to fail to qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Code.
-28-
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 Delaware. Each of Parent and Merger
Sub has the corporate power to own its properties and to carry on its business
as now being conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified would have
a material adverse effect on Parent or Merger Sub or the ability of either to
consummate the transactions contemplated hereby.
3.2 Authority. Parent and Merger Sub have all requisite corporate power
---------
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub. This
Agreement has been duly executed and delivered by Parent and Merger Sub and
constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable in accordance with its terms. 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 Certificate 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, waiver, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity or any third party (so as
not to trigger any conflict), is required by 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 Certificate of Merger with
the Secretary of State of the State of Delaware or (ii) such other consents,
waivers, 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.
-29-
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 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 any
material adverse change in the financial condition, liabilities, assets or
business of Parent.
3.6 Reorganization. Neither Parent nor Merger Sub nor any Affiliate (as
--------------
defined in Section 6.14) of Parent or Merger Sub has taken or agreed to take any
action which would reasonably be expected to cause the Merger to fail to qualify
as a tax free reorganization wihtin the meaning of Section 368(a) of the Code.
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 exemption 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 stockholders shall have provided Parent such
representations, warranties, certifications and additional information as Parent
may reasonably
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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 Stockholders' Restrictions Regarding Securities Law
---------------------------------------------------------------
Matters. Each stockholder of the Company, by virtue of the Merger and the
-------
conversion into Parent Common Stock of the Company Capital Stock held by such
stockholder, shall be bound by the following provisions:
(a) Such stockholder will not offer, sell, or otherwise dispose of
any shares of Parent Common Stock except in compliance with the Securities Act
and the rules and regulations thereunder.
(b) Such stockholder will not sell, transfer or otherwise dispose of
any shares of Parent Common Stock unless (i) such sale, transfer or other
disposition is within the limitations of and in compliance with Rule 144
promulgated by the SEC under the Securities Act and the Stockholder furnishes
Parent with reasonable proof of compliance with such Rule, (ii) in the opinion
of counsel, reasonably satisfactory to Parent and its counsel, some other
exemption from registration 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 stockholders 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 E (the "Declaration of Registration Rights").
--------- ----------------------------------
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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;
(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
-32-
respect of, in lieu of or in substitution for 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 services;
(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);
(k) Cause or permit any amendments to its Certificate 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) 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;
-33-
(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 August 31, 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 stockholders of the Company to
approve 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
-34-
obtain knowledge of any facts that might make 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
stockholders approve this Agreement and the 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 stockholders 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 Stockholder Approval. The Company shall promptly after the date
--------------------
hereof and in accordance with Delaware Law and the Company's Certificate of
Incorporation and Bylaws, use commercially reasonable efforts to obtain the
approval by the Company's stockholders of the Merger, this Agreement and the
transactions contemplated hereby. The Company shall ensure that the stockholder
approval is solicited in compliance with Delaware Law, the Certificate 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 Delaware Law to
effect the Merger. Parent will make a representative available to stockholders
to answer any questions Company stockholders 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 May 29,
1999 and amended on June 10, 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 stockholders pursuant to Section 6.2 or disclosures necessary or
desirable to obtain the consents contemplated by Section 6.6) unless approved by
Parent and the Company prior to release, provided that such approval shall not
be unreasonably withheld.
6.6 Consents. Each of Parent and the Company shall promptly apply for or
--------
otherwise seek and use commercially reasonable efforts to obtain all consents
and approvals required to be
-35-
obtained by it for the consummation of the Merger, including, with respect to
the Company, 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 the consents and approvals
required to be obtained by the Company for the consummation of the Merger are
set forth in Schedule 2.6.
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, stockholders
and affiliates not to take any action that would adversely affect the ability of
Parent to account for the business combination to be effected by the Merger as a
pooling of interests. Except for any agreements in effect as of the date hereof,
neither Parent nor the Company shall take any action, either before or after
consummation of the Merger, including the acceleration of vesting of any
options, 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.
-36-
6.12 Reorganization. It is the intent of the Company, Parent, Merger Sub
--------------
and the Surviving Corporation that this Merger qualifies as a tax-free
reorganization under Section 368(a) of the Code, and the Company, Parent, Merger
Sub and the Surviving Corporation covenant and agree not to take any actions
inconsistent with such intent.
6.13 Declaration of Registration Rights. Parent agrees that the
----------------------------------
stockholders 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.
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 C (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 15 business 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. Concurrently with the
-----------------------------------------
execution of this Agreement, the Company will cause the employees listed on
Schedule 6.18 to execute Employment and Non-Competition Agreements in the form
attached 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.
-37-
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 Company Disclosure
Schedule, and Company's Certificate 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 Certificate 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
Certificate 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 stockholders and in
effect prior to the Closing, including but not limited to rights of co-sale,
voting, registration, first refusal, board observation or information or
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
-38-
(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 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 Options. Promptly following the Closing, Parent will grant options
-------
to purchase up to 275,000 shares of its Common Stock to employees of the Company
who are retained by Parent (both permanently and in transitional roles). These
options will be granted in accordance with Parent's stock option plans and the
requirements for accounting for the Merger as a pooling of interests. The
options will generally vest over 50 months, with 12% of the shares vesting six
months following the Closing Date and 2% of the shares vesting at the end of
each calendar month thereafter, subject in each case to continued employment
with or service to Parent following the Closing.
6.25 Severance. All employees of the Company who are not retained by
---------
Parent after the Closing Date shall receive severance payments of two weeks
salary for each year of service with the Company(to be prorated accordingly for
incomplete years), with a minimum of four weeks salary to be granted to each
employee. In addition, each employee of the Company who is retained by Parent
after the Closing Date, but (i) whose employment with Parent is terminated
without cause or (ii) whose annual salary and bonus are reduced substantially
from the annual salary and bonus paid to such employee immediately prior to the
Effective Time, in either case, at any time on or prior to the first anniversary
of the Closing Date, shall receive severance payments in accordance with
Parent's severance program then in effect.
