\n 8.4 Extension; Waiver………………………………………………………………………. 44
\n —————– <\/p>\nARTICLE IX GENERAL PROVISIONS……………………………………………………………………………. 44<\/p>\n
9.1 Notices……………………………………………………………………………….. 44
\n ——-
\n 9.2 Interpretation…………………………………………………………………………. 46
\n ————–
\n 9.3 Counterparts…………………………………………………………………………… 46
\n ————
\n 9.4 Entire Agreement; Assignment…………………………………………………………….. 46
\n —————————-
\n 9.5 Severability…………………………………………………………………………… 46
\n ————
\n 9.6 Other Remedies…………………………………………………………………………. 47
\n ————–
\n 9.7 Governing Law………………………………………………………………………….. 47
\n ————-
\n 9.8 Rules of Construction…………………………………………………………………… 47
\n ———————
\n 9.9 Specific Performance……………………………………………………………………. 47
\n ——————–
\n 9.10 Attorneys’Fees…………………………………………………………………………. 47
\n ————–
\n<\/c><\/s><\/caption>\n<\/table>\n
-iii-<\/p>\n
AGREEMENT AND PLAN OF REORGANIZATION<\/p>\n
This AGREEMENT AND PLAN OF REORGANIZATION (this “Agreement”) is made
\nand entered into as of November 19, 1999 among GoTo.com, Inc., a Delaware
\ncorporation (“Parent”), Roy Acquisition Corp., a Delaware corporation and a
\nwholly-owned subsidiary of Parent (“Merger Sub”), Cadabra Inc., a California
\ncorporation (the “Company”), the undersigned escrow agent (the “Escrow Agent”)
\nand Narinder P. Singh (the “Securityholder Agent”) (the Escrow Agent and the
\nSecurityholder Agent being parties with respect to Article VII hereof only).<\/p>\n
RECITALS<\/p>\n
A. The Boards of Directors of each of the Company, Parent and Merger
\nSub believe it is in the best interests of each Company and their respective
\nshareholders that Parent acquire the Company through the statutory merger of
\nMerger Sub with and into the Company (the “Merger”) and, in furtherance thereof,
\nhave approved the Merger.<\/p>\n
B. Pursuant to the Merger, among other things, and subject to the terms
\nand conditions of this Agreement, all of the issued and outstanding shares of
\ncapital stock of the Company (“Company Capital Stock”) and all outstanding
\noptions, warrants or other rights to acquire or receive shares of Company
\nCapital Stock shall be converted into the right to receive shares of voting
\nCommon Stock of Parent (“Parent Common Stock”).<\/p>\n
C. A portion of the shares of Parent Common Stock otherwise issuable by
\nParent in connection with the Merger shall be placed in escrow by Parent, the
\nrelease of which amount shall be contingent upon certain events and conditions,
\nall as set forth in Article VII hereof.<\/p>\n
D. It is intended by the parties hereto that the Merger shall
\nconstitute a reorganization within the meaning of Section 368(a) of the Internal
\nRevenue Code of 1986, as amended (the “Code”).<\/p>\n
E. As a material inducement for Parent to consummate the Merger,
\ncertain key employees of the Company will enter into non-competition agreements
\nsubstantially in the form attached hereto as Exhibit A (the “Non-Competition
\n ———
\nAgreement”) with Parent, each of which shall become effective as of the
\nEffective Time (as defined herein).<\/p>\n
F. Concurrent with the execution and delivery of this Agreement, as a
\nmaterial inducement to Parent to enter into this Agreement, certain affiliate
\nshareholders of the Company are executing and delivering shareholder support
\nagreements (the “Support Agreements”), substantially in the form attached hereto
\nas Exhibit B, to Parent.
\n ———<\/p>\n
G. The Company, Parent and Merger Sub desire to make certain
\nrepresentations and warranties and other agreements in connection with the
\nMerger.<\/p>\n
NOW, THEREFORE, in consideration of the covenants, promises and
\nrepresentations set forth herein, and for other good and valuable consideration,
\nintending to be legally bound hereby the parties agree as follows:<\/p>\n
ARTICLE I<\/p>\n
THE MERGER<\/p>\n
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
\n ———-
\nsubject to and upon the terms and conditions of this Agreement and the
\napplicable provisions of the California General Corporation Law (“California
\nLaw”) and Delaware General Corporation Law (“Delaware Law”), Merger Sub shall be
\nmerged with and into Company, the separate corporate existence of Merger Sub
\nshall cease and Company shall continue as the surviving corporation. The
\nsurviving corporation after the Merger is sometimes referred to hereinafter as
\nthe “Surviving Corporation.”<\/p>\n
1.2 Effective Time. Unless this Agreement is earlier terminated
\n ————–
\npursuant to Section 8.1, the closing of the Merger (the “Closing”) will take
\nplace as promptly as practicable, but no later than two (2) business days
\nfollowing satisfaction or waiver of the conditions set forth in Article VI, at
\nthe offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto,
\nCalifornia, unless another place or time is agreed to in writing by Parent and
\nthe Company. The date upon which the Closing actually occurs is herein referred
\nto as the “Closing Date.” On the Closing Date, the parties hereto shall cause
\nthe Merger to be consummated by filing an Agreement of Merger (the “Agreement of
\nMerger”) with the Secretaries of State of the States of California and Delaware,
\nin accordance with the relevant provisions of applicable law (the time of
\nacceptance by the Secretary of State of California of such filing being referred
\nto herein as the “Effective Time”).<\/p>\n
1.3 Effect of the Merger. At the Effective Time, the effect of the
\n ——————–
\nMerger shall be as provided in the applicable provisions of California Law and
\nDelaware Law. Without limiting the generality of the foregoing, and subject
\nthereto, at the Effective Time, all the property, rights, privileges, powers and
\nfranchises of the Company and Merger Sub shall vest in the Surviving
\nCorporation, and all debts, liabilities and duties of the Company and Merger Sub
\nshall become the debts, liabilities and duties of the Surviving Corporation.<\/p>\n
1.4 Articles of Incorporation; Bylaws.
\n ———————————<\/p>\n
(a) Unless otherwise determined by Parent prior to the Effective
\nTime, at the Effective Time, the Articles of Incorporation of the Company as in
\neffect immediately prior to the Effective Time shall be the Articles of
\nIncorporation of the Surviving Corporation until thereafter amended in
\naccordance with California Law and as provided in such Articles of
\nIncorporation.”<\/p>\n
(b) Unless otherwise determined by Parent prior to the Effective
\nTime, the Bylaws of the Company as in effect immediately prior to the Effective
\nTime shall be the Bylaws of the Surviving Corporation at the Effective Time,
\nuntil thereafter amended in accordance with California Law and as provided in
\nthe Articles of Incorporation of the Surviving Corporation and such Bylaws.<\/p>\n
-2-<\/p>\n
1.5 Directors and Officers. Unless otherwise determined by Parent
\n ———————-
\nprior to the Effective Time, the directors of Merger Sub immediately prior to
\nthe Effective Time shall be the directors of the Surviving Corporation, each to
\nhold the office of a director of the Surviving Corporation in accordance with
\nthe provisions of California Law and the Articles of Incorporation and Bylaws of
\nthe Surviving Corporation until their successors are duly elected and qualified.
\nThe officers of Merger Sub immediately prior to the Effective Time shall be the
\nofficers of the Surviving Corporation, each to hold office in accordance with
\nthe provisions of the Bylaws of the Surviving Corporation.<\/p>\n
1.6 Merger Consideration.
\n ——————– <\/p>\n
(a) Certain Definitions. For purposes of this Agreement, the
\n ——————-
\nfollowing terms shall have the following meanings:<\/p>\n
“Aggregate Share Number” shall mean that number of shares of
\nParent Common Stock equal to (i) $242,000,000 divided by (ii) the average
\nclosing price of a share of Parent Common Stock for the thirty calendar days
\nprior to the Effective Time, as reported on the NASDAQ National Market (the “30-
\nDay Average Price”); provided, however, that if the 30-Day Average Price is
\ngreater than $130.00, Aggregate Share Number shall mean 1,861,539 shares of
\nParent Common Stock, and provided further, that if the 30-Day Average Price is
\nless than $40.00, Aggregate Share Number shall mean 6,050,000 shares of Parent
\nCommon Stock.<\/p>\n
“Company Capital Stock” shall mean shares of Company Common Stock,
\nCompany Preferred Stock and any shares of other capital stock of Company.<\/p>\n
“Company Common Stock” shall mean shares of common stock of
\nCompany.<\/p>\n
“Company Convertible Securities” shall mean the Company Options
\nand other rights (other than Company Preferred Stock) to acquire or receive
\nshares of Company Capital Stock.<\/p>\n
“Company Options” shall mean all issued and outstanding options to
\npurchase or otherwise acquire Company Capital Stock (whether or not vested) held
\nby employees or directors of or consultants to Company (other than Company
\nPreferred Stock).<\/p>\n
“Company Preferred Stock” shall mean shares of Company Series A
\nPreferred Stock and Company Series B Preferred Stock.<\/p>\n
“Company Series A Preferred Stock” shall mean shares of Series A
\nPreferred Stock of Company.<\/p>\n
“Company Series B Preferred Stock” shall mean shares of Series B
\nPreferred Stock of Company.<\/p>\n
“Company Shareholders” shall mean holders of any shares of Company
\nCapital Stock immediately prior to the Effective Time.<\/p>\n
-3-<\/p>\n
“Company Warrants” shall mean any outstanding warrants to purchase
\nshares of Company Common Stock.<\/p>\n
“Escrow Amount” shall mean that number of shares of Parent Common
\nStock equal to the Aggregate Share Number multiplied by 0.1.<\/p>\n
“Exchange Ratio” shall mean a number of shares of Parent Common
\nStock equal to the quotient obtained by dividing the Aggregate Share Number by
\nthe Total Outstanding Shares.<\/p>\n
“Knowledge” shall mean, with respect to Company or Parent, what is
\nwithin the actual knowledge of any of the officers of Company or Parent, as the
\ncase may be.<\/p>\n
“Per Share Cash Amount” shall mean an amount of cash equal to the
\nquotient obtained by dividing $8,000,000 by the Total Outstanding Shares.<\/p>\n
“Total Outstanding Shares” shall mean the aggregate number of
\nshares of Company Common Stock outstanding immediately prior to the Effective
\nTime plus the aggregate number of shares of Company Common Stock issuable, with
\nor without the passage of time or satisfaction of other conditions, upon
\nexercise of or conversion of all Company Convertible Securities and Company
\nPreferred Stock outstanding immediately prior to the Effective Time.<\/p>\n
(b) Shares to be Issued; Cash to be Issued; Effect on Capital
\n ———————————————————
\nStock. The maximum number of shares of Parent Common Stock and cash to be issued
\n—–
\n(including Parent Common Stock to be reserved for issuance upon exercise of any
\nof the Company’s options and warrants to be assumed by Parent) in exchange for
\nthe acquisition by Parent of all outstanding Company Capital Stock and all
\nunexpired and unexercised options, warrants or other rights to acquire Company
\nCapital Stock shall be determined immediately prior to the Effective Time and
\nshall be equal to the Aggregate Share Number plus $8,000,000. Subject to the
\nterms and conditions of this Agreement, as of the Effective Time, by virtue of
\nthe Merger and without any action on the part of Merger Sub, the Company or the
\nholder of any shares of the Company Capital Stock, the following shall occur:<\/p>\n
(i) Effect on Company Capital Stock. Each share of Company
\n ——————————-
\nCapital Stock issued and outstanding immediately prior to the Effective Time
\n(other than any Dissenting Shares, as defined in Section 1.7 hereof and any
\nshares owned by Parent, Merger Sub or Company or any direct or indirect wholly-
\nowned subsidiary thereof) shall be canceled and extinguished and shall be
\nconverted automatically into the right to receive, upon surrender of the
\ncertificate representing such share of Company Capital Stock and upon the terms
\nand subject to conditions set forth below and throughout this Agreement, a
\ncombination of (A) shares of Parent Common Stock equal to the Exchange Ratio and
\n(B) cash equal to the Per Share Cash Amount (collectively, the “Merger
\nConsideration”).<\/p>\n
(ii) Assumption of Company Options. Each outstanding Company
\n —————————–
\nOption issued pursuant to Company’s 1998 Stock Plan (the “Option Plan”) or
\notherwise, whether vested or unvested, will be assumed by Parent in connection
\nwith the Merger. Each Company Option so<\/p>\n
-4-<\/p>\n
assumed by Parent under this Agreement shall continue to have, and be subject
\nto, the same terms and conditions set forth in the Option Plan and\/or as
\nprovided in the respective option agreements immediately prior to the Effective
\nTime (including, without limitation, any vesting schedule or repurchase rights),
\nexcept that (i) each Company Option will be exercisable for (A) that number of
\nwhole shares of Parent Common Stock equal to the product of the number of shares
\nof Company Common Stock that were issuable upon exercise of such Company Option
\nimmediately prior to the Effective Time multiplied by the Exchange Ratio,
\nrounded down to the nearest whole number of shares of Parent Common Stock and
\n(B) cash equal to the Per Share Cash Amount multiplied by the number of shares
\nof Company Common Stock that were issuable upon exercise of such Company Option,
\nand (ii) the per share exercise price for the shares of Parent Common Stock
\nissuable upon exercise of such assumed Company Option will be equal to the
\nquotient determined by dividing the exercise price per share of Company Capital
\nStock at which such Company Option was exercisable immediately prior to the
\nEffective Time by the Exchange Ratio, rounded up to the nearest whole cent. The
\nrights of first refusal with respect to Company Options issued under the Option
\nPlan, set forth in the form of option agreement, are hereby waived by the
\nCompany and Parent as of the Effective Time.<\/p>\n
(iii) Option Status. It is the intention of the parties
\n ————-
\nhereto that the Company Options assumed by Parent following the Closing pursuant
\nto this Section 1.6 will, to the extent permitted by applicable law, qualify as
\nincentive stock options as defined in Section 422 of the Code, to the extent any
\nsuch Company Options qualified as incentive stock options immediately prior to
\nthe Effective Time.<\/p>\n
(iv) Assumption of Company Warrants. At the Effective Time,
\n ——————————
\neach outstanding Company Warrant will be assumed by Parent in connection with
\nthe Merger. Each Company Warrant so assumed by Parent under this Agreement shall
\ncontinue to have, and be subject to, the same terms and conditions set forth in
\nCompany Warrant immediately prior to the Effective Time, except that (i) each
\nCompany Warrant will be exercisable for (A) that number of whole shares of
\nParent Common Stock equal to the product of the number of shares of Company
\nCommon Stock that were issuable upon exercise of such Company Warrant
\nimmediately prior to the Effective Time multiplied by the Exchange Ratio,
\nrounded down to the nearest whole number of shares of Parent Common Stock and
\n(B) cash equal to the Per Share Cash Amount multiplied by the number of shares
\nof Company Common Stock that were issuable upon exercise of such Company
\nWarrant, and (ii) the per share exercise price for the shares of Parent Common
\nStock issuable upon exercise of such assumed Company Warrant will be equal to
\nthe quotient determined by dividing the exercise price per share of Company
\nCapital Stock at which such Company Warrant was exercisable immediately prior to
\nthe Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.<\/p>\n
(v) Fractional Shares. No fractional share of Parent
\n —————–
\nCommon Stock shall be issued in the Merger. In lieu thereof, any fractional
\nshare shall be paid in cash at the 30 Day Average Price.<\/p>\n
-5-<\/p>\n
(vi) Cancellation of Parent-Owned and Company-Owned Stock.
\n —————————————————-
\nEach share of Company Capital Stock owned by Parent, Merger Sub, Company or any
\ndirect or indirect wholly-owned subsidiary thereof immediately prior to the
\nEffective Time, shall be cancelled and extinguished without any conversion
\nthereof.<\/p>\n
(vii) Capital Stock of Merger Sub. Each share of capital
\n —————————
\nstock of Merger Sub issued and outstanding immediately prior to the Effective
\nTime shall be converted into and exchanged for one validly issued, fully paid
\nand nonassessable share of common stock of the Surviving Corporation. Each stock
\ncertificate of Merger Sub evidencing ownership of any such shares shall continue
\nto evidence ownership of such shares of capital stock of the Surviving
\nCorporation.<\/p>\n
1.7 Dissenting Shares for Holders of Company Capital Stock.
\n ——————————————————<\/p>\n
(a) Notwithstanding any provision of this Agreement to the
\ncontrary, any shares of Company Capital Stock held by a holder who has not
\nwithdrawn or lost appraisal or dissenter rights for such shares in accordance
\nwith California Law and who, as of the Effective Time, has not effectively
\nwithdrawn or lost such appraisal rights (“Dissenting Shares”), shall not be
\nconverted into or represent a right to receive Parent Common Stock pursuant to
\nSection 1.6, but the holder thereof shall only be entitled to such rights as are
\ngranted by California Law.<\/p>\n
(b) Notwithstanding the provisions of subsection (a), if any
\nholder of shares of Company Capital Stock shall effectively withdraw or lose
\n(through failure to perfect or otherwise) the right to appraisal, then, as of
\nthe later of the Effective Time and the occurrence of such event, such holder’s
\nshares shall automatically be converted into and represent only the right to
\nreceive the Merger Consideration as provided in Section 1.6 (and subject to the
\nprovisions of Section 7.2 hereof), without interest thereon, upon surrender of
\nthe certificate representing such shares.<\/p>\n
(c) Company shall give Parent (i) prompt notice of any written
\ndemands for appraisal of any shares of Company Capital Stock, withdrawals of
\nsuch demands, and any other instruments served pursuant to California Law and
\nreceived by Company and (ii) the opportunity to participate in all negotiations
\nand proceedings with respect to demands for appraisal under California Law.
\nCompany shall not, except with the prior written consent of Parent, voluntarily
\nmake any payment with respect to any demands for appraisal of capital stock of
\nCompany or offer to settle or settle any such demands. Parent shall have full
\nrecourse to the Escrow Fund (as defined in Section 7.2(a)) for the amount, if
\nany, paid by Company or Parent in respect of any Dissenting Shares in excess of
\nthe Merger Consideration (with the Exchange Ratio being valued at the 30 Day
\nAverage Price).<\/p>\n
1.8 Surrender of Certificates.
\n ————————-<\/p>\n
(a) Exchange Agent. The transfer agent of Parent (or another
\n ————–
\nentity reasonably acceptable to Parent and Company and determined prior to the
\nClosing) shall serve as exchange agent (the “Exchange Agent”) in the Merger.<\/p>\n
-6-<\/p>\n
(b) Parent to Provide Parent Common Stock. Prior to the Closing,
\n ————————————-
\nParent shall make available to the Exchange Agent for exchange in accordance
\nwith this Article I the shares of Parent Common Stock and cash issuable to
\nCompany Shareholders pursuant to Section 1.6 in exchange for outstanding shares
\nof Company Capital Stock, less the Escrow Amount which Parent shall deposit into
\nthe Escrow Fund (as defined in Section 7.2(a) hereof) on behalf of the Company
\nShareholders. The portion of the Escrow Amount contributed on behalf of each
\nCompany Shareholder shall be in proportion to the aggregate number of shares of
\nParent Common Stock each such Company Shareholder would otherwise be entitled to
\nreceive in the Merger (excluding any shares of Parent Common Stock issuable upon
\nexercise of any assumed Company Options) by virtue of ownership of outstanding
\nshares of Company Capital Stock immediately prior to the Effective Time.<\/p>\n
(c) Exchange Procedures. As soon as practicable following the
\n ——————-
\nClosing, Parent shall cause to be mailed to each Company Shareholder (i) a
\nletter of transmittal (which shall be in such form and contain such provisions
\nas Parent may reasonably specify and shall specify that delivery shall be
\neffected, and risk of loss and title to the certificates (the “Certificates”)
\nwhich immediately prior to the Effective Time represent outstanding shares of
\nCompany Capital Stock whose shares are converted into the right to receive such
\nCompany Shareholder’s pro rata portion of the Merger Consideration pursuant to
\nSection 1.6, shall pass, only upon delivery of the Certificates to the Exchange
\nAgent at the Closing) and (ii) instructions for use in effecting the surrender
\nat the Closing of the Certificates in exchange for certificates representing
\nsuch Company Shareholder’s pro rata portion of the Merger Consideration. Upon
\nsurrender of a Certificate at the Closing for cancellation to the Exchange Agent
\nor to such other agent or agents as may be appointed by Parent, together with
\nsuch letter of transmittal, duly completed and validly executed in accordance
\nwith the instructions thereto, the Company Shareholder shall be entitled to
\nreceive, and the Exchange Agent shall promptly deliver in exchange therefor, a
\ncertificate representing the number of whole shares of Parent Common Stock (less
\nthe number of shares of Parent Common Stock to be deposited in the Escrow Fund
\non such holder’s behalf pursuant to Section 1.8(b) and Article 7 hereof) and the
\ncash to which such holder is entitled pursuant to Section 1.6, and the
\nCertificate so surrendered shall forthwith be canceled. As soon as practicable
\nafter the Effective Time, and subject to and in accordance with the provisions
\nof Article VII hereof, Parent shall cause to be distributed to the Escrow Agent
\n(as defined in Article VII) a certificate or certificates representing that
\nnumber of shares of Parent Common Stock equal to the Escrow Amount which shall
\nbe registered in the name of the Escrow Agent. Such shares shall be beneficially
\nowned by the holders on whose behalf such shares were deposited in the Escrow
\nFund and shall be available to compensate Parent as provided in Article VII.
