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EXHIBIT 2.01
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is entered into as
of July 6, 2000, by and among Broadbase Software, Inc., a Delaware corporation
("BROADBASE"), Panopticon, Inc., a California corporation ("PANOPTICON"), and
Bridge Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary
of Broadbase ("MERGER SUB").
RECITALS
A. The parties intend that, on the terms and subject to the conditions
hereinafter set forth, Merger Sub will merge with and into Panopticon in a
reverse triangular merger (the "MERGER"), with Panopticon continuing as the
surviving corporation, all pursuant to the terms and conditions of this
Agreement, an Agreement of Merger substantially in the form of Exhibit A-1 (the
"AGREEMENT OF MERGER"), a Certificate of Merger substantially in the form of
Exhibit A-2 and containing the information required by Section 251 of the
Delaware General Corporation Law (the "CERTIFICATE OF MERGER") and the
applicable provisions of the laws of the states of California and Delaware. Upon
the effectiveness of the Merger, (i) all the outstanding shares of common stock
of Panopticon, and all the outstanding shares of preferred stock of Panopticon,
will be converted into the right to receive shares of common stock of Broadbase,
par value $0.001 per share, (ii) all options to purchase Panopticon common stock
will be assumed by Broadbase and converted into options to purchase Broadbase
common stock and (iii) all warrants to purchase Panopticon capital stock will be
assumed by Broadbase and converted into warrants to purchase Broadbase common
stock, all in the manner and on the basis determined herein and as provided in
the Agreement of Merger and Certificate of Merger.
B. The Boards of Directors of Broadbase, Merger Sub and Panopticon have
determined that the Merger is in the best interests of their respective
companies and stockholders, have approved and declared advisable this Agreement
and, accordingly have agreed to effect the Merger provided for herein upon the
terms and subject to the conditions of this Agreement;
C. Concurrently with the execution and delivery of this Agreement, and
as a condition and inducement to Broadbase's willingness to enter into this
Agreement: (i) each of the officers and directors of Panopticon and each of the
Panopticon Shareholders (as defined in this Agreement) listed on Schedule 1
shall have executed and delivered a Voting Agreement and Irrevocable Proxy in
substantially the form attached hereto as Exhibit B (the "VOTING AGREEMENT")
pursuant to which such Panopticon Shareholder will agree irrevocably to vote all
shares of Panopticon capital stock owned by such Panopticon Shareholder in favor
of the Merger and the transactions contemplated by the Merger, and (ii) each of
the employees of Panopticon listed on Schedule 2 shall have executed and
delivered to Broadbase an employment and non-competition agreement in
substantially the form attached hereto as Exhibit C (collectively, the
"EMPLOYMENT AGREEMENTS"), to be effective upon the Effective Time (as defined in
this Agreement).
D. Prior to the Closing Date (as defined in this Agreement), and as a
condition and inducement to Broadbase's willingness to enter into this
Agreement, Broadbase and the Representative (as defined in Section 12.6(a))
shall execute and deliver an Escrow Agreement in substantially the form attached
hereto as Exhibit D (the "ESCROW AGREEMENT"), to be effective upon consummation
of the Merger, pursuant to which certain shares of Broadbase common stock issued
in the Merger will be withheld by Broadbase and deposited in escrow as security
for the indemnification obligations provided for in Section 12.
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E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE"), and to cause the Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS OF CERTAIN TERMS
"ACQUISITION" means any transaction or series of related
transactions that results in the holders of record of an entity's capital stock
immediately prior to the transaction or transactions holding less than fifty
percent (50%) of the voting power of such entity immediately after the
transaction or transactions, including the acquisition of such entity by another
entity and any reorganization (other than a reincorporation of such entity under
the laws of the state of Delaware), merger, consolidation or share exchange, or
which results in the sale of all or substantially all of the assets of such
entity.
"BROADBASE DISCLOSURE LETTER" means that disclosure letter
dated as of the date hereof and provided by Broadbase and Merger Sub to
Panopticon simultaneously with the execution and delivery of this Agreement.
"COMMISSION" means the United States Securities and Exchange
Commission.
"CONTRACT" means, with respect to any person, any written or
oral agreement, contract, understanding, arrangement, instrument, note,
guaranty, indemnity, representation, warranty, deed, assignment, power of
attorney, purchase order, work order, insurance policy, benefit plan,
commitment, covenant, obligation, promise or undertaking of any nature to which
such person is a party or by which its properties or assets may be bound or
affected or under which it or its business, properties or assets receive
benefits.
"ESCROW AGENT" has the meaning set forth in Section 2.2(a).
"ESCROW PERIOD" means that time period beginning at the
Effective Time and ending at 12:01 a.m. on the First anniversary of the Closing
Date.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCHANGE OPTION" has the meaning set forth in Section
2.1(a)(iv).
"EXCHANGE SHARES" means the shares of Broadbase common stock
to be issued to Panopticon Shareholders in the Merger pursuant to Section 2.1.
"GAAP" means U.S. generally accepted accounting principles,
applied on a consistent basis.
"HSR ACT" has the meaning set forth in Section 2.5.
"MATERIAL ADVERSE EFFECT" when used in connection with an
entity means one or more changes, events, violations, inaccuracies,
circumstances or effects that, individually or in the aggregate, results or is
reasonably likely to be materially adverse to the business, employees, assets or
liabilities (including intangible assets), capitalization, financial condition,
operations or results of operations of such entity taken as a whole with its
subsidiaries, except to the extent that such change, event, violation,
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inaccuracy, circumstance or effect results from: (i) changes in general economic
conditions, (ii) changes affecting the industry generally in which the entity
operates which do not affect such entity disproportionately, (iii) with respect
to Broadbase, a decline in the trading prices of Broadbase common stock, or (iv)
with respect to Panopticon, Broadbase's failure to consent to actions requested
to be taken by Panopticon under Section 6.4.
"PANOPTICON ANCILLARY AGREEMENTS" has the meaning set forth in
Section 4.2(a).
"PANOPTICON CONTRACT" means any contract: (a) to which
Panopticon is a party; (b) by which Panopticon or any of its assets is bound or
subject to any obligation; or (c) under which Panopticon has or may acquire any
right or interest.
"PANOPTICON DISCLOSURE LETTER" means that disclosure letter
dated as of the date hereof and provided by Panopticon to Broadbase and
Broadbase Acquisition Corp. simultaneously with the execution and delivery of
this Agreement.
"PANOPTICON OPTION" has the meaning set forth in Section
4.5(b).
"PANOPTICON SHAREHOLDER" means a holder of shares of
Panopticon's capital stock, including Panopticon common stock.
"PRIVATE PLACEMENT EXEMPTION" has the meaning set forth in
Section 2.3(a).
"SECURITIES ACT" means the Securities Act of 1933, as amended.
2. PLAN OF MERGER
2.1 The Merger. The Agreement of Merger will be filed with the
Secretary of State of the State of California and the Certificate of Merger will
be filed with the Secretary of State of the State of Delaware as soon as
practicable after the Closing (as defined in Section 8.1). The effective time of
the Merger (the "EFFECTIVE TIME") shall be the time of filing of the Agreement
of Merger unless otherwise specified in the Agreement of Merger. On the terms
and subject to the conditions of this Agreement, the Agreement of Merger and the
Certificate of Merger, Merger Sub will be merged with and into Panopticon (such
remaining entity, as appropriate, the "SURVIVING CORPORATION") in a statutory
merger pursuant to the Agreement of Merger and the Certificate of Merger and in
accordance with applicable provisions of California and Delaware laws as
follows:
(a) Conversion of Panopticon Securities.
(i) Total Merger Consideration. In
connection with the Merger and pursuant to the provisions of this
Agreement, Broadbase will issue an aggregate of 3,179,810 fully paid
and nonassessable shares of Broadbase common stock (collectively the
"TOTAL MERGER CONSIDERATION," and each share individually, an "EXCHANGE
SHARE") determined as set forth in this Article 2 (provided that
additional shares of Broadbase common stock may be issued, but only
with the express written consent of Broadbase (for example, with
respect to new option grants pursuant to Section 6.4)) in exchange for
all of the securities (including shares of common stock, preferred
stock, options, warrants and other rights) of Panopticon outstanding
immediately prior to the Effective Time.
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(ii) Conversion of Panopticon Shares.
(A) On the terms and subject to the
conditions of this Agreement, at the Effective Time, each share of
Panopticon common stock and preferred stock held by a Panopticon
Shareholder that is issued and outstanding immediately prior to
the Effective Time, excluding any Dissenting Shares (as defined in
Section 8.3(a)) will, by virtue of the Merger and without further
action on the part of any holder thereof (except as expressly
provided herein), be converted into and represent the right to
receive the number of shares of Broadbase common stock that is
equal to the Conversion Ratio. For purposes of calculating the
Conversion Ratio, and as used elsewhere in this Agreement, the
following definitions apply:
(1) "PANOPTICON SHARE
NUMBER" equals the sum of: (x) the total number of shares of
Panopticon common stock (not including treasury shares)
outstanding, and which Panopticon has promised to issue or to
recommend to the Panopticon board of directors to issue, as of
the date of this Agreement, and (y) the total number of shares
of Panopticon common stock issuable upon exercise of all
Panopticon Options (as defined in Section 4.5), Panopticon
Warrants (as defined in Section 4.5) or other rights to
acquire Panopticon capital stock outstanding (whether or not
vested or exercisable), and those which Panopticon has
promised to grant or to recommend to the Panopticon board of
directors to grant, as of the date of this Agreement; and
(2) "CONVERSION RATIO"
means the quotient (calculated to the fourth decimal place)
obtained by dividing the Total Merger Consideration by the
Panopticon Share Number;
provided that, absent the express written consent of Broadbase
(for example, with respect to new option grants pursuant to
Section 6.4), in no event shall Broadbase issue more than
3,179,810 shares of Broadbase common stock in connection with the
Merger (including shares issuable upon exercise or conversion of
Exchange Options and Exchange Warrants). Each outstanding share of
Panopticon preferred stock will be converted to Panopticon common
stock at the then-applicable conversion ratio prior to the
Effective Time, and will be deemed to have been converted to
Panopticon common stock prior for purposes of calculating the
Conversion Ratio. Each share of Panopticon common stock owned by
Panopticon immediately prior to the Effective Time shall be
canceled and extinguished without any conversion pursuant to this
Section 2.2.
(B) Any right of repurchase by
Panopticon of any shares of Panopticon common stock that exists
immediately before the Effective Time shall continue and become a
right of Broadbase to repurchase on the same terms and conditions
(adjusted according to the Conversion Ratio) as the applicable
Exchange Shares, except, with respect to Exchange Shares issued to
those persons listed in Schedule 2, as explicitly set forth in the
Employment Agreements. Except for shares of Panopticon common
stock held by Gerald Held and Lee Kennedy, no right of repurchase
shall lapse as a result of the Merger, and if any holder of
restricted stock has acceleration provisions that would be
triggered by the Merger, each such holder, other than Mr. Held or
Ms. Kennedy, will waive such acceleration provisions.
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(iii) Dissenting Shares. Holders of shares
of Panopticon common stock who have complied with all requirements for
perfecting stockholders' rights of appraisal, as set forth in Section
1300 of the California Corporations Code, shall be entitled to their
rights under California law with respect to such rights.
(iv) Assumption and Conversion of Panopticon
Options.
(A) Effective at the Effective Time,
Broadbase will assume all Panopticon Options, and each of the
Panopticon Options shall by its terms be converted into an option
to purchase that number of shares of Broadbase common stock (an
"EXCHANGE OPTION") which equals the number of shares of Panopticon
common stock subject to the Panopticon Option immediately prior to
the Effective Time, multiplied by the Conversion Ratio, rounded
down to the nearest whole share. The per share exercise price for
each Exchange Option will equal the per share exercise price of
each such Panopticon Option immediately prior to the Effective
Time divided by the Conversion Ratio, rounded up to the nearest
whole cent. No cash will be paid in lieu of fractional shares
which are rounded down pursuant to this Section 2.1(a)(iv)(A). No
Exchange Options or Exchange Shares shall be issued with respect
to Panopticon Options which are cancelled subsequent to the date
of this Agreement and prior to the Effective Time.
(B) Terms of Assumption of Stock
Options; Vesting. The term, exercisability, vesting schedule,
status as an "incentive stock option" under Section 422 of the
Code, if applicable, and all other terms of each Exchange Option
will be the same in all material respects as the corresponding
Panopticon Option, except, with respect to Exchange Options
granted to those persons listed in Schedule 2, as explicitly set
forth in the Employment Agreements; provided, however, that if the
employment of a holder of Exchange Options (other than those
listed in Schedule 2) is terminated (1) by Broadbase without
"cause" (as such term is defined in the form of Employment
Agreement attached hereto), (2) by such holder, after
"Constructive Termination" (as such term is defined in the form of
Employment Agreement attached hereto) by Broadbase without cause,
or (3) due to the death or disability of such holder, then upon
such termination any unvested Exchange Options held by such holder
which are subject to cliff vesting as of the time of such
termination shall become vested and exercisable with respect to
the number of shares that would have vested on a monthly basis
during such period in accordance with the monthly vesting schedule
to take effect following such cliff period. No vesting of shares
subject to Panopticon Options will be accelerated as a result of
the Merger and if any holder of Panopticon Options has
acceleration provisions that would be triggered by the Merger,
each such holder will waive such acceleration provisions.
Continuous employment with Panopticon will be credited to holders
of Panopticon Options for purposes of determining the number of
Exchange Shares exercisable after the Effective Time.
(v) Assumption and Conversion of Panopticon
Warrants. Effective at the Effective Time, Broadbase will assume all
Panopticon Warrants, and each of the Panopticon Warrants shall by its
terms be converted into a warrant to purchase that number of shares of
Broadbase common stock (an "EXCHANGE WARRANT") which equals the number
of shares of Panopticon common stock subject to the Panopticon Warrant
immediately prior to the Effective Time, multiplied by the Conversion
Ratio, rounded down to the nearest whole share. The per share exercise
price for each Exchange Warrant will equal the per share exercise price
of each such Panopticon Warrant immediately prior to the Effective Time
divided by the
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Conversion Ratio, rounded up to the nearest whole cent. No cash will be
paid in lieu of fractional shares which are rounded down pursuant to
this Section 2.1(a)(v)(A). The term, exercisability, vesting schedule,
and all other terms of each Exchange Warrant will be the same in all
material respects as the corresponding Panopticon Warrant. No Exchange
Warrants or Exchange Shares shall be issued with respect to the
Panopticon Warrant held by Kindling I LLC issued August 15, 1999 (with
respect to the remaining shares subject to such warrant) and all other
Panopticon Warrants which, by their terms, will never become
exercisable (the "NON-EXERCISABLE PANOPTICON WARRANTS").
(vi) Adjustment for Capital Changes. If
prior to the Merger, Broadbase (A) recapitalizes either through a
split-up of the outstanding shares of Broadbase common stock into a
greater number, or through a combination of such outstanding shares
into a lesser number, (B) reorganizes, reclassifies or otherwise
changes such outstanding shares into the same or a different number of
shares of other classes or into securities of another company (other
than through a split-up or combination of shares provided for in the
previous clause), or (C) declares a dividend on its outstanding shares
payable in shares or securities convertible into shares, the
calculation of the Conversion Ratio and the Escrow Shares (as defined
in Section 2.2(b)) will be adjusted appropriately so as to maintain the
proportionate interests of the Panopticon Shareholders and the holders
of Broadbase common Stock at the time of such recapitalization.
(vii) Fractional Shares. No fractional
shares of Broadbase common stock will be issued in connection with the
Merger. However, in lieu thereof, each Panopticon Shareholder who would
otherwise be entitled to receive a fraction of a share of Broadbase
common stock (excluding with respect to Panopticon Options and
Panopticon Warrants) will receive from Broadbase an amount of cash
equal to the product obtained by multiplying (A) the closing price of a
share of Broadbase common stock on the Nasdaq National Market on the
last trading day before the Effective Time by (B) the fraction of a
share of Broadbase common stock that such holder would otherwise have
been entitled to receive.
(b) Effects of the Merger. At the Effective Time: (i)
Merger Sub will merge with and into Panopticon, Panopticon will be the
Surviving Corporation pursuant to the terms of the Agreement of Merger and
the Certificate of Merger and the separate existence of Merger Sub will
thereupon cease; (ii) each share of Panopticon capital stock outstanding
immediately prior to the Effective Time will be converted as provided in
this Section 2.1, subject to the escrow provisions of Section 2.2; (iii)
each share of common stock of Merger Sub that is issued and outstanding
immediately prior to the Effective Time will, by virtue of the Merger and
without further action on the part of the sole stockholder of Merger Sub,
be converted into and become one share of common stock of the Surviving
Corporation (and the shares of Surviving Corporation into which the shares
of Merger Sub common stock are so converted shall be the only shares of
Panopticon common stock that are issued and outstanding immediately after
the Effective Time); (iv) the Articles of Incorporation and Bylaws of
Panopticon shall be amended and restated to contain provisions in
substantially the form set forth in the Certificate of Incorporation and
Bylaws of Merger Sub; (v) the Board of Directors and executive officers of
Broadbase will remain unchanged and the sole director and officers of
Merger Sub immediately prior to the Effective Time will become the sole
director and officers of the Surviving Corporation; and (vi) the Merger
will, from and after the Effective Time, have all of the effects provided
by applicable law.
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2.2 Escrow.
(a) Escrow Agent. State Street Bank and Trust Company
of California, N.A., or such other escrow agent selected by Broadbase prior
to the Closing (the "ESCROW AGENT") shall hold, release and perform other
tasks related to the Escrow Shares (defined in Section 2.2(b)) pursuant to
the provisions of the Escrow Agreement.
(b) Escrow Shares. Broadbase will deduct, on a pro
rata basis from the number of Exchange Shares to be issued to each
Panopticon Shareholder pursuant to Section 2.1(a)(ii) upon surrender of his
or her Panopticon Certificates, that number of shares of Broadbase common
stock equal to ten percent (10%) of the shares of Broadbase common stock
issuable in the Merger to the holders of Panopticon common stock
immediately prior to the Effective Time, rounded to the nearest whole share
(the "ESCROW SHARES"). As soon as practicable after the Effective Time, and
in accordance with the provisions of the Escrow Agreement, Broadbase will
deposit with the Escrow Agent certificates representing the Escrow Shares,
issued in the name of each Panopticon Shareholder, together with related
stock transfer powers. Stock dividends that are issued in order to effect a
stock split of Broadbase common stock on Escrow Shares paid during the
Escrow Period shall also be held in escrow until such Escrow Shares are
released.