6.26 Termination of Advisory Board. The Company shall take such steps as
-----------------------------
may be necessary to provide for the termination as of the Closing of all members
of the Company's advisory board.
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:
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(a) Stockholder Approval. This Agreement shall have been approved
--------------------
and adopted by the stockholders of the Company by the requisite vote under
applicable law and the Company's Certificate of Incorporation.
(b) No Injunctions or Restraints; Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect.
(c) Opinion of Accountants. 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 Opinion. Parent and the Company shall each have received
-----------
written opinions from their counsel, Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., and
Xxxxx, Xxxxxxx & Xxxxxxxxx, 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 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.
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.
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(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 Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., counsel to Parent, in substantially
the form attached hereto as Exhibit G.
---------
(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 change attributable solely to a reduction in the trading price of
Parent's Common Stock, as reported on the Nasdaq National Market, or the failure
of Parent's financial results (i.e., revenue, operating loss or loss) for the
quarter and year ended September 30, 1999 to meet or exceed public analyst or
investor expectations, 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 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) (i) shall have been true and correct in all material respects as of
the date of this Agreement and (ii) shall be true and correct on and as of the
Effective Time with the same force and effect as if made on and as of the
Effective Time except (A) in each case, or in the aggregate, as do not
constitute a Material Adverse Effect on the Company, provided, however, such
Material Adverse Effect qualifier shall be inapplicable with respect to the
representations and warranties contained in Sections 2.3 and 2.14, (B) for
changes contemplated by this Agreement and (C) for those representations and
warranties which address matters only as of a particular date or for a
particular period, which representations and warranties shall have been true and
correct except as do not constitute a Material Adverse Effect on the Company as
of such particular date, provided, however, such Material Adverse Effect
qualifier shall be inapplicable with respect to the representations and
warranties contained in Sections 2.3 and 2.14; for purposes of this condition,
none of the events described in clauses (i) through (iv) of the last sentence of
Section 7.3(e) shall be deemed to constitute or contribute to a Material Adverse
Effect; 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, which certificate shall set forth any update of, or modification to,
the Company Schedules to reflect any exceptions to the representations and
warranties of the Company contained in this Agreement (it being understood that,
for purposes of determining the accuracy of such representations and warranties,
such update of, or modification to, the Company Schedules shall be disregarded.)
-41-
(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 7.3(c).
(d) Legal Opinion. Parent shall have received a legal opinion from
-------------
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP, legal counsel to the Company, in substantially
the form attached hereto as Exhibit H.
---------
(e) 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 the Company since August 31,
1999. For purposes of this condition, the following shall not constitute a
material adverse change: (i) changes in economic conditions or changes in the
industry in which the Company competes; (ii) the loss of one or more customers,
potential customers, distribution partners or potential distribution partners;
(iii) continued operating losses incurred by the Company in the ordinary course
of business; or (iv) the failure of the Company's financial results (i.e.
revenue, operating loss or loss) for the quarter ended September 30, 1999 (or
any period within such quarter) to meet or exceed the Company's internal
projections.
(f) Dissenters' Rights. Holders of not more than 5% of the
------------------
outstanding shares of Company Capital Stock shall have exercised, nor shall they
have any rights or continued right to exercise, appraisal or dissenters' rights
under Delaware or Massachusetts Law with respect to the transactions
contemplated by this Agreement.
(g) Termination of Company Investor Rights. Parent shall have been
--------------------------------------
furnished evidence reasonably satisfactory to it that all investor rights
granted by the Company to its stockholders and in effect prior to the Closing,
including but not limited to rights of co-sale, voting, registration, first
refusal, board observation or information or 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. All Employment
-----------------------------------------
Agreements entered into in connection with this Agreement shall continue to be
in full force and effect at the Closing.
(j) Conversion of Preferred Stock. All shares of Series A Preferred
-----------------------------
Stock and Series B Preferred Stock of the Company shall have converted into
Company Common Stock in accordance with the Company's Certificate of
Incorporation, subject to and effective upon the consummation of the Merger.
-42-
ARTICLE VIII
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 stockholders
-----------
will be deemed to have received and deposited with the Escrow Agent (as defined
below) the Escrow Amount (plus any additional shares as may be issued upon any
stock split, stock dividend or recapitalization effected by Parent after the
Effective Time) without any act of any stockholder. As soon as practicable after
the Effective Time, the Escrow Amount, without any act of any Company
stockholder, will be deposited with 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 stockholder of
the Company shall be in proportion to the aggregate Parent Common Stock which
such holder would otherwise be entitled under Section 1.6(a) and shall be in the
respective share amounts and percentages listed opposite each Company's
stockholder's names listed in a schedule to be executed by the Company and
delivered to Parent at Closing (the "Escrow Schedule"). 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. No portion of the Escrow Amount shall be contributed with
respect to Company Options or Warrants. The Escrow Fund shall be available to
compensate Parent and its affiliates for any claims, losses, liabilities,
damages, deficiencies, costs and expenses, including reasonable attorneys' fees
and expenses, and expenses of 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 $300,000, 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 $300,000 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 either legal fees or
-------- -------
investment
-43-
banking fees incurred by the Company in connection with this Agreement and the
Merger each individually exceed $125,000 and $1,500,000, such excess shall be
deemed a Loss for purposes of Article VIII and shall be immediately reimbursable
to Parent in accordance with this Article VIII (without regard to the $300,000
minimum threshold for Losses and without counting toward the $300,000
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
stockholders of the Company the remaining portion of the Escrow Fund not
required to satisfy such claims. Deliveries of Escrow Amounts to the
stockholders 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 stockholders 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 stockholder shall be deemed the record holder
of, and shall have voting, dividend, distribution and all other rights with
respect to the shares of Parent Common Stock contributed to the Escrow Fund by
such stockholder (and on any voting securities and other equity securities added
to the Escrow Fund in respect of such shares of Parent Common Stock).