\nUntil so surrendered, each outstanding Certificate that, prior to the Effective
\nTime, represented shares of Company Capital Stock will be deemed from and after
\nthe Effective Time, for all corporate purposes, other than the payment of
\ndividends, to evidence the ownership of the number of full shares of Parent
\nCommon Stock and cash into which such shares of Company Capital Stock shall have
\nbeen so converted, except that no interest shall accrue or be payable with
\nrespect to the cash portion of the Merger Consideration.<\/p>\n
(d) Distributions With Respect to Unexchanged Shares. No
\n ————————————————
\ndividends or other distributions declared or made after the Effective Time with
\nrespect to Parent Common Stock with a<\/p>\n
-7-<\/p>\n
record date after the Effective Time will be paid to the holder of any
\nunsurrendered Certificate with respect to the shares of Parent Common Stock
\nrepresented thereby until the holder of record of such Certificate shall
\nsurrender such Certificate. Subject to applicable law, following surrender of
\nany such Certificate, there shall be paid to the record holder of the
\ncertificates representing whole shares of Parent Common Stock and cash issued in
\nexchange therefor, plus the amount of dividends or other distributions (without
\ninterest) with a record date after the Effective Time theretofore paid with
\nrespect to such whole shares of Parent Common Stock.<\/p>\n
(e) Transfers of Ownership. If any certificate for shares of
\n ———————-
\nParent Common Stock is to be issued in a name other than that in which the
\nCertificate surrendered in exchange therefor is registered, it will be a
\ncondition of the issuance thereof that the Certificate so surrendered will be
\nproperly endorsed and otherwise in proper form for transfer and that the person
\nrequesting such exchange will have paid to Parent or any agent designated by it
\nany transfer or other taxes required by reason of the issuance of a certificate
\nfor shares of Parent Common Stock in any name other than that of the registered
\nholder of the Certificate surrendered.<\/p>\n
(f) Lost, Stolen or Destroyed Certificates. In the event any
\n ————————————–
\nCertificates evidencing shares of Company Capital Stock shall have been lost,
\nstolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
\nstolen or destroyed certificates, upon the delivery by the holder thereof of an
\naffidavit of that fact by the holder thereof containing customary
\nindemnification provisions.<\/p>\n
(g) No Liability. Notwithstanding anything to the contrary in
\n ————
\nthis Section 1.8, neither Parent nor any party hereto shall be liable to a
\nholder of shares of Parent Common Stock or Company Capital Stock for any amount
\nproperly paid to a public official pursuant to any applicable abandoned
\nproperty, escheat or similar law.<\/p>\n
(h) No Further Ownership Rights in Company Capital Stock. The
\n —————————————————-
\nshares of Parent Common Stock issued in accordance with the terms hereof shall
\nbe deemed to be full satisfaction of all rights pertaining to shares of Company
\nCapital Stock outstanding prior to the Effective Time, and there shall be no
\nfurther registration of transfers on the records of Parent of shares of Company
\nCapital Stock that were outstanding prior to the Effective Time. If, after the
\nEffective Time, Certificates are presented to Parent for any reason, they shall
\nbe canceled and exchanged as provided in this Article I.<\/p>\n
(i) Taking of Necessary Action; Further Action. If, at any time
\n ——————————————
\nafter the Effective Time, any further action is necessary or desirable to carry
\nout the purposes of this Agreement and to vest Surviving Corporation with full
\nright, title and possession to all assets, property, rights, privileges, powers
\nand franchises of Company, Parent and Merger Sub, the officers and directors of
\nCompany, Parent and Merger Sub are fully authorized in the name of their
\nrespective corporations or otherwise to take, and will take, all such lawful and
\nnecessary action.<\/p>\n
-8-<\/p>\n
ARTICLE II<\/p>\n
REPRESENTATIONS AND WARRANTIES OF THE COMPANY<\/p>\n
As of the date hereof and as of the Closing Date, the Company
\nrepresents and warrants to Parent and Merger Sub, subject to such exceptions as
\nare clearly disclosed in the disclosure letter (referencing the appropriate
\nsection number) supplied by the Company to Parent (the “Company Disclosure
\nLetter”) and dated as of the date hereof, as follows:<\/p>\n
2.1 Organization of the Company. The Company is a corporation duly
\n —————————
\norganized, validly existing and in good standing under the laws of the State of
\nCalifornia. The Company has the corporate power to own its properties and to
\ncarry on its business as now being conducted. The Company is duly qualified to
\ndo business and in good standing as a foreign corporation in each jurisdiction
\nin which the failure to be so qualified would be material. The Company has
\ndelivered a true and correct copy of its Articles of Incorporation and Bylaws,
\neach as amended to date, to Parent.<\/p>\n
2.2 Company Capital Structure.
\n ————————-<\/p>\n
(a) The authorized capital stock of the Company consists of
\n40,000,000 shares of authorized Common Stock, of which 3,598,750 shares are
\nissued and outstanding as of the date hereof, and 3,000,000 shares of authorized
\nPreferred Stock, 1,550,000 of which are designated Series A Preferred Stock, of
\nwhich 1,537,966 shares are issued and outstanding as of the date hereof and
\n1,450,000 of which are designated Series B Preferred Stock, of which 1,432,948
\nshares are issued and outstanding as of the date hereof. The Company Capital
\nStock is held of record by the persons, with the addresses of record and in the
\namounts set forth on Section 2.2(a) of the Company Disclosure Letter. All
\n ————–
\noutstanding shares of Company Capital Stock are duly authorized, validly issued,
\nfully paid and non-assessable and not subject to preemptive rights created by
\nstatute, the Articles of Incorporation or Bylaws of the Company or any agreement
\nto which the Company is a party or by which it is bound.<\/p>\n
(b) The Company has reserved 2,750,000 shares of Common Stock for
\nissuance to directors, officers, employees and consultants pursuant to the
\nOption Plan, of which 350,000 shares are subject to outstanding, unexercised
\noptions as of the date hereof and 1,793,250 shares remain available for future
\ngrant as of the date hereof. The Company has reserved no shares of Common Stock
\nfor issuance upon exercise of outstanding Company Options granted outside the
\nOption Plan. There are no outstanding Company Warrants as of the date hereof.
\nSection 2.2(b) of the Company Disclosure Letter sets forth for each outstanding
\n————–
\nCompany Option, the name of the holder of such option, the number of shares of
\nCommon Stock subject to such option, the exercise price of such option and the
\nvesting schedule for such option, including the extent vested to the date hereof
\nand whether the exercisability of such option will be accelerated and become
\nexercisable by reason of the transactions contemplated by this Agreement. Except
\nfor the Company Options described in Section 2.2(b) of the Company Disclosure
\n ————–
\nLetter, there are no options, warrants, calls, rights, commitments or agreements
\nof any character, written or oral, to which the Company is a party or by which
\nit is bound obligating the Company to issue, deliver, sell, repurchase or
\nredeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
\nshares of the capital stock of the<\/p>\n
-9-<\/p>\n
Company or obligating the Company to grant, extend, accelerate the vesting of,
\nchange the price of, otherwise amend or enter into any such option, warrant,
\ncall, right, commitment or agreement. The holders of Company Options have been
\nor will be given, or shall have properly waived, any required notice prior to
\nthe Merger, and all such rights will be terminated at or prior to the Effective
\nTime. As a result of the Merger, Parent will be the record and sole beneficial
\nowner of all capital stock of the Company and rights to acquire or receive such
\ncapital stock.<\/p>\n
2.3 Subsidiaries. The Company does not have and has never had any
\n ————
\nsubsidiaries or affiliated companies and does not otherwise own and has never
\notherwise owned any shares of capital stock or any interest in, or control,
\ndirectly or indirectly, any other corporation, partnership, association, joint
\nventure or other business entity.<\/p>\n
2.4 Authority. Subject only to the requisite approval of the Merger
\n ———
\nand this Agreement by the Company’s shareholders, the Company has all requisite
\ncorporate power and authority to enter into this Agreement and to consummate the
\ntransactions contemplated hereby. The vote required of the Company’s
\nshareholders to duly approve the Merger and this Agreement is a majority of the
\noutstanding shares of Company Common Stock and a majority of the outstanding
\nshares of Company Preferred Stock (collectively, the “Required Shares”). Company
\nShareholders who hold the Required Shares have executed the Support Agreements.
\nThe execution and delivery of this Agreement and the consummation of the
\ntransactions contemplated hereby have been duly authorized by all necessary
\ncorporate action on the part of the Company, subject only to the approval of the
\nMerger by the Company’s shareholders. The Company’s Board of Directors has
\nunanimously approved the Merger and this Agreement. This Agreement has been duly
\nexecuted and delivered by the Company and constitutes the valid and binding
\nobligation of the Company, enforceable in accordance with its terms. Subject
\nonly to the approval of the Merger and this Agreement by the Company’s
\nshareholders, the execution and delivery of this Agreement by the Company does
\nnot, and, as of the Effective Time, the consummation of the transactions
\ncontemplated hereby will not, conflict with, or result in any violation of, or
\ndefault under (with or without notice or lapse of time, or both), or give rise
\nto a right of termination, cancellation or acceleration of any obligation or
\nloss of any benefit under (any such event, a “Conflict”) (i) any provision of
\nthe Articles of Incorporation or Bylaws of the Company or (ii) any material
\nmortgage, indenture, lease, contract or other material agreement or instrument,
\npermit, concession, franchise, license, judgment, order, decree, statute, law,
\nordinance, rule or regulation applicable to the Company or its properties or
\nassets. No consent, waiver, approval, order or authorization of, or
\nregistration, declaration or filing with, any court, administrative agency or
\ncommission or other federal, state, county, local or foreign governmental
\nauthority, instrumentality, agency or commission (“Governmental Entity”) or any
\nthird party (so as not to trigger any Conflict) in connection with a material
\nmortgage, indenture, lease, contract or other material agreement is required by
\nor with respect to the Company in connection with the execution and delivery of
\nthis Agreement or the consummation of the transactions contemplated hereby,
\nexcept for (i) the filing of the Agreement of Merger with the California
\nSecretary of State, (ii) such consents, waivers, approvals, orders,
\nauthorizations, registrations, declarations and filings as may be required under
\napplicable federal and state securities laws and (iii) such other consents,
\nwaivers, authorizations, filings, approvals and registrations which are set
\nforth on Section 2.4 of the Company Disclosure Letter.
\n ———– <\/p>\n
-10-<\/p>\n
2.5 Company Financial Statements. Section 2.5 of the Company
\n —————————- ———–
\nDisclosure Letter sets forth (i) the Company’s unaudited financial statements
\nfor the year ended December 31, 1998, and (ii) the Company’s unaudited balance
\nsheet as of October 31, 1999 (the “Balance Sheet”) and the related unaudited
\nstatements of operations and cash flows for the ten-month period then ended ((i)
\nand (ii) collectively, the “Company Financials”). The Company Financials are
\ncorrect in all material respects and have been prepared in accordance with
\ngenerally accepted accounting principles (“GAAP”) applied on a basis consistent
\nthroughout the periods indicated and consistent with each other, subject to the
\nabsence of notes and, in the case of the Balance Sheet, to normal recurring
\nyear-end adjustments. The Company Financials present fairly the financial
\ncondition and operating results of the Company as of the dates and during the
\nperiods indicated therein, subject, in the case of the financial statements for
\nsuch ten-month period, to normal year-end adjustments, which such adjustments
\nwill not be material in amount or significance. At no time has the Company
\nfactored its accounts receivable or otherwise sold or transferred the right to
\ncollect any of its accounts receivable. In addition, at no time has the Company,
\nor any assets of the Company, been placed into receivership or otherwise been
\nsubject to any bankruptcy, insolvency or liquidation proceeding.<\/p>\n
2.6 No Undisclosed Liabilities. The Company does not have any
\n ————————–
\nliability, indebtedness, obligation, expense, claim, deficiency, guaranty or
\nendorsement of any type, whether accrued, absolute, contingent, matured,
\nunmatured or other (whether or not required to be reflected in financial
\nstatements in accordance with GAAP), which individually or in the aggregate, (i)
\nhas not been reflected in the Balance Sheet, or (ii) has not arisen in the
\nordinary course of the Company’s business since the date of the Balance Sheet,
\nconsistent with past practices.<\/p>\n
2.7 No Changes. Since September 30, 1999 and until the date hereof,
\n ———-
\nthere has not been, occurred or arisen any:<\/p>\n
(a) transaction by the Company except in the ordinary course of
\nbusiness as conducted on the date of the Balance Sheet and consistent with past
\npractices;<\/p>\n
(b) amendments or changes to the Articles of Incorporation or
\nBylaws of the Company;<\/p>\n
(c) capital expenditure or commitment by the Company, either
\nindividually or in the aggregate, exceeding $50,000;<\/p>\n
(d) destruction of, damage to or loss of any material assets,
\nbusiness or customer of the Company (whether or not covered by insurance);<\/p>\n
(e) labor trouble or claim of wrongful discharge or other
\nunlawful labor practice or action;<\/p>\n
(f) event or condition that has or would be reasonably expected
\nto have a Material Adverse Effect (as defined in Section 9.2 hereof) on the
\nCompany;<\/p>\n
-11-<\/p>\n
(g) change in accounting methods or practices (including any
\nchange in depreciation or amortization policies or rates) by the Company;<\/p>\n
(h) revaluation by the Company of any of its assets;<\/p>\n
(i) declaration, setting aside or payment of a dividend or other
\ndistribution with respect to the capital stock of the Company, or any direct or
\nindirect redemption, purchase or other acquisition by the Company of any of its
\ncapital stock;<\/p>\n
(j) increase in the salary or other compensation payable or to
\nbecome payable to any of its officers or directors, or the declaration, payment
\nor commitment or obligation of any kind for the payment of a bonus or other
\nadditional salary or compensation to any such person except as otherwise
\ncontemplated by this Agreement;<\/p>\n
(k) material sale, lease, license or other disposition of any of
\nthe assets or properties of the Company, except in the ordinary course of
\nbusiness as conducted on that date and consistent with past practices;<\/p>\n
(l) amendment or termination (other than pursuant to its terms)
\nof any material contract, agreement or license to which the Company is a party
\nor by which it is bound;<\/p>\n
(m) material loan by the Company to any person or entity,
\nincurring by the Company of any indebtedness, guaranteeing by the Company of any
\nindebtedness, issuance or sale of any debt securities of the Company or
\nguaranteeing of any debt securities of others, except for advances to employees
\nfor travel and business expenses in the ordinary course of business, consistent
\nwith past practices;<\/p>\n
(n) material waiver or release of any right or claim of the
\nCompany, including any write-off or other compromise of any account receivable
\nof the Company;<\/p>\n
(o) issuance or sale by the Company of any of its shares of
\ncapital stock, or securities exchangeable, convertible or exercisable therefor,
\nor of any other of its securities other than the grant or exercise of stock
\noptions in the ordinary course of business;<\/p>\n
(p) change in pricing or royalties set or charged by the Company
\nto its customers or licensees or in pricing or royalties set or charged by
\npersons who have licensed Intellectual Property (as defined in Section 2.11) to
\nthe Company; or<\/p>\n
(q) negotiation or agreement by the Company or any officer or
\nemployees thereof to do any of the things described in the preceding clauses (a)
\nthrough (p) (other than negotiations with Parent and its representatives
\nregarding the transactions contemplated by this Agreement).<\/p>\n
-12-<\/p>\n
2.8 Tax and Other Returns and Reports.
\n ———————————<\/p>\n
(a) Definition of Taxes. For the purposes of this Agreement,
\n ——————-
\n“Tax” or, collectively, “Taxes,” means any and all federal, state, local and
\nforeign taxes, assessments and other governmental charges, duties, impositions
\nand liabilities, including taxes based upon or measured by gross receipts,
\nincome, profits, sales, use and occupation, and value added, ad valorem,
\ntransfer, franchise, withholding, payroll, recapture, employment, excise and
\nproperty taxes, together with all interest, penalties and additions imposed with
\nrespect to such amounts and any obligations under any agreements or arrangements
\nwith any other person with respect to such amounts and including any liability
\nfor taxes of a predecessor entity.<\/p>\n
(b) Tax Returns and Audits.
\n ———————-<\/p>\n
(i) The Company as of the Effective Time will have
\nprepared and filed all required federal, state, local and foreign returns,
\nestimates, information statements and reports (“Returns”) relating to any and
\nall Taxes concerning or attributable to the Company or its operations and such
\nReturns are true and correct and have been completed in accordance with
\napplicable law.<\/p>\n
(ii) The Company as of the Effective Time: (A) will have
\npaid or accrued all Taxes it is required to pay or accrue and (B) will have
\nwithheld with respect to its employees all federal and state income taxes, FICA,
\nFUTA and other Taxes required to be withheld.<\/p>\n
(iii) The Company has not been delinquent in the payment of
\nany Tax nor is there any Tax deficiency outstanding, proposed or assessed
\nagainst the Company, nor has the Company executed any waiver of any statute of
\nlimitations on or extending the period for the assessment or collection of any
\nTax.<\/p>\n
(iv) No audit or other examination of any Return of the
\nCompany is currently in progress, nor has the Company been notified of any
\nrequest for such an audit or other examination.<\/p>\n
(v) The Company does not have any liabilities for unpaid
\nfederal, state, local and foreign Taxes which have not been accrued or reserved
\nagainst in accordance with GAAP on the Balance Sheet or accrued in the ordinary
\ncourse of business consistent with past practice, whether asserted or
\nunasserted, contingent or otherwise, and the Company has no Knowledge of any
\nbasis for the assertion of any such liability attributable to the Company, its
\nassets or operations.<\/p>\n
(vi) The Company has provided to Parent copies of all
\nfederal and state income and all state sales and use Tax Returns for all periods
\nsince the date of Company’s incorporation.<\/p>\n
(vii) There are (and as of immediately following the
\nEffective Date there will be) no liens, pledges, charges, claims, security
\ninterests or other encumbrances of any sort (“Liens”) on the assets of the
\nCompany relating to or attributable to Taxes.<\/p>\n
-13-<\/p>\n
(viii) The Company has no knowledge of any basis for the
\nassertion of any claim relating or attributable to Taxes which, if adversely
\ndetermined, would result in any Lien on the assets of the Company.<\/p>\n
(ix) None of the Company’s assets are treated as “tax-
\nexempt use property” within the meaning of Section 168(h) of the Code.<\/p>\n
(x) As of the Effective Time, there will not be any
\ncontract, agreement, plan or arrangement, including but not limited to the
\nprovisions of this Agreement, covering any employee or former employee of the
\nCompany that, individually or collectively, could give rise to the payment of
\nany amount that would not be deductible pursuant to Section 280G or 162 of the
\nCode.<\/p>\n
(xi) The Company has not filed any consent agreement under
\nSection 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
\nto any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
\nthe Code) owned by the Company.<\/p>\n
(xii) The Company is not a party to a tax sharing or
\nallocation agreement nor does the Company owe any amount under any such
\nagreement.<\/p>\n
(xiii) The Company is not, and has not been at any time, a
\n“United States real property holding corporation” within the meaning of Section
\n897(c)(2) of the Code.<\/p>\n
(xiv) The Company’s tax basis in its assets for purposes of
\ndetermining its future amortization, depreciation and other federal income tax
\ndeductions is accurately reflected on the Company’s tax books and records.<\/p>\n
2.9 Restrictions on Business Activities. There is no agreement
\n ———————————–
\n(noncompete or otherwise), commitment, judgment, injunction, order or decree to
\nwhich the Company is a party or otherwise binding upon the Company which has or
\nreasonably would be expected to have the effect of prohibiting or impairing any
\nbusiness practice of the Company, any acquisition of property (tangible or
\nintangible) by the Company or the conduct of business by the Company. Without
\nlimiting the foregoing, the Company has not entered into any agreement under
\nwhich the Company is restricted from selling, licensing or otherwise
\ndistributing any of its products to any class of customers, in any geographic
\narea, during any period of time or in any segment of the market.<\/p>\n
2.10 Title to Properties; Absence of Liens and Encumbrances.
\n ——————————————————<\/p>\n
(a) The Company owns no real property, nor has it ever owned any
\nreal property. Section 2.10(a) of the Company Disclosure Letter sets forth a
\n ————–
\nlist of all real property currently leased by the Company, the name of the
\nlessor, the date of the lease and each amendment thereto and the aggregate
\nannual rental and\/or other fees payable under any such lease. All such current
\nleases are in full force and effect, are valid and effective in accordance with
\ntheir respective terms, and there is not, under any of such leases, any existing
\ndefault on the part of the Company or event of default on<\/p>\n
-14-<\/p>\n
the part of the Company (or event which with notice or lapse of time, or both,
\nwould constitute such a default).<\/p>\n
(b) The Company has good and valid title to, or, in the case of
\nleased properties and assets, valid leasehold interests in, all of its tangible
\nproperties and assets, real, personal and mixed, used or held for use in its
\nbusiness, free and clear of any Liens (as defined in Section 2.8(b)(vii)),
\nexcept as reflected in the Company Financials and except for liens for taxes not
\nyet due and payable and such imperfections of title and encumbrances, if any,
\nwhich are not material in character, amount or extent, and which do not
\nmaterially detract from the value, or materially interfere with the present use,
\nof the property subject thereto or affected thereby.<\/p>\n
2.11 Intellectual Property.
\n ———————<\/p>\n
For the purposes of this Agreement, the following terms have the
\nfollowing definitions:<\/p>\n
“Intellectual Property” shall mean any or all of the following
\n and all rights in, arising out of, or associated therewith: (i)
\n all United States, international and foreign patents and
\n applications therefor and all reissues, divisions, renewals,
\n extensions, provisionals, continuations and continuations-in-part
\n thereof; (ii) all inventions (whether patentable or not),
\n invention disclosures, improvements, trade secrets, proprietary
\n information, know how, technology, technical data and customer
\n lists, and all documentation relating to any of the foregoing;
\n (iii) all copyrights, copyrights registrations and applications
\n therefor, and all other rights corresponding thereto throughout
\n the world; (iv) all industrial designs and any registrations and
\n applications therefor throughout the world; (v) all trade names,
\n logos, URLs, common law trademarks and service marks, trademark
\n and service mark registrations and applications therefor
\n throughout the world; (vi) all databases and data collections and
\n all rights therein throughout the world; (vii) all moral and
\n economic rights of authors and inventors; and (viii) any similar
\n or equivalent rights to any of the foregoing anywhere in the
\n world.<\/p>\n
“Company Intellectual Property” shall mean any Intellectual
\n Property that is owned by, or exclusively licensed to, the
\n Company.<\/p>\n
“Registered Intellectual Property” means all United States,
\n international and foreign: (i) patents and patent applications
\n (including provisional applications); (ii) registered trademarks,
\n applications to register trademarks, intent-to-use applications,
\n or other registrations or applications related to trademarks;
\n (iii) registered copyrights and applications for copyright
\n registration; and (iv) any other Intellectual Property that is
\n the subject of an application, certificate, filing, registration
\n or other similar document issued, filed with, or recorded by any
\n state, government or other public legal authority.<\/p>\n
“Company Registered Intellectual Property” means all of the
\n Registered Intellectual Property owned by, or filed in the
\n name of, the Company.<\/p>\n
-15-<\/p>\n
(a) No material Company Intellectual Property or product or
\nservice of the Company is subject to any proceeding or outstanding decree,
\norder, judgment, agreement or stipulation restricting in any manner the use,
\ntransfer, or licensing thereof by the Company, or which may affect the validity,
\nuse or enforceability of such Company Intellectual Property.<\/p>\n
(b) Section 2.11(b) of the Company Disclosure Letter is a
\n —————
\ncomplete and accurate list of all Company Registered Intellectual Property and
\nspecifies, where applicable, the jurisdictions in which each such item of
\nCompany Registered Intellectual Property has been issued or registered or in
\nwhich an application for such issuance and registration has been filed,
\nincluding the respective registration or application numbers. As of the date
\nhereof, each material item of Company Registered Intellectual Property is valid
\nand subsisting, all necessary registration, maintenance and renewal fees
\ncurrently due in connection with such Registered Intellectual Property have been
\nmade and all necessary documents, recordations and certificates in connection
\nwith such Registered Intellectual Property have been filed with the relevant
\npatent, copyright, trademark or other authorities in the United States or
\nforeign jurisdictions, noted for the purposes of maintaining such Registered
\nIntellectual Property.<\/p>\n
(c) The Company owns and has good and exclusive title to,
\nor has license (sufficient for the conduct of its business as currently
\nconducted and as currently proposed to be conducted) to, each material item of
\nCompany Intellectual Property or other Intellectual Property used by the Company
\nfree and clear of any lien or encumbrance (excluding licenses and related
\nrestrictions); and the Company is the exclusive owner of all trademarks and
\ntrade names used in connection with the operation or conduct of the business of
\nthe Company, including the sale of any products or the provision of any services
\nby the Company.<\/p>\n
(d) The Company owns exclusively, and has good title to,
\nall copyrighted works or which the Company otherwise expressly purports to own.