For the purposes of this Agreement and the Escrow
Agreement, Escrow Shares will be deemed to have a per share value equal to
the closing price per share of Broadbase common stock as quoted on the
Nasdaq National Market, and reported in The Wall Street Journal, for the
trading day immediately preceding the Closing Date (such price shall be
subject to adjustment to reflect any capital change of the type referred to
in Section 2.1(a)(v), whether occurring at or after the Effective Time, and
Broadbase shall promptly provide the Escrow Agent with written notice of
such capital change) as provided in the Escrow Agreement.
(c) Escrow Period. The Escrow Agent will hold the
Escrow Shares and dividends as collateral for Panopticon's indemnification
obligations and release shares to satisfy valid claims, all pursuant to the
Escrow Agreement and Article 12 of this Agreement. The Escrow Agent will
continue to hold Escrow Shares and dividends not released in satisfaction
of claims until the end of the Escrow Period.
2.3 Securities Law Compliance and Contractual
Restrictions.
(a) Issuance of Exchange Shares in Exchange for
Panopticon Common Stock. The parties to this Agreement intend that
Broadbase shall issue the Exchange Shares pursuant to a permit obtained
pursuant to a California fairness hearing under Section 3(a)(10) of the
Securities Act, or, if Broadbase and Panopticon are unable to obtain such a
permit after using reasonable best efforts to do so, pursuant to a "private
placement" under Regulation D and/or Section 4(2) of the Securities Act and
applicable state securities laws (the "PRIVATE PLACEMENT EXEMPTION"). In
the event that a permit is not obtained and the Exchange Shares are issued
pursuant to the Private Placement Exemption, the parties agree to cooperate
in good faith to negotiate and enter into, and cause the Panopticon
Shareholders to enter into, a registration rights agreement providing for
the terms set forth in Section 2.3(c)(ii).
(b) Issuance of Exchange Shares Pursuant to Exercises
of Exchange Options. Broadbase shall cause the Exchange Shares that are
issuable upon exercise of the Exchange Options to be registered under the
Securities Act on Form S-8 or any other applicable form within a
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reasonable time after the Closing Date (and in any event within 30 days
following the Closing Date). Broadbase will use commercially reasonable
efforts to maintain the effectiveness of such registration statement so
long as the Exchange Options and New Options (or shares issued upon
exercise thereof) remain outstanding.
(c) Securities Law Restrictions on Resale of Exchange
Shares.
(i) Fairness Hearing. In the event that the
Exchange Shares are issued pursuant to a permit obtained pursuant to a
California fairness hearing as provided above, the Exchange Shares will
be freely tradable, subject to (A) with respect to the persons listed
on Schedule 2, the contractual resale restrictions or repurchase rights
set forth in their Employment Agreements with Broadbase, (B) such
restrictions imposed by the Securities Act (including Rule 145
promulgated thereunder) on stockholders who are former affiliates of
Panopticon or who become affiliates of Broadbase following the Merger,
(C) the extent of any repurchase rights assumed by Broadbase with
respect to any such Exchange Shares which are unvested, and (D)
compliance with any securities trading policies of Broadbase that are
applicable to its officers and/or employees. In this circumstance,
Broadbase will not be under any obligation to register the offer and
sale of the Exchange Shares (other than those issued upon the exercise
of Exchange Options) with the Commission under the Securities Act.
(ii) Private Placement. In the event that
the Exchange Shares are issued pursuant to Private Placement Exemption:
(A) Restricted Securities. The
Exchange Shares shall constitute "restricted securities" within
the meaning of the Securities Act. The certificates for Exchange
Shares to be issued in the Merger shall bear appropriate legends
to identify such privately placed shares as being restricted under
the Securities Act, to comply with applicable state securities
laws.
(B) S-3 Registration Rights. Within
15 days after Broadbase becomes eligible to use such form under
the Securities Act, Broadbase shall file with the Commission a
shelf registration statement on Form S-3 to provide for the resale
of the Exchange Shares. Notwithstanding the foregoing, if
Broadbase is not eligible to use such form as of September 30,
2000, then Broadbase will instead use its best efforts to file
with the Commission a registration statement on Form S-1 to
provide for resale of the Exchange Shares on or before October 15,
2000. Broadbase will keep such registration statement effective
for a period of one year after the Effective Time, in accordance
with the terms and conditions of the registration rights
agreement.
(C) Piggyback Registration Rights.
Broadbase shall notify all holders of Exchange Shares in writing
at least thirty (30) days prior to filing any registration
statement under the Securities Act for purposes of effecting a
public offering of Broadbase securities (including, but not
limited to, registration statements relating to secondary
offerings of Broadbase securities, but excluding registration
statements relating to any employee benefit plan or a corporate
reorganization) and will afford each such holder an opportunity to
include in such registration statement all or any part of the
Exchange Shares then held by such holder. Each holder desiring to
include in any such registration statement all or any part of the
Exchange Shares held by such holder shall, within twenty (20) days
after receipt of the above-described notice from Broadbase, so
notify Broadbase in writing,
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and in such notice shall inform Broadbase of the number of
Exchange Shares such holder wishes to include in such
registration statement. The rights pursuant to this Section
2.3(c)(ii)(C) shall terminate and have no force and effect
upon the declaration by the Commission of the effectiveness of
a registration statement on Form S-3 filed by Broadbase
providing for the resale of the Exchange Shares.
(d) Holders of Exchange Shares will be wholly
responsible for compliance with all federal and state securities laws
regarding the sale, transfer or other disposition of such shares.
2.4 Tax and Accounting Aspects of the Merger.
(a) Tax Free Reorganization. The parties intend to
adopt this Agreement as a tax-free plan of reorganization and to consummate
the Merger in accordance with the provisions of Section 368(a)(1)(A) and
Section 368(a)(2)(E) of the Code. The parties to this Agreement hereby
adopt this Agreement as a "plan of reorganization" within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations. The value of the Exchange Shares and Exchange Options to be
received in the Merger is approximately equal, in each instance, to the
value of the Panopticon common stock and Panopticon Options to be
surrendered in exchange therefor. The Exchange Shares issued in the Merger
will be issued solely in exchange for the Panopticon common stock or upon
exercise of Exchange Options, and no other transaction other than the
Merger represents, provides for or is intended to be an adjustment to, the
consideration paid for the Panopticon common stock and Panopticon Options.
Except for any cash paid in lieu of fractional shares, no consideration
that could constitute "other property" within the meaning of Section 356 of
the Code is being paid by Broadbase for the Panopticon common stock and
Panopticon Options in the Merger. The parties shall treat the Merger as a
tax-free reorganization described in Section 368(a)(2)(E) of the Code and
shall not take any position on any tax returns or for any federal income
tax purposes that is inconsistent with such treatment or is inconsistent
with this Section 2.4(a). In addition, Broadbase represents that it
presently intends, and covenants that at the Effective Time it will intend,
to continue Panopticon's historic business or use a significant portion of
Panopticon's business assets in a business.
(b) Accounting Treatment. The parties intend that the
Merger be treated as a "purchase" for accounting purposes.
2.5 Antitrust. Each of Broadbase and Panopticon will promptly
prepare and file the applicable notices (if any) required to be filed by it
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR ACT"),
and comply promptly with any requests to it from the Federal Trade Commission or
United States Department of Justice for additional information.
2.6 Further Assurances. Panopticon agrees that if, at any time
before or after the Effective Time, Broadbase considers or is advised that any
further deeds, assignments or assurances are reasonably necessary or desirable
to vest, perfect or confirm in Broadbase title to any property or rights of
Panopticon or the Surviving Corporation as provided herein, Broadbase, the
Surviving Corporation and their proper officers and directors are hereby
authorized by Panopticon to execute and deliver all such proper deeds,
assignments and assurances and do all other things necessary or desirable to
vest, perfect or confirm title to such property or rights in Broadbase and
otherwise to carry out the purpose of this Agreement, in the name of Panopticon
or otherwise. The officers and directors of Broadbase, Panopticon and Merger Sub
will take all such other lawful and necessary or desirable action to carry out
the purposes of this Agreement.
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3. ADDITIONAL AGREEMENTS
3.1 Public Announcement. Broadbase and Panopticon will issue a
press release approved by both parties announcing the Merger as soon as
practicable following the execution of this Agreement. Each of Broadbase and
Panopticon may issue such press releases, and make such other disclosures
regarding the Merger, as it determines to be required or appropriate under
applicable securities laws or Nasdaq Stock Market rules after reasonable
consultation, where possible, with the other. Panopticon will not make any other
public announcement or disclosure of the transactions contemplated by this
Agreement. Panopticon will take all reasonable precautions to prevent any
trading in the securities of Broadbase by officers, directors, employees and
agents of Panopticon, having knowledge of any material information regarding
Broadbase provided hereunder, including, without limitation, the existence of
the transactions contemplated by this Agreement until the information in
question has been publicly disclosed.
3.2 Fees and Expenses. Except as set forth in this Section
3.3, each party will bear its respective expenses and fees of its own
accountants, attorneys, investment bankers and other professionals incurred with
respect to this Agreement and the transactions contemplated hereby. If the
Merger is consummated, Broadbase will pay at or immediately following the
Closing the reasonable investment banking, accounting and attorneys' fees and
expenses and other fees and expenses incurred by Panopticon in connection with
the Merger, not to exceed more than $235,000.
3.3 Integration Matters. Panopticon and Broadbase will
cooperate in good faith to identify and, to the extent practicable, to resolve
matters regarding the orderly integration of their respective operations.
4. REPRESENTATIONS AND WARRANTIES OF PANOPTICON
Except as set forth in the Panopticon Disclosure Letter, the
parts of which are numbered to correspond to the section numbers of this
Agreement, Panopticon hereby represents and warrants to Broadbase as follows:
4.1 Organization and Good Standing. Panopticon is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation and is qualified as a foreign corporation in
each other jurisdiction (as listed under Item 4.1 of the Panopticon Disclosure
Letter) in which a failure to be so qualified could reasonably be expected to
have a Material Adverse Effect on Panopticon.
4.2 Power, Authorization and Validity.
(a) Panopticon has the corporate power and authority
to: (i) carry on its business as now conducted and as proposed to be
conducted; (ii) own, operate and lease its properties in the manner in
which its properties are currently owned, used and leased and in the manner
in which its properties are proposed to be owned, used and leased; (iii)
perform its obligations under all Panopticon Contracts, and (iv) enter into
and perform its obligations under this Agreement and all agreements to
which Panopticon is or will be a party that are required to be executed
pursuant to or in connection with this Agreement (the "PANOPTICON ANCILLARY
AGREEMENTS"). The execution, delivery and performance of this Agreement and
the Panopticon Ancillary Agreements has been duly and validly approved by
the unanimous vote of the Panopticon Board of Directors.
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(b) No filing, authorization or approval,
governmental or otherwise, is necessary to enable Panopticon to enter into
and to perform its obligations under this Agreement and the Panopticon
Ancillary Agreements, except for (i) the filing of the Agreement of Merger
and the Certificate of Merger with the Secretaries of State of the State of
California and Delaware, respectively, the filing of such officers'
certificates and other documents as are required to effectuate the Merger
under California and Delaware law and the filing of appropriate documents
with the relevant authorities of the states other than California in which
Panopticon is qualified to do business, if any, (ii) such filings as may be
required to comply with federal and state securities laws, including the
Permit Application (as defined in Section 6.5), (iii) the approval of the
holders of at least a majority of the outstanding shares of Panopticon
common stock and two-thirds of the outstanding shares of Panopticon
preferred stock of the Merger, this Agreement and related transactions
contemplated hereby, and (iv) such filings as may be required by the HSR
Act. As of the date hereof, the Panopticon Shareholders who have executed
Voting Agreements collectively own shares of Panopticon Common Stock and
Panopticon Preferred Stock representing, in the aggregate, voting power
sufficient to approve the Merger, this Agreement and the related
transactions contemplated hereby.
(c) This Agreement and the Panopticon Ancillary
Agreements are, or when executed and delivered by Panopticon and the other
parties thereto will be, valid and binding obligations of Panopticon
enforceable against Panopticon in accordance with their respective terms,
except as to the effect, if any, of (i) applicable bankruptcy and other
similar laws affecting the rights of creditors generally, (ii) rules of law
governing specific performance, injunctive relief and other equitable
remedies and (iii) the enforceability of provisions requiring
indemnification; provided, however, that the Certificate of Merger, the
Agreement of Merger and the Panopticon Ancillary Agreements will not be
effective until the earlier of the Effective Time and the date provided for
therein.
4.3 No Violation of Charter Documents, Contracts or Laws.
Neither the execution and delivery of this Agreement or any Panopticon Ancillary
Agreement, nor the consummation of the transactions provided for herein or
therein, will conflict with, or (with or without notice or lapse of time, or
both) result in a termination, breach, impairment or violation of, (a) any
provision of the Certificate of Incorporation, Bylaws or other charter documents
of Panopticon, as currently in effect, (b) any material Panopticon Contract, or
(c) any federal, state, local or foreign judgment, writ, decree, order, statute,
rule or regulation applicable to Panopticon or its assets or properties. The
consummation of the Merger and succession by Broadbase to all rights, licenses,
franchises, leases and agreements of Panopticon will not require the consent of
any third party (except as set forth under Item 4.3 of the Panopticon Disclosure
Letter) and will not have a Material Adverse Effect on Panopticon.
4.4 Corporate Documents.
(a) Panopticon has made available to Broadbase for
examination all documents and information listed in the Panopticon
Disclosure Letter or other exhibits called for by this Agreement,
including, without limitation, the following: (i) copies of Panopticon's
Articles of Incorporation, Bylaws and other charter documents, as currently
in effect; (ii) Panopticon's minute book containing all records of all
proceedings, consents, actions and meetings of the shareholders, the Board
of Directors and any committees of the Board of Directors of Panopticon;
(iii) Panopticon's stock ledger, journal and other records reflecting all
stock issuances and transfers; and (iv) all permits, orders and consents
issued by any regulatory agency with respect to Panopticon, or any
securities of Panopticon, and all applications for such permits, orders and
consents.
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(b) There has not been any violation of any of the
provisions of the Panopticon Articles of Incorporation or Panopticon
bylaws, and to Panopticon's knowledge, no event has occurred, and no
condition or circumstance exists, that likely would (with or without notice
and/or lapse of time) constitute or result directly or indirectly in such a
violation.
(c) The books of account, stock records, minute books
and other records of Panopticon (i) are in all material respects true and
complete, (ii) have been maintained in accordance with reasonable business
practices and (iii) accurately and fairly reflect in all material respects
the transactions and dispositions of the assets of Panopticon.
4.5 Capitalization.
(a) Authorized/Outstanding Capital Stock. As of the
date hereof, the authorized capital stock of Panopticon consists solely of
10,000,000 shares of Panopticon common stock and 2,500,000 shares of
Panopticon preferred stock (all of which are designated as Series A
Preferred Stock). As of the date hereof, there are issued and outstanding
5,318,362 shares of Panopticon common stock and 2,220,759 shares of Series
A Preferred Stock (each of which is convertible into one share of
Panopticon common stock). All issued and outstanding shares of Panopticon
common stock and Panopticon preferred stock have been duly authorized and
validly issued, are fully paid and nonassessable, are not subject to any
right of rescission and have been offered, issued, sold and delivered by
Panopticon in compliance with all registration or qualification
requirements (or applicable exemptions therefrom) of applicable federal and
state securities laws. A list of all holders of Panopticon capital stock
and the number of shares held by each is set forth under Item 4.5(a) of the
Panopticon Disclosure Letter as of the date hereof, to be updated as of the
Closing Date.
(b) Options/Warrants/Rights. As of the date of this
Agreement: (i) options to purchase 1,139,700 shares of Panopticon common
stock (the "PANOPTICON OPTIONS") have been issued and are outstanding; (ii)
warrants to purchase 350,000 shares of Panopticon common stock have been
issued and are outstanding; and (iii) warrants to purchase 186,487 shares
of Panopticon Series A Preferred Stock have been issued and are outstanding
(the warrants in (ii) and (iii) are collectively referred to as the
"PANOPTICON WARRANTS"). A list of all holders of Panopticon Options and
Panopticon Warrants is set forth under Item 4.5(b) of the Panopticon
Disclosure Letter. Item 4.5(b) of the Panopticon Disclosure Letter lists
for each person who holds Panopticon Options or Panopticon Warrants, the
exercise price for each such Panopticon Option or Panopticon Warrant, the
number of shares or other securities covered by each such Panopticon Option
or Panopticon Warrant, the term of exercisability of each such Panopticon
Option or Panopticon Warrant, the vesting schedule and the extent each such
Panopticon Option or Panopticon Warrant is vested as of the date hereof. In
addition, Item 4.5(b) of the Panopticon Disclosure Letter lists all holders
of unvested shares of Panopticon common stock and for each such person, the
number of unvested shares of Panopticon common stock held and the vesting
schedule. Panopticon has delivered to Broadbase accurate and complete
copies of all plans pursuant to which Panopticon has ever granted stock
options or warrants. Except as set forth in Item 4.5(b) of the Panopticon
Disclosure Letter, there is no: (i) outstanding preemptive right, stock
appreciation right, subscription, option, call, warrant or right (whether
or not currently exercisable) to acquire from Panopticon or, to
Panopticon's knowledge, from affiliates of Panopticon, any shares of the
capital stock or other securities of Panopticon; (ii) outstanding security,
instrument or obligation issued by Panopticon or controlled affiliates of
Panopticon, that is or may become convertible into or exchangeable for any
shares of the capital stock or other securities of Panopticon; (iii)
shareholders' rights plan (or similar plan
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commonly referred to as a "poison pill") or Contract under which
Panopticon is or may become obligated to sell or otherwise
issue any shares of its capital stock or any other securities; (iv)
Contract to which Panopticon is a party relating to the voting or
registration of or restricting any person from purchasing, selling,
pledging or otherwise disposing of (or granting any option or similar right
with respect to) any shares of Panopticon common stock; (v) liability for
dividends accrued but unpaid; or (vi) condition or circumstance, to
Panopticon's knowledge, that likely would directly or indirectly give rise
to or provide a basis for the assertion of a claim by any person to the
effect that such person is entitled to acquire or receive any shares of
capital stock or other securities of Panopticon, including but not limited
to promises to issue or grant securities of Panopticon or to recommend to
Panopticon's board of directors to issue or grant securities of Panopticon.