-44-
(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 executive officer of Parent
(an "Officer's Certificate"): (A) stating that Parent has paid or properly
---------------------
accrued or reasonably anticipates that it will have to pay or accrue Losses, and
(B) specifying in reasonable detail the individual items of Losses included in
the amount so stated, the date each such item was paid or properly accrued, 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;
provided, however, that no shares of Parent Common Stock shall be delivered to
Parent as a result of a claim based upon an accrual or upon a substantial
likelihood of having to incur, pay or accrue Losses until such time as Parent
has actually incurred or paid Losses. All shares of Parent Common Stock subject
to such claims shall remain in the Escrow Fund until Losses are actually
incurred or paid or the Parent determines in its reasonably good faith judgment
that no Losses will be required to be incurred or paid (in which event such
shares shall be distributed to the former Company Stockholders in accordance
with Section 8.2(b)).
(ii) For the purposes of determining the number of shares of
Parent Common Stock to be delivered to Parent out of the Escrow Fund pursuant to
Section 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 fifteen (15) trading day period ending on the trading day
immediately 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.
-45-
(ii) If no such agreement can be reached after good faith
negotiation, and in any event not later than sixty (60) days after receipt of
the written objection of the Securityholder Agent, either Parent or the
Securityholder Agent may demand arbitration of the matter unless the amount of
the damage or loss is at issue in pending litigation with a third party, in
which event arbitration shall not be commenced until such amount is ascertained
or both parties agree to arbitration; and in either such event the matter shall
be settled by arbitration conducted by three arbitrators. Parent and the
Securityholder Agent shall each select one arbitrator, and the two arbitrators
so selected shall select a third arbitrator, each of which arbitrators shall be
independent and have at least ten years relevant experience. The arbitrators
shall set a limited time period and establish procedures designed to reduce the
cost and time for discovery while allowing the parties an opportunity, adequate
in the sole judgment of the arbitrators, to discover relevant information from
the opposing parties about the subject matter of the dispute. The arbitrators
shall rule upon motions to compel or limit discovery and shall have the
authority to impose sanctions, including attorneys fees and costs, to the same
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 Xxxxx 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 stockholders of the Company as represented by the
Securityholder Agent shall be deemed to be the Non-Prevailing Party. The Non-
Prevailing Party to an arbitration shall pay its own expenses, the fees of each
arbitrator, the administrative costs of the arbitration, and the expenses,
including without limitation, reasonable attorneys' fees and costs, incurred by
the other party to the arbitration, independent of the escrow fund.
(g) Securityholder Agent of the Stockholders; Power of Attorney.
-----------------------------------------------------------
(i) In the event that the Merger is approved, effective upon
such vote, and without further act of any stockholder, Xxx X. Xxxxxxxxxxx shall
be appointed as agent and attorney-in-fact (the "Securityholder Agent") for each
--------------------
stockholder of the Company (except such stockholders, if any, as shall have
perfected their dissenters' rights under Delaware Law), for and on behalf of
stockholders of the Company, to give and receive notices and communications, to
authorize delivery to Parent of shares of Parent Common Stock from the Escrow
Fund in satisfaction of claims by Parent, to object to such deliveries, to agree
to, negotiate, enter into settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to
-46-
such claims, and to take all actions necessary or appropriate in the judgment of
Securityholder Agent for the accomplishment of the foregoing. Such agency may be
changed by the stockholders of the Company from time to time upon not less than
thirty (30) days prior written notice to Parent; provided that the
Securityholder Agent may not be removed unless holders of a two-thirds interest
of the Escrow Fund agree to such removal and to the identity of the substituted
agent. Any vacancy in the position of Securityholder Agent may be filled by
approval of the holders of a majority in interest of the Escrow Fund. No bond
shall be required of the Securityholder Agent, and the Securityholder Agent
shall not receive compensation for his or her services. Notices or
communications to or from the Securityholder Agent shall constitute notice to or
from each of the stockholders of the Company.
(ii) The Securityholder Agent shall not be liable for any act
done or omitted hereunder as Securityholder Agent while acting in good faith and
in the exercise of reasonable judgment. The stockholders of the Company on whose
behalf the Escrow Amount was contributed to the Escrow Fund shall jointly and
severally indemnify the Securityholder Agent and hold the Securityholder Agent
harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Securityholder Agent and arising out
of or in connection with the acceptance or administration of the Securityholder
Agent's duties hereunder, including the reasonable fees and expenses of any
legal counsel retained by the Securityholder Agent.
(h) Actions of the Securityholder Agent. A decision, act, consent or
-----------------------------------
instruction of the Securityholder Agent shall constitute a decision of all the
stockholders for whom a portion of the Escrow Amount otherwise issuable to them
are deposited in the Escrow Fund and shall be final, binding and conclusive upon
each of such stockholders, and the Escrow Agent and Parent may rely upon any
such written decision, consent or instruction of the Securityholder Agent as
being the decision, consent or instruction of each every such stockholder of the
Company. The Escrow Agent and Parent are hereby relieved from any liability to
any person for any acts done by them in accordance with such decision, consent
or instruction of the Securityholder Agent.
(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
stockholders from any obligation hereunder unless the Securityholder Agent and
the Company stockholders are thereby materially prejudiced in the defense of
such claim (and then solely to the extent of such prejudice). The Securityholder
Agent and the Company stockholders shall not be liable for any attorneys fees
and expenses incurred by Parent prior to Parent's giving notice to the
Securityholder Agent of a Third Party Claim. The notice from Parent to the
Securityholder Agent shall set forth such material information with respect to
the Third Party Claim as is then reasonably available to Parent.