\nThe Company owns exclusively, and has good title to, all source-code and object-
\ncode used in or incorporated in the Company’s products or services.<\/p>\n
(e) To the extent that any material Intellectual Property
\nhas been developed or created by a third party for the Company, the Company has
\na written agreement with such third party with respect thereto and the Company
\nthereby either (i) has obtained ownership of, and is the exclusive owner of or
\n(ii) has obtained a license (sufficient for the conduct of its business as
\ncurrently conducted and as currently proposed to be conducted) to all such third
\nparty’s Intellectual Property in such work, material or invention by operation
\nof law or by valid assignment, to the fullest extent it is legally possible to
\ndo so.<\/p>\n
(f) The Company has not transferred ownership of, or
\ngranted any exclusive license with respect to, any Intellectual Property that is
\nmaterial to the Company Intellectual Property, to any third party.<\/p>\n
(g) Section 2.11(g) of the Company Disclosure Letter lists
\n ————–
\nall material contracts, licenses and agreements to which the Company is a party
\n(i) with respect to the Company Intellectual Property licensed or transferred to
\nany third party (other than end-user licenses in the<\/p>\n
-16-<\/p>\n
ordinary course); or (ii) pursuant to which a third party has licensed or
\ntransferred any material Intellectual Property to the Company.<\/p>\n
(h) All material contracts, licenses and agreements relating to
\nCompany Intellectual Property are in full force and effect. The consummation of
\nthe transactions contemplated by this Agreement will neither violate nor result
\nin the breach, modification, cancellation, termination or suspension of such
\ncontracts, licenses and agreements. The Company is in material compliance with,
\nand has not materially breached any term any of such contracts, licenses and
\nagreements and, to the Knowledge of the Company, all other parties to such
\ncontracts, licenses and agreements are in compliance with, and have not
\nmaterially breached any term of, such contracts, licenses and agreements.
\nFollowing the Closing Date, the Surviving Corporation will be permitted to
\nexercise all of the Company’s rights under such contracts, licenses and
\nagreements to the same extent the Company would have been able to had the
\ntransactions contemplated by this Agreement not occurred and without the payment
\nof any additional amounts or consideration other than ongoing fees, royalties or
\npayments which the Company would otherwise be required to pay.<\/p>\n
(i) The operation of the business of the Company as such
\nbusiness currently is conducted, including the Company’s design, development,
\nmarketing and sale of the products or services of the Company (including with
\nrespect to products and services currently under development) has not, does not
\nand will not infringe or misappropriate the Intellectual Property of any third
\nparty or constitute unfair competition or trade practices under the laws of any
\njurisdiction.<\/p>\n
(j) The Company has not received notice from any third party
\nthat the operation of the business of the Company or any act, product or service
\nof the Company, infringes or misappropriates the Intellectual Property of any
\nthird party or constitutes unfair competition or trade practices under the laws
\nof any jurisdiction.<\/p>\n
(k) To the Knowledge of the Company, no person has or is
\ninfringing or misappropriating, in any respect materially adverse to the
\nCompany, any Company Intellectual Property.<\/p>\n
(l) The Company has taken reasonable steps to protect the
\nCompany’s rights in the Company’s confidential information and trade secrets
\nthat it wishes to protect or any trade secrets or confidential information of
\nthird parties provided to the Company, and, without limiting the foregoing, the
\nCompany has and enforces a policy requiring each employee and contractor to
\nexecute a proprietary information\/confidentiality and invention assignment
\nagreement and all current and former employees and contractors of the Company
\nhave executed such an agreement, except where the failure to do so is not
\nreasonably expected to be material to the Company.<\/p>\n
2.12 Agreements, Contracts and Commitments.
\n ————————————-<\/p>\n
(a) As of the date hereof, the Company does not have, is not a
\nparty to nor is it bound by:<\/p>\n
(i) any collective bargaining agreements,<\/p>\n
-17-<\/p>\n
(ii) any agreements or arrangements that contain any
\nseverance pay or post-employment liabilities or obligations,<\/p>\n
(iii) any bonus, deferred compensation, pension, profit
\nsharing or retirement plans, or any other employee benefit plans or
\narrangements,<\/p>\n
(iv) any employment or consulting agreement, contract or
\ncommitment with an employee or individual consultant or salesperson or any
\nconsulting or sales agreement, contract or commitment under which any firm or
\nother organization provides material services to the Company,<\/p>\n
(v) any agreement or plan, including, without limitation,
\nany stock option plan, stock appreciation rights plan or stock purchase plan,
\nany of the benefits of which will be increased, or the vesting of benefits of
\nwhich will be accelerated, by the occurrence of any of the transactions
\ncontemplated by this Agreement or the value of any of the benefits of which will
\nbe calculated on the basis of any of the transactions contemplated by this
\nAgreement,<\/p>\n
(vi) any fidelity or surety bond or completion bond, <\/p>\n
(vii) any lease of personal property having a value
\nindividually in excess of $15,000,<\/p>\n
(viii) any agreement of indemnification or guaranty,<\/p>\n
(ix) any agreement, contract or commitment containing any
\ncovenant limiting the freedom of the Company to engage in any line of business
\nor to compete with any person,<\/p>\n
(x) any agreement, contract or commitment relating to
\ncapital expenditures and involving future payments in excess of $25,000,<\/p>\n
(xi) any agreement, contract or commitment relating to the
\ndisposition or acquisition of assets or any interest in any business enterprise
\noutside of the ordinary course of the Company’s business,<\/p>\n
(xii) any mortgages, indentures, loans or credit
\nagreements, security agreements or other agreements or instruments relating to
\nthe borrowing of money or extension of credit, including guaranties referred to
\nin clause (viii) hereof,<\/p>\n
(xiii) any construction contracts, <\/p>\n
(xiv) any distribution, joint marketing or development
\nagreement,<\/p>\n
(xv) any agreement pursuant to which the Company has
\ngranted or may grant in the future, to any party, a source-code license or
\noption or other right to use or acquire source-code,<\/p>\n
-18-<\/p>\n
(xvi) any agreement, arrangement, joint venture,
\npartnership, license or other relationship with any Governmental Entity whereby
\nthe United States Government or any other Governmental Entity has an ownership
\ninterest in or otherwise has the right to exploit in any manner any Company
\nIntellectual Property or any other assets of the Company, or<\/p>\n
(xvii) any other agreement, contract or commitment that
\ninvolves $25,000 or more or is not cancelable without penalty within thirty (30)
\ndays.<\/p>\n
(b) Except for such alleged breaches, violations and defaults
\nand events that would constitute a breach, violation or default with the lapse
\nof time, giving of notice, or both, as are all noted in Section 2.12(b) of the
\n —————
\nDisclosure Letter, the Company has not breached, violated or defaulted
\nunder, or received notice that it has breached, violated or defaulted under, any
\nof the terms or conditions of any material agreement, contract or commitment
\nrequired to be set forth on Section 2.12(a) of the Company Disclosure Letter or
\n —————
\nSection 2.11(g) of the Company Disclosure Letter (any such agreement, contract
\n—————
\nor commitment, a “Contract”). Each Contract is in full force and effect and is
\nnot subject to any default thereunder of which the Company has Knowledge by any
\nparty obligated to the Company pursuant thereto.<\/p>\n
2.13 Interested Party Transactions. No officer, director or
\n —————————–
\nshareholder of the Company (nor any ancestor, sibling, descendant or spouse of
\nany of such persons, or any trust, partnership or corporation in which any of
\nsuch persons has or has had an interest), has or has had, directly or
\nindirectly, (i) an economic interest in any entity which furnished or sold, or
\nfurnishes or sells, services or products that the Company furnishes or sells, or
\nproposes to furnish or sell, (ii) an economic interest in any entity that
\npurchases from or sells or furnishes to, the Company, any goods or services or
\n(iii) a beneficial interest in any contract or agreement set forth in Section
\n ——–
\n2.12(a) of the Company Disclosure Letter or Section 2.11(g) of the Company
\n——- —————
\nDisclosure Letter; provided, that ownership of no more than one percent (1%) of
\nthe outstanding voting stock of a publicly traded corporation shall not be
\ndeemed an “economic interest in any entity” for purposes of this Section 2.13.<\/p>\n
2.14 Compliance with Laws. The Company has complied in all material
\n ——————–
\nrespects with, is not in material violation of, and has not received any notices
\nof violation with respect to, any foreign, federal, state or local statute, law
\nor regulation.<\/p>\n
2.15 Litigation. As of the date hereof, there is no action, suit or
\n ———-
\nproceeding of any nature pending or to the Company’s knowledge threatened
\nagainst the Company or its properties. There is no action, suit or proceeding of
\nany nature pending or, to the Company Knowledge, threatened against any of its
\nofficers or directors, in their respective capacities as such. To the Company’s
\nKnowledge, as of the date hereof, there is no investigation pending or
\nthreatened against the Company, its properties or any of its officers or
\ndirectors by or before any governmental entity. Section 2.15 of the Company
\n ————
\nDisclosure Letter sets forth, with respect to any pending or threatened action,
\nsuit, proceeding or investigation as of the date hereof, the forum, the parties
\nthereto, the subject matter thereof and the amount of damages claimed or other
\nremedy requested. To the Company’s Knowledge, as of the date hereof, no
\ngovernmental entity has at any time challenged or questioned the legal right of
\nthe Company to manufacture, offer or sell any of its products or services<\/p>\n
-19-<\/p>\n
in the present manner or style thereof. Nothing contained in this Section shall
\nlimit any other representation and warranty made by the Company in this
\nAgreement.<\/p>\n
2.16 Insurance. With respect to the insurance policies and fidelity
\n ———
\nbonds covering the assets, business, equipment, properties, operations,
\nemployees, officers and directors of the Company, there is no claim by the
\nCompany pending under any of such policies or bonds as to which coverage has
\nbeen questioned, denied or disputed by the underwriters of such policies or
\nbonds. All premiums due and payable under all such policies and bonds have been
\npaid and the Company is otherwise in material compliance with the terms of such
\npolicies and bonds (or other policies and bonds providing substantially similar
\ninsurance coverage). The Company has no knowledge of any threatened termination
\nof, or material premium increase with respect to, any of such policies.<\/p>\n
2.17 Minute Books. The minute books of the Company made available to
\n ————
\ncounsel for Parent are the only minute books of the Company and contain a
\nreasonably accurate summary of all meetings of directors (or committees thereof)
\nand shareholders or actions by written consent since the time of incorporation
\nof the Company until the date hereof.<\/p>\n
2.18 Environmental Matters.
\n ———————<\/p>\n
(a) Hazardous Material. The Company has not operated any
\n ——————
\nunderground storage tanks, and has no Knowledge of the existence, at any time,
\nof any underground storage tank (or related piping or pumps), at any property
\nthat the Company has at any time owned, operated, occupied or leased. The
\nCompany has not released any amount of any substance that has been designated by
\nany Governmental Entity or by applicable federal, state or local law to be
\nradioactive, toxic, hazardous or otherwise a danger to health or the
\nenvironment, including, without limitation, PCBs, asbestos, oil and petroleum
\nproducts, urea-formaldehyde and all substances listed as a “hazardous
\nsubstance,” “hazardous waste,” “hazardous material” or “toxic substance” or
\nwords of similar import, under any law, including but not limited to, the
\nComprehensive Environmental Response, Compensation, and Liability Act of 1980,
\nas amended; the Resource Conservation and Recovery Act of 1976, as amended; the
\nFederal Water Pollution Control Act, as amended; the Clean Air Act, as amended,
\nand the regulations promulgated pursuant to said laws (a “Hazardous Material”).
\nNo Hazardous Materials are present as a result of the actions or omissions of
\nthe Company, or, to the Company’s Knowledge, as a result of any actions of any
\nthird party or otherwise, in, on or under any property, including the land and
\nthe improvements, ground water and surface water thereof, that the Company has
\nat any time owned, operated, occupied or leased.<\/p>\n
(b) Hazardous Materials Activities. The Company has not
\n ——————————
\ntransported, stored, used, manufactured, disposed of, released or exposed its
\nemployees or others to Hazardous Materials in violation of any law in effect on
\nor before the Effective Time, nor has the Company disposed of, transported,
\nsold, or manufactured any product containing a Hazardous Material (any or all of
\nthe foregoing being collectively referred to as “Hazardous Materials
\nActivities”) in violation of any rule, regulation, treaty or statute promulgated
\nby any Governmental Entity in effect prior to or as of the date hereof to
\nprohibit, regulate or control Hazardous Materials or any Hazardous Material
\nActivity.<\/p>\n
-20-<\/p>\n
(c) Permits. The Company currently holds all environmental
\n ——-
\napprovals, permits, licenses, clearances and consents (the “Environmental
\nPermits”) necessary for the conduct of the Company’s Hazardous Material
\nActivities and other businesses of the Company as such activities and businesses
\nare currently being conducted.<\/p>\n
(d) Environmental Liabilities. No action, proceeding, revocation
\n ————————-
\nproceeding, amendment procedure, writ, injunction or claim is pending, or to the
\nCompany’s Knowledge, threatened concerning any Environmental Permit, Hazardous
\nMaterial or any Hazardous Materials Activity of the Company. The Company is not
\naware of any fact or circumstance which could involve the Company in any
\nenvironmental litigation or impose upon the Company any environmental liability.<\/p>\n
2.19 Brokers’ and Finders’ Fees; Third Party Expenses. Except as set
\n ————————————————
\nforth on Section 2.19 of the Company Disclosure Letter, the Company has not
\n ————
\nincurred, nor will it incur, directly or indirectly, any liability for brokerage
\nor finders’ fees or agents’ commissions or any similar charges in connection
\nwith this Agreement or any transaction contemplated hereby. Section 2.19 of the
\n ————
\nCompany Disclosure Letter sets forth the principal terms and conditions of any
\nagreement, written or oral, with respect to such fees. Section 2.19 of the
\n ————
\nCompany Disclosure Letter also sets forth the Company’s current reasonable
\nestimate of all Third Party Expenses (as defined in Section 5.5) expected to be
\nincurred by the Company in connection with the negotiation and effectuation of
\nthe terms and conditions of this Agreement and the transactions contemplated
\nhereby.<\/p>\n
2.20 Employee Matters and Benefit Plans.
\n ———————————-<\/p>\n
(a) Definitions. With the exception of the definition of
\n ———–
\n“Affiliate” set forth in Section 2.20(a)(i) below (which definition shall apply
\nonly to this Section 2.20), for purposes of this Agreement, the following terms
\nshall have the meanings set forth below:<\/p>\n
(i) “Affiliate” shall mean, for purposes of this Section
\n2.20, any other person or entity under common control with the Company within
\nthe meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations
\nthereunder;<\/p>\n
(ii) “ERISA” shall mean the Employee Retirement Income
\nSecurity Act of 1974, as amended;<\/p>\n
(iii) “Company Employee Plan” shall refer to any plan,
\nprogram, policy, practice, contract, agreement or other arrangement providing
\nfor compensation, severance, termination pay, performance awards, stock or
\nstock-related awards, fringe benefits or other employee benefits or remuneration
\nof any kind, whether formal or informal, funded or unfunded and whether or not
\nlegally binding, including without limitation, each “employee benefit plan”,
\nwithin the meaning of Section 3(3) of ERISA which is or has been maintained,
\ncontributed to, or required to be contributed to, by the Company or any
\nAffiliate for the benefit of any “Employee” (as defined below), and pursuant to
\nwhich the Company or any Affiliate has or may have any material liability
\ncontingent or otherwise;<\/p>\n
-21-<\/p>\n
(iv) “Employee” shall mean any current, former, or retired
\nemployee, officer or director of the Company or any Affiliate;<\/p>\n
(v) “Employee Agreement” shall refer to each management,
\nemployment, severance, consulting, relocation, repatriation, expatriation,
\nvisas, work permit or similar agreement or contract between the Company or any
\nAffiliate and any Employee or consultant;<\/p>\n
(vi) “IRS” shall mean the Internal Revenue Service;<\/p>\n
(vii) “Multiemployer Plan” shall mean any “Pension Plan”
\n(as defined below) which is a “multiemployer plan”, as defined in Section 3(37)
\nof ERISA; and<\/p>\n
(viii) “Pension Plan” shall refer to each Company Employee
\nPlan which is an “employee pension benefit plan”, within the meaning of Section
\n3(2) of ERISA.<\/p>\n
(b) Disclosure. Section 2.20(b) of the Company Disclosure Letter
\n ———- —————
\ncontains an accurate and complete list of each Company Employee Plan and each
\nEmployee Agreement. The Company does not have any plan or commitment, whether
\nlegally binding or not, to establish any new Company Employee Plan or Employee
\nAgreement, to modify any Company Employee Plan or Employee Agreement (except to
\nthe extent required by law or to conform any such Company Employee Plan or
\nEmployee Agreement to the requirements of any applicable law, in each case as
\npreviously disclosed to Parent in writing, or as required by this Agreement), or
\nto enter into any Company Employee Plan or Employee Agreement, nor does it have
\nany intention or commitment to do any of the foregoing.<\/p>\n
(c) Documents. The Company has provided to Parent (i) correct
\n ———
\nand complete copies of all documents embodying or relating to each Company
\nEmployee Plan and each Employee Agreement including all amendments thereto and
\nwritten interpretations thereof; (ii) the most recent annual actuarial
\nvaluations, if any, prepared for each Company Employee Plan; (iii) the three
\nmost recent annual reports (Series 5500 and all schedules thereto), if any,
\nrequired under ERISA or the Code in connection with each Company Employee Plan
\nor related trust; (iv) if the Company Employee Plan is funded, the most recent
\nannual and periodic accounting of Company Employee Plan assets; (v) the most
\nrecent summary plan description together with the most recent summary of
\nmaterial modifications, if any, required under ERISA with respect to each
\nCompany Employee Plan; (vi) all IRS determination letters and rulings relating
\nto Company Employee Plans and copies of all applications and correspondence to
\nor from the IRS or the Department of Labor (“DOL”) with respect to any Company
\nEmployee Plan; (vii) all communications material to any Employee or Employees
\nrelating to any Company Employee Plan and any proposed Company Employee Plans,
\nin each case, relating to any amendments, terminations, establishments,
\nincreases or decreases in benefits, acceleration of payments or vesting
\nschedules or other events which would result in any material liability to the
\nCompany; and (viii) all registration statements and prospectuses prepared in
\nconnection with each Company Employee Plan.<\/p>\n
(d) Employee Plan Compliance. (i) The Company has performed in
\n ————————
\nall material respects all obligations required to be performed by it under each
\nCompany Employee Plan, and<\/p>\n
-22-<\/p>\n
each Company Employee Plan has been established and maintained in all material
\nrespects in accordance with its terms and in compliance with all applicable
\nlaws, statutes, orders, rules and regulations, including but not limited to
\nERISA or the Code; (ii) no “prohibited transaction,” within the meaning of
\nSection 4975 of the Code or Section 406 of ERISA, has occurred with respect to
\nany Company Employee Plan; (iii) as of the date hereof, there are no actions,
\nsuits or claims pending, or, to the knowledge of the Company, threatened or
\nanticipated (other than routine claims for benefits) against any Company
\nEmployee Plan or against the assets of any Company Employee Plan; and (iv) each
\nCompany Employee Plan can be amended, terminated or otherwise discontinued after
\nthe Effective Time in accordance with its terms, without liability to the
\nCompany, Parent or any of its Affiliates (other than ordinary administration
\nexpenses typically incurred in a termination event); (v) as of the date hereof,
\nthere are no inquiries or proceedings pending or, to the knowledge of the
\nCompany or any affiliates, threatened by the IRS or DOL with respect to any
\nCompany Employee Plan; and (vi) neither the Company nor any Affiliate is subject
\nto any material penalty or tax with respect to any Company Employee Plan under
\nSection 502(i) of ERISA or Section 4975 through 4980 of the Code.<\/p>\n
(e) Pension Plans. The Company does not now, nor has it ever,
\n ————-
\nmaintained, established, sponsored, participated in, or contributed to, any
\nPension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
\nIV of ERISA or Section 412 of the Code. <\/p>\n
(f) Multiemployer Plans. At no time has the Company contributed to or been
\n ——————-
\nrequested to contribute to any Multiemployer Plan.<\/p>\n
(g) No Post-Employment Obligations. No Company Employee Plan provides, or
\n ——————————
\nhas any liability to provide, life insurance, medical or other employee benefits
\nto any Employee upon his or her retirement or termination of employment for any
\nreason, except as may be required by statute, and the Company has never
\nrepresented, promised or contracted (whether in oral or written form) to any
\nEmployee (either individually or to Employees as a group) that such Employee(s)
\nwould be provided with life insurance, medical or other employee welfare
\nbenefits upon their retirement or termination of employment, except to the
\nextent required by statute.<\/p>\n
(h) Effect of Transaction.