(c) Panopticon is not under any obligation to
register under the Securities Act any of its presently outstanding
securities or any securities that may be subsequently issued.
(d) To Panopticon's knowledge (i) each Panopticon
Shareholder has valid title to the shares of Panopticon common stock to be
sold by such shareholder as set forth under Item 4.5(d) of the Panopticon
Disclosure Letter, and the legal right and power, and all authorizations
and approvals required by law, to enter into this Agreement, and to sell,
transfer and deliver the shares to be sold by such shareholder; (ii) no
Panopticon Shareholder has sold, assigned or otherwise transferred to any
third party any of his or her right, title or interest in or to any of the
shares of Panopticon common stock set forth as owned by such shareholder on
Item 4.5(d); and (iii) there exists no pledge, lien, security interest,
claim or encumbrance whatsoever on or relating to any of the shares of
Panopticon common stock set forth as owned by such shareholder on Item
4.5(d). To Panopticon's knowledge, (i) no Panopticon Shareholder has
claimed any interest in any additional shares of capital stock of
Panopticon, or any options, warrants or other securities of Panopticon,
except for the number of shares of Panopticon common stock which such
person is shown to be the owner of on Item 4.5(d), and (ii) no third party
who is not listed on Item 4.5(d) has made, or has, any claim of entitlement
to receive any shares of the capital stock of Panopticon, any warrants or
other rights to acquire any capital stock of Panopticon or any other
securities of Panopticon.
4.6 Board of Directors, Officers and Key Personnel. Item 4.6
of the Panopticon Disclosure Letter accurately sets forth: (a) the name and
title of each of Panopticon's officers; (b) the name and title of supervisory,
developmental or other key personnel of Panopticon; and (c) the name, principal
occupation and address of each member of Panopticon's board of directors.
4.7 Subsidiaries and Guaranties. Panopticon does not have any
equity interest, direct or indirect, in any corporation, partnership, joint
venture or other business entity. Panopticon is not a guarantor of any
obligation of a third party, whether or not such third party is related to or
affiliated with Panopticon.
4.8 Litigation. There is no action, suit, arbitration,
mediation, proceeding, claim or, to Panopticon's knowledge, investigation
pending against Panopticon, nor, to Panopticon's knowledge, are any of the
foregoing threatened against Panopticon before any court, administrative agency
or arbitrator that, if determined adversely to Panopticon, may reasonably be
expected to have a Material Adverse Effect on Panopticon. There is no judgment,
decree, injunction, rule or administrative agency or arbitrator outstanding
against Panopticon. To the knowledge of Panopticon, there is no basis for any
person, firm, corporation or entity to assert a claim against Panopticon, or
Broadbase as successor in interest to Panopticon, based upon: (a) ownership or
rights to ownership of any shares of Panopticon common stock or other
securities, (b) any rights as a Panopticon securities holder, including, without
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limitation, any option, warrant or other right to acquire any Panopticon
securities, any preemptive rights or any rights to notice or to vote, or (c) any
rights under any agreement between Panopticon and any Panopticon securities
holder or former Panopticon securities holder in such holder's capacity as such.
There is no action, suit, proceeding, claim, arbitration or investigation
pending as to which Panopticon has received notice of assertion against
Panopticon, which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay any of the transactions contemplated by this Agreement.
4.9 Panopticon Financial Statements. Panopticon has delivered
to Broadbase, attached hereto as Exhibit E, Panopticon's unaudited balance sheet
as of December 31, 1998 and 1999 and its unaudited balance sheet as of May 31,
2000 (the "BALANCE SHEET DATE"), Panopticon's unaudited income statements and
cash flows for the years ended December 31, 1998 and 1999 and its unaudited
income statement and cash flow for the period from January 1, 2000 through May
31, 2000 (collectively, the "PANOPTICON FINANCIAL STATEMENTS"). Except as
disclosed under Item 4.9 of the Panopticon Disclosure Letter, the Panopticon
Financial Statements: (a) are in accordance with the books and records of
Panopticon, (b) present fairly and accurately the financial condition of
Panopticon at the respective dates specified therein and the results of
operations for the respective periods specified therein in accordance with GAAP
and (c) have been prepared in accordance with GAAP applied on a consistent basis
(except for the absence of any footnotes required by GAAP in the Financial
Statements and subject to customary year-end adjustments). In the opinion of
management of Panopticon, the Financial Statements include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations of Panopticon
for the unaudited interim period. Panopticon has no material debt, liability or
obligation of any nature, whether accrued, absolute, contingent or otherwise,
and whether due or to become due, that is not reflected, reserved against or
disclosed in the Panopticon Financial Statements or under Item 4.9 of the
Panopticon Disclosure Letter, except for those that may have been incurred after
the Balance Sheet Date in the ordinary course of Panopticon's business,
consistent with past practice and that are in an aggregate amount not to exceed
$50,000.
4.10 Taxes.
(a) For the purposes of this Section 4.10, the terms
"TAX" and "TAXES" include all federal, state, local and foreign income,
gains, franchise, excise, property, sales, use, employment, license,
payroll, occupation, recording, value added or transfer taxes, governmental
charges, fees, levies or assessments (whether payable directly or by
withholding), and, with respect to such taxes, any estimated tax, interest
and penalties or additions to tax and interest on such penalties and
additions to tax.
(b) Except as set forth in Item 4.10(b) of the
Panopticon Disclosure Letter, Panopticon has filed all federal, state,
local and foreign tax and material information returns required to be filed
prior to the date hereof, has paid all taxes required to be paid in respect
of all periods prior to the date hereof for which returns have been filed,
has made all necessary estimated tax payments, and has no material
liability for taxes in excess of the amount so paid, except to the extent
adequate reserves have been established in the Panopticon Financial
Statements. True, correct and complete copies of all such tax and
information returns for the past two years have been provided or made
available by Panopticon to Broadbase. Panopticon is not delinquent in the
payment of any tax or in the filing of any tax returns, and no deficiencies
for any tax have been threatened, claimed, proposed or assessed which have
not been settled or paid. No tax return of Panopticon has ever been audited
by the Internal Revenue Service or any state taxing agency or authority.
Panopticon does not have any current or deferred federal income tax
liabilities and will not as a result of the Merger become
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liable for any income tax not adequately reserved against on the
Panopticon Financial Statements. Panopticon has not filed a consent
pursuant to Section 341(f) of the Code.
(c) No benefit payable or which may become payable by Panopticon pursuant
to any Panopticon Employee Plan (as defined in Section 4.17(c) or any
Panopticon Benefit Arrangement (as defined in Section 4.17(e) or as a
result of or arising under this Agreement shall constitute an "excess
parachute payment" (as defined in Section 280G(b)(1) of the Code) which is
subject to the imposition of an excise tax under Section 4999 of the Code
or which would not be deductible by reason of Section 280G of the Code.
4.11 Title to Properties.
(a) Panopticon has good and marketable title to all
of its assets as shown on the balance sheet as of the Balance Sheet Date
included in the Panopticon Financial Statements, free and clear of all
liens, charges or encumbrances (other than for taxes not yet due and
payable). Except as set forth under Item 4.11 of the Panopticon Disclosure
Letter, there are no UCC financing statements of record with any state
naming Panopticon as debtor and Panopticon does not own any property in any
other state. The machinery and equipment included in the assets of
Panopticon is in all material respects in good condition and repair, normal
wear and tear excepted, and all leases of real or personal property to
which Panopticon is a party are fully effective and afford Panopticon
peaceful and undisturbed possession of the subject matter of the lease. To
its knowledge, Panopticon is not in violation of any zoning, building,
safety or environmental ordinance, regulation or requirement or other law
or regulation applicable to the operation of owned or leased properties,
and Panopticon has not received any notice of such violation with which it
has not complied or had waived.
(b) Panopticon owns no real property, nor has it ever
owned any real property. All leases of real or personal property to which
Panopticon is a party are fully effective and afford Panopticon peaceful
and undisturbed possession of the subject matter of the lease. The
Surviving Corporation will obtain a valid ownership or leasehold interest
in all such personal property that Panopticon currently owns or leases and
all real property that Panopticon currently leases, as of the date of this
Agreement, in each case free and clear of all title defects and
encumbrances of any kind, except: (i) mechanics', carriers', workers' and
other similar liens arising in the ordinary course of business, and (ii)
liens for current taxes not yet due and payable.
4.12 Absence of Certain Changes or Events. Since the Balance
Sheet Date, Panopticon has carried on its business in the ordinary course
substantially in accordance with the procedures and practices in effect on the
Balance Sheet Date.
(a) Except as set forth under Item 4.12 of the
Panopticon Disclosure Letter or permitted by the terms of this Agreement,
since the Balance Sheet Date there has not been with respect to Panopticon:
(i) any change, event, violation,
circumstance or effect on the business, prospects, assets or
liabilities (including intangible assets), capitalization, financial
condition or results of operations of Panopticon, which by itself or in
conjunction with all other such changes, whether or not arising in the
ordinary course of business, has had or can reasonably be expected to
have a Material Adverse Effect on Panopticon;
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<PAGE> 16
(ii) any contingent liability incurred by
Panopticon as guarantor or surety with respect to the obligations of
others which exceed in the aggregate $100,000;
(iii) any mortgage, encumbrance or lien
placed on any of the properties of Panopticon;
(iv) any obligation or liability incurred by
Panopticon other than in the ordinary course of business, which
obligations or liabilities do not exceed in the aggregate $100,000
through the date of this Agreement;
(v) any purchase, license, sale or other
disposition, or any agreement or other arrangement for the purchase,
license, sale or other disposition, of any of the property (including
Panopticon IP Rights), assets or goodwill of Panopticon other than in
the ordinary course of business and consistent with past practice;
(vi) any material damage, destruction or
loss of any material property or asset, whether or not covered by
insurance;
(vii) any labor dispute or claim of unfair
labor practices;
(viii) any change in the compensation
payable or to become payable to any of Panopticon's officers, employees
or agents earning compensation at an anticipated annual rate in excess
of $50,000, or any bonus payment or arrangement made to or with any of
such officers, employees, consultants or agents; or any change in the
compensation payable or to become payable to any of Panopticon's other
officers, employees, consultants or agents (other than normal annual
raises for non-officers in the ordinary course of business consistent
with past practice) or any bonus payment or arrangement made to or with
any of such officers, employees or agents other than normal bonuses or
compensation increases granted prior to the date of this Agreement as
disclosed under Item 4.12(a)(viii);
(ix) any material change with respect to the
personnel of Panopticon; and
(x) any loss of one or more material
Panopticon customers or such number of Panopticon customers which
together represent a material amount of business;
(b) Except as set forth under Item 4.12 or permitted
by the terms of this Agreement, since the Balance Sheet Date
Panopticon has not:
(i) formed any subsidiary or acquired any
equity interest or other interest in any other entity;
(ii) amended the Panopticon Articles of
Incorporation, Panopticon Bylaws or any other charter document;
(iii) made any payment or discharged any
material lien or liability of Panopticon, which lien or liability was
not either (A) shown on the balance sheet as of the Balance Sheet Date
included in the Panopticon Financial Statements or (B) incurred in the
ordinary course of business after the Balance Sheet Date;
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(iv) incurred any obligation or liability to
any of its officers, directors, shareholders or affiliates, or any
loans or advances made to any of its officers, directors, shareholders
or affiliates, except normal compensation and expense allowances
payable to officers or directors;
(v) sold, issued, granted or authorized the
issuance or grant of: (A) any shares of its capital stock of any class
or other security (other than (1) options issued to employees in the
ordinary course of business consistent with past practice (all of which
had been granted as of the date of this Agreement), or (2) pursuant to
exercise of outstanding stock options); (B) any option, call, warrant,
obligation, subscription, or other right to acquire any capital stock
or any other security, except for stock options described in Section
4.5; or (C) any instrument convertible into or exchangeable for any
capital stock or other security; or accelerated the vesting of any
outstanding option or other security, except for acceleration
provisions that are contained in existing stock option grants (each of
which is listed under Item 4.12);
(vi) declared, set aside or paid any
dividend on, or made any other distribution in respect of, the capital
stock of Panopticon, or made any changes in any rights, preferences,
privileges or restrictions of any outstanding capital stock of
Panopticon;
(vii) effected any split, stock dividend,
combination or recapitalization of the capital stock of Panopticon or
any direct or indirect redemption, purchase or other acquisition by
Panopticon of the capital stock of Panopticon;
(viii) effected or been a party to any
transaction relating to a merger, consolidation, sale of all or
substantially all of its assets, or similar transaction; or accepted or
otherwise entered into any Acquisition Proposal;
(ix) executed, amended, relinquished,
terminated or failed to renew any material Contract, lease, transaction
or legally binding commitment other than in the ordinary course of
Panopticon's business (nor, to Panopticon's knowledge, has there been
any written or oral indication or assertion by the other party thereto
of its desire to so amend, relinquish, terminate or not renew any such
Contract, lease transaction or legally binding commitment);
(x) deferred the payment of any accounts
payable outside the ordinary course of business or in an amount which
is material or any discount, accommodation or other concession made
outside the ordinary course in order to accelerate or induce the
collection of any receivable;
(xi) borrowed any money other than in the
ordinary course of its business, and not in excess of $100,000 in the
aggregate; or
(xii) entered into any other transaction or
taken any other action outside the ordinary course of Panopticon's
business (other than as disclosed in Item 4.12).
4.13 Agreements and Commitments. Except as set forth under
Item 4.13 of the Panopticon Disclosure Letter and delivered or made available by
Panopticon to Broadbase herewith, or as listed under Item 4.14 or Item 4.17 as
required by Section 4.14 or Section 4.17, as the case may be, Panopticon is not
a party or subject to any oral or written executory agreement, obligation or
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commitment that is material to Panopticon, its financial condition or business
or which is described below and is not terminable within 60 days without cost or
penalty to Panopticon, including but not limited to the following:
(a) Any Contract providing for payments by
or to Panopticon in an amount with respect to any single transaction of
(i) $100,000 or more in the ordinary course of business or (ii) $50,000
or more not in the ordinary course of business;
(b) Any license agreement as licensor or licensee,
including without limitation any Contract to which Panopticon has granted
or may grant in the future a source code license or option or other right
to use or acquire source code (except: (i) as licensee of standard
non-exclusive consumer software licenses in the ordinary course of
business, and (ii) for standard non-exclusive software licenses granted to
end-user customers in the ordinary course of business, the form of which
has been provided to Broadbase);
(c) Any agreement by Panopticon to encumber, transfer
or sell any material rights in or with respect to any Panopticon IP Rights
(as defined in Section 4.14) except in the ordinary course of business
consistent with past practice;
(d) Any Contract currently in force for hosting, data
center, transaction processing or other services related to the Panopticon
website and provision of hosted versions of Panopticon products and
services;
(e) Any agreement for the sale or lease of real or
personal property involving more than $50,000 per year;
(f) Any dealer, distributor, sales representative,
original equipment manufacturer, value added remarketer or other agreement
for the distribution of Panopticon's products;
(g) Any franchise agreement or financing statement;
(h) Any stock redemption or purchase agreement;
(i) Any joint venture Contract or arrangement or any
other agreement that involves a sharing of profits with other persons or
the payment of royalties to any other person;
(j) Any instrument evidencing indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase
money obligation, conditional sale, guarantee or otherwise, except for
trade indebtedness or any advance to any employee of Panopticon incurred or
made in the ordinary course of business, and except as disclosed in the
Panopticon Financial Statements;
(k) Any Contract containing covenants purporting to
limit Panopticon's freedom to compete in any line of business in any
geographic area or to sell products or services to a specific entity;
(l) Any Contract currently in force to provide source
code to any third party for any product or technology;
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(m) Any Contract for the employment of any officer,
employee or consultant of Panopticon or any other type of Contract or
understanding with any officer, employee or consultant of Panopticon that
is not immediately terminable by Panopticon without cost or liability;
(n) Any contract for consulting or similar services
with a term of more than sixty (60) days and which is not terminable
without penalty with notice of sixty (60) days or less; or
(o) any other material Contract entered into outside
the ordinary course of business.
All agreements, obligations and commitments listed
in Item 4.13, Item 4.14, or Item 4.17, as required by Section 4.13, Section
4.14, or Section 4.17, as the case may be, are valid and in full force and
effect, and except as expressly noted, a true and complete copy of each has been
delivered or made available to Broadbase. Except as noted on Item 4.13, neither
Panopticon nor, to the knowledge of Panopticon, any other party is in material
breach of or default under any material term of any such agreement, obligation
or commitment. Panopticon has no liability for renegotiation of government
Contracts or sub-Contracts which are material to Panopticon, its financial
condition, business or prospects.
4.14 Intellectual Property.
(a) Definition. As used herein, the term
"INTELLECTUAL PROPERTY RIGHTS" shall mean all worldwide industrial and
intellectual property rights, including, without limitation, patents,
patent applications, patent rights, trademarks, trademark applications,
trade names, service marks, service mark applications, URLs, copyright,
copyright applications, franchises, licenses, inventories, know-how, trade
secrets, customer lists, proprietary processes and formulae, all source and
object code, algorithms, architecture, structure, display screens, layouts,
inventions, development tools and all documentation and media constituting,
describing or relating to the above, including, without limitation,
manuals, memoranda and records.
(b) Ownership of Intellectual Property. Panopticon
owns all right, title and interest in, or has the right to use, all
Intellectual Property Rights used in or reasonably necessary to the conduct
of its business as presently conducted and the business of the licensing
and use of Panopticon products and the sale of commercial services using
such intellectual property and proprietary rights ("PANOPTICON IP RIGHTS").