-47-
(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
stockholders will be entitled, if the Securityholder Agent so elects by written
notice delivered to Parent within 30 days after receiving Parent's notice, to
assume the defense thereof, at the expense of the Company stockholders
independent of the Escrow Fund, 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
d) counsel selected by the Securityholder Agent is
reasonably acceptable to Parent.
If the Securityholder Agent and the Company stockholders so assume any such
defense, the Securityholder Agent and the Company stockholders shall conduct the
defense of the Third Party Claim actively and diligently. The Securityholder
Agent and the Company stockholders shall not compromise or settle such Third
Party Claim or consent to entry of any judgment in respect thereof without the
prior written consent of Parent and/or its affiliates, as applicable.
(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. 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 within a reasonable period of time after receiving written notice thereof,
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
-48-
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 stockholders will cooperate with Parent
or its affiliates in the defense of that claim and will provide full access to
documents, assets, properties, books and records reasonably requested by Parent
and material to the claim and will make available all individuals reasonably
requested by Parent for investigation, depositions and trial.
(j) Escrow Agent's Duties.
---------------------
(i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by an officer of
Parent and the Securityholder Agent and the Escrow Agent, 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
-49-
Agent be liable or responsible for forgeries, fraud, impersonations, or
determining the scope of 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.
Except for gross negligence or willful misconduct on the part of the Escrow
Agent, 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 reasonable discretion, the Escrow Agent
may be required, despite what may be set forth elsewhere in this Agreement. In
such event, the Escrow Agent will not be liable for damage. Furthermore, the
Escrow Agent may at its option, file an action of interpleader requiring the
parties to answer and litigate any claims and rights among themselves. The
Escrow Agent is authorized to deposit with the clerk of the court all documents
and shares of Parent Common Stock held in escrow, except all cost, expenses,
charges and reasonable attorney fees incurred by the Escrow Agent due to the
interpleader action and which the parties jointly and severally agree to pay.
Upon initiating such action, the Escrow Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of
this Agreement.
(vii) Parent and the Surviving Corporation agree jointly and
severally to indemnify and hold Escrow Agent harmless against any and all
losses, claims, damages, liabilities, and expenses, including reasonable costs
of investigation, counsel fees, and disbursements that may be imposed on Escrow
Agent or incurred by Escrow Agent in connection with the performance of his/her
duties under this Agreement, including but not limited to any litigation arising
from this Agreement or involving its subject matter; provided, however, that in
-------- -------
the event the Securityholder Agent shall be the Non-Prevailing Party in
connection with any claim or action initiated by a Company stockholder or
Company stockholders, then such Company stockholder or Company stockholders
shall be responsible for the indemnification of the Escrow Agent to the full
extent provided by this paragraph.
(viii) The Escrow Agent may resign at any time upon giving at
least thirty (30) days written notice to the parties; provided, however, that no
such resignation shall become effective until the appointment of a successor
escrow agent which shall be accomplished as follows: the parties shall use their
best efforts to mutually agree on a successor escrow agent within thirty (30)
days after receiving such notice. If the parties fail to agree upon a successor
escrow agent within such time, the Escrow Agent shall have the right to appoint
a successor escrow agent authorized to do business in the state of California.
The successor escrow agent shall execute and deliver an instrument accepting
such appointment and it shall, without further acts, be vested with all the
estates, properties, rights, powers, and duties of the predecessor escrow agent
as if originally named as escrow agent. The Escrow Agent shall be discharged
from any further duties and liability under this Agreement.
-50-
(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. 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 stockholder, 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; provided, however, that the foregoing limitation
shall not apply in the case of matters involving intentional fraud and willful
misconduct with respect to any person who was involved in such intentional fraud
or willful misconduct.
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:
(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 October 15, 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;
-51-
(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 October 15, 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 October 15, 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 October 15, 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 October 15, 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, and such action shall
be effective upon delivery of the notice described in Section 9.2.
9.2 Effect of Termination. 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 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 stockholders who receive
more than 50% of the Parent Common Stock issued or to be issued pursuant to
Section 1.6.
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
-52-
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
0000 X. Xxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Vice President, General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Xxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to the Company, prior to the Effective Time, to:
WebSpective Software, Inc.
00 X Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx X. House
President and Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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with a copy to:
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(c) if to the Securityholder Agent:
Xxx X. Xxxxxxxxxxx
Xxxxxxx River Partnership VII L.P.
0000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
(d) if to the Escrow Agent:
U.S. Bank Trust NA
Global Escrow Depository Services
Xxx Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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.
(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 Xxxxx,
Xxxxxxx & Xxxxxxxxx, 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
-54-
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 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.
-55-
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.
-56-
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.
WEBSPECTIVE SOFTWARE, INC. INKTOMI CORPORATION
a Delaware Corporation a Delaware Corporation
By /s/ Xxxxx X. House, Sr. By /s/ Xxxxx X. Xxxxxxxxxxxx
______________________________________ ________________________________
Xxxxx X. House, Sr. Xxxxx X. Xxxxxxxxxxxx
President and Chief Executive Officer President and Chief Executive
Officer
SECURITYHOLDER AGENT WS ACQUISITION CORPORATION
a Delaware Corporation
/s/ Xxx X. Xxxxxxxxxxx By /s/ Xxxxx X. Xxxxxxxxxxxx
_________________________________________ ________________________________
Xxx X. Xxxxxxxxxxx Xxxxx X. Xxxxxxxxxxxx
President and Chief Executive
Officer
ESCROW AGENT
U.S. Bank Trust NA
By /s/ Xxx Xxxxxx
______________________________________
Name: Xxx Xxxxxx
Title:
INDEX OF EXHIBITS
Exhibit Description
------- -----------
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 Certificate of Merger
Exhibit E Form of Declaration of Registration Rights
Exhibit F Form of Parent Affiliate Agreement
Exhibit G Form of Legal Opinion of Counsel to Parent
Exhibit H Form of Legal Opinion of Counsel to the Company
INDEX OF SCHEDULES
Schedule Description
-------- -----------
2.3(a) Stockholder List
2.3(b) Option and Warrant Holder List
2.5 Conflicts
2.6 Governmental and Third Party Consents
2.7 Company Financial Statements
2.8 Undisclosed Liabilities
2.9 No Changes
2.10(b) Tax Returns and Audits
2.11 Restrictions on Business Activities
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
2.14(f) Registrations and Renewal Fees
2.14(g) Incorporation of Certain Software
2.14(i) Transfers and Exclusive Licenses of Company Intellectual Property
2.14(m) See Schedule 2.14(i) above
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 Stockholders to Sign Voting Agreement
6.18 Employees to Sign Employment and Non-Competition Agreement
EXHIBIT A
WEBSPECTIVE SOFTWARE, INC.