\n ———————<\/p>\n
(i) The execution of this Agreement and the consummation of the
\ntransactions contemplated hereby will not (either alone or upon the occurrence
\nof any additional or subsequent events) constitute an event under any Company
\nEmployee Plan, Employee Agreement, trust or loan that will or may result in any
\npayment (whether of severance pay or otherwise), acceleration, forgiveness of
\nindebtedness, vesting, distribution, increase in benefits or obligation to fund
\nbenefits with respect to any Employee.<\/p>\n
(ii) No payment or benefit which will or may be made by the Company or
\nParent or any of their respective affiliates with respect to any Employee will
\nbe characterized as an “excess parachute payment”, within the meaning of Section
\n280G(b)(1) of the Code.<\/p>\n
-23-<\/p>\n
(i) Employment Matters. The Company (i) is in compliance in all
\n ——————
\nmaterial respects with all applicable foreign, federal, state and local laws,
\nrules and regulations respecting employment, employment practices, terms and
\nconditions of employment and wages and hours, in each case, with respect to
\nEmployees; (ii) has withheld all amounts required by law or by agreement to be
\nwithheld from the wages, salaries and other payments to Employees; (iii) is not
\nliable for any material arrears of wages or any taxes or any material penalty
\nfor failure to comply with any of the foregoing; and (iv) is not liable for any
\npayment to any trust or other fund or to any governmental or administrative
\nauthority, with respect to unemployment compensation benefits, social security
\nor other benefits or obligations for Employees (other than routine payments to
\nbe made in the normal course of business and consistent with past practice).<\/p>\n
(j) Labor. No work stoppage or labor strike against the Company is
\n —–
\npending or, to the best knowledge of the Company, threatened. The Company is not
\ninvolved in or, to the Knowledge of the Company, threatened with, any labor
\ndispute, grievance, or litigation relating to labor, safety or discrimination
\nmatters involving any Employee, including, without limitation, charges of unfair
\nlabor practices or discrimination complaints, which, if adversely determined,
\nwould, individually or in the aggregate, result in liability to the Company.
\nNeither the Company nor any of its subsidiaries has engaged in any unfair labor
\npractices within the meaning of the National Labor Relations Act which would,
\nindividually or in the aggregate, directly or indirectly result in a liability
\nto the Company. The Company is not presently, nor has it been in the past, a
\nparty to, or bound by, any collective bargaining agreement or union contract
\nwith respect to Employees and no collective bargaining agreement is being
\nnegotiated by the Company.<\/p>\n
2.21 Officer Matters. To the Company’s Knowledge, no officer of the Company
\n —————
\nhas ever been convicted of a felony or been the subject of a governmental
\ninvestigation. To the Company’s Knowledge, no company of which any officer of
\nthe Company is or was an officer has ever been subject to any bankruptcy or
\ninsolvency proceeding.<\/p>\n
2.22 Year 2000 Compliance. As of the date hereof, to the Company’s
\n ——————–
\nKnowledge the Company’s products, services and internal systems have been
\ndesigned to ensure date and time entry recognition, calculations that
\naccommodate same century and multi-century formulas and date values, leap year
\nrecognition and calculations, and date data interface values that reflect the
\ncentury. As of the date hereof, to the Company’s Knowledge the Company’s
\nproducts, services and internal systems manage and manipulate data involving
\ndates and times, including single century formulas and multi-century formulas,
\nand do not cause an abnormal ending scenario within the application or generate
\nincorrect values or invalid results involving such dates.<\/p>\n
2.23 Representations Complete. As of the date hereof, none of the
\n ————————
\nrepresentations or warranties made by the Company (as modified by the Company
\nDisclosure Letter), nor any statement made in any schedule or certificate
\nfurnished by the Company pursuant to this Agreement, or furnished in or in
\nconnection with documents mailed or delivered to the shareholders of the Company
\nin connection with soliciting their consent to this Agreement and the Merger,
\ncontains or will contain at the Effective Time, any untrue statement of a
\nmaterial fact, or omits or will omit at <\/p>\n
-24-<\/p>\n
the Effective Time to state any material fact necessary in order to make the
\nstatements contained herein or therein, in the light of the circumstances under
\nwhich made, not misleading. <\/p>\n
ARTICLE III<\/p>\n
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB<\/p>\n
As of the date hereof and as of the Closing Date, Parent and Merger Sub
\nrepresent and warrant to the Company as follows:<\/p>\n
3.1 Organization, Standing and Power. Parent is a corporation duly
\n ——————————–
\norganized, validly existing and in good standing under the laws of the State of
\nDelaware. Merger Sub is a corporation duly organized, validly existing and in
\ngood standing under the laws of the State of California. Each of Parent and
\nMerger Sub has the corporate power to own its properties operate and use its
\nassets and to carry on its business as now being conducted and is duly qualified
\nto do business as a foreign corporation and is in good standing under the laws
\nof each jurisdiction in which the failure to be so qualified would be material
\nto Parent and Merger Sub as a whole.<\/p>\n
3.2 Authority. Parent and Merger Sub have all requisite corporate power
\n ———
\nand authority to enter into this Agreement and to consummate the transactions
\ncontemplated hereby. No vote of the Parent’s stockholders is required with
\nrespect to the Merger and the other transactions contemplated hereby. The
\nexecution and delivery of this Agreement and the consummation of the
\ntransactions contemplated hereby have been duly authorized by all necessary
\ncorporate action on the part of Parent and Merger Sub. This Agreement has been
\nduly executed and delivered by Parent and Merger Sub and constitutes the valid
\nand binding obligations of Parent and Merger Sub, enforceable in accordance with
\nits terms. As of the Effective Times, the consummation of the transactions
\ncontemplated by this Agreement will not Conflict with (i) any provision of the
\nCertificate of Incorporation or Bylaws of Parent, (ii) any agreement to which
\nParent is a party that it has filed or that is required to be filed with the
\nSecurities and Exchange Commission or (iii) any permit, license, judgment,
\norder, decree, statute, law, ordinance, rule or regulation of any Governmental
\nEntity applicable to Parent or its properties or assets, except such Conflicts
\nwhich would not result in a Material Adverse Effect on Parent.<\/p>\n
3.3 Capital Structure.
\n —————–<\/p>\n
(a) As of the date hereof, the authorized stock of Parent consists of
\n(i) 200,000,000 shares of Common Stock, of which 45,532,469 shares were issued
\nand outstanding as of September 30, 1999, and 10,000,000 shares of Preferred
\nStock, none of which was issued or outstanding as of September 30, 1999, and
\n(ii) options and warrants to purchase fewer than 2,600,000 shares of Parent
\nCommon Stock as of September 30, 1999. The authorized capital stock of Merger
\nSub consists of 1,000 shares of Common Stock, 1,000 shares of which, as of the
\ndate hereof, are issued and outstanding and are held by Parent. All such shares
\nhave been duly authorized, and all such issued and outstanding shares have been
\nvalidly issued, are fully paid and nonassessable. <\/p>\n
-25-<\/p>\n
(b) The shares of Parent Common Stock to be issued pursuant to the
\nMerger, when issued, will be duly authorized, validly issued, fully paid, non-
\nassessable and issued in compliance with applicable federal and state securities
\nlaws.<\/p>\n
3.4 SEC Documents; Parent Financial Statements. Parent has furnished or
\n ——————————————
\nmade available to the Company true and complete copies of all reports or
\nregistration statements filed by it with the Securities and Exchange Commission
\n(the “SEC”) since June 17, 1999, all in the form so filed (all of the foregoing
\nbeing collectively referred to as the “SEC Documents”). As of their respective
\nfiling dates, the SEC Documents complied in all material respects with the
\nrequirements of the Securities Act of 1933 (the “Securities Act”) or the
\nSecurities Exchange Act of 1934 (the “Exchange Act”) as the case may be, and
\nnone of the SEC Documents contained any untrue statement of a material fact or
\nomitted to state a material fact required to be stated therein or necessary to
\nmake the statements made therein, in light of the circumstances in which they
\nwere made, not misleading, in any such case except to the extent corrected by a
\ndocument subsequently filed with the SEC. The financial statements of Parent,
\nincluding the notes thereto, included in the SEC Documents (the “Parent
\nFinancial Statements”) comply as to form in all material respects with
\napplicable accounting requirements and with the published rules and regulations
\nof the SEC with respect thereto, have been prepared in accordance with generally
\naccepted accounting principles consistently applied (except as may be indicated
\nin the notes thereto or, in the case of unaudited statements, as permitted by
\nForm 10-Q of the SEC) and present fairly the consolidated financial position of
\nParent at the dates thereof and the consolidated results of its operations and
\ncash flows for the periods then ended (subject, in the case of unaudited
\nstatements, to normal audit adjustments). As of the date hereof, there has been
\nno change in Parent accounting policies except as described in the notes to the
\nParent Financial Statements; provided, however, the Parent may have restated or
\nmay restate one or more of the Parent Financial Statements to reflect
\nacquisitions entered into subsequent to the respective dates thereof.<\/p>\n
3.5 No Material Adverse Change. Since the date of the balance sheet
\n ————————–
\nincluded in Parent’s most recently filed report on Form 10-Q until the date
\nhereof, Parent has conducted its business in the ordinary course of business and
\nthere has not occurred: (a) any material adverse effect on the business, assets
\n(including intangible assets), financial condition, capitalization or results of
\noperations of Parent (“Material Adverse Effect on Parent”); (b) any amendment or
\nchange in the Certificate of Incorporation or Bylaws of Parent (other than
\nrestatements of the Certificate of Incorporation which did not require
\nshareholders’ approval) except as disclosed in the SEC Documents; or (c) any
\ndamage to, destruction or loss of any assets of Parent (whether or not covered
\nby insurance) that materially and adversely affects the financial condition or
\nbusiness of Parent. <\/p>\n
3.6 Disclosure. No statement made or furnished by Parent to the Company or
\n ———-
\ncontained in the information regarding Parent in the Information Statement (or
\nany other document) prepared or provided by Parent for use in connection with
\nsoliciting approval of the Merger by the Company’s shareholders contains any
\nuntrue statement of a material fact or omits to state a material fact necessary
\nin order to make the statements contained therein not misleading in light of the
\ncircumstances under which they were made. <\/p>\n
-26-<\/p>\n
ARTICLE IV<\/p>\n
CONDUCT PRIOR TO THE EFFECTIVE TIME<\/p>\n
4.1 Conduct of Business of the Company. During the period from the date of
\n ———————————-
\nthis Agreement and continuing until the earlier of the termination of this
\nAgreement and the Effective Time, the Company agrees (except to the extent that
\nParent shall otherwise consent in writing) to carry on its business in the
\nusual, regular and ordinary course in substantially the same manner as
\nheretofore conducted, to pay its debts and Taxes when due, to pay or perform
\nother obligations when due, and, to the extent consistent with such business, to
\nuse commercially reasonable efforts consistent with past practice and policies
\nto preserve intact its present business organization, keep available the
\nservices of its present officers and key employees and preserve their
\nrelationships with customers, suppliers, distributors, licensors, licensees, and
\nothers having business dealings with it, all with the goal of preserving
\nunimpaired its goodwill and ongoing businesses at the Effective Time. The
\nCompany shall promptly notify Parent of any event or occurrence or emergency not
\nin the ordinary course of its business, and any material event involving or
\nadversely affecting the Company or its business. Except as expressly
\ncontemplated by this Agreement, the Company shall not, without the prior written
\nconsent of Parent:<\/p>\n
(a) Enter into any transaction exceeding $100,000 or any commitment
\nor transaction of the type described in Section 2.12(a) hereof not in the
\nordinary course of business;<\/p>\n
(b) Transfer to any person or entity any rights to any Company
\nIntellectual Property (other than pursuant to end-user licenses in the ordinary
\ncourse of business) or enter into any agreement with respect to Company
\nIntellectual Property with any person or entity other than in the ordinary
\ncourse of business consistent with past practice;<\/p>\n
(c) Terminate any employees other than for cause or encourage any
\nemployees to resign from the Company;<\/p>\n
(d) Amend or otherwise modify (or agree to do so), except in the
\nordinary course of business, or violate the terms of, any of the agreements set
\nforth or described in the Company Disclosure Letter;<\/p>\n
(e) Commence or settle any litigation; <\/p>\n
(f) Declare, set aside or pay any dividends on or make any other
\ndistributions (whether in cash, stock or property) in respect of any of its
\ncapital stock, or split, combine or reclassify any of its capital stock or issue
\nor authorize the issuance of any other securities in respect of, in lieu of or
\nin substitution for shares of capital stock of the Company, or repurchase,
\nredeem or otherwise acquire, directly or indirectly, any shares of its capital
\nstock (or options, warrants or other rights exercisable therefor) except for (i)
\nrepurchases of Company Capital Stock upon the termination of service of any
\nservice providers of Company in accordance with the standard terms set forth in
\nthe agreements governing such repurchases, all of which agreements have been
\nprovided <\/p>\n
-27-<\/p>\n
or made available to Parent, (ii) conversion of Company Preferred Stock and
\n(iii) exercises or conversion of Company Convertible Securities;<\/p>\n
(g) Except for the issuance of shares of Company Capital Stock upon
\nexercise or conversion of presently outstanding Company Options or Warrants,
\nissue, sell, grant, contract to issue, grant or sell, or authorize the issuance,
\ndelivery, sale or purchase of any shares of Company Capital Stock or securities
\nconvertible into, or exercisable or exchangeable for, shares of Company Capital
\nStock, or any securities, warrants, options or rights to purchase any of the
\nforegoing, except for (i) issuances of Company Capital Stock upon the exercise
\nthereof or upon exercise or conversion of Company Convertible Securities or
\nCompany Preferred Stock outstanding as of the date of this Agreement and (ii)
\nissuances of Company Options in the ordinary course of business consistent with
\npast practice and in consultation with Parent, with an exercise price of fair
\nmarket value of Company Common Stock (considering the Merger Consideration and
\nthe Merger), but in no event Company Options to purchase more than 25,000 shares
\n(in any one case) or 125,000 shares (in the aggregate);<\/p>\n
(h) Cause or permit any amendments to its Articles of Incorporation
\nor Bylaws;<\/p>\n
(i) Acquire or agree to acquire by merging or consolidating with, or
\nby purchasing any assets or equity securities of, or by any other manner, any
\nbusiness or any corporation, partnership, association or other business
\norganization or division thereof, or otherwise acquire or agree to acquire any
\nassets which are material, individually or in the aggregate, to the business of
\nthe Company;<\/p>\n
(j) Sell, lease, license or otherwise dispose of any of the assets or
\nproperties of Company which are not Company Intellectual Property other than in
\nthe ordinary course of business and consistent with past practices, including
\nbut not limited to the performance of obligations under contractual arrangements
\nlisted on the Company Disclosure Letter existing as of the date hereof, or
\ncreate any security interest in such assets or properties;<\/p>\n
(k) Grant any loan to any person or entity, incur any indebtedness or
\nguarantee any indebtedness, issue or sell any debt securities, guarantee any
\ndebt securities of others, purchase any debt securities of others or amend the
\nterms of any outstanding agreements related to borrowed money, except for
\nadvances to employees for travel and business expenses in the ordinary course of
\nbusiness consistent with past practices;<\/p>\n
(l) Grant any severance or termination pay (i) to any director or
\nofficer or (ii) to any employee or consultant, except payments made pursuant to
\nstandard written agreements outstanding as of the date hereof and disclosed on
\nSection 4.1(m) of the Company Disclosure Letter, or increase in the salary or
\n————–
\nother compensation payable or to become payable by Company to any of its
\nofficers, directors, employees or advisors, or declare, pay or make any
\ncommitment or obligation of any kind for the payment by Company of a bonus or
\nother additional salary or compensation to any such person, or adopt or amend
\nany employee benefit plan or enter into any employment contract;<\/p>\n
-28-<\/p>\n
(m) Revalue any of its assets, including without limitation writing
\ndown the value of inventory or writing off notes or accounts receivable other
\nthan in the ordinary course of business and consistent with past practice;<\/p>\n
(n) Take any action to accelerate the vesting schedule of any of the
\noutstanding Company Options or Company Capital Stock;<\/p>\n
(o) Pay, discharge or satisfy, in an amount in excess of $30,000 (in
\nany one case) or $150,000 (in the aggregate) any claim, liability or obligation
\n(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
\nthe payment, discharge or satisfaction in the ordinary course of business and in
\na manner consistent with past practice;<\/p>\n
(p) Make or change any material election in respect of Taxes, adopt
\nor change any accounting method in respect of Taxes, enter into any closing
\nagreement, settle any claim or assessment in respect of Taxes, or consent to any
\nextension or waiver of the limitation period applicable to any claim or
\nassessment in respect of Taxes;<\/p>\n
(q) Enter into any strategic alliance, affiliate agreement, data or
\nsoftware licensing agreement (other than off-the-shelf, commercially-available,
\nshrink-wrap, inbound software (e.g., MS Word, Excel), or joint development or
\njoint marketing arrangement or agreement;<\/p>\n
(r) Fail to pay or otherwise satisfy its monetary obligations as they
\nbecome due, except such as are being contested in good faith;<\/p>\n
(s) Waive or commit to waive any rights with a value in excess of
\n$30,000 (in any one case) or $100,000 (in the aggregate);<\/p>\n
(t) Cancel, materially amend or renew any insurance policy other than
\nin the ordinary course of business;<\/p>\n
(u) Implement any Company Employee Plan;<\/p>\n
(v) Alter, or enter into any commitment to alter, its interest in any
\ncorporation, association, joint venture, partnership or business entity in which
\nthe Company directly or indirectly holds any interest on the date hereof; or<\/p>\n
(w) Take, or agree in writing or otherwise to take, any of the
\nactions described in Sections 4.1(a) through (v) above, or any other action that
\nwould prevent the Company from performing or cause the Company not to perform
\nits covenants hereunder.<\/p>\n
4.2 No Solicitation. Until the earlier of the Effective Time and the date
\n —————
\nof termination of this Agreement pursuant to the provisions of Section 8.1
\nhereof, the Company will not (nor will the Company permit any of the Company’s
\nofficers, directors, shareholders, agents, representatives or affiliates to)
\ndirectly or indirectly, take any of the following actions with any party other
\nthan Parent and its designees: (a) solicit, initiate or encourage any proposals
\nor offers from, or conduct<\/p>\n
-29-<\/p>\n
discussions with or engage in negotiations with, any person relating to any
\npossible acquisition of the Company or any of its subsidiaries (whether by way
\nof merger, purchase of capital stock, purchase of assets or otherwise), any
\nmaterial portion of its capital stock or assets or any equity interest in the
\nCompany or any of its subsidiaries, (b) provide information with respect to its
\nbusiness, technologies or properties to any person, other than Parent, relating
\nto, or otherwise cooperate with, facilitate or encourage any effort or attempt
\nby any such person with regard to, any possible acquisition of the Company
\n(whether by way of merger, purchase of capital stock, purchase of assets or
\notherwise), any material portion of its capital stock or assets or any equity
\ninterest in the Company or any of its subsidiaries, (c) enter into an agreement
\nwith any person, other than Parent, providing for the acquisition of the Company
\n(whether by way of merger, purchase of capital stock, purchase of assets or
\notherwise), any material portion of its capital stock or assets or any equity
\ninterest in the Company or any of its subsidiaries, or (d) make or authorize any
\nstatement, recommendation or solicitation in support of any possible acquisition
\nof the Company or any of its subsidiaries (whether by way of merger, purchase of
\ncapital stock, purchase of assets or otherwise), any material portion of its
\ncapital stock or assets or any equity interest in the Company or any of its
\nsubsidiaries by any person, other than by Parent. The Company shall immediately
\ncease and cause to be terminated any such contacts or negotiations with third
\nparties relating to any such transaction or proposed transaction. In addition to
\nthe foregoing, if the Company receives prior to the Effective Time or the
\ntermination of this Agreement any offer or proposal relating to any of the
\nabove, the Company shall immediately notify Parent thereof, including
\ninformation as to the identity of the offeror or the party making any such offer
\nor proposal and the specific terms of such offer or proposal, as the case may
\nbe, and such other information related thereto as Parent may reasonably request
\n(subject to the requirements of nondisclosure agreements of the Company as exist
\nas of the date hereof and are then in force).<\/p>\n
4.3 Conduct of Business of Parent. During the period from the date hereof
\n —————————–
\nand continuing until the earlier of the termination of this Agreement or the
\nEffective Date, Parent shall not (without the prior written consent of the
\nCompany) declare, accrue, set aside or pay any extraordinary dividend or any
\nother extraordinary distribution in respect of any shares of its capital stock
\nor take any other action with respect to its Certificate of Incorporation or
\nBylaws, if in such case, the action would have the effect of being materially
\nadverse to Company Shareholders as compared with the then existing stockholders