Panopticon has the unrestricted, worldwide right to reproduce, manufacture,
sell, license and distribute all of its products and services (such
products and services being set forth under Item 4.14(b) of the Panopticon
Disclosure Letter) and the right to use all of its customer and supplier
lists. Except as set forth under Item 4.14(b), Panopticon has not granted
any reseller, distributor, sales representative, original equipment
manufacturer, value added reseller or other third party any right to
reproduce, manufacture, sell, license or distribute any of its products or
services in any market segment or geographic location. Set forth under Item
4.14(b) is a true and complete list of all copyright, mask work and
trademark registrations and applications and all patents and patent
applications for Panopticon IP Rights owned by Panopticon. Panopticon is
not aware of any loss, cancellation, termination or expiration of any such
registration or patent except as set forth on Item 4.14(b).
(c) No Violation of Rights of Others. The business of
Panopticon as conducted as of the date hereof does not, and the business of
the licensing and use of Panopticon products and the sale of commercial
services using such intellectual property and proprietary rights
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after the Effective Time will not cause Panopticon to, infringe or violate:
(i) with respect to any contribution or participation by any employee or
consultant of Panopticon in developing any Panopticon product, Panopticon
software or Panopticon IP Right, any of the Intellectual Property Rights of
any other person; (ii) any of the Intellectual Property Rights (other than
patent rights) of any other person; or (iii) to the knowledge of
Panopticon, any patent rights of any other person; and Panopticon has not
received any written or oral claim or notice of infringement or potential
infringement of the Intellectual Property Rights of any other person which
could be reasonably expected to have a Material Adverse Effect on
Panopticon. To the knowledge of Panopticon, Panopticon is not using any
confidential information or trade secrets of any past or present employees.
(d) Protection of Rights. Panopticon has taken
reasonable and practicable steps designed to safeguard and maintain the
secrecy and confidentiality of, and its proprietary rights in, all
Panopticon IP Rights. To the knowledge of Panopticon, there is no material
unauthorized use, infringement or misappropriation of any Panopticon IP
Rights by any third party, including, to the knowledge of Panopticon, any
Panopticon employee. All Panopticon officers, employees and consultants
have executed and delivered to Panopticon an agreement regarding the
protection of proprietary information and the assignment to Panopticon of
all Intellectual Property Rights arising from the services performed for
Panopticon by such persons, and Panopticon made available or has delivered
to Broadbase copies of all such agreements. Panopticon has taken reasonable
measures to protect all Panopticon IP Rights, and, except as set forth on
Item 4.14(d), to the knowledge of Panopticon, Panopticon is not aware of
any infringement of any Panopticon IP Rights by any third party.
(e) Conformity of Products and Services. All software
developed by Panopticon and licensed by Panopticon to customers and all
other products manufactured, sold, licensed, leased or delivered by
Panopticon to customers and all services provided by Panopticon to
customers on or prior to the Closing Date conform in all material respects
(to the extent required in contracts with such customers) to applicable
contractual commitments, express and implied warranties, product
specifications and product documentation and to any representations
provided to customers and Panopticon has no material liability (and, to
Panopticon's knowledge, there is no legitimate basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand against Panopticon giving rise to any material liability
relating to the foregoing contracts) for replacement or repair thereof or
other damages in connection therewith in excess of any reserves therefor
reflected on the Balance Sheet.
4.15 Compliance with Laws. Panopticon has complied, or prior
to the Closing Date will have complied, and is or will be at the Closing Date in
compliance, in all respects material to Panopticon, with all applicable laws,
ordinances, regulations and rules, and all orders, writs, injunctions, awards,
judgments and decrees, applicable to Panopticon or to the assets, properties and
business of Panopticon, including, without limitation:
(a) all applicable federal and state securities laws
and regulations;
(b) all applicable federal, state and local laws,
ordinances and regulations, and all orders, writs, injunctions, awards,
judgments and decrees, pertaining to (i) the sale, licensing, leasing,
ownership or management of Panopticon's owned, leased or licensed real or
personal property, products or technical data, (ii) employment or
employment practices, terms and conditions of employment, or wages and
hours or (iii) safety, health, fire prevention, environmental protection
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(including toxic waste disposal and related matters described in Section
4.20), building standards, zoning or other similar matters;
(c) the Export Administration Act and regulations
promulgated thereunder or other laws, regulations, rules, orders, writs,
injunctions, judgments or decrees applicable to the export or re-export of
controlled commodities or technical data;
(d) the Immigration Reform and Control Act; and
(e) all governmental and nongovernmental regulations
related to the operation and use of the Internet.
Panopticon has received all material permits and approvals
from, and has made all material filings with, third parties, including
government agencies and authorities, that are necessary to the conduct of its
business as presently conducted.
4.16 Certain Transactions and Agreements. To Panopticon's
knowledge, no person who is an officer or director of Panopticon, or a member of
any officer's or director's immediate family:
(a) has any direct or indirect ownership interest in
or any employment or consulting agreement with any firm or corporation that
competes with Panopticon or Broadbase (except with respect to any interest
in less than 1% of the outstanding voting shares of any corporation whose
stock is publicly traded);
(b) is directly or indirectly interested in any
Contract or informal arrangement with Panopticon, including, but not
limited to, any loan arrangements, except for compensation for services as
an officer (listed under Item 4.6 of the Panopticon Disclosure Letter),
director or employee of Panopticon and except for the normal rights of a
stockholder or optionholder.
(c) has any interest in any (i) Panopticon IP Rights
or (ii) property (other than Panopticon IP Rights) used in the business of
Panopticon whether such property is real or personal, tangible or
intangible.
To Panopticon's knowledge, no Panopticon officer or director, or any "affiliate"
or "associate" (as those terms are defined in Rule 405 promulgated under the
Securities Act) of any such person has had, either directly or indirectly, a
material interest in: (i) any entity which purchases from or sells, licenses or
furnishes to Panopticon any goods, property, technology or intellectual or other
property rights or services, or (ii) any Contract to which Panopticon is a party
or by which it may be bound or affected other than with respect to arms-length
transactions.
4.17 Employees.
(a) General Compliance. Panopticon is in compliance
in all material respects with all applicable laws and Contracts relating to
employment, employment practices, wages, hours, and terms and conditions of
employment, including, but not limited to, employee compensation matters,
and has correctly classified employees as exempt employees and non-exempt
employees under the Fair Labor Standards Act. Except as set forth under
Item 4.17(a) of the Panopticon Disclosure Letter, Panopticon has no
employment or consulting Contracts currently in effect that are not
terminable at will (other than agreements with the sole purpose of
providing for the confidentiality of proprietary information or assignment
of inventions). All independent
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contractors have been properly classified as independent contractors for
the purposes of federal and applicable state tax laws, laws applicable to
employee benefits and other applicable laws. All Panopticon employees are
legally permitted to be employed by Panopticon in the United States of
America. Panopticon will have no liability to any employee or to any
organization or any other entity as a result of the termination of any
employee leasing arrangement.
(b) Good Labor Relations. Panopticon: (i) to
Panopticon's knowledge has never been and is not now subject to a union
organizing effort; (ii) is not subject to any collective bargaining
agreement with respect to any of its employees; (iii) is not subject to any
other Contract with any trade or labor union, employees' association or
similar organization; and (iv) to its knowledge has no current labor
disputes. Panopticon has good labor relations, and has no knowledge of any
facts indicating that the consummation of the Merger or any of the other
transactions contemplated hereby will have a Material Adverse Effect on
such labor relations. As of the date of this Agreement, Panopticon has no
knowledge that any key personnel or other employees intends to leave its
employment. There are no controversies pending or, to Panopticon's
knowledge, threatened, between Panopticon and any of its employees that
would be reasonably likely to result in Panopticon incurring any material
liability.
(c) Employee Plans. Item 4.17(c) identifies: (i) each
"employee benefit plan", as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"); and (ii) all
other written or formal plans or Contracts involving direct or indirect
compensation or benefits (including any employment Contracts entered into
between Panopticon and any employee of Panopticon, but excluding workers'
compensation, unemployment compensation and other government-mandated
programs) currently or previously maintained, contributed to or entered
into by Panopticon under which Panopticon or any ERISA Affiliate (as
defined below) has any present or future Liability (collectively, the
"PANOPTICON EMPLOYEE PLANS"). For purposes of this Section 4.17, "ERISA
AFFILIATE" shall mean any entity which is a member of: (i) a "controlled
group of corporations", as defined in Section 414(b) of the Code; (ii) a
group of entities under "common control", as defined in Section 414(c) of
the Code; or (iii) an "affiliated service group", as defined in Section
414(m) of the Code, or treasury regulations promulgated under Section
414(o) of the Code, any of which includes Panopticon. Copies of all
Panopticon Employee Plans (and, if applicable, related trust agreements)
and all related documents, amendments and written interpretations
(including summary plan descriptions) thereto have been delivered to
Broadbase or its counsel, together with the two most recent annual reports
(Form 5500, including, if applicable, Schedule B thereto) prepared in
connection with any such Panopticon Employee Plan. No "prohibited
transaction," as defined in Section 406 of ERISA or Section 4975 of the
Code, has occurred with respect to any Panopticon Employee Plan which is
covered by Title I of ERISA which would result in a material liability to
Panopticon, excluding transactions effected pursuant to a statutory or
administrative exemption. Nothing done or omitted to be done and no
transaction or holding of any asset under or in connection with any
Panopticon Employee Plan has or will make Panopticon or any Panopticon
officer or director subject to any material liability under Title I of
ERISA or liability for any material tax (as defined in Section 4.14) or
penalty pursuant to Sections 4972, 4975, 4976 or 4979 of the Code or
Section 502 of ERISA. Except as set forth in Item 4.17(c) of the Panopticon
Disclosure Letter, no Panopticon Employee Plans will be subject to any
surrender fees or service fees upon termination other than the normal and
reasonable administrative fees associated with the termination of benefit
plans. All contributions due from Panopticon with respect to any of the
Panopticon Employee Plans have been made as required under ERISA or have
been accrued on the Panopticon Financial Statements. Panopticon has
performed in all material respects all obligations required to be performed
by it under each Panopticon Employee Plan, and each
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Panopticon Employee Plan has been maintained substantially in compliance
with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including, without limitation,
ERISA and the Code, which are applicable to such Panopticon Employee Plans.
(d) Pension Plans. All Panopticon Employee Plans
which individually or collectively would constitute an "employee pension
benefit plan", as defined in Section 3(2) of ERISA (collectively, the
"PANOPTICON PENSION PLANS"), are identified as such under Item 4.17(d). Any
Panopticon Pension Plan which is intended to be qualified under Section
401(a) of the Code (a "PANOPTICON 401(a) PLAN") is so qualified and has
been so qualified during the period from its adoption to date, and the
trust forming a part is exempt from tax pursuant to Section 501(a) of the
Code. No Panopticon Pension Plan constitutes, or has since the enactment of
ERISA constituted, a "multiemployer plan," as defined in Section 3(37) of
ERISA. No Panopticon Pension Plans are subject to Title IV of ERISA.
Panopticon has delivered to Broadbase or its counsel a complete and correct
copy of the most recent Internal Revenue Service determination letter with
respect to each Panopticon 401(a) Plan, if any exists.
(e) Benefit Arrangements. Item 4.17(e) lists each
employment, severance (including all post-employment Liabilities) or other
similar Contract or policy and each Contract providing for insurance
coverage (including any self-insured arrangements), workers' benefits,
vacation benefits, severance benefits, disability benefits, death benefits,
hospitalization benefits, retirement benefits, deferred compensation,
profit-sharing, bonuses, stock options, stock purchase, phantom stock,
stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits for employees,
consultants or directors which: (i) is not an Panopticon Employee Plan;
(ii) is entered into, maintained or contributed to by Panopticon; and (iii)
covers any employee or former employee of Panopticon. Such Contracts and
policies as are described in this Section 4.17(e) are herein referred to
collectively as the "PANOPTICON BENEFIT ARRANGEMENTS." Each Panopticon
Benefit Arrangement has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations which are applicable to such Panopticon Benefit
Arrangement. Panopticon has delivered to Broadbase or its counsel a
complete and correct copy or description of each Panopticon Benefit
Arrangement. All individuals who, pursuant to the terms of any Panopticon
Benefit Arrangement, are entitled to participate in any such Panopticon
Benefit Arrangement, are currently participating in such Panopticon Benefit
Arrangement or have been offered an opportunity to do so and have declined.
(f) Since December 31, 1999, there has been no
amendment to, written interpretation or announcement (whether or not
written) by Panopticon relating to, or change in employee participation or
coverage under, any Panopticon Employee Plan or Panopticon Benefit
Arrangement that would increase materially the expense of maintaining such
Panopticon Employee Plan or Panopticon Benefit Arrangement in the future.
(g) COBRA Compliance. Panopticon has complied in all
material respects prior to the date hereof, with the continuation coverage
requirements of Section 4980B of the Code and the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"), Sections 601
through 608 of ERISA, the American Civil Disabilities Act of 1990, as
amended, and the Family Medical Leave Act of 1993, as amended, and the
regulations thereunder, and no material tax payable on account of Section
4980B of the Code has been incurred with respect to any current or former
employees (or their beneficiaries) of Panopticon.
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<PAGE> 24
(h) No Violation of Contracts. To the knowledge of
Panopticon, no Panopticon employee or consultant is in violation of any
term of any employment Contract, patent disclosure agreement,
non-competition agreement, or any other Contract, or any restrictive
covenant relating to the right of any such employee to be employed by
Panopticon, or to use Intellectual Property Rights of others. To
Panopticon's knowledge, the mere fact of employment of any Panopticon
employee does not subject Panopticon to any liability.
(i) Effect of Merger.
(i) Panopticon is not a party to any
Contract or plan with any key personnel of Panopticon: (A) the benefits
of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving Panopticon in the nature
of any of the transactions contemplated by this Agreement; (B)
providing any term of employment or compensation guarantee; or (C)
providing severance benefits or other benefits after the termination of
employment of such employee regardless of the reason for such
termination of employment.
(ii) Panopticon is not a party to any
Contract or plan, including, without limitation, any stock option plan,
stock appreciation rights plan or stock purchase plan, any of the
benefits of which will be materially increased, or the vesting of
benefits of which will be materially accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of
any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement, except as set forth
under Item 4.17(j).
(j) List of Current Panopticon Employees. A list of
all current Panopticon employees and consultants and the current
compensation of each is set forth under Item 4.18(k).
4.18 No Brokers. Except as set forth under Item 4.18 of the
Panopticon Disclosure Letter, Panopticon is not obligated for the payment of
fees or expenses of any investment banker, broker or finder in connection with
the origin, negotiation or execution of this Agreement or in connection with any
transaction provided for herein or therein.
4.19 Insurance. Panopticon maintains, and at all times since
its inception has maintained, fire and casualty, workers compensation, general
liability, business interruption and product liability insurance (which policies
are listed under Item 4.19 of the Panopticon Disclosure Letter) which it
believes to be reasonably prudent for similarly sized and similarly situated
businesses. Item 4.19 sets forth all material claims made under insurance
policies since December 31, 1997 and the premiums that apply with respect to
such insurance policies as of the date of this Agreement. Panopticon has not
changed insurance carriers since its inception.
4.20 Environmental Matters.
(a) For the purposes of this Agreement, the terms
"DISPOSAL," "RELEASE," and "THREATENED RELEASE" shall have the definitions
assigned thereto by the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA"). For the purposes of this Agreement, "HAZARDOUS MATERIALS" shall
mean any hazardous or toxic substance, material or waste which is or
becomes prior to the Closing regulated under, or defined as a "hazardous
substance," "pollutant," "contaminant," "toxic chemical," "hazardous
material," "toxic substance" or "hazardous chemical" under: (i) CERCLA;
(ii) the
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Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Section 11001
et seq.; (iii) the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq.; (iv) the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq.; (v) the Occupational Safety and Health Act of 1970,
29 U.S.C. Section 651 et seq.; (vi) regulations promulgated under any of
the above statutes; or (vii) any other applicable federal, state or local
statute, ordinance, rule or regulation that has a scope or purpose similar
to those identified above.
(b) To Panopticon's knowledge, none of Panopticon's
properties or facilities is in violation of any federal, state or local
law, ordinance, regulation or order relating to industrial hygiene or to
the environmental conditions on, under or about such properties or
facilities, including, but not limited to, soil and ground water condition.
(c) To Panopticon's knowledge, during the time that
Panopticon has owned or leased properties or owned or operated any
facilities:
(i) neither Panopticon nor any third party
has used, generated, manufactured or stored on, under or about such
properties or facilities or transported to or from such properties or
facilities any Hazardous Materials;
(ii) there have been no disposals, releases
or threatened releases of Hazardous Materials (as defined below) on,
from or under such properties or facilities;
(iii) no Hazardous Materials have been
transported from such premises to any site or facility now listed or
proposed for listing on the National Priorities List, at 40 C.F.R. Part
300, or any list with a similar scope or purpose published by any state
authority; and
(iv) there has been no litigation,
proceeding or administrative action brought, threatened in writing
against Panopticon, or any settlement reached by Panopticon with, any
party or parties alleging the presence, disposal, release or threatened
release of any Hazardous Materials on, from or under any of such
premises.
(d) Panopticon has no knowledge of any presence,
disposals, releases or threatened releases of Hazardous Materials on, from
or under any of such properties or facilities that may have occurred prior
to Panopticon having taken possession of any of such properties or
facilities.
4.21 Year 2000 Compliance. Panopticon conducted a reasonable
review of all of the technology, systems and infrastructure used to host and
deliver its services and all material operating codes, programs, utilities and
other software, as well as all hardware and systems, utilized by it
(collectively, "SYSTEMS") to determine whether such Systems are designed to
record, store, process and present millennial dates in the same manner, and with
the same functionality, as provided on or before December 31, 1999, and on or
before June 30, 2000, and are designed to not lose functionality or degrade in
performance as a consequence of such software operating on and after December
31, 1999, and on and after June 30, 2000 (such design and performance being
referred to as "Y-2000 COMPLIANT"). All of Panopticon's systems are Y-2000
Compliant except where the failure to be Y-2000 Compliant does and will not have
a Material Adverse Effect on Panopticon or materially impair the performance of
any of Panopticon's services. Except as set forth under Item 4.21 of the
Panopticon Disclosure Letter, to the knowledge of Panopticon, all suppliers of
products or services to Panopticon are Y-2000 Compliant.
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4.22 Warranties. Except as set forth under Item 4.22 of the
Panopticon Disclosure Letter, Panopticon has not provided to its customers (i)
any express warranties, including any warranties related to Y-2000 Compliant
issues, regarding the services it provides to such customers or (ii) rights to
obtain refunds with respect to any such services.