VOTING AGREEMENT
This Voting Agreement ("Agreement") is made and entered into as of
---------
September 15, 1999, between Inktomi Corporation, a Delaware corporation
("Parent"), and the undersigned stockholder ("Stockholder") of WebSpective
------ -----------
Software, Inc., a Delaware corporation ("Company").
-------
RECITALS
A. Concurrently with the execution of this Agreement, Parent, Company and
WS Acquisition Corporation, a Delaware 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 Stockholder is the record holder and beneficial owner (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of such number of shares of the outstanding Common Stock and/or
------------
Preferred Stock of the Company as is indicated on the final page of this
Agreement (the "Shares").
------
C. Parent desires the Stockholder to agree, and the Stockholder is willing
to agree, not to transfer or otherwise dispose of any of the Shares, or any
other shares of capital stock of the Company acquired hereafter and prior to the
Expiration Date (as defined in Section 1.1 below, except as otherwise permitted
hereby), and to vote the Shares and any other such shares of capital stock of
the Company so as to facilitate consummation of the Merger.
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Agreement to Retain Shares.
--------------------------
1.1 Transfer and Encumbrance. Stockholder agrees not to transfer
------------------------
(except as may be specifically required by court order), sell, exchange, pledge
or otherwise dispose of or encumber any of the Shares or any New Shares as
defined in Section 1.2 below, or to make any offer or agreement relating
thereto, at any time during the period beginning on the date hereof and ending
on 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 Stockholder is a signatory to the Company's
Affiliate Agreement, nothing contained herein shall release such Stockholder 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. Stockholder agrees that any shares of
--------------------
capital stock of the Company that Stockholder purchases or with respect to which
Stockholder 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 stockholders of the
------------------------
Company called with respect to any of the following, and at every adjournment
thereof, and on every action or approval by written consent of the stockholders
of the Company with respect to any of the following, Stockholder shall vote the
Shares and any New Shares: (i) in favor of approval of the principal terms of
the Reorganization Agreement and the Merger and any matter that could reasonably
be expected to facilitate the consummation of 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").
Stockholder agrees not to take any actions contrary to Stockholder's obligations
under this Agreement.
3. Stockholder Capacity. The Stockholder is executing this Agreement
--------------------
solely in his or her capacity as the record and beneficial owner of such
Stockholder's Shares, and, if the Stockholder is a director or officer to the
Company, Stockholder makes no agreement or understanding herein in his or her
capacity as an officer or director. The parties hereto acknowledge and agree
that none of the provisions herein set forth shall be deemed to restrict or
limit any fiduciary duty the undersigned may have as a member of the Board of
Directors or executive officer of the Company; provided, that no such duty shall
excuse the undersigned from his or her obligations as a Stockholder of the
Company to vote the Shares and the New Shares, to the extent that they may be so
voted, as herein provided and to otherwise comply with the terms and conditions
of this Agreement.
4. Irrevocable Proxy. Concurrently with the execution of this Agreement,
-----------------
Stockholder agrees to deliver to Parent a proxy in the form attached hereto as
Exhibit A (the "Proxy"), which shall be irrevocable, with the total number of
---------
shares of capital stock of the Company beneficially owned (as such term is
defined in Rule 13d-3 under the Exchange Act) by Stockholder and subject to the
Proxy set forth therein.
5. Representations, Warranties and Covenants of the Stockholder.
------------------------------------------------------------
Stockholder hereby represents, warrants and covenants to Parent as follows:
5.1 Ownership of Shares. Stockholder (i) is the beneficial owner of
-------------------
the Shares, which at the date hereof and at all times up until the Expiration
Date will be free and clear of any liens, claims, options, charges or other
encumbrances, except for liens arising in favor of the Company under the
Company's 1998 Executive Loan Program; (ii) does not beneficially own any shares
of capital stock of the Company other than the Shares (excluding shares as to
which Stockholder currently disclaims beneficial ownership in accordance with
applicable law); and (iii) has full power and authority to make, enter into and
carry out the terms of this Agreement and the Proxy.
5.2 No Proxy Solicitations. Stockholder, in his or her capacity as a
----------------------
Stockholder of the Company, will not, and will not permit any entity under
Stockholder'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
-2-
the timely consummation of the Merger in accordance with the terms of the
Reorganization Agreement; (ii) initiate a stockholders' vote or action by
consent of the Company stockholders with respect to an Opposing Proposal; or
(iii) become a member of a "group" (as such term is used in Section 13(d) of the
Exchange Act) with respect to any voting securities of the Company with respect
to an Opposing Proposal.
6. Additional Documents. Stockholder hereby covenants and agrees to
--------------------
execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Parent or Stockholder, as the case may be, to carry out
the intent of this Agreement.