\nof Parent as a group.<\/p>\n
-30-<\/p>\n
ARTICLE V<\/p>\n
ADDITIONAL AGREEMENTS<\/p>\n
5.1 Fairness Hearing; Shareholder Approval.
\n ————————————–<\/p>\n
(a) As soon as reasonably practicable following the execution of this
\nAgreement, Parent and Company shall prepare the necessary documents and Parent
\nshall apply to obtain a permit (a “California Permit”) from the Commissioner of
\nCorporations of the State of California (after a hearing before such
\nCommissioner) pursuant to Section 25121 of the California Corporate Securities
\nLaw of 1968, so that the issuance of Parent Common Stock in the Merger shall be
\nexempt from registration under Section 3(a)(10) of the Securities Act. Company
\nand Parent will respond to any comments from the California Department of
\nCorporations and use their commercially reasonable efforts to have the
\nCalifornia Permit granted as soon as practicable after such filing. As promptly
\nas practical after the date of this Agreement, Parent shall prepare and make
\nsuch filings as are required under applicable Blue Sky laws relating to the
\ntransactions contemplated by this Agreement. Company shall use reasonable and
\ngood faith efforts to assist Parent as may be necessary to comply with the
\nsecurities and blue sky laws relating to the transactions contemplated by this
\nAgreement.<\/p>\n
(b) As promptly as practicable after the receipt of a California
\nPermit, the Company shall submit this Agreement and the transactions
\ncontemplated hereby to its shareholders for approval and adoption as provided by
\nCalifornia Law and its Articles of Incorporation and Bylaws. The Company shall
\nuse its best efforts to solicit and obtain the consent of its shareholders
\nsufficient to approve the Merger and this Agreement (and the other matters set
\nforth in Section 1.1(ii) of the Support Agreements) and to enable the Closing to
\noccur as promptly as practicable following the date hereof and, in any event,
\nwithin 15 days following the receipt of the California Permit. The materials
\nsubmitted to the Company’s shareholders shall be subject to reasonable review
\nand approval by Parent and include information regarding the Company, the terms
\nof the Merger and this Agreement and the unanimous recommendation of the Board
\nof Directors of the Company in favor of the Merger and this Agreement, and the
\ntransactions contemplated hereby.<\/p>\n
5.2 Nasdaq Listing. Parent shall use reasonable efforts to ensure that at
\n ————–
\nthe Effective Time, the shares of Parent Common Stock to be delivered to the
\nCompany Shareholders pursuant to this Agreement shall have been accepted for
\nquotation on the National Association of Securities Dealers Automated Quotation
\nNational Market System.<\/p>\n
5.3 Access to Information. Each party shall afford the others and its
\n ———————
\naccountants, counsel and other representatives, reasonable access during normal
\nbusiness hours during the period prior to the Effective Time to (a) all of its
\nproperties, books, contracts, commitments, records and auditors, and (b) all
\nother information concerning the business, properties and personnel (subject to
\nrestrictions imposed by applicable law) of it as the others may reasonably
\nrequest, subject, in the case of Parent, to reasonable limits on access to its
\ntechnical and other nonpublic information. No information or knowledge obtained
\nin any investigation pursuant to this Section 5.3 shall affect or be deemed to
\nmodify any representation or warranty contained herein or the conditions to the
\nobligations of the parties to consummate the Merger.<\/p>\n
-31-<\/p>\n
5.4 Confidentiality. Each of the parties hereto hereby agrees to keep the
\n —————
\nterms of this Agreement (except to the extent contemplated hereby, including as
\nrequired in connection with the California Permit required pursuant to Section
\n5.1) and such information or knowledge obtained in any investigation pursuant to
\nSection 5.3, or pursuant to the negotiation and execution of this Agreement or
\nthe effectuation of the transactions contemplated hereby, confidential;
\nprovided, however, that the foregoing shall not apply to information or
\nknowledge which (a) a party can demonstrate was already lawfully in its
\npossession prior to the disclosure thereof by the other party, (b) is generally
\nknown to the public and did not become so known through any violation of law,
\n(c) became known to the public through no fault of such party, (d) is later
\nlawfully acquired by such party without confidentiality restrictions from other
\nsources, (e) is required to be disclosed by order of court or government agency
\nwith subpoena powers (provided that such party shall have provided the other
\nparty with prior notice of such order and an opportunity to object or take other
\navailable action) or (f) which is disclosed in the course of any litigation
\nbetween any of the parties hereto.<\/p>\n
5.5 Expenses. Whether or not the Merger is consummated, all fees and
\n ——–
\nexpenses incurred in connection with the Merger including, without limitation,
\nall legal, accounting, financial advisory, consulting and all other fees and
\nexpenses of third parties (“Third Party Expenses”) incurred by a party in
\nconnection with the negotiation and effectuation of the terms and conditions of
\nthis Agreement and the transactions contemplated hereby, shall be the obligation
\nof the respective party incurring such fees and expenses.<\/p>\n
5.6 Public Disclosure. Unless otherwise required by law (including,
\n —————–
\nwithout limitation, federal and state securities laws) or, as to Parent, by the
\nrules and regulations of the National Association of Securities Dealers, Inc.,
\nprior to the Effective Time, no disclosure (whether or not in response to an
\ninquiry) of the subject matter of this Agreement shall be made by any party
\nhereto unless approved by Parent and the Company prior to release, provided that
\nsuch approval shall not be unreasonably withheld.<\/p>\n
5.7 Consents. The Company shall use commercially reasonable efforts to
\n ——–
\nobtain the consents, waivers and approvals under any of the Contracts as may be
\nrequired in connection with the Merger (all of such consents, waivers and
\napprovals are set forth in Company Disclosure Letter) so as to preserve all
\nrights of and benefits to the Company thereunder.<\/p>\n
5.8 FIRPTA Compliance. On or prior to the Closing Date, the Company shall
\n —————–
\ndeliver to Parent a properly executed statement in a form reasonably acceptable
\nto Parent for purposes of satisfying Parent’s obligations under Treasury
\nRegulation Section 1.1445-2(c)(3).<\/p>\n
5.9 Reasonable Efforts. Subject to the terms and conditions provided in
\n ——————
\nthis Agreement, each of the parties hereto shall use its reasonable efforts to
\nensure that its representations and warranties remain true and correct in all
\nmaterial respects, and to take promptly, or cause to be taken, all actions, and
\nto do promptly, or cause to be done, all things necessary, proper or advisable
\nunder applicable laws and regulations to consummate and make effective the
\ntransactions contemplated hereby, to obtain all necessary waivers, consents and
\napprovals, to effect all necessary registrations and filings, and to remove any
\ninjunctions or other impediments or delays, legal or otherwise, in order to
\nconsummate and make effective the transactions contemplated by this Agreement
\nfor the<\/p>\n
-32-<\/p>\n
purpose of securing to the parties hereto the benefits contemplated by this
\nAgreement; provided that Parent shall not be required to agree to any
\ndivestiture by Parent or the Company or any of Parent’s subsidiaries or
\naffiliates of shares of capital stock or of any business, assets or property of
\nParent or its subsidiaries or affiliates or the Company or its affiliates, or
\nthe imposition of any material limitation on the ability of any of them to
\nconduct their businesses or to own or exercise control of such assets,
\nproperties and stock.<\/p>\n
5.10 Notification of Certain Matters. The Company shall give prompt notice
\n ——————————-
\nto Parent, and Parent shall give prompt notice to the Company, of (i) the
\noccurrence or non-occurrence of any event, the occurrence or non-occurrence of
\nwhich is likely to cause any representation or warranty of the Company and
\nParent, respectively, contained in this Agreement to be untrue or inaccurate at
\nor prior to the Effective Time and (ii) any failure of the Company or Parent, as
\nthe case may be, to comply with or satisfy any covenant, condition or agreement
\nto be complied with or satisfied by it hereunder; such that the conditions set
\nforth in Section 6.2(a) or (b) or Section 6.3(a) or (b) would not be satisfied;
\nprovided, however, that the delivery of any notice pursuant to this Section 5.10
\nshall not limit or otherwise affect any remedies available to the party
\nreceiving such notice.<\/p>\n
5.11 Affiliate Agreements. Section 5.11 of the Company Disclosure Letter
\n ——————– ————
\nsets forth those persons who, in the Company’s reasonable judgment, are or may
\nbe “affiliates” of the Company within the meaning of Rule 145 (each such person
\na “Company Affiliate”) promulgated under the Securities Act (“Rule 145”). The
\nCompany shall provide Parent such information and documents as Parent shall
\nreasonably request for purposes of reviewing such list. The Company shall
\ndeliver or cause to be delivered to Parent, concurrently with the execution of
\nthis Agreement (and in any case prior to the Closing) from each of the Company
\nAffiliates, an executed Affiliate Agreement in the form attached hereto as
\nExhibit C. Parent shall be entitled to place appropriate legends on the
\n———
\ncertificates evidencing any Parent Common Stock to be received by such Company
\nAffiliates pursuant to the terms of this Agreement, and to issue appropriate
\nstop transfer instructions to the transfer agent for Parent Common Stock,
\nconsistent with the terms of such Affiliate Agreements.<\/p>\n
5.12 Additional Documents and Further Assurances. Each party hereto, at the
\n ——————————————-
\nrequest of the other party hereto, shall execute and deliver such other
\ninstruments and do and perform such other acts and things as may be necessary or
\ndesirable for effecting completely the consummation of this Agreement and the
\ntransactions contemplated hereby.<\/p>\n
5.13 Employee Benefits. It is Parent’s intent to use reasonable efforts to
\n —————–
\nattempt to ensure that: (a) as soon as practicable after the Effective Time,
\nParent’s benefit plans and benefit arrangements will provide benefits to the
\nContinuing Employees (as defined below) that are comparable to the non-
\ndiscretionary, non-cash benefits generally provided to similarly situated
\nemployees of Parent and (b) to the extent practicable, Parent’s benefit plans
\nand benefit arrangements give full credit to each Continuing Employee for such
\nContinuing Employee’s period of service with Company prior to the Effective Time
\nfor all purposes for which such service was recognized under the plans prior to
\nthe Effective Time. For purposes of this Section, “Continuing Employee” shall
\nmean any employee of the Company who continues as an employee of the Surviving
\nCorporation or Parent after the Effective Time.<\/p>\n
-33-<\/p>\n
5.14 Indemnification. After the Effective Time, the Surviving Corporation
\n —————
\nshall indemnify and hold harmless each Person who has at any time prior to the
\nEffective Time been an officer or director of the Company pursuant to its
\nArticles of Incorporation and Bylaws as they are currently in effect on the date
\nhereof to the same extent as provided in such Articles of Incorporation and
\nBylaws, but to no greater extent than that provided in Parent’s Certificate of
\nIncorporation and Bylaws; provided, that it is understood that the foregoing
\n ——–
\nundertaking shall not grant to any such officers or directors rights of
\nindemnity against either Parent or Surviving Corporation more extensive than
\nthose such Persons may currently have against the Company.<\/p>\n
5.15 Stock Options. Parent shall take all corporate action necessary to
\n ————-
\nreserve for issuance of a sufficient number of Parent Common Stock for delivery
\nupon the exercise of each Company Option assumed pursuant to Section 1.6(b)
\nhereof. As soon as practicable after the Effective Time, and not more than ten
\nbusiness days thereafter, Parent shall file registration statement on Form S-8
\n(or any successor or other appropriate form), with respect to the shares of
\nParent Common Stock subject to such options.<\/p>\n
ARTICLE VI<\/p>\n
CONDITIONS TO THE MERGER<\/p>\n
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
\n ————————————————————
\nrespective obligations of each party to this Agreement to effect the Merger
\nshall be subject to the satisfaction at or prior to the Closing of the following
\nconditions:<\/p>\n
(a) Shareholder Approval. This Agreement and the Merger shall have
\n ——————–
\nbeen approved and adopted by the shareholders of the Company by the requisite
\nvote under applicable law and the Company’s Articles of Incorporation.<\/p>\n
(b) California Permit. The Commissioner of Corporations for the State
\n —————–
\nof California shall have approved the terms and conditions of the transactions
\ncontemplated by this Agreement, and the fairness of such terms and conditions
\nfollowing a hearing for such purpose, and shall have issued a California Permit.<\/p>\n
(c) No Injunctions or Restraints; Illegality. No temporary
\n —————————————-
\nrestraining order, preliminary or permanent injunction or other order issued by
\nany court of competent jurisdiction or other legal or regulatory restraint or
\nprohibition preventing the consummation of the Merger shall be in effect.<\/p>\n
6.2 Additional Conditions to Obligations of the Company. The obligations
\n —————————————————
\nof the Company to consummate the Merger and the transactions contemplated by
\nthis Agreement shall be subject to the satisfaction at or prior to the Closing
\nof each of the following conditions, any of which may be waived, in writing,
\nexclusively by the Company:<\/p>\n
(a) Representations and Warranties. The representations and
\n ——————————
\nwarranties of Parent and Merger Sub contained in this Agreement shall be true
\nand correct in all material respects on and<\/p>\n
-34-<\/p>\n
as of the Closing Date, except for those representations and warranties which
\naddress matters only as of a particular date (which shall remain true and
\ncorrect in all material respects as of such date), with the same force and
\neffect as if made on and as of the Closing Date, except in all such cases in the
\naggregate as would not have a Material Adverse Effect on Parent and Merger Sub,
\nas applicable, and the Company shall have received a certificate to such effect
\nsigned on behalf of Parent by a duly authorized officer of Parent.<\/p>\n
(b) Agreements and Covenants. Parent and Merger Sub shall have
\n ————————
\nperformed or complied in all material respects with all agreements and covenants
\nrequired by this Agreement to be performed or complied with by them on or prior
\nto the Effective Time, and the Company shall have received a certificate to such
\neffect signed by a duly authorized officer of Parent.<\/p>\n
6.3 Additional Conditions to the Obligations of Parent and Merger Sub. The
\n —————————————————————–
\nobligations of Parent and Merger Sub to consummate the Merger and the
\ntransactions contemplated by this Agreement shall be subject to the satisfaction
\nat or prior to the Closing of each of the following conditions, any of which may
\nbe waived, in writing, exclusively by Parent:<\/p>\n
(a) Representations and Warranties. The representations and
\n ——————————
\nwarranties of the Company contained in this Agreement shall have been true and
\ncorrect in all material respects on and as of the date hereof. In addition, the
\nrepresentations and warranties of the Company shall be true and correct in all
\nmaterial respects on and as of the Closing Date with the same force and effect
\nas if made on and as of the Closing Date, except for those representations and
\nwarranties which address matters only as of a particular date (which shall
\nremain true and correct in all material respects as of such date) and except for
\ninaccuracies in the representations and warranties contained in Sections 2.6,
\n2.7, 2.8, 2.10, 2.16, 2.18 and 2.21 of this Agreement arising after the date
\nhereof (unless such inaccuracies in such Sections in the aggregate constitute a
\nBusiness Adverse Effect (as defined in Section 9.2)). Parent and Merger Sub
\nshall have received a certificate to such effect signed on behalf of the Company
\nby the chief executive officer and chief financial officer of the Company;<\/p>\n
(b) Agreements and Covenants. The Company shall have performed or
\n ————————
\ncomplied in all material respects with all agreements and covenants required by
\nthis Agreement to be performed or complied with by it on or prior to the
\nEffective Time, and Parent and Merger Sub shall have received a certificate to
\nsuch effect signed by a duly authorized officer of the Company;<\/p>\n
(c) Third Party Consents. Parent shall have been furnished with
\n ——————–
\nevidence satisfactory to it that the Company has obtained the consents,
\napprovals and waivers set forth in Section 6.3(c) of the Company Disclosure
\nLetter.<\/p>\n
(d) Legal Opinion. Parent shall have received a legal opinion from
\n ————-
\nFenwick & West LLP, legal counsel to the Company, in substantially the form
\nattached hereto as Exhibit D.
\n ———<\/p>\n
(e) Affiliate Agreements. Each of the parties identified by the
\n ——————–
\nCompany as being a Company Affiliate shall have delivered to Parent an executed
\nAffiliate Agreement which shall be in full force and effect.<\/p>\n
-35-<\/p>\n
(f) Non-Competition Agreements. Each of the persons listed in Exhibit
\n ————————–
\nL of the Company Disclosure Schedule shall have executed and delivered to Parent
\na Non-Competition Agreement in substantially the form of Exhibit A, and all of
\nthe Non-Competition Agreements shall be in full force and effect.<\/p>\n
(g) Employee Agreements. Each Employee Agreement shall have been
\n ——————-
\nterminated in accordance with its terms, other than consulting agreements with
\noutside software engineers and those agreements identified in Section 7.3(g) of
\nthe Company Disclosure Letter.<\/p>\n
(h) No Dissenters. Holders of no more than 5% of the outstanding
\n ————-
\nshares of Company Capital Stock shall have exercised, or have any continued
\nright to exercise, appraisal, dissenters’ or similar rights under applicable law
\nwith respect to their shares by virtue of the Merger.<\/p>\n
(i) Termination of Investors’ Rights Agreements. The following
\n ——————————————-
\nagreements shall have been terminated in accordance with their respective terms:
\n(i) the Restated and Amended Investors’ Rights Agreement dated as of March 10,
\n1999 among the Company and certain investors; (ii) the Restated and Amended
\nRight of First Refusal and Co-Sale Agreement dated as of March 10, 1999 among
\nthe Company and certain investors; and (iii) any other similar agreements
\nbetween the Company and any of the Company Shareholders.<\/p>\n
ARTICLE VII<\/p>\n
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW<\/p>\n
7.1 Survival of Representations and Warranties. All of the Company’s
\n ——————————————
\nrepresentations and warranties in this Agreement or in any instrument delivered
\npursuant to this Agreement (each as modified by the Company Disclosure Letter)
\nshall survive the Merger and continue until 5:00 p.m., California time, on the
\ndate which is one year following the Closing Date (the “Expiration Date”) at
\nwhich time they shall expire.<\/p>\n
7.2 Escrow Arrangements.
\n ——————-<\/p>\n
(a) Escrow Fund. At the Effective Time, the Company Shareholders will
\n ———–
\nbe deemed to have received and deposited with the Escrow Agent (as defined
\nbelow) the Escrow Amount (plus any additional shares as may be issued upon any
\nstock split, stock dividend or recapitalization effected by Parent after the
\nEffective Time) without any act of any Company Shareholder. As soon as
\npracticable after the Effective Time, the Escrow Amount, without any act of any
\nCompany Shareholder, will be deposited with an institution reasonably acceptable
\nto Parent and the Securityholder Agent (as defined in Section 7.2(g) below), as
\nEscrow Agent (the “Escrow Agent”), such deposit to constitute an escrow fund
\n(the “Escrow Fund”) to be governed by the terms set forth herein and at Parent’s
\ncost and expense. The Escrow Fund shall be available to compensate Parent and
\nits affiliates for any claims, losses, liabilities, damages, deficiencies, costs
\nand expenses, including reasonable attorneys’ fees and expenses, and expenses of
\ninvestigation and defense (hereinafter individually a “Loss” and collectively
\n“Losses”) incurred by Parent, its officers, directors, or affiliates (including
\nthe Surviving Corporation) directly or indirectly as a result of any<\/p>\n
-36-<\/p>\n
inaccuracy or breach of a representation or warranty of the Company (as modified
\nby the Company Disclosure Letter), or any failure by the Company to perform or
\ncomply with any covenant contained herein. Parent may not receive any shares
\nfrom the Escrow Fund unless and until Officer’s Certificates (as defined in
\nparagraph (d) below) identifying Losses, the aggregate amount of which exceed
\n$250,000 have been delivered to the Escrow Agent as provided in paragraph (e);
\nin such case, Parent may recover from the Escrow Fund the total of its Losses,
\nnot including the first $250,000. The Escrow Fund shall be the sole and
\nexclusive remedy for all such Losses, provided that nothing herein shall limit
\nany remedy for fraud or willful noncompliance with covenants and nothing herein
\nshall limit the liability of the Company for any breach of any representation,
\nwarranty or covenant if the Merger does not close.<\/p>\n
(b) Escrow Period; Distribution upon Termination of Escrow Periods.
\n ————————————————————–
\nSubject to the following requirements, the Escrow Fund shall be in existence
\nimmediately following the Effective Time and shall terminate at 5:00 p.m.,
\nCalifornia time, on the Expiration Date (the “Escrow Period”) at which time the
\nremaining Escrow Fund shall be released and shall be delivered by the Escrow
\nAgent to the Company Shareholders; provided that (i) the Escrow Period shall not
\n ——–
\nterminate and the Escrow Fund shall not be released with respect to such amount
\n(or some portion thereof), that together with the aggregate amount remaining in
\nthe Escrow Fund is necessary in the reasonable judgment of Parent, subject to
\nthe objection of the Securityholder Agent and the subsequent arbitration of the
\nmatter in the manner provided in Section 7.2(f) hereof, to satisfy any
\nunsatisfied claims concerning facts and circumstances existing prior to the
\ntermination of such Escrow Period specified in any Officer’s Certificate
\ndelivered to the Escrow Agent prior to termination of such Escrow Period, and
\n(ii) upon release of any portion of the Escrow Fund, the Securityholder Agent
\nmay properly deduct from such released amounts any administrative costs,
\nexpenses, attorneys’ fees and costs incurred in connection with the its duties
\nunder this Agreement. As soon as all such claims have been resolved, the Escrow
\nAgent shall deliver to the Company Shareholders the remaining portion of the
\nEscrow Fund and not required to satisfy such claims. Deliveries of Escrow
\nAmounts to the Company Shareholders pursuant to this Section 7.2(b) shall be
\nmade in proportion to their respective original contributions to the Escrow Fund
\nas determined pursuant to Section 1.8(b).<\/p>\n
(c) Protection of Escrow Fund.
\n ————————-<\/p>\n
(i) The Escrow Agent shall hold and safeguard the Escrow Fund
\nduring the Escrow Period, shall treat such fund as a trust fund in accordance
\nwith the terms of this Agreement and not as the property of Parent and shall
\nhold and dispose of the Escrow Fund only in accordance with the terms hereof.<\/p>\n
(ii) Any shares of Parent Common Stock or other equity
\nsecurities issued or distributed by Parent (including shares issued upon a stock
\nsplit) (“New Shares”) in respect of Parent Common Stock in the Escrow Fund which
\nhave not been released from the Escrow Fund shall be added to the Escrow Fund
\nand become a part thereof. New Shares issued in respect of shares of Parent
\nCommon Stock which have been released from the Escrow Fund shall not be added to
\nthe Escrow Fund but shall be distributed to the recordholders thereof. Cash
\ndividends on Parent<\/p>\n
-37-<\/p>\n
Common Stock shall not be added to the Escrow Fund but shall be distributed to
\nthe recordholders thereof.<\/p>\n
(iii) Each Company Shareholder shall have voting rights with respect
\nto the shares of Parent Common Stock contributed to the Escrow Fund by such
\nCompany Shareholder (and on any voting securities added to the Escrow Fund in
\nrespect of such shares of Parent Common Stock).<\/p>\n
(d) Claims Upon Escrow Fund.