4.23 Information Supplied. None of the information supplied or
to be supplied by Panopticon for inclusion in the Notice Materials and the
Information Statement (both as defined in Section 6.5), at the date such
information is supplied and at the time of the meeting, or the date of the
written consent, of the Panopticon Shareholders to approve the Merger, contains
or will contain any untrue statement of a material fact or omits or will omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
4.24 Voting Arrangements. Except for the Voting Agreements,
there are no outstanding stockholder agreements, voting trusts, proxies or other
Contracts to which Panopticon is a party or, to Panopticon's knowledge, to which
any other person or entity is a party, relating to the voting of any shares of
Panopticon's capital stock.
4.25 Ownership of Shares of Broadbase Capital Stock. Except as
set forth under Item 4.25 of the Panopticon Disclosure Letter, as of the date
hereof, neither Panopticon nor, to Panopticon's knowledge, any of Panopticon's
affiliates or associates (as such terms are defined under the Exchange Act of
1934): (a) beneficially owns, directly or indirectly; or (b) is party to any
Contract for the purpose of acquiring, holding, voting or disposing of, in each
case, shares of Broadbase capital stock (except for shares of Broadbase capital
stock in the aggregate representing less than 1% of the outstanding shares of
Broadbase capital stock).
4.26 Accuracy of Disclosure. This Agreement, its exhibits and
schedules, and any of the certificates or documents to be delivered by
Panopticon to Broadbase under this Agreement, taken together, do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained herein and therein, in light of the
circumstances under which such statements were made, not misleading.
5. REPRESENTATIONS AND WARRANTIES OF BROADBASE AND MERGER SUB
Except as set forth in the Broadbase Disclosure Letter, the
parts of which are numbered to correspond to the section numbers of this
Agreement, each of Broadbase and Merger Sub, where applicable, hereby represents
and warrants to Panopticon as follows:
5.1 Organization and Good Standing. Each of Broadbase and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power and
authority to own, operate and lease its properties and to carry on its business
as now conducted and as proposed to be conducted.
5.2 Power, Authorization and Validity.
(a) Each of Broadbase and Merger Sub has the
corporate power and authority to enter into and perform its obligations
under this Agreement, and all agreements to which Broadbase or Merger Sub
is or will be a party that are required to be executed pursuant to this
Agreement (the "BROADBASE ANCILLARY AGREEMENTS") (either or both of the
Panopticon Ancillary
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Agreements and the Broadbase Ancillary Agreements, as the context requires
the "ANCILLARY AGREEMENTS"). The execution, delivery and performance of
this Agreement and the Broadbase Ancillary Agreements have been duly and
validly approved and authorized by Broadbase's Board of Directors and
Merger Sub's Board of Directors, as applicable.
(b) No filing, authorization or approval,
governmental or otherwise, is necessary to enable Broadbase or Merger Sub
to enter into, and to perform its obligations under, this Agreement and the
Broadbase Ancillary Agreements, except for (i) the filing of the
Certificate of Merger with the Delaware Secretary of State and the filing
of appropriate documents with the relevant authorities of other states in
which Broadbase is qualified to do business, if any, (ii) such filings as
may be required to comply with federal and state securities laws, including
the Permit Application (as defined in Section 6.5), and (iii) such filings
as may be required by the HSR Act.
(c) This Agreement and the Broadbase Ancillary
Agreements are, or when executed by Broadbase and Merger Sub (as
applicable) and the other parties thereto will be, valid and binding
obligations of Broadbase and Merger Sub, enforceable against Broadbase and
Merger Sub in accordance with their respective terms, except as to the
effect, if any, of (i) applicable bankruptcy and other similar laws
affecting the rights of creditors generally, (ii) rules of law governing
specific performance, injunctive relief and other equitable remedies and
(iii) the enforceability of provisions requiring indemnification; provided,
however, that the Certificate of Merger, the Agreement of Merger and the
Broadbase Ancillary Agreements will not be effective until the earlier of
the Effective Time or the date provided for therein.
5.3 No Violation of Charter Documents, Contracts or Laws.
Neither the execution nor delivery of this Agreement or any Broadbase Ancillary
Agreement, nor the consummation of the transactions contemplated hereby or
thereby, will conflict with, or (with or without notice or lapse of time, or
both) result in a termination, breach, impairment or violation of (a) any
provision of the Certificate of Incorporation or Bylaws of Broadbase or Merger
Sub, as currently in effect, (b) in any material respect, any material Broadbase
Contract, or (c) any federal, state, local or foreign judgment, writ, decree,
order, statute or regulation applicable to Broadbase or its assets or
properties.
5.4 Litigation. There is no action, suit, arbitration,
mediation, proceeding, claim or, to Broadbase's knowledge, investigation
pending, nor, to Broadbase's knowledge, are any of the foregoing threatened
against Broadbase or Merger Sub before any court, administrative agency or
arbitrator that, if determined adversely to Broadbase or Merger Sub, may
reasonably be expected to have a Material Adverse Effect on Broadbase or Merger
Sub. There is no action, suit, proceeding, claim, arbitration or investigation
pending as to which Broadbase or Merger Sub has received notice of assertion
against Broadbase or Merger Sub, which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement.
5.5 Disclosure. Broadbase has furnished Panopticon with its
annual report on Form 10-K filed with the Commission on March 13, 2000 (the
"10-K"), its definitive proxy statement filed with the Commission on April 27,
2000, and all other reports or documents required to be filed by Broadbase
pursuant to Section 13(a) or 15(d) of the Exchange Act since the filing of the
10-K (collectively, the "BROADBASE DISCLOSURE PACKAGE"). The Broadbase
Disclosure Package, this Agreement, the exhibits and schedules hereto, and any
certificates or documents to be delivered to Panopticon pursuant to this
Agreement, when taken together, do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which such statements were made, not misleading.
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5.6 Broadbase Financial Statements. Broadbase's audited
balance sheet as of December 31, 1999 and its audited income statements and
statements of cash flows for the years ended December 31, 1997, 1998 and 1999
which are contained in the Broadbase Disclosure Package (a) are in accordance
with the books and records of Broadbase, (b) fairly and accurately represent in
all material respects the financial condition of Broadbase at the respective
dates specified therein and the results of operations for the respective periods
specified therein and (c) have been prepared in accordance with GAAP applied on
a consistent basis.
5.7 Capitalization. As of June 30, 2000, the authorized
capital stock of Broadbase consisted solely of 90,000,000 shares of Broadbase
common stock and 5,000,000 shares of Broadbase preferred stock. As of June 30,
2000, there were issued and outstanding 47,394,896 shares of Broadbase common
stock and no shares of Broadbase preferred stock.
5.8 Information Supplied. None of the information supplied or
to be supplied by Broadbase for inclusion in the Notice Materials and the
Information Statement (both as defined in Section 6.5), at the date such
information is supplied and at the time of the meeting, or the date of the
written consent, of the Panopticon Shareholders to approve the Merger, contains
or will contain any untrue statement of a material fact or omits or will omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
5.9 Valid Issuance. The Broadbase common stock to be issued in
the Merger will, when issued in accordance with the provisions of this
Agreement, the Agreement of Merger and the Certificate of Merger, be validly
issued, fully paid and nonassessable.
6. PANOPTICON PRE-CLOSING COVENANTS
During the period from the date of this Agreement until the
earlier to occur (a) the Effective Time and (b) the termination of this
Agreement in accordance with the provisions of Article 11 hereof, Panopticon
covenants to and agrees with Broadbase as follows:
6.1 Access to Information. Until the Closing Date and subject
to the terms and conditions hereof relating to the confidentiality and use of
confidential and proprietary information, Panopticon will provide Broadbase and
its agents with reasonable access, during regular business hours, to the files,
books, records and offices of Panopticon, including, without limitation, any and
all information relating to Panopticon taxes, commitments, Contracts, leases,
licenses, real, personal and intangible property, and financial condition.
Panopticon will cause its accountants to cooperate with Broadbase and its agents
in making available all financial information reasonably requested, including,
without limitation, the right to examine all working papers pertaining to all
financial statements prepared or audited by such accountants.
6.2 Advice of Changes. Panopticon will promptly advise
Broadbase in writing of: (i) the discovery by Panopticon of any event,
condition, fact or circumstance occurring on or prior to the date of this
Agreement that would render any representation or warranty by Panopticon
contained in this Agreement untrue or inaccurate in any material respect; (ii)
any event, condition, fact or circumstance occurring subsequent to the date of
this Agreement that would render any representation or warranty by Panopticon
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect; (iii) any breach of
any covenant or obligation of Panopticon
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pursuant to this Agreement or any Ancillary Agreement; (iv) any event,
condition, fact or circumstance that may make the timely satisfaction of any of
the conditions set forth in Article 10 impossible or unlikely; and (v) any
Material Adverse Effect on Panopticon.
6.3 Maintenance of Business. The parties hereto understand and
acknowledge that it is their intent to work closely together during the period
from the date hereof until the Closing Date. Panopticon will use reasonable best
efforts to carry on its business, and to maintain its relations and goodwill
with all customers, suppliers, landlords, creditors, licensors, licensees,
employees and other persons having business relationships with Panopticon, in
substantially the same manner as it has prior to the date of this Agreement. If
Panopticon becomes aware of a material deterioration in the relationship with
any customer, supplier or key employee, it will promptly bring such information
to the attention of Broadbase in writing and, if requested by Broadbase, will
exert reasonable best efforts to restore the relationship. Panopticon will use
commercially reasonable efforts to maintain its equipment and other assets in
good working condition and repair according to the standards it has maintained
to the date of this Agreement, subject only to ordinary wear and tear; and to
keep in full force all insurance policies identified under Item 4.19 of the
Panopticon Disclosure Letter and obtain any additional insurance required
consistent with past practices for its business and property.
6.4 Conduct of Business. Except as provided otherwise herein
or as approved or recommended by Broadbase, Panopticon will not, without the
prior written consent of an executive officer of Broadbase, which consent shall
not be unreasonably withheld or delayed:
(a) encumber or permit to be encumbered any of its
properties except in the ordinary course of its business consistent with
past practice and to an extent which is not material;
(b) incur any obligation, liability or indebtedness
other than in the ordinary course of business, which obligations,
liabilities or indebtedness exceed $250,000 in the aggregate;
(c) enter into any transactions or make any
commitments involving an expense of Panopticon or capital expenditure by
Panopticon, which in the aggregate are in excess of $250,000, or enter into
any Contract that has a term extending sixty (60) days or more beyond the
Effective Time which is not terminable without penalty with notice of sixty
(60) days or less;
(d) dispose of any of its assets except in the
ordinary course of business consistent with past practice;
(e) except as required under agreements existing as
of the date of this Agreement as set forth under Item 6.4(e) of the
Panopticon Disclosure Letter, pay any bonus, royalty, increased salary or
other compensation to any officer, employee, consultant or agent (except
pursuant to existing arrangements heretofore disclosed in writing to
Broadbase) or enter into any new employment or consulting agreement with
any such person, or enter into any new agreement or plan of the type
described in Section 4.17(c);
(f) form any subsidiary or acquire any equity
interest or other interest in any other entity;
(g) amend its Articles of Incorporation, Bylaws or
any other charter document;
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(h) incur any obligation or liability to any of its
officers, directors, shareholders or affiliates, or make any loans or
advances to any of its officers, directors, shareholders or affiliates,
except normal compensation and expense allowances payable to officers or
directors;
(i) borrow any money other than in the ordinary
course of business
(j) lend any amount to any person or entity, other
than advances for travel and expenses which are incurred in the ordinary
course of business consistent with past practice, not material in amount,
which travel and expenses shall be documented by receipts for the claimed
amounts;
(k) guarantee or act as a surety for any obligation
except for the endorsement of checks and other negotiable instruments in
the ordinary course of business, consistent with past practice;
(l) enter into any material lease or Contract for the
purchase or sale of any property, real or personal, tangible or intangible,
except in the ordinary course of business consistent with past practice or
enter into any agreement of the types described in Section 4.13;
(m) amend or terminate any Contract or license to
which it is a party, or relinquish or fail to renew any material Contract
or license to which it is a party;
(n) waive or release any material right or claim
except in the ordinary course of business, consistent with past practice;
(o) license any of Panopticon's technology or any of
the Panopticon IP Rights, except for non-exclusive licenses in the ordinary
course of business consistent with past practice;
(p) issue or sell any shares of its capital stock of
any class or any other of its securities, or issue, grant or create any
warrants, obligations, subscriptions, options, convertible securities,
stock appreciation rights or other commitments to issue shares of capital
stock other than (i) the issuance of Panopticon common stock pursuant to
the exercise of Panopticon Options, (ii) the ratification by the board of
directors of Panopticon of issuances of securities previously made by
Panopticon which are reflected in Items 4.5(a) and (b) of the Panopticon
Disclosure Letter, and (iii) the granting of the options to purchase shares
of Panopticon common stock set forth in Item 6.4(p) of the Panopticon
Disclosure Letter; or accelerate the vesting of any outstanding option or
other security;
(q) declare, set aside or pay any cash or stock
dividend or other distribution in respect of capital stock, or redeem or
otherwise acquire any of its capital stock;
(r) split or combine the outstanding shares of its
capital stock of any class, pay any stock dividend, or enter into any
recapitalization affecting the number of outstanding shares of its capital
stock of any class or affecting any other of its securities;
(s) except for the Merger, merge, consolidate or
reorganize with, or acquire any entity;
(t) change accounting methods;
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(u) agree to any audit assessment by any tax
authority or file any federal or state income or franchise tax return
unless copies of such returns have been delivered to Broadbase for its
review prior to filing;
(v) change any insurance coverage or issue any
certificates of insurance;
(w) terminate the employment of any person listed
under Item 4.6 of the Panopticon Disclosure Letter;
(x) expand the size of the Panopticon Board of
Directors, elect or appoint anyone to Panopticon's Board of Directors, or
form any committees of the Board of Directors; or
(y) agree to do any of the things described in the
preceding clauses 6.4(a) through (x).
6.5 Preparation of Permit Application, Hearing Request,
Hearing Notice and Information Statement. As promptly as reasonably practicable
after the date hereof, Broadbase and Panopticon shall prepare and file with the
California Commissioner of Corporations the documents required by the California
Corporate Securities Law of 1968, as amended (the "CCSL") including, but not
limited to, any required "PERMIT APPLICATION," "HEARING REQUEST," and "HEARING
NOTICE", pursuant to Sections 25121 and 25142 of the CCSL (collectively, the
"NOTICE MATERIALS"), in connection with the Merger in order to perfect the
exemption from registration provided in Section 3(a)(10) of the Securities Act.
Each of Broadbase and Panopticon shall use its reasonable best efforts to have
the Permit Application, Hearing Request and Hearing Notice declared effective
under the CCSL as promptly as practicable after such filing. In addition,
Panopticon and Broadbase will prepare and Panopticon will distribute an
information statement (the "INFORMATION STATEMENT") along with the Notice
Materials, as may be required by California Law, at the earliest practicable
date to submit this Agreement, the Merger and related matters for the
consideration and approval of the Panopticon Shareholders, which approval will
be recommended by Panopticon's Board of Directors and management. Such
Information Statement will contain information, and will be distributed, in
compliance with applicable law. Panopticon will promptly provide all information
relating to its business and operations necessary for inclusion in the Notice
Materials to satisfy all requirements of applicable state and federal securities
laws. Panopticon shall be solely responsible for any statement, information or
omission in the Notice Materials relating to it or its affiliates based upon
written information furnished by it. In the event that the Permit Application,
Hearing Request and Hearing Notice shall not have been declared effective by
September 30, 2000, then at the written request of Panopticon to Broadbase,
Broadbase and Panopticon shall take all reasonable actions necessary to qualify
the issuance of the Exchange Shares in the Merger for an exemption from
registration under the Securities Act pursuant to the Private Placement
Exemption.
6.6 Approval of Panopticon Shareholders.
(a) Panopticon will hold a special meeting or solicit
written consent of the Panopticon Shareholders as promptly as practicable,
and in any event (to the extent permissible under applicable law) no more
than fifteen (15) days after the California Commissioner of Corporations
has issued a permit declaring the Permit Application, Hearing Request and
Hearing Notice with respect to the Merger effective, for the purpose of
voting upon approval of this Agreement and the Merger (or if such permit
shall not have been issued by September 30, 2000, and either Broadbase or
Panopticon shall have delivered the written notice described in the last
sentence
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of Section 6.5 as soon as practicable after such date). Panopticon will
solicit from the Panopticon Shareholders proxies in favor of the approval
of this Agreement and the Merger, and will use its reasonable best efforts
to take all other action necessary or advisable to secure the vote or
consent of the Panopticon Shareholders required by the rules of California
law to obtain such approvals. Any meeting of the Panopticon Shareholders
shall be called, held and conducted, and any proxies or shareholder written
consents will be solicited, in compliance with California law and
Panopticon's Articles of Incorporation and Bylaws, and all other applicable
legal requirements. Panopticon's obligation to call, give notice of,
convene, hold and conduct the Panopticon Shareholders Meeting or solicit a
written consent of the Panopticon Shareholders in accordance with this
Section 6.6 shall not be limited to or otherwise affected by the
commencement, disclosure, announcement or submission to Panopticon of any
Acquisition Proposal (as defined in Section 6.7), or by any withdrawal,
amendment or modification of the recommendation of the Board of Directors
of Panopticon to the Panopticon Shareholders to approve this Agreement and
the Merger.
(b) In the event a meeting of the Panopticon
Shareholders is held to approve this Agreement and the Merger (the
"PANOPTICON SHAREHOLDERS MEETING"), then notwithstanding anything to the
contrary contained in this Agreement, Panopticon may adjourn or postpone
the Panopticon Shareholders Meeting if as of the time for which the
Panopticon Shareholders Meeting is originally scheduled there are
insufficient shares of Panopticon common stock represented (either in
person or by proxy) to constitute a quorum necessary to conduct the
business of the Panopticon Shareholders Meeting. Panopticon shall ensure
that the Panopticon Shareholders Meeting is called, noticed, convened, held
and conducted prior to and separate from any meeting of the Panopticon
Shareholders at which any Acquisition Proposal or Acquisition Transaction
(as defined in Section 6.7) is considered or voted upon.