7. Consent and Waiver. Stockholder hereby gives any consents or waivers
------------------
that are reasonably required for the consummation of the Merger under the terms
of any agreements to which Stockholder is a party as a stockholder or pursuant
to any rights Stockholder may have as a stockholder.
8. 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.
9. Miscellaneous.
-------------
9.1 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.
9.2 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.
9.3 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.
9.4 Specific Performance; Injunctive Relief. The parties hereto
---------------------------------------
acknowledge that Parent will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreement of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Parent upon any such violation, Parent
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Parent at law
or in equity.
9.5 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:
-3-
If to Parent: Inktomi Corporation
0000 X. Xxxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
With a copy to: Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
If to the Stockholder: To the address for notice set forth on the last
page hereof.
with a copy to: Xxxxx, Hurwitz, Thibeault, LLP
000 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
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.
9.6 Governing Law. This Agreement shall be governed by, and
-------------
construed and enforced in accordance with, the laws of the State of Delaware
without giving effect to the conflict of laws provision thereof.
9.7 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.
9.8 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.
9.9 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]
-4-
IN WITNESS WHEREOF, the parties have caused this Voting Agreement to be
duly executed on the date and year first above written.
INKTOMI CORPORATION
By: _____________________________________________
Xxxxx X. Xxxxxxxxxxxx
President and Chief Executive Officer
STOCKHOLDER:
By: _____________________________________________
Print
Name:_____________________________________________
Stockholder'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 stockholder of WebSpective Software, Inc., a Delaware
corporation ("Company"), hereby irrevocably appoints Xxxxx X. Xxxxxxxxxxxx and
-------
Xxxxxxx X. Xxxxxxx 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 (i) such time as that certain Agreement of Merger and Plan of
Reorganization dated as of September 15, 1999 (the "Reorganization Agreement"),
------------------------
among Parent, WS Acquisition Corporation, a Delaware corporation and a wholly-
owned subsidiary of Parent ("Merger Sub"), and Company, shall be terminated in
----------
accordance with its terms; or (ii) 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 September 15, 1999 between Parent and the undersigned stockholder
(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
stockholders, 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 stockholders 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
stockholder 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, but shall terminate on the Expiration Date (as
defined in the Voting Agreement).
Dated: September 15, 1999
Signature of Stockholder: ______________________________
Print Name of Stockholder: ______________________________
Shares beneficially owned:
__________ shares of Common Stock
__________ shares of Series A Preferred Stock
__________ shares of Series B Preferred Stock
-2-
EXHIBIT B
WEBSPECTIVE SOFTWARE, INC.
AFFILIATE AGREEMENT
This AFFILIATE AGREEMENT (this "Agreement") is made and entered into as of
---------
September 15, 1999, between Inktomi Corporation, a Delaware corporation
("Parent") and the undersigned affiliate ("Affiliate") of Webspective Software,
------ ---------
Inc., a Delaware 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. 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 Delaware 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: __________________________________________
Xxxxx X. Xxxxxxxxxxxx
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"), Webspective Software, Inc.,
("Webspective") and __________ ("Employee") as of ___________, 1999.
RECITALS
A. Pursuant to that certain Agreement and Plan of Reorganization (the
"Merger Agreement") dated as of September __, 1999 by and between Inktomi,
WS Acquisition Corporation ("Sub") and Webspective, Sub will merge with and into
Webspective (the "Merger") and any shares of Webspective capital stock owned by
Employee will be exchanged for Inktomi Common Stock and any options to acquire
Webspective Common Stock will be assumed by Inktomi and become options to
acquire Inktomi Common Stock;
B. Employee owns an equity interest in Webspective (whether through
outstanding capital stock or options to purchase capital stock), has served as a
________________________ at Webspective and has gained substantial knowledge and
expertise in connection with Webspective'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. Webspective is engaged in the development, manufacturing, distributing
and licensing of software related to network traffic management, Internet
applications management and content distribution (the "Business");
F. It is a condition to the obligation of Inktomi to consummate the
Merger that certain key employees of Webspective, 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 Webspective 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. In the event Inktomi
terminates the employment relationship under this subsection (d) without cause,
as severance, Inktomi shall (i) continue to pay Employee his then current base
salary for a period of four weeks or for that number of weeks equal to two times
the number of years that Employee has collectively worked for Inktomi and
WebSpective, whichever period is longer, and (ii) if such termination occurs
during the initial one year Period of Employment, pay Employee in one lump sum
payment the total integration bonus set forth on Exhibit A, pro rated for the
---------
number of months during the initial one year Period of Employment that Employee
was an employee, less any portion of the integration bonus previously paid. All
such payments shall be subject to applicable tax withholding.
-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 WebSpective's principal offices located in Needham,
Massachusetts, without Employee's written consent. In the event Employee
terminates the employment relationship under this subsection (e), as severance,
Inktomi shall (i) continue to pay Employee his then current base salary for a
period of four weeks or for that number of weeks equal to two times the number
of years that Employee has collectively worked for Inktomi and WebSpective,
whichever period is longer, and (ii) if such termination occurs during the
initial one year Period of Employment, pay Employee in one lump sum payment
the total integration bonus set forth on Exhibit A, pro rated for the number
---------
of months during the initial one year Period of Employment that Employee was
an employee, less any portion of the integration bonus previously paid. All
such payments shall be subject to applicable tax withholding.
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 Webspective, owns a significant
number of shares of Webspective 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, Webspective 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 Webspective 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
Webspective Business;
(ii) induce or attempt to induce any person who at the time of
such inducement is an employee of Webspective 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 2.1, 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.
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
-5-
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 October 31, 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: _________________________________________
Xxxxx X. Xxxxxxxxxxxx
President and Chief Executive Officer
WEBSPECTIVE SOFTWARE, INC.