\n ———————–<\/p>\n
(i) Upon receipt by the Escrow Agent at any time on or before the
\nlast day of the Escrow Period of a certificate signed by any officer of Parent
\n(an “Officer’s Certificate”): (A) stating that Parent has paid or properly
\naccrued or reasonably anticipates that it will have to pay or accrue Losses, and
\n(B) specifying in reasonable detail the individual items of Losses included in
\nthe amount so stated, the date each such item was paid or properly accrued, or
\nthe basis for such anticipated liability (including a current good faith
\nestimate of actual Losses of any reasonably anticipated accrual or Loss), and
\nthe nature of the misrepresentation, breach of warranty or covenant to which
\nsuch item is related, the Escrow Agent shall, subject to the provisions of
\nSection 7.2(e) hereof, deliver to Parent out of the Escrow Fund, as promptly as
\npracticable, shares of Parent Common Stock held in the Escrow Fund in an amount
\nequal to such Losses.<\/p>\n
(ii) For the purposes of determining the number of shares of Parent
\nCommon Stock to be delivered to Parent out of the Escrow Fund pursuant to
\nSection 7.2(d)(i) hereof, the shares of Parent Common Stock shall be valued at
\nthe 30-Day Average Price.<\/p>\n
(e) Objections to Claims. At the time of delivery of any Officer’s
\n ——————–
\nCertificate to the Escrow Agent, a duplicate copy of such certificate shall be
\ndelivered to the Securityholder Agent (as defined in Section 7.2(g)) and for a
\nperiod of thirty (30) days after such delivery, the Escrow Agent shall make no
\ndelivery to Parent of any Escrow Amounts pursuant to Section 7.2(d) hereof
\nunless the Escrow Agent shall have received written authorization from the
\nSecurityholder Agent to make such delivery. After the expiration of such thirty
\n(30)-day period, the Escrow Agent shall make delivery of shares of Parent Common
\nStock from the Escrow Fund in accordance with Section 7.2(d) hereof, provided
\nthat no such payment or delivery may be made if the Securityholder Agent shall
\nobject in a written statement to the claim made in the Officer’s Certificate,
\nand such statement shall have been delivered to the Escrow Agent prior to the
\nexpiration of such thirty (30)-day period.<\/p>\n
(f) Resolution of Conflicts; Arbitration.
\n ———————————— <\/p>\n
(i) In case the Securityholder Agent shall so object in writing to
\nany claim or claims made in any Officer’s Certificate, the Securityholder Agent
\nand Parent shall attempt in good faith to agree upon the rights of the
\nrespective parties with respect to each of such claims. If the Securityholder
\nAgent and Parent should so agree, a memorandum setting forth such agreement
\nshall be prepared and signed by both parties and shall be furnished to the
\nEscrow Agent. The<\/p>\n
-38-<\/p>\n
Escrow Agent shall be entitled to rely on any such memorandum and distribute
\nshares of Parent Common Stock from the Escrow Fund in accordance with the terms
\nthereof.<\/p>\n
(ii) If no such agreement can be reached after good faith
\nnegotiation, either Parent or the Securityholder Agent may demand arbitration of
\nthe matter unless the amount of the damage or loss is at issue in pending
\nlitigation with a third party, in which event arbitration shall not be commenced
\nuntil such amount is ascertained or both parties agree to arbitration; and in
\neither such event the matter shall be settled by arbitration conducted by three
\narbitrators. Parent and the Securityholder Agent shall each select one
\narbitrator, and the two arbitrators so selected shall select a third arbitrator.
\nThe arbitrators shall set a limited time period and establish procedures
\ndesigned to reduce the cost and time for discovery while allowing the parties an
\nopportunity, adequate in the sole judgment of the arbitrators, to discover
\nrelevant information from the opposing parties about the subject matter of the
\ndispute. The arbitrators shall rule upon motions to compel or limit discovery
\nand shall have the authority to impose sanctions, including attorneys’ fees and
\ncosts, to the extent as a court of competent law or equity, should the
\narbitrators determine that discovery was sought without substantial
\njustification or that discovery was refused or objected to without substantial
\njustification. The decision of a majority of the three arbitrators as to the
\nvalidity and amount of any claim in such Officer’s Certificate shall be binding
\nand conclusive upon the parties to this Agreement, and notwithstanding anything
\nin Section 7.2(e) hereof, the Escrow Agent shall be entitled to act in
\naccordance with such decision and make or withhold payments out of the Escrow
\nFund in accordance therewith. Such decision shall be written and shall be
\nsupported by written findings of fact and conclusions which shall set forth the
\naward, judgment, decree or order awarded by the arbitrators.<\/p>\n
(iii) Judgment upon any award rendered by the arbitrators may be
\nentered in any court having jurisdiction. Any such arbitration shall be held in
\nSanta Clara County, California under the rules then in effect of the American
\nArbitration Association. For purposes of this Section 7.2(f), in any arbitration
\nhereunder in which any claim or the amount thereof stated in the Officer’s
\nCertificate is at issue, Parent shall be deemed to be the Non-Prevailing Party
\nin the event that the arbitrators award Parent less than the sum of one-half
\n(1\/2) of the disputed amount plus any amounts not in dispute; otherwise, the
\nshareholders of the Company as represented by the Securityholder Agent shall be
\ndeemed to be the Non-Prevailing Party. The Non-Prevailing Party to an
\narbitration shall pay its own expenses, the fees of each arbitrator, the
\nadministrative costs of the arbitration and the expenses, including without
\nlimitation, reasonable attorneys’ fees and costs, incurred by the other party to
\nthe arbitration.<\/p>\n
(g) Securityholder Agent of the Shareholders; Power of Attorney.
\n ———————————————————–
\n (i) In the event that the Merger is approved, effective upon such
\nvote, and without further act of any Company Shareholder, Narinder P. Singh
\nshall be appointed as agent and attorney-in-fact (the “Securityholder Agent”)
\nfor each Company Shareholder (except such shareholders, if any, as shall have
\nperfected their appraisal or dissenters’ rights under California Law), for and
\non behalf of the Company Shareholders, to give and receive notices and
\ncommunications, to authorize delivery to Parent of shares of Parent Common Stock
\nfrom the Escrow<\/p>\n
-39-<\/p>\n
Fund in satisfaction of claims by Parent, to object to such deliveries, to agree
\nto, negotiate, enter into settlements and compromises of, and demand arbitration
\nand comply with orders of courts and awards of arbitrators with respect to such
\nclaims, and to take all actions necessary or appropriate in the judgment of
\nSecurityholder Agent for the accomplishment of the foregoing. Such agency may be
\nchanged by the Company Shareholders from time to time upon not less than thirty
\n(30) days prior written notice to Parent; provided that the Securityholder Agent
\nmay not be removed unless holders of a two-thirds interest of the Escrow Fund
\nagree to such removal and to the identity of the substituted agent. Any vacancy
\nin the position of Securityholder Agent may be filled by approval of the holders
\nof a majority in interest of the Escrow Fund. No bond shall be required of the
\nSecurityholder Agent, and the Securityholder Agent shall not receive
\ncompensation for his or her services. Notices or communications to or from the
\nSecurityholder Agent shall constitute notice to or from each of the Company
\nShareholders.<\/p>\n
(ii) The Securityholder Agent shall not be liable for any act done or
\nomitted hereunder as Securityholder Agent while acting in good faith and in the
\nexercise of reasonable judgment. The Company Shareholders on whose behalf the
\nEscrow Amount was contributed to the Escrow Fund shall severally indemnify the
\nSecurityholder Agent and hold the Securityholder Agent harmless against any
\nloss, liability or expense incurred without gross negligence or bad faith on the
\npart of the Securityholder Agent and arising out of or in connection with the
\nacceptance or administration of the Securityholder Agent’s duties hereunder,
\nincluding the reasonable fees and expenses of any legal counsel retained by the
\nSecurityholder Agent.<\/p>\n
(h) Actions of the Securityholder Agent. A decision, act, consent or
\n ———————————–
\ninstruction of the Securityholder Agent shall constitute a decision of all the
\nshareholders for whom a portion of the Escrow Amount otherwise issuable to them
\nare deposited in the Escrow Fund and shall be final, binding and conclusive upon
\neach of such Company Shareholder, and the Escrow Agent and Parent may rely upon
\nany such decision, act, consent or instruction of the Securityholder Agent as
\nbeing the decision, act, consent or instruction of each such Company
\nShareholder. The Escrow Agent and Parent are hereby relieved from any liability
\nto any person for any acts done by them in accordance with such decision, act,
\nconsent or instruction of the Securityholder Agent.<\/p>\n
(i) Third-Party Claims. In the event Parent becomes aware of a third-party
\n ——————
\nclaim which Parent believes may result in a demand against the Escrow Fund,
\nParent shall notify the Securityholder Agent of such claim, and the
\nSecurityholder Agent, as representative for the shareholders of the Company,
\nshall be entitled, at their expense, to participate in any defense of such
\nclaim. Parent shall have the right in its sole discretion to settle any such
\nclaim; provided, however, that except with the consent of the Securityholder
\nAgent, no settlement of any such claim with third-party claimants shall alone be
\ndeterminative of the amount of any claim against the Escrow Fund. In the event
\nthat the Securityholder Agent has consented to any such settlement and agrees
\nthat the amount of such settlement should be rightfully deducted from the Escrow
\nFund, the Securityholder Agent shall have no power or authority to object under
\nany provision of this Article VII to the amount of any claim by Parent against
\nthe Escrow Fund with respect to such settlement.<\/p>\n
-40-<\/p>\n
(j) Escrow Agent’s Duties.
\n ——————— <\/p>\n
(i) The Escrow Agent shall be obligated only for the performance of
\nsuch duties as are specifically set forth herein, and as set forth in any
\nadditional written escrow instructions which the Escrow Agent may receive after
\nthe date of this Agreement which are signed by an officer of Parent and the
\nSecurityholder Agent, and may rely and shall be protected in relying or
\nrefraining from acting on any instrument reasonably believed to be genuine and
\nto have been signed or presented by the proper party or parties. The Escrow
\nAgent shall not be liable for any act done or omitted hereunder as Escrow Agent
\nwhile acting in good faith and in the exercise of reasonable judgment, and any
\nact done or omitted pursuant to the advice of counsel shall be conclusive
\nevidence of such good faith.<\/p>\n
(ii) The Escrow Agent is hereby expressly authorized to comply with
\nand obey orders, judgments or decrees of any court of law, notwithstanding any
\nnotices, warnings or other communications from any party or any other person to
\nthe contrary. In case the Escrow Agent obeys or complies with any such order,
\njudgment or decree of any court, the Escrow Agent shall not be liable to any of
\nthe parties hereto or to any other person by reason of such compliance,
\nnotwithstanding any such order, judgment or decree being subsequently reversed,
\nmodified, annulled, set aside, vacated or found to have been entered without
\njurisdiction.<\/p>\n
(iii) The Escrow Agent shall not be liable in any respect on account
\nof the identity, authority or rights of the parties executing or delivering or
\npurporting to execute or deliver this Agreement or any documents or papers
\ndeposited or called for hereunder.<\/p>\n
(iv) The Escrow Agent shall not be liable for the expiration of any
\nrights under any statute of limitations with respect to this Agreement or any
\ndocuments deposited with the Escrow Agent.<\/p>\n
(v) In performing any duties under the Agreement, the Escrow Agent
\nshall not be liable to any party for damages, losses, or expenses, except for
\ngross negligence or willful misconduct on the part of the Escrow Agent. The
\nEscrow Agent shall not incur any such liability for (A) any act or failure to
\nact made or omitted in good faith, or (B) any action taken or omitted in
\nreliance upon any instrument, including any written statement or affidavit
\nprovided for in this Agreement that the Escrow Agent shall in good faith believe
\nto be genuine, nor will the Escrow Agent be liable or responsible for forgeries,
\nfraud, impersonations, or determining the scope of any representative authority.
\nIn addition, the Escrow Agent may consult with the legal counsel in connection
\nwith Escrow Agent’s duties under this Agreement and shall be fully protected in
\nany act taken, suffered, or permitted by him\/her in good faith in accordance
\nwith the advice of counsel. The Escrow Agent is not responsible for determining
\nand verifying the authority of any person acting or purporting to act on behalf
\nof any party to this Agreement.<\/p>\n
(vi) If any controversy arises between the parties to this
\nAgreement, or with any other party, concerning the subject matter of this
\nAgreement, its terms or conditions, the Escrow Agent will not be required to
\ndetermine the controversy or to take any action regarding it. The Escrow Agent
\nmay hold all documents and shares of Parent Common Stock and may wait for<\/p>\n
-41-<\/p>\n
settlement of any such controversy by final appropriate legal proceedings or
\nother means as, in the Escrow Agent’s discretion, the Escrow Agent may be
\nrequired, despite what may be set forth elsewhere in this Agreement. In such
\nevent, the Escrow Agent will not be liable for damage. Furthermore, the Escrow
\nAgent may at its option, file an action of interpleader requiring the parties to
\nanswer and litigate any claims and rights among themselves. The Escrow Agent is
\nauthorized to deposit with the clerk of the court all documents and shares of
\nParent Common Stock held in escrow, except all cost, expenses, charges and
\nreasonable attorney fees incurred by the Escrow Agent due to the interpleader
\naction and which the parties jointly and severally agree to pay. Upon initiating
\nsuch action, the Escrow Agent shall be fully released and discharged of and from
\nall obligations and liability imposed by the terms of this Agreement. <\/p>\n
(vii) The Company, Parent and Merger Sub and their respective
\nsuccessors and assigns agree jointly and severally to indemnify and hold Escrow
\nAgent harmless against any and all losses, claims, damages, liabilities, and
\nexpenses, including reasonable costs of investigation, counsel fees, and
\ndisbursements that may be imposed on Escrow Agent or incurred by Escrow Agent in
\nconnection with the performance of his\/her duties under this Agreement,
\nincluding but not limited to any litigation arising from this Agreement or
\ninvolving its subject matter. The parties agree that any liability of the
\nCompany hereunder may be satisfied out of the Escrow Fund.<\/p>\n
(viii) The Escrow Agent may resign at any time upon giving at least
\nthirty (30) days written notice to the parties; provided, however, that no such
\nresignation shall become effective until the appointment of a successor escrow
\nagent which shall be accomplished as follows: the parties shall use their best
\nefforts to mutually agree on a successor escrow agent within thirty (30) days
\nafter receiving such notice. If the parties fail to agree upon a successor
\nescrow agent within such time, the Escrow Agent shall have the right to appoint
\na successor escrow agent authorized to do business in the State of California.
\nThe successor escrow agent shall execute and deliver an instrument accepting
\nsuch appointment and it shall, without further acts, be vested with all the
\nestates, properties, rights, powers, and duties of the predecessor escrow agent
\nas if originally named as escrow agent. The Escrow Agent shall be discharged
\nfrom any further duties and liability under this Agreement.<\/p>\n
(k) Fees. All fees of the Escrow Agent for performance of its duties
\n —-
\nhereunder shall be paid by Parent. It is understood that the fees and usual
\ncharges agreed upon for services of the Escrow Agent shall be considered
\ncompensation for ordinary services as contemplated by this Agreement. In the
\nevent that the conditions of this Agreement are not promptly fulfilled, or if
\nthe Escrow Agent renders any service not provided for in this Agreement, or if
\nthe parties request a substantial modification of its terms, or if any
\ncontroversy arises, or if the Escrow Agent is made a party to, or intervenes in,
\nany litigation pertaining to this escrow or its subject matter, the Escrow Agent
\nshall be reasonably compensated for such extraordinary services and reimbursed
\nfor all costs, attorney’s fees, and expenses occasioned by such default, delay,
\ncontroversy or litigation. Parent promises to pay these sums upon demand.<\/p>\n
-42-<\/p>\n
ARTICLE VIII<\/p>\n
TERMINATION, AMENDMENT AND WAIVER<\/p>\n
8.1 Termination. Except as provided in Section 8.2 below, this Agreement
\n ———–
\nmay be terminated and the Merger abandoned at any time prior to the Effective
\nTime:<\/p>\n
(a) by mutual consent of the Company and Parent;<\/p>\n
(b) by Parent or the Company if: (i) the Effective Time has not
\noccurred before 5:00 p.m. (Pacific time) on March 15, 2000 (the “End Date”)
\n(provided that the right to terminate this Agreement under this Section
\n8.1(b)(i) shall not be available to any party whose willful failure to fulfill
\nany obligation hereunder has been the cause of, or resulted in, the failure of
\nthe Effective Time to occur on or before such date); (ii) there shall be a final
\nnonappealable order of a federal or state court in effect preventing
\nconsummation of the Merger; or (iii) there shall be any statute, rule,
\nregulation or order enacted, promulgated or issued or deemed applicable to the
\nMerger by any governmental entity that would make consummation of the Merger
\nillegal;<\/p>\n
(c) by Parent if there shall be any action taken, or any statute,
\nrule, regulation or order enacted, promulgated or issued or deemed applicable to
\nthe Merger, by any Governmental Entity, which would: (i) prohibit Parent’s or
\nthe Company’s ownership or operation of all or any portion of the business of
\nthe Company or (ii) compel Parent or the Company to dispose of or hold separate
\nall or a portion of the business or assets of the Company or Parent as a result
\nof the Merger;<\/p>\n
(d) by Parent, upon a breach of any representation, warranty,
\ncovenant or agreement on the part of the Company set forth in this Agreement, or
\nif any representation or warranty of the Company shall have become untrue, in
\neither case such that the conditions set forth in Section 6.3(a) or Section
\n6.3(b) would not be satisfied as of the time of such breach or as of the time
\nsuch representation or warranty shall have become untrue, provided that if any
\nsuch inaccuracy in the Company’s representations and warranties or breach by the
\nCompany is curable by the Company through the exercise of its commercially
\nreasonable efforts, then Parent may not terminate this Agreement under this
\nSection 8.1(d) prior to the End Date, provided the Company continues to exercise
\ncommercially reasonable efforts to cure such breach (it being understood that
\nParent may not terminate this Agreement pursuant to this Section 8.1(d) if it
\nshall have materially breached this Agreement or if such breach by the Company
\nis cured prior to the End Date);<\/p>\n
(e) by the Company, upon a breach of any representation, warranty,
\ncovenant or agreement on the part of Parent set forth in this Agreement, or if
\nany representation or warranty of Parent shall have become untrue, in either
\ncase such that the conditions set forth in Section 6.2(a) or Section 6.2(b)
\nwould not be satisfied as of the time of such breach or as of the time such
\nrepresentation or warranty shall have become untrue, provided, that if any such
\ninaccuracy in Parent’s representations and warranties or breach by Parent is
\ncurable by Parent through the exercise of its commercially reasonable efforts,
\nthen the Company may not terminate this Agreement under this Section 8.1(e)
\nprior to the End Date, provided Parent continues to exercise commercially
\nreasonable efforts to cure such breach (it being understood that the Company may
\nnot terminate this<\/p>\n
-43-<\/p>\n
Agreement pursuant to this Section 8.1(e) if it shall have materially breached
\nthis Agreement or if such breach by the Company is cured prior to the End Date).<\/p>\n
Where action is taken to terminate this Agreement pursuant to this Section
\n8.1, it shall be sufficient for such action to be authorized by the Board of
\nDirectors (as applicable) of the party taking such action.<\/p>\n
8.2 Effect of Termination. In the event of termination of this Agreement
\n ———————
\nas provided in Section 8.1, this Agreement shall forthwith become void and there
\nshall be no liability or obligation on the part of Parent, Merger Sub or the
\nCompany, or their respective officers, directors or shareholders, provided that
\neach party shall remain liable for any breaches of this Agreement prior to its
\ntermination; and provided further that, the provisions of Sections 5.5 and 5.6
\nand Articles VIII and IX of this Agreement shall remain in full force and effect
\nand survive any termination of this Agreement.<\/p>\n
8.3 Amendment. Except as is otherwise required by applicable law after the
\n ———
\nshareholders of the Company approve this Agreement, this Agreement may be
\namended by the parties hereto at any time by execution of an instrument in
\nwriting signed on behalf of each of the parties hereto.<\/p>\n
8.4 Extension; Waiver. At any time prior to the Effective Time, Parent and
\n —————–
\nMerger Sub, on the one hand, and the Company, on the other, may, to the extent
\nlegally allowed, (i) extend the time for the performance of any of the
\nobligations of the other party hereto, (ii) waive any inaccuracies in the
\nrepresentations and warranties made to such party contained herein or in any
\ndocument delivered pursuant hereto, and (iii) waive compliance with any of the
\nagreements or conditions for the benefit of such party contained herein. Any
\nagreement on the part of a party hereto to any such extension or waiver shall be
\nvalid only if set forth in an instrument in writing signed on behalf of such
\nparty.<\/p>\n
ARTICLE IX<\/p>\n
GENERAL PROVISIONS<\/p>\n
9.1 Notices. All notices and other communications hereunder shall be in
\n ——-
\nwriting and shall be deemed given if delivered personally or by commercial
\ndelivery service, or mailed by registered or certified mail (return receipt
\nrequested) or sent via facsimile (with acknowledgment of complete transmission)
\nto the parties at the following addresses (or at such other address for a party
\nas shall be specified by like notice):<\/p>\n
-44-<\/p>\n
(i) if to Parent or Merger Sub, to:<\/p>\n
GoTo.com, Inc.
\n 140 West Union Street
\n Pasadena, California 91103
\n Attention: Todd Tappin
\n Telephone No.: (626) 685-5600
\n Facsimile No.: (626) 685-5601<\/p>\n
with a copy to:<\/p>\n
Wilson Sonsini Goodrich & Rosati, Professional Corporation
\n 650 Page Mill Road
\n Palo Alto, California 94304
\n Attention: Martin W. Korman, Esq.
\n Robert Sanchez, Esq.
\n Cynthia M. Greene, Esq.
\n Telephone No.: (650) 493-9300
\n Facsimile No.: (650) 493-6811<\/p>\n
(ii) if to the Company, to:<\/p>\n
Cadabra Inc.
\n 1820 Gateway Dr., Suite 300
\n San Mateo, CA 94404
\n Attention: Narinder P. Singh
\n Telephone No.: (650) 403-2200
\n Facsimile No.: (650) 403-2201<\/p>\n
with a copy to:<\/p>\n
Fenwick & West LLP
\n Two Palo Alto Square
\n Palo Alto, California 94306
\n Attention: Barry Kramer, Esq.
\n David A. Bell, Esq.
\n Telephone No.: (650) 494-0600
\n Facsimile No.: (650) 494-1417<\/p>\n
-45-<\/p>\n
(c) if to the Securityholder Agent:<\/p>\n
Narinder P. Singh
\n 28 Mirada Rd.