(c) The Board of Directors of Panopticon shall
unanimously recommend that the Panopticon Shareholders approve this
Agreement and the Merger. The Information Statement and the written consent
of shareholders, if any, shall include a statement to the effect that the
Board of Directors of Panopticon has recommended that the Panopticon
Shareholders approve this Agreement and the Merger. Neither the Board of
Directors of Panopticon nor any committee thereof shall withdraw, amend or
modify, or propose or resolve to withdraw, amend or modify in a manner
adverse to Broadbase, the recommendation of the Board of Directors of
Panopticon that the Panopticon Shareholders vote in favor of and approve
this Agreement and the Merger.
(d) Nothing contained in this Agreement shall
prohibit Panopticon or its Board of Directors from taking and disclosing to
the Panopticon Shareholders a position contemplated by Rules 14d-9 and
14e-2(a) promulgated under the Exchange Act of 1934.
6.7 No Solicitation.
(a) Definitions.
(i) "ACQUISITION PROPOSAL" with respect to
Panopticon means any offer or proposal (other than an offer or proposal
by Broadbase) relating to an Acquisition Transaction.
(ii) "ACQUISITION TRANSACTION" with respect
to Panopticon means any transaction or series of related transactions
other than the transactions contemplated by this Agreement involving:
(a) any acquisition or purchase from Panopticon by any person or
"group"
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(as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of more than a 5% interest in the total
outstanding voting securities of Panopticon or any of its subsidiaries
or any tender offer or exchange offer that if consummated would result
in any person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) beneficially
owning 5% or more of the total outstanding voting securities of
Panopticon, or any of its subsidiaries or any merger, consolidation,
business combination or similar transaction involving Panopticon; (b)
any sale, lease (other than in the ordinary course of business),
exchange, transfer, license (other than in the ordinary course of
business), acquisition or disposition of more than 5% of the assets of
Panopticon; or (c) any liquidation or dissolution of Panopticon.
(b) From and after the date of this Agreement until
the Effective Time or termination of this Agreement pursuant to Article 11,
Panopticon will not, nor will it authorize or permit any of its officers,
directors, affiliates or employees or any investment banker, attorney or
other advisor or representative retained by any it to, directly or
indirectly:
(i) solicit, initiate, encourage or induce
the making, submission or announcement of any Acquisition Proposal;
(ii) furnish to any person any non-public
information with respect to any Acquisition Proposal;
(iii) participate or engage in any
discussions or negotiations with any person with respect to any
Acquisition Proposal, except that Panopticon may inform third parties,
in response to unsolicited inquiries, of the existence of these
provisions;
(iv) except as permitted by Section 6.6(d),
approve, endorse or recommend any Acquisition Proposal; or
(v) enter into any letter of intent or
similar document or any Contract contemplating or otherwise relating to
any Acquisition Transaction.
(c) In addition to the obligations of Panopticon set
forth in Section 6.7(b), Panopticon as promptly as practicable shall advise
Broadbase orally and in writing of any request for non-public information
or any other inquiry which Panopticon reasonably believes could lead to an
Acquisition Proposal or of any Acquisition Proposal, the material terms and
conditions of such request, inquiry or Acquisition Proposal, and the
identity of the person or group making any such request, inquiry or
Acquisition Proposal. Panopticon will keep Broadbase informed as promptly
as practicable in all material respects of amendments to any such request,
inquiry or Acquisition Proposal.
6.8 Regulatory Approvals. Panopticon will execute and file, or
join in the execution and filing, of any application or other document that may
be necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign, which may be reasonably
required, or which Broadbase may reasonably request, in connection with the
consummation of the transactions provided for in this Agreement. Panopticon will
use reasonable best efforts to obtain or assist Broadbase in obtaining all such
authorizations, approvals and consents.
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6.9 Necessary Consents. Panopticon will use reasonable best
efforts to obtain such written consents and take such other actions as may be
necessary or appropriate for Panopticon, in addition to those set forth in
Section 6.5, to allow the consummation of the transactions provided for herein
and to facilitate and allow Broadbase to carry on Panopticon's business after
the Closing Date. Panopticon will use its best efforts to obtain from Kindling
LLC waivers of any acceleration provisions that would be triggered by the
Merger.
6.10 Blue Sky Laws. Panopticon shall use reasonable efforts to
assist Broadbase to the extent necessary to comply with the securities and Blue
Sky laws of all jurisdictions applicable in connection with the Merger.
6.11 Panopticon Dissenting Shares. As promptly as practicable
after the date the Information Statement is distributed to Panopticon
Shareholders and prior to the Closing Date, Panopticon shall furnish Broadbase
with the name and address of each Panopticon Shareholder who has up to such time
dissented and the number of shares owned by such Panopticon Shareholders.
6.12 Litigation. Panopticon will notify Broadbase in writing
promptly after learning of any material action, suit, proceeding or
investigation by or before any court, board or governmental agency, initiated by
or against Panopticon or threatened against it. If Panopticon becomes subject to
a review by the Internal Revenue Service or any other taxing agency or authority
for accounting periods prior to the Closing Date (including but not limited to
any short tax year resulting from the Merger), then Panopticon acknowledges that
Broadbase will be entitled to participate in such review and that Panopticon
shall be responsible for payment of any assessment subject to the limitations on
indemnification contained in Article 12. Panopticon will not enter into any
settlement or other stipulation with respect to any such review without the
written consent of Broadbase, which consent will not be unreasonably withheld.
6.13 Certain Employee Benefits. As soon as practicable after
the execution of this Agreement, Panopticon and Broadbase shall confer and work
together in good faith to agree upon mutually acceptable employee benefit and
compensation arrangements for Panopticon employees following the Merger.
Panopticon shall take such actions as are necessary to terminate such Panopticon
Employee Plans as are requested by Broadbase to be terminated, provided that
those Panopticon employees who are eligible to participate in each such Employee
Plan shall be provided the opportunity to participate in a substantially
comparable employee benefit plan maintained by Broadbase and provided further
that Broadbase requests such termination no later than ten days prior to the
Closing Date. Panopticon agrees that it shall terminate any and all group
severance, separation, retention and salary continuation plans, programs or
arrangements (other than agreements entered into by certain individuals to
effect transactions contemplated by this Agreement) prior to the Closing.
6.14 Notification of Employee Problems. Panopticon will
promptly notify Broadbase if any of Panopticon's officers becomes aware that any
of the key employees listed under Item 4.6 of the Panopticon Disclosure Letter
intends to leave its employ.
6.15 Certain Agreements. Panopticon will use all reasonable
efforts to cause all present employees and consultants of Panopticon who have
not previously executed Panopticon's forms of assignments of copyright and other
intellectual property rights to Panopticon to execute such forms, copies of
which are attached hereto as Exhibit F.
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6.16 Panopticon Affiliates. To help ensure that the issuance
of the Exchange Shares complies with the Securities Act, prior to the Closing
Date Panopticon will deliver a letter identifying all persons who are, in
Panopticon's reasonable judgment, "affiliates" of Panopticon at that time (the
"PANOPTICON AFFILIATES"). Panopticon will provide Broadbase with all information
and documents needed to evaluate this list for compliance with securities laws.
Broadbase will cause the Exchange Shares issued to the Panopticon Affiliates to
bear legends with respect to any application limitations on transfer under Rule
145 promulgated under the Securities Act.
6.17 Tax Free Reorganization. Panopticon will cooperate with
the other parties and take all reasonable actions as may be necessary to ensure
that this Agreement involves a tax-free plan of reorganization and that the
Merger is consummated in accordance with the provisions of Section 368(a)(1)(A)
and Section 368(a)(2)(E) of the Code.
6.18 Satisfaction of Closing Conditions. Panopticon will use
its reasonable best efforts to satisfy or cause to be satisfied all the
conditions precedent which are set forth in Article 10 on or before September
15, 2000, subject to any regulatory approvals or requirements. Panopticon will
use its reasonable best efforts to cause the transactions contemplated by this
Agreement to be consummated, and, without limiting the generality of the
foregoing, to obtain all consents and authorizations of third parties and to
make all filings with, and give all notices to, third parties that may be
necessary or reasonably required on its part in order to effect the transactions
contemplated hereby.
7. BROADBASE PRE-CLOSING COVENANTS
During the period from the date of this Agreement until the
Effective Time, Broadbase covenants to and agrees with Panopticon as follows:
7.1 Advice of Changes. Broadbase will promptly advise
Panopticon in writing of: (i) the discovery by Broadbase of any event,
condition, fact or circumstance occurring on or prior to the date of this
Agreement that would render any representation or warranty by Broadbase
contained in this Agreement untrue or inaccurate in any material respect; (ii)
any event, condition, fact or circumstance occurring subsequent to the date of
this Agreement that would render any representation or warranty by Broadbase
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect; (iii) any breach of
any covenant or obligation of Broadbase pursuant to this Agreement or any
Ancillary Agreement; (iv) any event, condition, fact or circumstance that may
make the timely satisfaction of any of the conditions set forth in Article 9
impossible or unlikely; and (v) any Material Adverse Effect on Broadbase.
7.2 Regulatory Approvals. Broadbase will execute and file, or
join in the execution and filing, of any application or other document that may
be necessary in order to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign, which may be reasonably
required, or which Panopticon may reasonably request, in connection with the
consummation of the transactions provided for in this Agreement. Broadbase will
use reasonable best efforts to obtain all such authorizations, approvals and
consents.
7.3 Preparation of Permit Application, Hearing Request and
Hearing Notice. As promptly as practicable after the date hereof, Broadbase,
with Panopticon's assistance, shall prepare and file with the California
Commissioner of Corporations the Notice Materials, including the Permit
Application, Hearing Request and Hearing Notice, in connection with the Merger.
Broadbase, with
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Panopticon's assistance, shall use its reasonable best efforts to have the
Permit Application, Hearing Request and Hearing Notice declared effective under
the CCSL as promptly as practicable after such filing. Broadbase will promptly
provide all information relating to its business and operations necessary for
inclusion in the Notice Materials to satisfy all requirements of applicable
state and federal securities laws. Broadbase shall be solely responsible for any
statement, information or omission in the Notice Materials relating to it or its
affiliates based upon written information furnished by it. In the event that the
Permit Application, Hearing Request and Hearing Notice shall not have been
declared effective by September 30, 2000, then at the written request of
Panopticon to Broadbase, Broadbase and Panopticon shall take all reasonable
actions necessary to qualify the issuance of the Exchange Shares in the Merger
for an exemption from registration under the Securities Act pursuant to the
Private Placement Exemption.
7.4 Litigation. Broadbase will notify Panopticon in writing
promptly after learning of any litigation or proceeding threatened or pending
for the purpose or with the probable effect of enjoining or preventing the
consummation of any of the transactions contemplated by this Agreement, or which
would be reasonably expected to have a Material Adverse Effect on Broadbase.
7.5 Certain Employee Benefits. After the Effective Time,
Broadbase shall grant (or cause to be granted) to each Panopticon employee
credit for all service with Panopticon prior to the Effective Time to the same
extent as if such service had been with Broadbase for (a) all eligibility and
vesting purposes under all employee benefit plans, policies, programs and
arrangements of Broadbase and any of its subsidiaries that cover an Panopticon
employee, (b) vacation accrual purposes after the Effective Time, and (c)
purposes of satisfying any preexisting condition exclusion or actively-at-work
requirement that would otherwise apply to each Panopticon employee under any
medical, dental or other welfare benefit plans, policies, programs and
arrangements of Broadbase and any of its subsidiaries that employ a Panopticon
employee, to the extent that this clause (c) does not violate the applicable
plan, policy, program or arrangement.
7.6 Tax Free Reorganization. Broadbase will cooperate with the
other parties and take all reasonable actions as may be necessary to ensure that
this Agreement involves a tax-free plan of reorganization and that the Merger is
consummated in accordance with the provisions of Section 368(a)(1)(A) and
Section 368(a)(2)(E) of the Code.
7.7 Satisfaction of Conditions Precedent. Broadbase will use
its reasonable best efforts to satisfy or cause to be satisfied all the
conditions precedent which are set forth in Article 9 on or before September 15,
2000, subject to any regulatory approvals or requirements. Broadbase will use
reasonable best efforts to cause the transactions provided for in this Agreement
to be consummated, and, without limiting the generality of the foregoing, to
obtain all consents and authorizations of third parties and to make all filings
with, and give all notices to, third parties that may be necessary or reasonably
required on its part in order to effect the transactions provided for herein.
7.8 Indemnification of Directors and Officers; Directors &
Officers Insurance.
(a) From and after the Effective Time, Broadbase will
cause the Surviving Corporation to fulfill and honor in all respects the
obligations of Panopticon pursuant to any indemnification agreements
between Panopticon and its directors and officers as of or prior to the
date hereof (or indemnification agreements in Panopticon's customary form
for directors joining Panopticon's Board of Directors prior to the
Effective Time) and any indemnification provisions
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under Panopticon's Articles of Incorporation or bylaws as in effect
immediately prior to the Effective Time.
(b) For a period of three years after the Effective
Time, Broadbase will maintain or cause the Surviving Corporation to
maintain in effect, if available, directors' and officers' liability
insurance covering those persons who, as of immediately prior to the
Effective Time, were scheduled to be covered by Panopticon's directors' and
officers' liability insurance policy (the "INSURED PARTIES").
(c) The provisions of this Section 7.7 are intended
to be for the benefit of, and will be enforceable by, each Insured Party
entitled to indemnification hereunder and the heirs and representatives of
such Insured Party. Broadbase will not permit the Surviving Corporation to
merge or consolidate with any other entity unless the Surviving Corporation
will ensure that the surviving or resulting entity assumes the obligations
imposed by this Section 7.7.
7.9 Interim Financing.
(a) Provided this Agreement has not been terminated
as provided in Article 11, Broadbase agrees to lend up to an aggregate of
$2,000,000 to Panopticon (the "LOAN") for the purpose of financing
operating expenses incurred in the ordinary course of business, pursuant to
the terms set forth in the form of convertible promissory note attached
hereto as Exhibit G, and subject to execution and delivery of such note by
Panopticon. Each advance of all or any portion of the Loan shall be subject
to the conditions that (i) the representations and warranties of Panopticon
set forth in this Agreement shall be true and correct as of the time of
such advance (provided that this condition shall be deemed satisfied unless
the cumulative effect of such inaccuracies and breaches has a Material
Adverse Effect on Panopticon), (ii) Panopticon shall not have breached any
material covenant contained in this Agreement, and (iii) Panopticon shall
have given Broadbase at least five (5) days' written notice requesting such
advance and affirming that the conditions described in clauses (i) and (ii)
have been satisfied.
(b) If this Agreement is terminated by Broadbase
pursuant to Section 11.1(b) or the provisions specifically enumerated in
Section 11.4, then all unpaid principal and accrued interest under the Loan
shall be accelerated and shall become due and payable by Panopticon upon
the earliest to occur of: (i) Panopticon's next equity financing of at
least $5 million, (ii) an Acquisition of Panopticon, or (iii) the date that
is six months after the date of such termination. Panopticon may pre-pay
any unpaid principal and accrued interest under the Loan upon two days'
written notice to Broadbase. At the election of Broadbase, the Loan may
instead be converted into shares of Panopticon preferred stock issued in
Panopticon's next equity financing at a conversion price equal to the price
per share of the equity securities sold in such equity financing, and each
party hereto will take all steps necessary or advisable to effect such
result.
8. CLOSING MATTERS
8.1 The Closing. Subject to termination of this Agreement as
provided in Article 11, the closing of the transactions provided for herein (the
"CLOSING") will take place at the offices of Fenwick & West LLP, Two Palo Alto
Square, Palo Alto, California 94306 at 10:00 a.m., Pacific Time no later than
the later of September 15, 2000 and the third business day after all conditions
to closing have been satisfied or waived (the "CLOSING DATE"). Prior to or
concurrently with the Closing, the Agreement of Merger, Certificate of Merger
and such officers' certificates or other documents as may be required to
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effectuate the Merger will be filed in the offices of the California Secretary
of State and Delaware Secretary of State, respectively.
8.2 Exchange of Certificates.
(a) Procedures.
(i) U.S. Stock Corporation, transfer agent
for Broadbase common stock, will act as exchange agent (the "EXCHANGE
AGENT") for the Exchange Shares. On the Closing Date, Broadbase will
deposit with the Exchange Agent the Exchange Shares, to be held by the
Exchange Agent until released as provided herein. Within a reasonable
time after the Closing, Broadbase shall cause to be mailed to each
holder of record of a certificate(s) for shares of Panopticon capital
stock (the "PANOPTICON CERTIFICATES"): (A) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss
and title to the Panopticon Certificates shall pass, only upon delivery
of the Panopticon Certificates to the Exchange Agent), and (B)
instructions for use in effecting the surrender of the Panopticon
Certificates in exchange for certificates representing Exchange Shares.
As soon as practicable after the Effective Time, each Panopticon
Shareholder (1) will surrender either (x) the Panopticon Certificates
to Broadbase for cancellation or (y) an affidavit of lost certificate
(or nonissued) and a bond in form and amount reasonably satisfactory to
Broadbase or the Exchange Agent (a "BOND"), (2) will execute and
deliver an indemnification letter pursuant to which each Panopticon
Shareholder will agree to indemnify the Indemnified Persons (as defined
in Section 12.2) pursuant to the terms of Article 12 (the
"INDEMNIFICATION LETTER"), (3) will execute and deliver representations
as to such Panopticon Shareholder's valid and marketable title to such
holder's shares of Panopticon common stock, and (4), if a permit is not
obtained from the California Department of Corporations as contemplated
by Section 6.5, a representation letter stating that such shareholder
is acquiring the "Exchange Shares" for investment purposes and not with
a view to any distribution thereof, and such other matters as Broadbase
may reasonably require in order to establish the Private Placement
Exemption (items 3 and 4 collectively, the "PANOPTICON SHAREHOLDER
REPRESENTATIONS"). Promptly following the Effective Time and receipt of
Panopticon Certificates and/or the Bonds, the Indemnification Letter
and the Panopticon Shareholder Representations, Broadbase will cause
the Exchange Agent to issue to such surrendering holder certificate(s)
for the number of Exchange Shares to which such holder is entitled
pursuant to Section 2.1, less the Escrow Shares to be deposited into
escrow on behalf of such holder pursuant to Section 2.2, and will
distribute any cash payable under Section 2.1(a)(v).