By: _________________________________________
Xxxxx House
President and Chief Executive Officer
EMPLOYEE:
By:__________________________________________
Print Name:__________________________________
Employment and Non-Competition Agreement
EXHIBIT A
---------
Description of Employment
Name of Employee:
Position/Title:
Reporting To:
Compensation: Base Salary
Bonus (Inktomi MBO, if applicable)
Stock Options
Retention Bonus
EXHIBIT D
CERTIFICATE OF MERGER
MERGING
WS ACQUISITION CORPORATION,
A DELAWARE CORPORATION
WITH AND INTO
WEBSPECTIVE SOFTWARE, INC.,
A DELAWARE CORPORATION
____________________________________
Pursuant to Section 251 of the General Corporation Law of the State of
Delaware
____________________________________
WebSpective Software, Inc., a Delaware corporation ("WebSpective"), does
hereby certify as follows:
FIRST: The constituent corporations are WebSpective and WS Acquisition
Corporation, a Delaware corporation ("WS").
SECOND: An Agreement and Plan of Reorganization (the "Reorganization
Agreement"), dated September 15, 1999, among Inktomi Corporation, WS and
WebSpective, setting forth the terms and conditions of the merger of WS with and
into WebSpective (the "Merger"), has been approved, adopted, certified, executed
and acknowledged by each of the constituent corporations in accordance with
Section 252 of the Delaware General Corporation Law.
THIRD: The name of the surviving corporation in the Merger (the "Surviving
Corporation") shall be WebSpective Software, Inc.
FOURTH: The Certificate of Incorporation of the Surviving Corporation is
amended to read in its entirety as set forth in Exhibit A hereto.
---------
FIFTH: An executed copy of the Reorganization Agreement is on file at the
principal place of business of WebSpective at the following address:
WebSpective Software, Inc.
00 X Xxxxxx
Xxxxxxx, XX 00000
SIXTH: An executed copy of the Reorganization Agreement will be furnished
by the Surviving Corporation, on request and without cost, to any stockholder of
either constituent corporation.
SEVENTH: The authorized capital stock of WS is 1,000 no par value shares,
of common stock.
EIGHTH: The Merger shall become effective upon the filing of this
Certificate of Merger with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, WebSpective has caused this Certificate of Merger to be
executed in its corporate name as of the 1st day of October, 1999.
WEBSPECTIVE SOFTWARE, INC.
By: _______________________________________
Xxxxx X. House Sr.
President and Chief Executive Officer
ATTEST:
____________________________________
-2-
EXHIBIT E
INKTOMI CORPORATION
DECLARATION OF REGISTRATION RIGHTS
This Declaration of Registration Rights ("Declaration") is made as of
-----------
September 15, 1999, by Inktomi Corporation, a Delaware corporation ("Parent"),
------
for the benefit of stockholders of WebSpective Software, Inc., a Delaware
corporation (the "Company"), acquiring shares of Parent Common Stock pursuant to
-------
that Agreement and Plan of Reorganization dated as of September 15, 1999 (the
"Reorganization Agreement"), among the Company, Parent and WS Acquisition
------------------------
Corporation, a Delaware 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
---------
stockholders' approving 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 Delaware
--------------
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 stockholder 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 including any shares of Parent Common Stock issued by
Parent upon any stock split, stock dividend, recapitalization or similar event,
and for all Holders the sum of the Registrable Securities held by them .
(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 within 15 business days following the
Effective Time, 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 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 270 days (plus any additional days
required to be added pursuant to this Section 4) 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 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.
-2-
(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 15 days beyond the date specified under
Section 2(a) above.
3. Piggyback Registration.
----------------------
(a) Parent may determine to provide for the firmly underwritten sale
of Parent Common Stock for its own account and/or the account of other
stockholders, 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 a 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 Registrable Securities shall be included
-------- -------
in a registration statement filed with the SEC if (i) the Registrable Securities
are included in a registration statement pursuant to Section 2 or (ii) the
Parent reasonably determines that the Underwritten Sale will not be completed
(i.e., the registration statement is not declared effective) within 1 year of
the Effective Time. An Underwritten Sale, including the form of underwriting
agreement to be entered into by Parent, the underwriter(s) and any selling
stockholders, 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 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.
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
-3-
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,
based on the advice of counsel, 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 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 270-day period set forth
in clause (B) in the first sentence of Section 2(b) above. In addition, each
Holder who becomes an employee of Parent shall be subject, for so long as such
Holder remains employed with Parent, to the trading restrictions related to the
release of quarterly results of operations in the same manner as other employees
of Parent.
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
-4-
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; provided, however,
-------- -------
that the foregoing is subject to the condition that, insofar as it relates to
any such untrue statement, alleged untrue statement, omission or alleged
omission made in a preliminary prospectus on file with the Commission at the
time the registration statement becomes effective or the amended prospectus is
filed with the Commission pursuant to Rule 424(b) (the "Final Prospectus"), the
provisions hereof shall not inure to the benefit of any Holder, if a copy of the
Final Prospectus was furnished to the person asserting the loss, liability,
claim or damage at or prior to the time such action is required by the
Securities Act, and if the Final Prospectus would have cured the defect giving
rise to the loss, liability, claim or damage.
(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 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
-5-
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 6
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 6 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.
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 stockholders, partners or
retired partners, or members or retired members of a Holder (including spouses
and ancestors, lineal descendants, and siblings of such stockholders, partners,
members or spouses who acquire Registrable Securities by right, will, or
intestate succession) and all such transferees or assignees agree in writing to
appoint a single representative as their attorney-in-fact for the purpose of
receiving any notices and exercising their rights under this Declaration. Prior
to a permitted transfer of registration rights under this Declaration, Holder
must furnish Parent with written notice of the name and address of such
transferee and the Registrable Securities with respect to which such
registration rights are being assigned and a copy of a duly executed written
instrument in form reasonably satisfactory to Parent by which such transferee
assumes all of the obligations and liabilities of its transferor hereunder and
agrees itself to be bound hereby. No transfer of registration rights under this
Declaration shall be permitted if immediately following such transfer the
disposition of such Registrable Securities by the transferee is not restricted
under the Securities Act.