\n Half Moon Bay, CA 94019
\n Telephone No.: (650) 712-0743<\/p>\n
9.2 Interpretation. The words “include,” “includes” and “including” when
\n ————–
\nused herein shall be deemed in each case to be followed by the words “without
\nlimitation.” As used herein, the term “Material Adverse Effect” shall mean a
\nsubstantial material adverse effect on the business, assets (including
\nintangible assets), financial condition, capitalization or results of operations
\nof the Company. As used herein, the term “Business Adverse Effect” shall mean
\n(i) a material impairment in the Surviving Corporation’s ability to continue to
\noffer after Closing the Company’s products and services offered prior to
\nClosing, (ii) a material impairment in the Surviving Corporation’s ability to
\nuse the Intellectual Property used by the Company prior to Closing or (iii) any
\nother liability of the Company that would be reasonably likely to have a
\nMaterial Adverse Effect on Parent. The table of contents and headings contained
\nin this Agreement are for reference purposes only and shall not affect in any
\nway the meaning or interpretation of this Agreement.<\/p>\n
9.3 Counterparts. This Agreement may be executed in one or more
\n ————
\ncounterparts, all of which shall be considered one and the same agreement and
\nshall become effective when one or more counterparts have been signed by each of
\nthe parties and delivered to the other party, it being understood that all
\nparties need not sign the same counterpart and that the Escrow Agent need not
\nsign this Agreement for it to be effective among the other parties.<\/p>\n
9.4 Entire Agreement; Assignment. This Agreement, the Company Disclosure
\n —————————-
\nLetter and Exhibits hereto, and the documents and instruments and other
\nagreements among the parties hereto referenced herein: (a) constitute the entire
\nagreement among the parties with respect to the subject matter hereof and
\nsupersede all prior agreements and understandings, both written and oral, among
\nthe parties with respect to the subject matter hereof; (b) are not intended to
\nconfer upon any other person any rights or remedies hereunder; and (c) shall not
\nbe assigned by operation of law or otherwise except as otherwise specifically
\nprovided, except that Parent and Merger Sub may assign their respective rights
\nand delegate their respective obligations hereunder to their respective
\naffiliates.<\/p>\n
9.5 Severability. In the event that any provision of this Agreement or the
\n ————
\napplication thereof, becomes or is declared by a court of competent jurisdiction
\nto be illegal, void or unenforceable, the remainder of this Agreement will
\ncontinue in full force and effect and the application of such provision to other
\npersons or circumstances will be interpreted so as reasonably to effect the
\nintent of the parties hereto. The parties further agree to replace such void or
\nunenforceable provision of this Agreement with a valid and enforceable provision
\nthat will achieve, to the extent possible, the economic, business and other
\npurposes of such void or unenforceable provision.<\/p>\n
-46-<\/p>\n
9.6 Other Remedies. Except as otherwise provided herein, any and all
\n ————–
\nremedies herein expressly conferred upon a party will be deemed cumulative with
\nand not exclusive of any other remedy conferred hereby, or by law or equity upon
\nsuch party, and the exercise by a party of any one remedy will not preclude the
\nexercise of any other remedy.<\/p>\n
9.7 Governing Law. This Agreement shall be governed by and construed in
\n ————-
\naccordance with the laws of the State of California, regardless of the laws that
\nmight otherwise govern under applicable principles of conflicts of laws thereof.
\nEach of the parties hereto agrees that process may be served upon them in any
\nmanner authorized by the laws of the State of California for such persons and
\nwaives and covenants not to assert or plead any objection which they might
\notherwise have to such jurisdiction and such process.<\/p>\n
9.8 Rules of Construction. The parties hereto agree that they have been
\n ———————
\nrepresented by counsel during the negotiation and execution of this Agreement
\nand, therefore, waive the application of any law, regulation, holding or rule of
\nconstruction providing that ambiguities in an agreement or other document will
\nbe construed against the party drafting such agreement or document.<\/p>\n
9.9 Specific Performance. The parties hereto agree that irreparable damage
\n ——————–
\nwould occur in the event that any of the provisions of this Agreement were not
\nperformed in accordance with their specific terms or were otherwise breached. It
\nis accordingly agreed that the parties shall be entitled to an injunction or
\ninjunctions to prevent breaches of this Agreement and to enforce specifically
\nthe terms and provisions hereof in any court of the United States or any state
\nhaving jurisdiction, this being in addition to any other remedy to which they
\nare entitled at law or in equity.<\/p>\n
9.10 Attorneys’ Fees. If any action or other proceeding relating to the
\n —————
\nenforcement of any provision of this Agreement is brought by any party hereto,
\nthe prevailing party shall be entitled to recover reasonable attorneys’ fees,
\ncosts, and disbursements (in addition to any other relief to which the
\nprevailing party may be entitled); provided, that in the event the Company is
\n ——–
\nliable for such fees hereunder, Parent shall not be restricted to satisfying
\nsuch liability out of the Escrow Fund.<\/p>\n
(Remainder of page intentionally left blank.)<\/p>\n
-47-<\/p>\n
IN WITNESS WHEREOF, Parent, Merger Sub, the Company and, with respect
\nto Article VII only, the Escrow Agent and the Securityholder Agent, and have
\ncaused this Agreement to be signed by their duly authorized respective officers,
\nall as of the date first written above.<\/p>\n
CADABRA INC. GOTO.COM, INC.<\/p>\n
By:_____________________________ By:_____________________________________<\/p>\n
Name:___________________________ Name:___________________________________ <\/p>\n
Title:__________________________ Title:__________________________________ <\/p>\n
SECURITYHOLDER AGENT ROY ACQUISITION CORP.
\n(with respect to Article VII):<\/p>\n
________________________________ By:_____________________________________
\nName
\n Name:___________________________________<\/p>\n
Title:__________________________________ <\/p>\n
ESCROW AGENT
\n(with respect to Article VII):<\/p>\n
________________________________
\nName<\/p>\n
***REORGANIZATION AGREEMENT***<\/p>\n
EXHIBITS
\n ——– <\/p>\n
EXHIBIT A FORM OF NON-COMPETITION AGREEMENT<\/p>\n
EXHIBIT B FORM OF SUPPORT AGREEMENT<\/p>\n
EXHIBIT C FORM OF COMPANY AFFILIATE AGREEMENT<\/p>\n
EXHIBIT D FORM OF OPINION OF FENWICK & WEST LLP<\/p>\n
EXHIBIT A
\n ———<\/p>\n
NON-COMPETITION AGREEMENT
\n This Non-Competition Agreement is entered into by and among GoTo.com, Inc., a
\nDelaware corporation (“Parent”), Cadabra Inc., a California corporation (the
\n“Company”) and Peter Lee (“Employee”) as of November __, 1999.<\/p>\n
RECITALS<\/p>\n
A. Pursuant to that certain Agreement and Plan of Reorganization (the “Merger
\nAgreement”) dated as of November 19, 1999 by and between Parent, Roy Acquisition
\nCorp. (“Merger Sub”), a Delaware corporation and wholly-owned subsidiary of
\nParent, the Company and certain other parties, pursuant to which Merger Sub will
\nmerge with and into the Company (the “Merger”) and any shares of Company Capital
\nStock owned by Employee will be exchanged for Parent Common Stock and cash and
\nany options to acquire Company Common Stock will be assumed by Parent and become
\noptions to acquire Parent Common Stock and cash (as adjusted in accordance with
\nthe terms and conditions contained in the Merger Agreement);<\/p>\n
B. Employee owns an equity interest in the Company (whether through
\noutstanding capital stock or options to purchase capital stock), has served as a
\nkey employee at the Company and has gained substantial knowledge and expertise
\nin connection with the Company’s products, services, organization, customers,
\ndistribution partners and other proprietary matters related to the Company’s
\nbusiness;<\/p>\n
C. Parent and Employee acknowledge that it would be detrimental to Parent if
\nEmployee would compete with Parent following the Merger;<\/p>\n
D. It is a condition to the obligation of Parent to consummate the Merger
\nthat certain key employees of the Company, including Employee, enter into this
\nAgreement;<\/p>\n
E. As inducement to Parent to consummate the Merger, and in consideration of
\nshares of Parent Common Stock paid to Company Shareholders under the Merger
\nAgreement and the options to purchase Company Common Stock assumed by Parent
\nunder the Merger Agreement, Employee desires to agree with Parent as further
\nprovided herein; and<\/p>\n
F. Capitalized terms used herein and not defined shall have the meaning
\nascribed to them in the Merger Agreement.<\/p>\n
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
\nagree as follows:<\/p>\n
NON-COMPETITION.<\/p>\n
Non-Competition.
\nEmployee acknowledges that the promises and restrictive covenants that Employee
\nis providing in this Agreement are reasonable and necessary to the protection of
\nParent’s business and its legitimate interests in Parent’s acquisition of the
\nCompany (including the preservation of the Company’s goodwill) pursuant to the
\nMerger Agreement.<\/p>\n
The parties understand and agree that this Agreement is entered into in
\nconnection with the Merger. The parties further understand and agree that
\nEmployee is a key and significant member of the Company, owns a significant
\nnumber of shares of Company Capital Stock or rights to acquire such stock and
\nthat the Merger is contingent upon Employee entering into this Agreement,
\nincluding this non-competition provision. Employee further acknowledges that
\nParent and the <\/p>\n
Company following the Merger will continue conducting their respective business
\nin all parts of the Geographic Scope of the Business (as defined below).<\/p>\n
During the period commencing at the Effective Time and ending three years
\nfollowing the Effective Time (the “Termination Date”), without the prior written
\nconsent of the Chief Executive Officer of Parent, Employee shall not either as
\nan individual or as an employee, agent, consultant, advisor, independent
\ncontractor, general partner, officer, director, shareholder or investor of any
\nperson, firm, corporation, partnership or other entity:<\/p>\n
participate or engage in the business conducted or in development by Parent or
\nits majority-owned subsidiaries or the Company as of either the date hereof or
\nprior to the date of termination of Employee’s employment with Parent or the
\nCompany (if, in the case of business in development by Parent, Employee has
\nknowledge of such business in development) (the “Business”) within the
\nGeographic Scope of the Business;<\/p>\n
induce or attempt to induce any person who at the time of such inducement is an
\nemployee of the Company or Parent or any of their majority-owned subsidiaries to
\nperform work or services for any other person or entity other than the Company
\nor Parent or any of their majority-owned subsidiaries; or<\/p>\n
permit the name of Employee to be used in connection with a business that
\ncompetes with the Business.<\/p>\n
Notwithstanding the foregoing, Employee may own, directly or indirectly,
\nsolely as passive investment, up to one percent (1%) of any class of “publicly
\ntraded securities” of any person or entity which owns a competitive Business,
\nand up to three percent (3%) of the outstanding securities that are not
\n“publicly traded securities” of any person or entity which owns a competitive
\nBusiness. For the purposes of this Section 1(a), the term “publicly traded
\nsecurities” shall mean securities that are traded on a national securities
\nexchange or listed on the Nasdaq National Market, and the term “passive
\ninvestment” shall include an investment through a mutual fund, limited
\npartnership or other investment vehicle which is engaged in the business of
\nportfolio investments.<\/p>\n
Savings Clause. If any restriction set forth in Section 1 above is held to be
\nunreasonable or unenforceable, then Employee agrees, and hereby submits, to the
\nreduction and limitation of such prohibition to such area or period as shall be
\ndeemed reasonable.<\/p>\n
No impairment of At-Will Employment Relationship. Nothing in this Section 1
\nshall be deemed or construed to alter any employment relationship between Parent
\nor the Company and Employee, which shall be “at-will.”<\/p>\n
MISCELLANEOUS.<\/p>\n
Successors, Assigns, Merger. This Agreement shall be binding upon and shall
\ninure to the benefit of Parent, the Company and their affiliates, successors and
\nassigns. This Agreement shall be binding upon Employee and shall inure to his
\nbenefit and to the benefit of his or her heirs, executors, administrators and
\nlegal representatives, but shall not be assignable by Employee.<\/p>\n
Independence of Obligations. The covenants and obligations of Employee set
\nforth in this Agreement shall be construed as independent of any other agreement
\nor <\/p>\n
arrangement between Employee, on the one hand, and the Company or Parent or any
\naffiliate thereof, on the other.<\/p>\n
Specific Performance. Employee agrees that in the event of any breach by
\nEmployee of any covenant, obligation or other provision contained in this
\nAgreement, Parent shall be entitled (in addition to any other remedy that may be
\navailable to it) to the extent permitted by applicable law (a) a decree or order
\nof specific performance to enforce the observance and performance of such
\ncovenant, obligation or other provision and (b) an injunction restraining such
\nbreach or threatened breach.<\/p>\n
Non-Exclusivity. The rights and remedies of Parent hereunder are not exclusive
\nof or limited by any other rights or remedies which Parent may have, whether at
\nlaw, in equity, by contract or otherwise, all of which shall be cumulative (and
\nnot alternative). Without limiting the generality of the foregoing, the rights
\nand remedies of Parent hereunder, and the obligations and liabilities of
\nEmployee hereunder, are in addition to their respective rights, remedies,
\nobligations and liabilities under the law of unfair competition,
\nmisappropriation of trade secrets and the like.<\/p>\n
Entire Agreement. This Agreement (including the exhibits hereto) constitutes
\nthe entire agreement between Parent, the Company and Employee relating to his or
\nher employment and the additional matters herein provided for. This Agreement
\nsupersedes and replaces any prior verbal or written agreements between the
\nparties. This Agreement may be amended or altered only in a writing signed by
\nthe President and Chief Executive Officer of Parent and Employee.<\/p>\n
Applicable Law; Severability. This Agreement shall be construed and interpreted
\nin accordance with the laws of the State of California without regard to
\nconflicts of laws and principles. Each provision of this Agreement is severable
\nfrom the others, and if any provision hereof shall be to any extent
\nunenforceable it and the other provisions hereof shall continue to be
\nenforceable to the full extent allowable, as if such offending provision had not
\nbeen a part of this Agreement.<\/p>\n
Amendments and Modifications. This Non-Competition Agreement may not be
\namended, modified, altered or supplemented other than by means of a written
\ninstrument duly executed and delivered on behalf of Parent and Employee.<\/p>\n
Effectiveness. This Agreement shall become effective at the Effective Time.
\n (Signature Page Follows)<\/p>\n
IN WITNESS WHEREOF, the parties have executed this Agreement effective as of
\nthe date first written above.<\/p>\n
PARENT<\/p>\n
By:_____________________________________<\/p>\n
Title:____________________________________<\/p>\n
Print Name:______________________________<\/p>\n
COMPANY<\/p>\n
By:_____________________________________<\/p>\n
Title:____________________________________<\/p>\n
Print Name:______________________________<\/p>\n
EMPLOYEE<\/p>\n
By:_____________________________________<\/p>\n
Print Name:______________________________<\/p>\n
*** NON-COMPETITION AGREEMENT ***<\/p>\n
EXHIBIT B
\n ———<\/p>\n
SUPPORT AGREEMENT<\/p>\n
This Support Agreement (“Agreement”) is made and entered into as of
\nNovember __, 1999, between Goto.com, Inc., a Delaware corporation (“Parent”),
\nand the undersigned shareholder (“Shareholder”) of Cadabra Inc., a California
\ncorporation (the “Company”).<\/p>\n
RECITALS<\/p>\n
A. Concurrently with the execution of this Agreement, Parent, the Company
\nand Roy Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary
\nof Parent (“Merger Sub”), are entering into an Agreement and Plan of
\nReorganization (the “Merger Agreement”) which provides for the merger (the
\n“Merger”) of Merger Sub and the Company. Pursuant to the Merger, shares of
\ncapital stock of the Company will be converted into Common Stock of Parent and
\ncash on the basis described in the Merger Agreement.<\/p>\n
B. Shareholder is the record holder of the number of outstanding shares
\nof capital stock of the Company indicated on Annex I to this Agreement.<\/p>\n
C. As a material inducement to enter into the Merger Agreement, Parent
\ndesires the Shareholder to agree, and in consideration of good and valuable
\nconsideration the receipt and sufficiency of which is hereby acknowledged, the
\nShareholder is willing to agree, to vote the Shares and New Shares (as defined
\nbelow) so as to facilitate consummation of the Merger.<\/p>\n
NOW, THEREFORE, intending to be legally bound, the parties agree as
\nfollows:<\/p>\n
1. Agreement to Vote Shares; Additional Purchases; Transfers and
\n ————————————————————-
\nEncumbrance.
\n———–<\/p>\n
1.1 Agreement to Vote Shares. At every meeting of the shareholders of
\n ————————
\nthe Company called with respect to any of the following, and at every
\nadjournment thereof, and on every action or approval by written consent of the
\nshareholders of the Company with respect to any of the following, Shareholder
\nshall cause the Shares and any New Shares (as defined below) to be voted and
\nshall otherwise consent to:<\/p>\n
(i) in favor of approval of the Merger and the adoption and
\napproval of the Merger Agreement including all actions contemplated thereby;<\/p>\n
(ii) in favor of the conversion of all shares of preferred stock of
\nthe Company into shares of Common Stock immediately prior to, and contingent
\nupon, the Closing of the Merger and the termination of any shareholders
\nagreements to which the Shareholder is a party including, without limitation,
\nthe Restated and Amended Investors’ Rights Agreement and the Restated and
\nAmended Right of First Refusal and Co-Sale Agreement, each dated as of March 10,
\n1999;<\/p>\n
(iii) against approval of any proposal made in opposition to, or in
\ncompetition with, consummation of the Merger and the Merger Agreement; and<\/p>\n
(iv) against any of the following actions (other than those actions
\nthat relate to the Merger and are contemplated by the Merger Agreement): (A) any
\nmerger, consolidation, business combination, sale of assets, reorganization or
\nrecapitalization of the Company with any party; (B) any dissolution, liquidation
\nor winding up of the Company; (C) any joint venture or material strategic
\nrelationship with any party; (D) any material change in the capitalization of
\nthe Company or the Company’s capital structure, except as contemplated by
\nSection 1.1(ii) and Section 3 hereof or the Merger Agreement; or (E) any other
\naction that is intended, or could reasonably be expected to impede, interfere
\nwith, delay, postpone, discourage or adversely affect the Merger or any of the
\ntransactions contemplated by the Merger Agreement.<\/p>\n
1.2 Definition. For purposes of this Agreement, “Shares” shall mean
\n ———-
\nall issued and outstanding shares of capital stock of the Company for which
\nShareholder is the beneficial owner or over which Shareholder has voting
\ncontrol, including any securities convertible into, or exercisable or
\nexchangeable for shares of the Company’s capital stock, all as set forth on
\nAnnex I attached hereto.<\/p>\n
1.3 Additional Purchases. Shareholder agrees that any shares of
\n ——————–
\ncapital stock of the Company that Shareholder purchases or with respect to which
\nShareholder otherwise acquires beneficial ownership or voting control after the
\nexecution of this Agreement and prior to the date of termination of this
\nAgreement (“New Shares”) shall be subject to the terms and conditions of this
\nAgreement to the same extent as if they constituted Shares.<\/p>\n
1.4 Transfer and Encumbrance. Without the prior written consent of
\n ————————
\nParent, Shareholder agrees not to transfer, sell, exchange, pledge, gift, or
\notherwise dispose of or encumber (collectively, “Transfer”) any of the Shares or
\n ——–
\nany New Shares or to discuss, negotiate, or make any offer or agreement relating
\nthereto. Shareholder acknowledges that the intent of the foregoing sentence is
\nto ensure that Parent retains the right under the Proxy (as defined in Section 2
\nhereof) to vote the Shares and any New Shares in accordance with the terms of
\nthe Proxy.<\/p>\n
2. Irrevocable Proxy. Concurrently with the execution of this Agreement,
\n —————–
\nShareholder agrees to deliver to Parent a proxy in the form attached hereto as
\nExhibit A (the “Proxy”) with respect to the Shares and New Shares, which,
\nsubject to Section 7 hereof, shall be irrevocable to the fullest extent
\npermitted by applicable law.<\/p>\n
3. Election to Convert Preferred Stock into Common Stock. Effective
\n —————————————————–
\nimmediately prior to the Effective Time (as defined in the Merger Agreement) of
\nthe Merger, Shareholder hereby irrevocably elects to convert all shares of all
\nseries of preferred stock of the Company held by Shareholder into shares of
\nCommon Stock of the Company in accordance with the Company’s Articles of
\nIncorporation.<\/p>\n
4. Representations and Warranties of the Shareholder.
\n ————————————————- <\/p>\n
(i) With respect to the Shares owned by Shareholder, Shareholder is
\nthe owner of the Shares free and clear of any liens, claims, options, charges or
\nother encumbrances.<\/p>\n
(ii) Shareholder (A) has full authority to vote and direct the voting
\nof the Shares; (B) does not beneficially own any securities of the Company other
\nthan the Shares indicated on the final page of this Agreement; and (C) has full
\npower and authority to make, enter into and carry out the terms of this
\nAgreement and the Proxy.<\/p>\n
5. Additional Documents; Shareholder Agreement. Shareholder and Parent
\n ——————————————-
\nhereby covenant and agree to execute and deliver any additional documents
\nnecessary or desirable, in the reasonable opinion of Parent or Shareholder, as
\nthe case may be, to carry out the intent of this Agreement.<\/p>\n
6. Consent and Waiver. Shareholder hereby gives any consents or waivers
\n ——————
\nthat are reasonably required for the consummation of the Merger under the terms
\nof any agreements to which Shareholder is a party or pursuant to any rights
\nShareholder may have.<\/p>\n
7. Termination. This Agreement and the Proxy shall terminate and shall
\n ———–
\nhave no further force or effect as of the earlier to occur of (i) such date and
\ntime as the Merger shall become effective in accordance with the terms and
\nprovisions of the Merger Agreement or (ii) such date and time as the Merger
\nAgreement shall have been terminated in accordance with its terms.<\/p>\n
8. Miscellaneous.
\n ————- <\/p>\n
8.1 Severability. If any term, provision, covenant or restriction of
\n ————
\nthis Agreement is held by a court of competent jurisdiction to be invalid, void
\nor unenforceable, then the remainder of the terms, provisions, <\/p>\n
covenants and restrictions of this Agreement shall remain in full force and
\neffect and shall in no way be affected, impaired or invalidated.<\/p>\n
8.2 Binding Effect and Assignment. This Agreement and all of the
\n —————————–
\nprovisions hereof shall be binding upon and inure to the benefit of the parties
\nhereto and their respective successors and permitted assigns and any person or
\nentity to which legal or beneficial ownership of such Shares or New Shares shall
\npass whether by operation of law or otherwise, but, except as otherwise
\nspecifically provided herein, neither this Agreement nor any of the rights,
\ninterests or obligations of the parties hereto may be assigned by either of the
\nparties without prior written consent of the other.<\/p>\n
8.3 Amendments and Modification. This Agreement may not be modified,
\n —————————
\namended, altered or supplemented except upon the execution and delivery of a
\nwritten agreement executed by the parties hereto.<\/p>\n
8.4 Specific Performance; Injunctive Relief. The parties hereto
\n —————————————
\nacknowledge that Parent will be irreparably harmed and that there will be no
\nadequate remedy at law for a violation of any of the covenants or agreements of
\nShareholder set forth herein. Therefore, it is agreed that, in addition to any
\nother remedies that may be available to Parent upon any such violation, Parent
\nshall have the right to enforce such covenants and agreements by specific
\nperformance, injunctive relief or by any other means available to Parent at law
\nor in equity.<\/p>\n
8.5 Notices. All notices, requests, claims, demands and other
\n ——-
\ncommunications hereunder shall be in writing and sufficient if delivered in
\nperson or sent by overnight courier by a reputable carrier (prepaid) to the
\nrespective parties as follows:<\/p>\n
If to Parent: GoTo.com, Inc.