(ii) At the Effective Time, the stock
transfer books of Panopticon will be closed and no transfer of shares
of Panopticon capital stock will thereafter be made. If, after the
Effective Time, Panopticon Certificates are presented for any reason,
they will be canceled and exchanged as provided in this Section 8.2;
provided, however, that subject to applicable law any Panopticon
Certificate that is not properly submitted to Broadbase for exchange
and cancellation within three years after the Effective Time shall no
longer evidence ownership of or any right to receive shares of
Broadbase common stock and all rights of the holder of such Panopticon
Certificate, with respect to the shares previously evidenced by such
Panopticon Certificate, shall cease.
(iii) Subject to the provisions of Section
2.2 and the Escrow Agreement with respect to the Escrow Shares, all
Exchange Shares delivered upon the surrender of Panopticon Certificates
in accordance with the terms hereof will be deemed to have been
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delivered in full satisfaction of all rights pertaining to the
Panopticon common stock evidenced by such Panopticon Certificates.
(b) Unexchanged Shares. Until Panopticon Certificates
outstanding prior to the Merger (or affidavits of lost (or non-issued)
certificates and attendant Bonds) are surrendered pursuant to Section
8.2(a), such Panopticon Certificates will be deemed, for all purposes, to
evidence ownership of (i) the number of Exchange Shares into which the
Panopticon common stock will have been converted (less the number of shares
to be withheld as Escrow Shares pursuant to Section 2.2) and (ii) if
applicable, cash in lieu of fractional shares.
(c) Payment of Dividends. No dividends or
distributions payable to holders of record of Broadbase common stock after
the Effective Time, or cash payable in lieu of fractional shares, will be
paid to holders of any unsurrendered Panopticon Certificates until such
holders surrender their Panopticon Certificates (or affidavits of lost (or
non-issued) certificates and attendant Bonds). Upon such surrender, subject
to the effect, if any, of applicable escheat and other laws, there will be
delivered to such tendering holder the amount of any dividends and
distributions paid with respect to Exchange Shares so withheld as of any
date subsequent to the Effective Time and prior to such date of delivery,
less any stock dividends for Escrow Shares that are issued in order to
effect a stock split of Broadbase common stock (which shall be held until
the Escrow Shares are released). Except for the Escrow Shares, no other
interest shall be paid on any such dividends withheld.
(d) Miscellaneous.
(i) If any certificates for Exchange Shares
are to be issued in a name other than that in which the Panopticon
Certificate surrendered in exchange therefor is registered, the
following shall be conditions of such exchange: (A) the Panopticon
Certificate must be properly endorsed and otherwise in proper form for
transfer, and (B) the person requesting such exchange shall either pay
to the Exchange Agent any transfer or other taxes required by reason of
the issuance of certificates for such Exchange Shares in a name other
than that of the registered holder of the Panopticon Certificate
surrendered or establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not applicable.
(ii) Notwithstanding anything in this
Agreement to the contrary, neither the Exchange Agent nor any party
hereto shall be liable to a Panopticon Shareholder for any Exchange
Shares or dividends thereon or the cash payments otherwise due
hereunder delivered to a public official pursuant to applicable
abandoned property, escheat or other similar laws following the passage
of time specified therein.
8.3 Dissenting Shares. Notwithstanding anything to the
contrary in this Agreement:
(a) For each Panopticon Shareholder who exercises
appraisal rights with respect to shares of Panopticon capital stock in
accordance with Chapter 13 of the California General Corporation Law
("CALIFORNIA CODE") and, as of the Effective Time, has not lost or
effectively withdrawn such appraisal rights, such Panopticon shares
("DISSENTING SHARES") will not be converted into or represent a right to
receive the consideration described in Section 2.1(a)(i). Instead, each
holder of Dissenting Shares will be entitled only to such rights as are
granted by Chapter 13 of the California Code. The Exchange Shares to which
such dissenting Panopticon Shareholders would have been entitled had each
assented to the merger will have the status of authorized and unissued
shares of Broadbase.
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(b) For each Panopticon Shareholder who demands
appraisal rights with respect to such shares, but subsequently loses
(through the failure to perfect or otherwise) or effectively withdraws such
demand for appraisal rights in accordance with Chapter 13 of the California
Code, such holder's shares shall, as of the Effective Time (or, if after
the Effective Time, upon the occurrence of such event) automatically be
converted into and represent only the right to receive the consideration
described in Section 2.1 upon surrender of the applicable certificate(s) as
provided in Section 8.2.
(c) Panopticon shall comply with the notice and other
procedural requirements set forth in Chapter 13 of the California Code with
respect to any Panopticon Shareholder who demands appraisal rights for such
Panopticon shares and has not lost or effectively withdrawn such demand for
appraisal rights. Broadbase shall have the opportunity to participate in
all negotiations and proceedings with respect to such demands. Panopticon
shall not, except with the prior written consent of Broadbase, voluntarily
make any payment with respect to any demands for the exercise of appraisal
rights or offer to settle or settle any such demands.
8.4 Employee Plans. As of the Effective Time, Broadbase and
Panopticon shall take such actions as are necessary to effect the mutually
acceptable employee benefit and compensation arrangements as determined pursuant
to Section 6.13.
9. CONDITIONS TO OBLIGATIONS OF PANOPTICON
Panopticon's obligations hereunder are subject to the
fulfillment or satisfaction, on and as of the Closing, of each of the following
conditions (any one or more of which may be waived by Panopticon, but only in a
writing signed on behalf of Panopticon by its President, Chief Executive Officer
or Chief Financial Officer):
9.1 Accuracy of Representations and Warranties. Each of the
representations and warranties of Broadbase set forth in Article 5 of this
Agreement shall be true and correct as of the date hereof and at and as of the
Closing Date as if made at and as of such time, except that to the extent such
representations and warranties address matters only as of a particular date,
such representations and warranties shall, to such extent, be true and correct
as of the date hereof and at and as of such particular date as if made at and as
of such particular date; provided that if any of such representations and
warranties shall not be true and correct as aforesaid, then this condition shall
nevertheless be deemed satisfied if the cumulative effect of all inaccuracies of
such representations and breaches of such warranties does not have and is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Broadbase, and Panopticon shall have received a certificate to such
effect executed by the Chief Financial Officer or General Counsel of Broadbase.
9.2 Covenants. Broadbase shall have performed and complied in
all material respects with all of its covenants contained in Article 7 on or
before the Closing Date, and Panopticon shall have received a certificate to
such effect executed on behalf of Broadbase by the Chief Financial Officer or
General Counsel of Broadbase.
9.3 Absence of Material Adverse Effect. There shall have not
been any change, event, violation, inaccuracy, circumstance or effect that,
individually or in the aggregate, whether or not arising in the ordinary course
of business, is materially adverse to the business, employees, assets or
liabilities (including intangible assets), capitalization, financial condition,
operations or results of
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operations of Broadbase, except to the extent that such change, event,
violation, inaccuracy, circumstance or effect results from: (a) changes in
general economic conditions, (b) changes affecting the industry generally in
which Broadbase operates which do not affect Broadbase disproportionately, or
(c) a decline in the trading price of Broadbase common stock.
9.4 Compliance with Law. There shall be no order, decree, or
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transactions
contemplated by this Agreement.
9.5 Government Consents. There shall have been obtained at or
prior to the Closing Date such permits or authorizations, and there shall have
been taken such other actions, as may be required to consummate the Merger by
any regulatory authority having jurisdiction over the parties and the actions
herein proposed to be taken, including but not limited to satisfaction of all
requirements under applicable federal and state securities laws.
9.6 Securities Compliance. Either: (a) the California
Commissioner of Corporations shall have issued a permit declaring the Permit
Application, Hearing Request and Hearing Notice with respect to the Merger
effective, or (b) the issuance of the Broadbase common stock in connection with
the Merger either (i) shall have been registered pursuant to a registration
statement declared effective by the Commission, or (ii) shall be issuable
pursuant to the Private Placement Exemption.
9.7 Requisite Approvals. The principal terms of this
Agreement, the Merger, the Agreement of Merger and Certificate of Merger shall
have been approved and adopted by the written consent or vote of: (a) the
Panopticon Shareholders, as required by applicable law and Panopticon's Articles
of Incorporation and Bylaws, and (b) Panopticon's Board of Directors.
9.8 Opinion of Broadbase's Counsel. Panopticon shall have
received from Fenwick & West LLP, counsel to Broadbase, an opinion letter in
form reasonably satisfactory to Panopticon and its counsel with respect to
matters customary for a transaction of this nature dated as of the Closing Date.
10. CONDITIONS TO OBLIGATIONS OF BROADBASE
The obligations of Broadbase hereunder are subject to the
fulfillment or satisfaction on, and as of the Closing, of each of the following
conditions (any one or more of which may be waived by Broadbase, but only in a
writing signed on behalf of Broadbase by its Chief Financial Officer or General
Counsel):
10.1 Accuracy of Representations and Warranties. Each of the
representations and warranties of Panopticon set forth in Article 4 of this
Agreement shall be true and correct as of the date hereof and at and as of the
Closing Date as if made at and as of such time, except that, to the extent such
representations and warranties address matters only as of a particular date,
such representations and warranties shall, to such extent, be true and correct
at and as of the date hereof and at and as of such particular date as if made at
and as of such particular date; provided that if any of such representations and
warranties shall not be true and correct as aforesaid, then this condition shall
nevertheless be deemed satisfied if the cumulative effect of all inaccuracies of
such representations and breaches of such warranties does not have and is not
reasonably likely to have a Material Adverse Effect on Panopticon, and Broadbase
shall have received a certificate to such effect executed on behalf of
Panopticon by the President, Chief Executive Officer or Chief Financial Officer
of Panopticon.
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10.2 Covenants. Panopticon shall have performed and complied
in all material respects with all of its covenants contained in Article 6 on or
before the Closing Date, and Broadbase shall have received a certificate to such
effect executed on behalf of Panopticon by the President, Chief Executive
Officer or Chief Financial Officer of Panopticon.
10.3 Absence of Material Adverse Effect. There shall have not
been any change, event, violation, inaccuracy, circumstance or effect that,
individually or in the aggregate, whether or not arising in the ordinary course
of business, is materially adverse to the business, employees, assets or
liabilities (including intangible assets), capitalization, financial condition,
operations or results of operations of Panopticon, except to the extent that
such change, event, violation, inaccuracy, circumstance or effect results from:
(a) changes in general economic conditions, (b) changes affecting the industry
generally in which Panopticon operates which do not affect Panopticon
disproportionately, or (c) any omission of Panopticon directly resulting from
Broadbase's failure to consent to actions requested to be taken by Panopticon
under Section 6.4. This condition shall not be satisfied (i.e. a material
adverse change shall have occurred, without exception) if either (i) Stanley
Kim, or (ii) Craig Hughes, or (iii) any two or more of Arash Afrakhteh, Alan
Thornton Gous, Miguel Lobo, and Arman Magbouleh, or (iv) 25% or more of the
employees employed by Panopticon as of the date of this Agreement, is (are) not
an employee(s) (or, in the case of Mr. Gous, a consultant) of Panopticon as of
the Effective Time.
10.4 Compliance with Law. There shall be no order, decree, or
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transactions
contemplated by this Agreement.
10.5 Government Consents. There shall have been obtained at or
prior to the Closing Date such permits or authorizations and there shall have
been taken such other action, as may be required to consummate the Merger by any
regulatory authority having jurisdiction over the parties and the actions herein
proposed to be taken, including but not limited to satisfaction of all
requirements under applicable federal and state securities laws.
10.6 Securities Compliance. Either: (a) the California
Commissioner of Corporations shall have issued a permit declaring the Permit
Application, Hearing Request and Hearing Notice with respect to the Merger
effective, or (b) the issuance of the Broadbase common stock in connection with
the Merger either (i) shall have been registered pursuant to a registration
statement declared effective by the Commission, or (ii) shall be issuable
pursuant to the Private Placement Exemption.
10.7 Investment Representation Letters. In the event Broadbase
elects for securities law purposes to effect the Merger by means of the Private
Placement Exemption, each of the Panopticon Shareholders shall have executed and
delivered to Broadbase an investment representation letter (or equivalent
document) in form reasonably necessary to establish the Private Placement
Exemption.
10.8 Requisite Approvals. The principal terms of this
Agreement, the Merger, the Agreement of Merger and Certificate of Merger shall
have been approved and adopted by the written consent or vote of: (a) the
Panopticon Shareholders, as required by applicable law and Panopticon's Articles
of Incorporation and Bylaws, and (b) Panopticon's Board of Directors. Conversion
of all of the shares of Panopticon preferred stock outstanding immediately prior
to the Closing into shares of Panopticon common stock shall have been approved
by the holders of Panopticon preferred stock, as required by Panopticon's
Articles of Incorporation.
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10.9 Termination of Rights. Other than the acceleration
provisions in options held by Gerald Held and Lee Kennedy, any registration
rights, rights of accelerated vesting, rights of first refusal, rights to any
liquidation preference, or redemption rights of any holder of Panopticon
securities shall have been terminated or waived as of the Closing.
10.10 Third-Party Consents; Assignments; Other Documents.
Broadbase shall have received (a) duly executed copies of all material
third-party consents, approvals, assignments, waivers, authorizations or other
certificates set forth on Schedule 3 hereto, and (b) any other written consents,
assignments, waivers, authorizations or other certificates where, in the case of
this clause (b), the failure to have received the same would have a Material
Adverse Effect on Panopticon.
10.11 Dissenting Shares. The number of Dissenting Shares shall
not constitute more than nine percent (9%) of the total number of shares of
Panopticon common stock (on an as-if converted to Panopticon common stock basis)
outstanding immediately prior to the Effective Time.
10.12 Resignations. Broadbase shall have received an executed
letter from each member of the Board of Directors of Panopticon immediately
prior to the Effective Time of the Merger to the effect that each such director
agrees to resign his or her post as a director of the Surviving Corporation
effective as of the Effective Time of the Merger.
10.13 Escrow Agreement. Broadbase shall have received the
Escrow Agreement, executed by Panopticon and in substantially the form attached
hereto as Exhibit D, providing for the escrow of the Escrow Shares.
10.14 Opinion of Panopticon's Counsel. Broadbase shall have
received from Wilson Sonsini Goodrich & Rosati, P.C., counsel to Panopticon, an
opinion letter in form reasonably satisfactory to Broadbase and its counsel with
respect to matters customary for a transaction of this nature dated as of the
Closing Date.
11. TERMINATION OF AGREEMENT
11.1 Right to Terminate. This Agreement may be terminated and
the Merger abandoned at any time prior to the Effective Time, whether before or
after approval by the Panopticon Shareholders:
(a) by the mutual written consent of Panopticon and
Broadbase;
(b) by either Panopticon or Broadbase, if such party
(including its stockholders) is not in material breach of any
representation, warranty, covenant or agreement contained in this
Agreement, and such other party is in material breach of any
representation, warranty, covenant or agreement contained in this
Agreement, or if any representation of such other party will have become
untrue, in either case to an extent that would cause the conditions set
forth in Article 9 (for Panopticon) or Article 10 (for Broadbase) not to be
satisfied and such breaching party fails to cure such material breach
within fifteen (15) days of written notice of such material breach from the
non-breaching party (except that no cure period will be provided for a
breach which by its nature cannot be cured);
(c) by either Panopticon or Broadbase, if any of the
conditions precedent to such party's obligations set forth in Article 9
(for Panopticon) or Article 10 (for Broadbase) have not
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been fulfilled or waived on or before November 15, 2000 (the "FINAL DATE")
other than as a result of a breach of this Agreement by the terminating
party;
(d) by either Panopticon or Broadbase, if there is a
final nonappealable order of a federal or state court in effect preventing
consummation of the Merger, or if any statute, rule, regulation or order is
enacted, promulgated or issued or deemed applicable to the Merger by any
governmental body that would make consummation of the Merger illegal; or
(e) by either Panopticon or Broadbase if the required
approval of the Panopticon Shareholders contemplated by this Agreement
shall not have been obtained by reason of the failure to obtain the
required vote by written consent or at a meeting of the Panopticon
Shareholders duly convened therefore or at any adjournment thereof;
provided, however, that the right to terminate this Agreement under this
11.1 shall not be available to a party where the failure to obtain the
Panopticon Shareholder approval shall have been caused by the action or
failure to act of such party (or an officer or director of such party) and
such action or failure to act constitutes a material breach of this
Agreement.
11.2 Termination Procedures. If either party wishes to
terminate this Agreement pursuant to Section 11.1, such party shall deliver to
the other party a written notice stating that such party is terminating this
Agreement and setting forth a brief description of the basis of such
termination. Termination of this Agreement will be effective upon the delivery
of such notice.
11.3 Continuing Obligations. In the event of the termination
of this Agreement as provided in Section 11.1, this Agreement shall be of no
further force or effect, except (i) as set forth in this Section 11.3 and
Article 12, each of which shall survive the termination of this Agreement, and
(ii) nothing herein shall relieve any party from liability for any willful
breach of this Agreement. No termination of this Agreement shall affect the
obligations of the parties pursuant to any agreement to maintain the
confidentiality of information regarding the other party, all of which
obligations shall survive termination of this Agreement in accordance with their
terms.
11.4 Termination Fee. In the event that this Agreement is
terminated by Broadbase for any reason other than: (i) those reasons enumerated
in Section 11.1 (a), (d), or (e); (ii) pursuant to Section 10.1 (but only with
respect to any Material Adverse Effect on Panopticon arising, as a result of
inaccuracies of representations or breaches of warranties made as of the date of
this Agreement); (iii) pursuant to Section 10.2; and (iv) pursuant to Section
10.3, with respect to any Material Adverse Effect on Panopticon arising out of
matters covered by (A) Section 4.8 (with respect to the Panopticon IP Rights
only) and Section 4.14, and (B) if either (1) Stanley Kim, or (2) Craig Hughes,
or (3) any two or more of Arash Afrakhteh, Alan Thornton Gous, Miguel Lobo, and
Arman Magbouleh, or (4) 25% or more of the employees employed by Panopticon as
of the date of this Agreement, is (are) not an employee(s) (or, in the case of
Mr. Gous, a consultant) of Panopticon as of the Effective Time, then:
(a) Broadbase shall promptly, but in no event later
than five days after the date of such termination, pay Panopticon in
immediately available funds a fee equal to $8 million (the "TERMINATION
FEE"), plus an amount equal to Panopticon's reasonable investment banking,
accounting and attorneys' fees and expenses and other fees and expenses
incurred by Panopticon with respect to this Agreement and the transactions
contemplated hereby (except that the amount of such expenses to be paid by
Broadbase shall not be in excess of the amount set forth in Section 3.2)
provided that
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(b) if any principal or interest under any of the
Loan contemplated by Section 7.8 remain outstanding, then the Termination
Fee payable by Broadbase pursuant to this Section 11.2(b) shall be reduced
by the amount of the Loan owed by Panopticon.