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.
-6-
9. Governing Law. This Declaration shall be governed in all respects by
-------------
and construed in accordance with the laws of the State of Delaware.
10. Beneficiaries. Parent hereby expressly intends that each of the
-------------
stockholders of the Company acquiring shares of Parent's Common Stock pursuant
to the Reorganization Agreement shall be a beneficiary of this Declaration.
INKTOMI CORPORATION
By: ______________________________________
Xxxxx X. Xxxxxxxxxxxx
President and Chief Executive Officer
EXHIBIT F
INKTOMI CORPORATION
AFFILIATE AGREEMENT
This AFFILIATE AGREEMENT (this "Agreement") is made and entered into as of
---------
September 15, 1999, between Inktomi Corporation, a Delaware corporation
("Inktomi") and the undersigned affiliate ("Affiliate") of Inktomi.
------- ---------
WHEREAS, Inktomi and Webspective, Inc., a Delaware corporation
("Webspective") propose to enter into an Agreement and Plan of Reorganization
------------
(the "Reorganization Agreement") pursuant to which a subsidiary of Inktomi will
------------------------
merge into Webspective ("Merger"), and Webspective 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
Webspective 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, Webspective, 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 Webspective, 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 Delaware.
(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: ____________________________________________
Xxxxx X. Xxxxxxxxxxxx
President and Chief Executive Officer
AFFILIATE
Name of Affiliate:______________________________
By: ____________________________________________
____________________________________________
Name of Signatory (if different from name of
Affiliate)
____________________________________________
Title of Signatory (if applicable)
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):
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
1. Parent is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware and is duly qualified to do
business as a foreign corporation in the State of California. Merger Sub is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware. Each of Parent and Merger Sub has the corporate
power to own its properties and to carry on its business as now being conducted.
2. Parent and Merger Sub have all requisite corporate power and authority
to enter into the Reorganization Agreement and to consummate the transactions
contemplated thereby and Parent has all requisite corporate power and authority
to enter into the 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 Certificate 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 June 30, 1999 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 Certificate of Merger with the Secretary of State of the State of
Delaware 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; 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 WebSpective
stockholders, the Parent Common Stock to be issued pursuant to the
Reorganization Agreement will be exempt from the registration requirements of
the Securities Act of 1933, as amended.
-2-
EXHIBIT G
FORM OF XXXXX XXXXXXX OPINION
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, with the requisite
corporate power and authority to own its properties and to conduct its business
as presently conducted. The Company is qualified to do business and is in good
standing in the Commonwealth of Massachussetts.
2. The authorized capitalization of the Company is as follows:
(a) Capital Stock. The authorized capital stock of the Company
-------------
consists of 13,380,660 shares of authorized Common Stock, of which 3,526,039
shares are issued and outstanding and 6,940,984 shares of authorized Preferred
Stock. The authorized Preferred Stock consists of 3,035,000 shares of authorized
Series A Preferred, of which 3,028,333 shares are issued and outstanding, and
3,905984 shares of authorized Series B Preferred, of which 3,545324 shares are
issued and outstanding. All outstanding shares of Company Capital Stock are duly
authorized, validly issued, fully paid and non-assessable .
(b) Rights to Acquire Stock. Except for the Company Options, stock
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purchase rights and warrants described in Schedule 2.3(b) of the Reorganization
Agreement, to our knowledge, 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.
3. At or before the Effective Time, all investor rights granted by the
Company to its stockholders and in effect prior to the Closing, including but
not limited to rights of co-sale, voting, registration, information rights,
rights of first refusal, board observation or information or operational
covenants granted pursuant to the Series B Stock Purchase Agreement dated June
9, 1998, as amended, the Amended and Restated Stockholders Agreement dated June
8, 1998, as amended, the Amended and Restated Voting Agreement dated June 9,
1998, as amended and the Amended and Restated Registration Rights Agreement
dated June 9, 1998, as amended, shall have been terminated.
4. The Company has the requisite corporate power and authority to
execute, deliver and perform its obligations under the Agreement. The execution,
delivery and performance of the Agreement have been duly authorized by all
necessary corporate action of the Company, and the Agreement has been duly
executed and delivered by the Company. The Agreement constitutes a legally valid
and binding obligation of the Company, enforceable against the Company according
to its terms.
5. The execution, delivery and performance of the obligations of the
Company under the Agreement, do not (i) to our knowledge, violate any provision
of any federal, Delaware corporate or Massachusetts law, rule or regulation
applicable to the Company, (ii) violate any provision of the
Company's certificate of incorporation or bylaws, or (iii) conflict with or
constitute a material default under the provisions of judgments, writs, decrees
or orders, if any, specifically identified in the Company Schedules or the
provisions of any agreement listed in Annex A.
6. The execution, delivery and performance of the obligations of the
Company under the Agreement do not require any consents, approvals, permits,
orders or authorizations of, or any qualifications, registrations, designations,
declarations or filings with, any federal or Massachusetts state governmental
authority on the part of the Company except (i) as have been obtained and are
effective, (ii) the filing of the Certificate of Merger with the Delaware
Secretary of State, (iii) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws, and (iv) such other consents,
waivers, approvals, orders, authorizations, registrations, declarations and
filings which if not made or obtained would not have a Material Adverse Effect
on the Company.
To our knowledge, except as set forth in the Company Schedules, there is no
action, suite, proceeding or investigation pending against the Company before
any court or administrative agency (i) that questions the validity of the Merger
Documents or the right of the Company to enter into the Merger Documents or (ii)
that, if determined adversely, would be likely to result in a Material Adverse
Effect on the Company.
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