\n 140 West Union Street
\n Pasadena, California 91103
\n Attn: Todd Tappin<\/p>\n
With a copy to: Wilson Sonsini Goodrich & Rosati, P.C.
\n 650 Page Mill Road
\n Palo Alto, California 94304-1050
\n Attention: Marty W. Korman, Esq.
\n Michael D. Weisberg, Esq<\/p>\n
If to the Shareholder: To the address for notice set forth on the
\nsignature page hereof.<\/p>\n
With a copy to: Fenwick & West LLP
\n Two Palo Alto Square
\n Palo Alto, California 94306
\n Attention: Barry Kramer, Esq.
\n David A. Bell, Esq.<\/p>\n
or to such other address as any party may have furnished to the other in writing
\nin accordance herewith, except that notices of change of address shall only be
\neffective upon receipt.<\/p>\n
8.6 Governing Law. This Agreement shall be governed by, and
\n ————-
\nconstrued and enforced in accordance with, the internal laws of the State of
\nCalifornia (without regard to the principles of conflict of laws thereof).<\/p>\n
8.7 Entire Agreement. This Agreement contains the entire
\n —————-
\nunderstanding of the parties in respect of the subject matter hereof, and
\nsupersedes all prior negotiations and understandings between the parties with
\nrespect to such subject matter.<\/p>\n
8.8 Counterparts. This Agreement may be executed in several
\n ————
\ncounterparts, each of which shall be an original, but all of which together
\nshall constitute one and the same agreement.<\/p>\n
8.9 Effect of Headings. The section headings herein are for
\n ——————
\nconvenience only and shall not affect the construction or interpretation of this
\nAgreement.<\/p>\n
IN WITNESS WHEREOF, the parties have caused this Support Agreement to be
\nduly executed on the date and year first above written.<\/p>\n
PARENT<\/p>\n
By:______________________<\/p>\n
Name: Todd Tappin<\/p>\n
Title: Chief Financial Officer<\/p>\n
SHAREHOLDER:<\/p>\n
By:_____________________<\/p>\n
Name:___________________<\/p>\n
Title:__________________<\/p>\n
Shareholder’s Address for Notice:<\/p>\n
___________________________<\/p>\n
___________________________<\/p>\n
___________________________<\/p>\n
[Signature Page to Support Agreement]<\/p>\n
ANNEX I<\/p>\n
Shareholder beneficially owns and has voting control over the following
\ncapital stock of the Company:<\/p>\n
Common Stock<\/p>\n
1. _____ shares of Common Stock of the Company.<\/p>\n
Preferred Stock<\/p>\n
2. _____ shares of Series A Preferred Stock of the Company.<\/p>\n
3. _____ shares of Series B Preferred Stock of the Company.<\/p>\n
Options, Warrants and Other Convertible Securities<\/p>\n
4. ____ shares of __________ Stock issuable upon exercise of Stock
\nOptions.<\/p>\n
5. ____ shares of __________ Stock issuable upon exercise of
\nWarrants.<\/p>\n
6. ____ shares of __________ Stock issuable upon exercise or
\nconversion of other outstanding securities of the Company.<\/p>\n
EXHIBIT A<\/p>\n
IRREVOCABLE PROXY<\/p>\n
The undersigned Shareholder of Cadabra Inc., a California corporation (the
\n“Company”), hereby irrevocably appoints the directors on the Board of Directors
\nof GoTo.com, Inc., a Delaware corporation (“Parent”), and each of them, as the
\nsole and exclusive attorneys and proxies of the undersigned, with full power of
\nsubstitution and resubstitution, to the full extent of the undersigned’s rights
\nwith respect to the voting of the Shares and New Shares (as each such term is
\ndefined in the Support Agreement of even date between Parent and the Shareholder
\n(the “Support Agreement”)) on the matters described below (and on no other
\nmatter), until such time as that certain Agreement and Plan of Reorganization
\ndated as of November 19, 1999 (the “Merger Agreement”), among Parent, Roy
\nAcquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
\nParent (“Merger Sub”), and the Company, shall be terminated in accordance with
\nits terms or the Merger (as defined in the Merger Agreement) becomes effective.
\nUpon the execution hereof, all prior proxies given by the undersigned with
\nrespect to the Shares and any and all other shares or securities issued or
\nissuable in respect thereof on or after the date hereof are hereby revoked and
\nno subsequent proxies will be given.<\/p>\n
This proxy is irrevocable (to the fullest extent permitted by law and
\nsubject to the termination of the Proxy as set forth in Section 7 of the Support
\nAgreement), is granted pursuant to the Support Agreement, is granted in
\nconsideration of Parent entering into the Merger Agreement and is coupled with
\nan interest. The attorneys and proxies named above will be empowered at any
\ntime prior to the earlier of termination of the Merger Agreement and the date on
\nwhich the Merger becomes effective to exercise all voting rights (including,
\nwithout limitation, the power to execute and deliver written consents with
\nrespect to the Shares and the New Shares) of the undersigned at every annual,
\nspecial or adjourned meeting of the Company’s shareholders, and in every written
\nconsent in lieu of such a meeting, or otherwise, to vote the Shares and the New
\nShares:<\/p>\n
(i) in favor of approval of the Merger and the adoption and approval
\nof the Merger Agreement including all actions contemplated thereby;<\/p>\n
(ii) in favor of the conversion of all shares of preferred stock of
\nthe Company into shares of Common Stock immediately prior to, and contingent
\nupon, the Closing of the Merger;<\/p>\n
(iii) against approval of any proposal made in opposition to, or in
\ncompetition with, consummation of the Merger and the Merger Agreement; and<\/p>\n
(iv) against any of the following actions (other than those actions that
\nrelate to the Merger and are contemplated by the Merger Agreement): (A) any
\nmerger, consolidation, business combination, sale of assets, reorganization or
\nrecapitalization of the Company with any party; (B) any dissolution, liquidation
\nor winding up of the Company; (C) any joint venture or material strategic
\nrelationship with any party; (D) any material change in the capitalization of
\nthe Company or the Company’s capital structure, except as contemplated by the
\nMerger Agreement and by Section 1.2(ii) and Section 3 of the Support Agreement;
\nor (E) any other action that is intended, or could reasonably be expected to
\nimpede, interfere with, delay, postpone, discourage or adversely affect the
\nMerger or any of the transactions contemplated by the Merger Agreement.<\/p>\n
The attorneys and proxies named above may only exercise this proxy to vote
\nthe Shares and any New Shares subject hereto at any time prior to the earlier of
\ntermination of the Merger Agreement and the date on which the Merger becomes
\neffective, at every annual, special or adjourned meeting of the shareholders of
\nthe Company and in every written consent in lieu of such meeting. The
\nundersigned Shareholder may vote the Shares and New Shares on all other matters.<\/p>\n
Any obligation of the undersigned hereunder shall be binding upon the
\nsuccessors and assigns of the undersigned.<\/p>\n
This proxy is irrevocable and coupled with an interest.<\/p>\n
Dated:<\/p>\n
Signature of Shareholder:_________________<\/p>\n
Print Name of Shareholder:________________<\/p>\n
***PROXY***<\/p>\n
EXHIBIT C
\n ———<\/p>\n
COMPANY AFFILIATE AGREEMENT<\/p>\n
THIS COMPANY AFFILIATE AGREEMENT (this “Agreement”) is made and entered into as
\n ———
\nof November ___, 1999, among GoTo.com, Inc., a Delaware corporation (“Parent”),
\n ——
\nand the undersigned stockholder who may be deemed an affiliate (“Affiliate”) of
\n ———
\nCadabra Inc., a California corporation (“Company”). Capitalized terms used but
\n ——-
\nnot otherwise defined herein shall have the meanings ascribed to them in the
\nReorganization Agreement (as defined below).<\/p>\n
RECITALS
\n ——–<\/p>\n
A. The Company, Merger Sub (as defined below) and Parent have entered into an
\nAgreement and Plan of Reorganization (the “Reorganization Agreement”) which
\n ————————
\nprovides for the merger (the “Merger”) of a wholly-owned subsidiary of Parent
\n ——
\n(“Merger Sub”) with and into the Company. Pursuant to the Merger, all
\n————
\noutstanding capital stock of the Company (the “Company Capital Stock”) shall be
\nconverted into the right to receive Common Stock of Parent;<\/p>\n
B. Affiliate has been advised that Affiliate may be deemed to be an
\n“affiliate” of the Company, as the term “affiliate” is used for purposes of Rule
\n144 of the Rules and Regulations (the “Rules and Regulations”) of the Securities
\n ———————
\nand Exchange Commission (the “Commission”); and
\n ———- <\/p>\n
C. The execution and delivery of this Agreement by Affiliate is a material
\ninducement to Parent to enter into the Reorganization Agreement.<\/p>\n
NOW, THEREFORE, intending to be legally bound, the parties hereto agree as
\nfollows:<\/p>\n
Acknowledgments by Affiliate. Affiliate acknowledges and understands that the
\n—————————-
\nrepresentations, warranties and covenants by Affiliate set forth herein shall be
\nrelied upon by Parent, the Company and their respective affiliates, counsel and
\naccounting firms, and that substantial losses and damages may be incurred by
\nthese persons if Affiliate’s representations, warranties or covenants are
\nbreached. Affiliate has carefully read this Agreement and the Reorganization
\nAgreement and has discussed the requirements of this Agreement with Affiliate’s
\nprofessional advisors, who are qualified to advise Affiliate with regard to such
\nmatters.<\/p>\n
Beneficial Ownership of Company Capital Stock. The Affiliate is the beneficial
\n———————————————
\nowner of shares of Company Capital Stock (the “Shares”). The Shares are not
\n ——
\nsubject to any claim, lien, pledge, charge, security interest or other
\nencumbrance or to any rights of first refusal of any kind. There are no
\noptions, warrants, calls, rights, commitments or agreements of any character,
\nwritten or oral, to which the Affiliate is party or by which it is bound
\nobligating the Affiliate to issue, deliver, sell, repurchase or redeem, or cause
\nto be issued, delivered, sold, repurchased or redeemed, any Shares or obligating
\nthe Affiliate to grant or enter into any such option, warrant, call, right,
\ncommitment or agreement. The Affiliate has the sole right to transfer such
\nShares. The Shares are not subject to preemptive rights created by any
\nagreement to which the Affiliate is party. All shares of Company Capital Stock
\nand common stock of Parent (“Parent Common Stock”) acquired by Affiliate in the
\nMerger) shall be subject to the <\/p>\n
provisions of this Agreement as if held by Affiliate as of the date hereof
\n(excluding Parent Common Stock aquired in the open market).<\/p>\n
Compliance with Rule 145 and the Securities Act.
\n ———————————————– <\/p>\n
Affiliate has been advised that (i) the issuance of shares of Parent Common
\nStock in connection with the Merger is expected to be effected pursuant to a
\nfairness hearing under California law, and the resale of such shares shall be
\nsubject to restrictions set forth in Rule 145 promulgated under the Securities
\nAct of 1933, as amended (the “Securities Act”), and (ii) Affiliate may be deemed
\n ————–
\nto be an affiliate of the Company. Affiliate accordingly agrees not to sell,
\ntransfer or otherwise dispose of any Parent Common Stock issued to Affiliate in
\nthe Merger unless (i) such sale, transfer or other disposition is made in
\nconformity with the requirements of Rule 145(d) promulgated under the Securities
\nAct, (ii) such sale, transfer or other disposition is made pursuant to an
\neffective registration statement under the Securities Act or an appropriate
\nexemption from registration, (iii) Affiliate delivers to Parent a written
\nopinion of counsel, reasonably acceptable to Parent in form and substance, that
\nsuch sale, transfer or other disposition is otherwise exempt from registration
\nunder the Securities Act or (iv) an authorized representative of the Commission
\nshall have rendered written advice to Affiliate to the effect that the
\nCommission would take no action, or that the staff of the Commission would not
\nrecommend that the Commission take any action, with respect to the proposed
\ndisposition if consummated.<\/p>\n
Parent shall give stop transfer instructions to its transfer agent with respect
\nto any Parent Common Stock received by Affiliate pursuant to the Merger and
\nthere shall be placed on the certificates representing such Common Stock, or any
\nsubstitutions therefor, a legend stating in substance:<\/p>\n
“THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
\n WHICH RULE 145 APPLIES AND MAY ONLY BE TRANSFERRED IN CONFORMITY WITH RULE
\n 145(d) OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
\n SECURITIES ACT OF 1933, AS AMENDED, OR IN ACCORDANCE WITH A WRITTEN OPINION
\n OF COUNSEL, REASONABLY ACCEPTABLE TO THE ISSUER IN FORM AND SUBSTANCE, THAT
\n SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
\n AS AMENDED.”<\/p>\n
The legend set forth above shall be removed (by delivery of a substitute
\ncertificate without such legend) and Parent shall so instruct its transfer
\nagent, if Affiliate delivers to Parent (i) satisfactory written evidence that
\nthe shares have been sold in compliance with Rule 145 (in which case, the
\nsubstitute certificate shall be issued in the name of the transferee), or (ii)
\nan opinion of counsel, in form and substance reasonably satisfactory to Parent,
\nto the effect that public sale of the shares by the holder thereof is no longer
\nsubject to Rule 145.<\/p>\n
Rule 144\/145 Reporting. Parent shall, for a period of two (2) years from the
\n———————-
\ndate hereof, use commercially reasonable efforts to: (a) make and keep public
\ninformation available (as such terms are understood and defined in Rule 144
\nunder the Securities Act) and (b) file with the Commission in a timely manner
\nall reports and other documents required of Parent under the Securities Act and
\nthe Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (c)
\n ————
\nfurnish to Affiliate promptly upon request a written statement as to its
\ncompliance with reporting requirements of Rule 144.<\/p>\n
Termination. This Agreement shall be terminated and shall be of no further
\n———–
\nforce and effect in the event of the termination of the Reorganization Agreement
\npursuant to Article VIII of the Reorganization Agreement.<\/p>\n
Miscellaneous.
\n ————- <\/p>\n
Waiver; Severability. No waiver by any party hereto of any condition or of any
\n——————–
\nbreach of any provision of this Agreement shall be effective unless in writing
\nand signed by each party hereto. In the event that any provision of this
\nAgreement, or the application of any such provision to any person, entity or set
\nof circumstances, shall be determined to be invalid, unlawful, void or
\nunenforceable to any extent, the remainder of this Agreement, and the
\napplication of such provision to persons, entities or circumstances other than
\nthose as to which it is determined to be invalid, unlawful, void or
\nunenforceable, shall not be impaired or otherwise affected and shall continue to
\nbe valid and enforceable to the fullest extent permitted by law.<\/p>\n
Binding Effect and Assignment. This Agreement and all of the provisions hereof
\n—————————–
\nshall be binding upon and inure to the benefit of the parties hereto and their
\nrespective successors and permitted assigns, but, except as otherwise
\nspecifically provided herein, neither this Agreement nor any of the rights,
\ninterests or obligations of the parties hereto may be assigned by either of the
\nparties without prior written consent of the other party hereto.<\/p>\n
Amendments and Modification. This Agreement may not be modified, amended,
\n—————————
\naltered or supplemented except upon the execution and delivery of a written
\nagreement executed by the parties hereto.<\/p>\n
Injunctive Relief. Each of the parties acknowledge that (i) the covenants and
\n—————–
\nthe restrictions contained in this Agreement are necessary, fundamental, and
\nrequired for the protection of Parent and the Company and to preserve for Parent
\nthe benefits of the Merger; (ii) such covenants relate to matters which are of a
\nspecial, unique, and extraordinary character that gives each of such covenants a
\nspecial, unique, and extraordinary value; and (iii) a breach of any such
\ncovenants or any other provision of this Agreement shall result in irreparable
\nharm and damages to Parent and the Company which cannot be adequately
\ncompensated by a monetary award. Accordingly, it is expressly agreed that in
\naddition to all other remedies available at law or in equity, Parent and the
\nCompany shall be entitled to the immediate remedy of a temporary restraining
\norder, preliminary injunction, or such other form of injunctive or equitable
\nrelief as may be used by any court of competent jurisdiction to restrain or
\nenjoin any of the parties hereto from breaching any such covenant or provision
\nor to specifically enforce the provisions hereof.<\/p>\n
Governing Law. This Agreement shall be governed by and construed, interpreted
\n————-
\nand enforced in accordance with the internal laws of the State of California
\nwithout giving effect to any choice or conflict of laws provision or rule
\n(whether of the State of California or any other jurisdiction) that would cause
\nthe application of the laws of any jurisdiction other than the State of
\nCalifornia.<\/p>\n
Entire Agreement. This Agreement, the Reorganization Agreement and the other
\n—————-
\nagreements referred to in the Reorganization Agreement set forth the entire
\nunderstanding of Affiliate and Parent relating to the subject matter hereof and
\nthereof and supersede all prior agreements and understandings between Affiliate
\nand Parent relating to the subject matter hereof and thereof.<\/p>\n
Attorneys’ Fees. In the event of any legal actions or proceeding to enforce or
\n—————
\ninterpret the provisions hereof, the prevailing party shall be entitled to
\nreasonable attorneys’ fees, whether or not the proceeding results in a final
\njudgment.<\/p>\n
Further Assurances. Affiliate shall execute and\/or cause to be delivered to
\n——————
\nParent such instruments and other documents and shall take such other actions as
\nParent may reasonably request to effectuate the intent and purposes of this
\nAgreement.<\/p>\n
Third Party Reliance. Counsel to and independent auditors for Parent and the
\n——————–
\nCompany shall be entitled to rely upon this Affiliate Agreement.
\nSurvival. The representations, warranties, covenants and other provisions
\n——–
\ncontained in this Agreement shall survive the Merger.<\/p>\n
Notices. All notices and other communications pursuant to this Agreement shall
\n——-
\nbe in writing and deemed to be sufficient if contained in a written instrument
\nand shall be deemed given if delivered personally, telecopied, sent by
\nnationally-recognized overnight courier or mailed by registered or certified
\nmail (return receipt requested), postage prepaid, to the parties at the
\nfollowing address (or at such other address for a party as shall be specified by
\nlike notice):<\/p>\n
If to Parent: GoTo.com, Inc.
\n 140 West Union Street
\n Pasadena, California 91103
\n Attention: Todd Tappin
\n Telephone: (626) 685-5600
\n Facsimile: (626) 685-5601
\n With a copy to: Wilson Sonsini Goodrich & Rosati, P.C.
\n 650 Page Mill Road
\n Palo Alto, California 94304
\n Attention: Martin W. Korman, Esq.
\n Michael D. Weisberg, Esq.
\n Telephone: (650) 493-9300
\n Facsimile: (650) 493-6811<\/p>\n
If to Affiliate: To the address for notice set forth on the signature
\npage hereof.<\/p>\n
Counterparts. This Agreement shall be executed in one or more counterparts,
\n————
\neach of which shall be deemed an original, and all of which together shall
\nconstitute one and the same instrument.<\/p>\n
IN WITNESS WHEREOF, the parties have caused this Affiliate Agreement to be duly
\nexecuted on the day and year first above written.<\/p>\n
GOTO.COM, INC. AFFILIATE<\/p>\n
By:_____________________ By:_______________________<\/p>\n
Name: Todd Tappin Affiliate’s Address for Notice:<\/p>\n
Title: Chief Financial Officer ______________________________<\/p>\n
______________________________<\/p>\n
______________________________<\/p>\n
[Signature Page to Affiliate Agreement]<\/p>\n
EXHIBIT D
\n ———<\/p>\n
Form of Opinion of Fenwick & West, LLP<\/p>\n
[Capitalized terms in this Exhibit have the meanings ascribed
\n to such terms in the Agreement and Plan of Reorganization]<\/p>\n
[Introduction, exceptions, etc.]<\/p>\n
1. The Company is a corporation duly organized, validly existing and in good
\nstanding under the laws of the State of California, and has the requisite
\ncorporate power and authority to own or lease and to operate and use its assets
\nto carry on its business as now conducted.<\/p>\n
2. Immediately prior to the [Effective Time] of the Merger, the Company’s
\nauthorized capital stock consisted of __________ shares of Common Stock, of
\nwhich to our knowledge ________ shares were issued and outstanding; _________
\nshares of Series A Preferred Stock, of which to our knowledge ________ shares
\nwere issued and outstanding; and _________ shares of Series B Preferred Stock,
\nof which to our knowledge ________ shares were issued and outstanding. All of
\nsuch issued and outstanding shares have been duly authorized and validly issued,
\nwere fully paid and nonassessable. To our knowledge, except for the conversion
\nprivileges of the Series A Preferred Stock and the Series B Preferred Stock and
\nas otherwise set forth in the Agreement and the Company Disclosure Letter, there
\nwere immediately prior to the Effective Time of the Merger __________ shares
\nsubject to options and no warrants or conversion privileges or other rights
\noutstanding to purchase or otherwise acquire any authorized but unissued shares
\nof the Company’s capital stock or other securities convertible into or
\nexercisable for the Company’s capital stock.<\/p>\n
3. The Company has the requisite corporate power and authority to execute,
\ndeliver and perform the Agreement and the Agreement. The execution, delivery
\nand performance by the Company of the Agreement have been duly authorized by all
\nnecessary corporate action and proceedings on the part of the Board of Directors
\nand shareholders of the Company.<\/p>\n
4. The execution, delivery and performance of the Agreement does not and will
\nnot violate or conflict with the Articles of Incorporation or Bylaws of the
\nCompany.<\/p>\n
5. To our knowledge, there is no action, suit, proceeding, claim or
\ninvestigation pending or overtly threatened against the Company before any court
\nor administrative agency that questions the validity of the Agreement or that
\nmight result in a Material Adverse Effect on the Company.<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[7665],"corporate_contracts_industries":[],"corporate_contracts_types":[9622,9626],"class_list":["post-43181","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-gotocom-inc","corporate_contracts_types-planning","corporate_contracts_types-planning__merger"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/43181","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=43181"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43181"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43181"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43181"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}