The payment provided for in this Section 11.4 shall be treated as liquidated
damages and shall be in lieu of any other payments for damages incurred by
Panopticon or its shareholders for any termination of this Agreement by
Broadbase pursuant to this Section 11.4.
12. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND
REMEDIES, CONTINUING COVENANTS
12.1 Survival of Representations. All representations,
warranties, covenants and agreements of Broadbase and Panopticon contained in
this Agreement will remain operative and in full force and effect, regardless of
any investigation made by or on behalf of the parties to this Agreement, until
the earlier of the termination of this Agreement and the expiration of the
Escrow Period, whereupon such representations, warranties, covenants and
agreements will expire.
12.2 Agreement to Indemnify. Subject to the limitations set
forth in this Article 12, Panopticon and each of the Panopticon Shareholders
hereby agree (and each Panopticon Shareholder shall execute and deliver to
Broadbase an Indemnification Letter to signify such agreement) to severally
indemnify and hold harmless Broadbase and its officers, directors, agents and
employees, and each person, if any, who controls or may control Broadbase within
the meaning of the Securities Act (hereinafter referred to individually as an
"INDEMNIFIED PERSON" and collectively as "INDEMNIFIED PERSONS") from and against
any and all claims, demands, actions, causes of actions, losses, costs, damages,
liabilities and expenses, including without limitation, reasonable legal fees
and costs (hereinafter referred to as "DAMAGES") directly or indirectly arising
out of or resulting from:
(a) any misrepresentation or breach of or default in
connection with any of the representations, warranties, agreements and
covenants given or made by Panopticon in this Agreement or any certificate,
document or instrument delivered by or on behalf of Panopticon pursuant
hereto, including, without limitation, any Damages arising out of or
relating to the Non-Exercisable Panopticon Warrants; or
(b) any failure of such Panopticon Shareholders (i)
to have good, valid and marketable title to the issued and outstanding
Panopticon common stock held by such shareholders, free and clear of all
liens, claims, pledges, options, adverse claims, assessments or charges of
any nature whatsoever, or (ii) to have full right, capacity and authority
to vote such Panopticon common stock in favor of the Merger and the other
transactions contemplated hereby;
provided, however, that for purposes of the foregoing clause (b), the
Indemnified Person may only seek and recover Damages from the Indemnifying
Stockholder who failed to have good, valid and marketable title to or authority
to vote the issued and outstanding Panopticon common stock held by such
Indemnifying Stockholder.
12.3 Limitations on Liability; Exceptions.
(a) Limitations on Liability. Except as set forth in
Section 12.3(b), the Escrow Shares and any other assets deposited in escrow
pursuant to the Escrow Agreement shall be the Indemnified Persons' sole
recourse under this Agreement, and no claim for Damages shall first
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be made under Section 12.2 or otherwise under this Agreement after
expiration of the Escrow Period. Except as set forth in Section 12.3(b),
the remedies set forth in this Article 12 shall be the exclusive remedies
of Broadbase and the other Indemnified Persons against any Panopticon
Shareholder under any theory or liability.
(b) Exceptions to Limitations on Liability. None of
the limitations set forth in Section 12.3(a) shall in any manner limit the
liability or indemnification obligations of the Panopticon Shareholders
with respect to: (i) intentional fraud or willful misconduct, (ii) any
breach of the representations and warranties made in Section 4.5 or any
claim for Damages arising out of or relating to the Non-Exercisable
Panopticon Warrants, or (iii) any matter or claim described in Section
12.2(b), except that the liability or indemnification obligation of each
individual Panopticon Shareholder with respect to items within (ii) or
(iii) above shall be limited to the consideration received or to be
received by such Panopticon Shareholder in connection with the Merger.
(c) Basket. Except for indemnification with respect
to fees and expenses pursuant to Section 3.2, the indemnification provided
for in this Article 12 shall not apply unless the aggregate Damages, as the
case may be, for which one or more Indemnified Persons seeks
indemnification exceeds $100,000, in which event the indemnification
provided for in this Article 12 will include the aggregate of all Damages.
12.4 Survival of Claims. Notwithstanding anything to the
contrary, if, prior to the expiration of the Escrow Period, an Indemnified
Person makes a claim for indemnification under either this Agreement or the
Escrow Agreement with respect to a misrepresentation or breach of such
representation, warranty or covenant, then the Indemnified Person's rights to
indemnification under this Article 12 for such claim shall survive the
expiration of the Escrow Period.
12.5 No Indemnity for Corporate Agents. Each of the
indemnifying shareholders agrees that such indemnifying shareholder will not
make any claim for indemnification against Panopticon by reason of the fact that
such indemnifying shareholder was a director, officer, employee or agent of any
such entity or was serving at the request of any such entity as a partner,
trustee, director, officer, employee or agent of another entity (whether such
claims is for judgments, damages, penalties, fines, costs, amounts paid in
settlement, losses, expense or otherwise and whether such claim is pursuant to
any statute, charter document, bylaw, agreement or otherwise) with respect to
any action, suit, proceeding, complaint, claim or demand brought by Broadbase
against the indemnifying shareholder (whether such action, suit, proceeding,
complaint, claim or demand is pursuant to this Agreement, applicable law or
otherwise).
12.6 Panopticon Shareholders' Representative.
(a) Authority. The Panopticon Shareholders, by their
approval of the Merger and/or their tender pursuant to Section 8.2 of
Panopticon Certificates, will be conclusively deemed to have consented to,
approved and agreed to be personally bound by: (a) the indemnification
provisions of Article 12, (b) the Escrow Agreement, (c) the appointment of
Stanley Kim as the representative of the Panopticon Shareholders (the
"REPRESENTATIVE") under the Escrow Agreement and as the attorney-in-fact
and agent for and on behalf of the Panopticon Shareholders (including their
successors and assigns) as provided in the Escrow Agreement and (d) the
taking by the Representative of any and all actions and the making of any
decisions required or permitted to be taken by the Representative under the
Escrow Agreement, including, without limitation, the exercise of the power
to: (i) authorize delivery to Broadbase of Escrow Shares in satisfaction of
indemnity
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claims by Broadbase or any other Indemnified Person (as defined herein)
pursuant to Article 12 hereof and/or the Escrow Agreement; (ii) agree to,
negotiate, enter into settlements and compromises of, demand arbitration
of, and comply with orders of courts and awards of arbitrators with respect
to, such claims; (iii) arbitrate, resolve, settle or compromise any claim
for indemnity made pursuant to Article 12; (iv) waive any right of any or
all of the Panopticon Shareholders following the Merger with respect to
matters set forth in this Agreement, the Escrow Agreement or any other
agreement contemplated by this Agreement; (v) give and receive all notices
required to be given under this Agreement and the Escrow Agreement; and
(vi) take all actions necessary in the sole judgment of the Representative
for the accomplishment of the foregoing. The Representative will have
unlimited authority and power to act on behalf of the Panopticon
Shareholders with respect to the Escrow Agreement and the disposition,
settlement or other handling of all claims governed by the Escrow
Agreement, and all rights or obligations arising under the Escrow Agreement
so long as all Panopticon Shareholders are treated in the same manner. The
Representative is authorized to take any actions deemed by him to be
appropriate or reasonably necessary to carry out the provisions of Article
12 hereof. In addition, the Representative is authorized to accept service
of process upon the Panopticon Shareholders. All decisions and actions of
the Representative in connection with this Agreement and the Escrow
Agreement shall be binding and conclusive upon the Panopticon Shareholders,
and Broadbase, the Surviving Corporation and the Escrow Agent will be
entitled to rely on any action or decision of the Representative. The
Representative will not be a trustee for any Panopticon Shareholder or have
any fiduciary duty to any Panopticon Shareholder, and in performing the
functions specified in this Agreement and the Escrow Agreement, the
Representative will not be liable to any Panopticon Shareholders for any
act or omission the Representative made in good faith and in the exercise
of reasonable judgment. As provided in the Escrow Agreement, any
out-of-pocket costs and expenses reasonably incurred by the Representative
in connection with actions taken pursuant to the terms of the Escrow
Agreement, at the Representative's option, either (i) will be paid by the
Panopticon Shareholders to the Representative or (ii) if shares are
available for distribution to the Panopticon Shareholders pursuant to the
Escrow Agreement, at the request of the Representative, a portion of those
shares will be sold by the Escrow Agent and the proceeds paid to or at the
direction of the Representative, in either case, pro rata in proportion to
the Panopticon Shareholders' respective percentage interests in the Escrow
Shares.
(b) Standard of Conduct. Neither the Representative
nor any of his partners, members, directors, officers, employees or agents
shall be liable to any of the Panopticon Shareholders for any error of
judgment, act done or omitted by them, or mistake of fact or law in
connection with his services pursuant to Article 12, unless caused by his
own gross negligence or willful misconduct. In taking any action or
refraining from taking any action whatsoever the Representative shall be
protected in relying upon any notice, paper or other document reasonably
believed by him to be genuine, or upon any evidence reasonably deemed by
him to be sufficient. The Representative shall not be required to take any
action which is contrary to this Agreement, the Escrow Agreement or
applicable law. The Representative may consult with counsel in connection
with his duties and shall be fully protected in any act taken, suffered or
permitted by them in good faith in accordance with the advice of counsel.
In connection with their services under Article 12, the Representative
shall not be responsible for determining or verifying the authority of any
person acting or purporting to act on behalf of any party to this
Agreement.
(c) Indemnification. Each Panopticon Shareholder
agrees to indemnify the Representative, ratably in accordance with his or
her pro rata share of the Escrow Shares, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may at any
time be imposed on, incurred by
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<PAGE> 48
or asserted against the Representative in any way relating to or arising
out of this Agreement or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or the
enforcement of any of the terms hereof or thereof or of any such other
documents; provided, however, that no Panopticon Shareholder shall be
liable for any of the foregoing to the extent they arise from the
Representative's gross negligence or willful misconduct. The Representative
shall be fully justified in refusing to take or to continue to take any
action hereunder unless he shall first be indemnified to his reasonable
satisfaction by the Panopticon Shareholders against any and all liability
and expense which may be incurred by him by reason of taking or continuing
to take any such action.
(d) Resignation or Removal of the Representative.
Subject to the appointment and acceptance of a successor Representative as
provided below, the Representative may (i) resign at any time thirty (30)
days subsequent to giving notice thereof to the Panopticon Shareholders,
and (ii) be removed at any time with or without cause by action of the
Panopticon Shareholders who represented a majority of the rights to the
Escrow Shares. Upon any such resignation or removal, holders of a majority
of the Escrow Shares may appoint a successor Representative, which
successor shall be reasonably acceptable to Broadbase. If no successor
Representative shall have been appointed by the Panopticon Shareholders and
accepted such appointment within twenty (20) days after the retiring
Representative's giving of notice of resignation or the Panopticon
Shareholders' removal of the Representative, then the retiring or removed
Representative may, on behalf of the Panopticon Shareholders, appoint a
successor, which shall be reasonably acceptable to Broadbase. Upon the
acceptance of any appointment as the Representative hereunder, such
successor Representative shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring or removed
Representative, and the retiring or removed Representative shall be
discharged from his duties and obligations hereunder. After any retiring
Representative's resignation or removal hereunder as the Representative,
the provisions of Article 12 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was
acting as the Representative.
(e) Representative as Panopticon Shareholder. The
Representative, to the extent he is or was a Panopticon Shareholder, shall
have the same rights and powers under this Agreement as any other
Panopticon Shareholder and may exercise the same as though he were not
serving as the Representative, and the term "Panopticon Shareholder" shall
include the Representative in his capacity as such.
13. MISCELLANEOUS
13.1 Entire Agreement. The Letter Agreement between Panopticon
and Broadbase dated June 26, 2000 with respect to non-disclosure of confidential
information, this Agreement and the exhibits hereto constitute the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect to the subject matter hereof. The express terms
hereof control and supersede any course of performance or usage of trade
inconsistent with any of the terms hereof.
13.2 Assignment; Binding Upon Successors and Assigns. Neither
party hereto may assign any of its rights or obligations hereunder without the
prior written consent of the other party
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hereto. This Agreement will be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
13.3 No Third Party Beneficiaries. No provisions of this
Agreement are intended, nor will be interpreted, to provide or create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, stockholder, partner, employee or any party hereto or any
other Person unless specifically provided otherwise herein, and, except as so
provided, all provisions hereof will be personal solely between the parties to
this Agreement.
13.4 No Joint Venture. Nothing contained in this Agreement
will be deemed or construed as creating a joint venture or partnership between
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party will have
the power to control the activities and operations of any other, and the
parties' status is, and at all times, will continue to be, that of independent
contractors with respect to each other. No party will have any power or
authority to bind or commit any other. No party will hold itself out as having
any authority or relationship in contravention of this Section.
13.5 Construction of Agreement. This Agreement has been
negotiated by the respective parties hereto and their attorneys and have been
reviewed by each party hereto. Accordingly, no ambiguity in the language hereof
will be construed for or against either party.
13.6 Severability. If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
13.7 Section Headings. A reference to an article, Section or
Exhibit will mean an article or Section in, or an Exhibit to, this Agreement,
unless otherwise explicitly set forth. The titles and headings in this Agreement
are for reference purposes only and will not in any manner limit the
construction of this Agreement. For the purposes of such construction, this
Agreement will be considered as a whole.
13.8 Amendment, Extension and Waivers. At any time prior to
the Effective Time, Broadbase, Merger Sub and Panopticon may, to the extent
legally allowed: (a) extend the time for performance of any of the obligations
of the other party; (b) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant thereto; and (c) waive compliance with any of the agreements, covenants
or conditions for the benefit of such party contained herein. Any term or
provision of this Agreement may be amended. Any agreement to any amendment,
extension or waiver will be valid only if set forth in writing and signed by the
party to be bound. The waiver by a party of any breach hereof or default in the
performance hereof will not be deemed to constitute a waiver of any other
default or any succeeding breach or default. The failure of any party to enforce
any of the provisions hereof will not be construed to be a waiver of the right
of such party thereafter to enforce such provisions. The Agreement may be
amended by the parties hereto at any time before or after approval of the
Panopticon Shareholders, but, after such approval, no amendment will be made
which by applicable law requires the further approval of the Panopticon
Shareholders without obtaining such further approval.
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13.9 Governing Law. The validity of this Agreement the
construction of its terms, and the interpretation and enforcement of the rights
and duties of the parties of this Agreement will be exclusively governed by and
construed in accordance with the internal laws of the State of California, as
applied to agreements entered into solely between residents of and to be
performed entirely in the State of California, without reference to that body of
law relating to conflicts of law or choice of law.
13.10 Dispute Resolution. Any dispute hereunder ("DISPUTE")
shall be settled by arbitration, to be held in San Francisco, California, and,
except as herein specifically stated, in accordance with the commercial
arbitration rules of the American Arbitration Association ("AAA RULES") then in
effect. However, in all events, these arbitration provisions shall govern over
any conflicting rules which may now or hereafter be contained in the AAA Rules.
Any judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction over the subject matter thereof. The arbitrator shall
have the authority to grant any equitable and legal remedies that would be
available in any judicial proceeding instituted to resolve a Dispute.
(a) Compensation of Arbitrator. Any such arbitration
will be conducted before a single arbitrator who will be compensated for
his or her services at a rate to be determined by the parties or by the
American Arbitration Association, but based upon reasonable hourly or daily
consulting rates for the arbitrator in the event the parties are not able
to agree upon his or her rate of compensation.
(b) Selection of Arbitrator. The American Arbitration
Association will have the authority to select an arbitrator from a list of
arbitrators who are lawyers familiar with California contract law;
provided, however, that such lawyers cannot work for a firm then performing
services for either party, that each party will have the opportunity to
make such reasonable objection to any of the arbitrators listed as such
party may wish and that the American Arbitration Association will select
the arbitrator from the list of arbitrators as to whom neither party makes
any such objection. In the event that the foregoing procedure is not
followed, each party will choose one person from the list of arbitrators
provided by the American Arbitration Association (provided that such person
does not have a conflict of interest), and the two persons so selected will
select from the list provided by the American Arbitration Association the
person who will act as the arbitrator.
(c) Payment of Costs. Broadbase and Panopticon, or
Broadbase and the Panopticon Shareholders after the Closing, will bear the
expense of deposits and advances required by the arbitrator in equal
proportions, but either party may advance such amounts, subject to recovery
as an addition or offset to any award. The arbitrator will award to the
prevailing party, as determined by the arbitrator, all costs, fees and
expenses related to the arbitration, including reasonable fees and expenses
of attorneys, accountants and other professionals incurred by the
prevailing party.
(d) Burden of Proof. For any Dispute submitted to
arbitration, the burden of proof will be as it would be if the claim were
litigated in a judicial proceeding.
(e) Award. Upon the conclusion of any arbitration
proceedings hereunder, the arbitrator will render findings of fact and
conclusions of law and a written opinion setting forth the basis and
reasons for any decision reached and will deliver such documents to each
party to this Agreement along with a signed copy of the award.
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(f) Terms of Arbitration. The arbitrator chosen in
accordance with these provisions will not have the power to alter, amend or
otherwise affect the terms of these arbitration provisions or the
provisions of this Agreement.
(g) Exclusive Remedy. Except as specifically
otherwise provided in this Agreement, arbitration will be the sole and
exclusive remedy of the parties for any Dispute arising out of this
Agreement.
13.11 Other Remedies. Except as otherwise provided in Section
12.3 or elsewhere herein, any and all remedies herein expressly conferred upon a
party will be deemed cumulative with and not exclusive of any other remedy
conferred hereby or by law on such party, and the exercise of any one remedy
will not preclude the exercise of any other.
13.12 Notices. Any notice or other communication required or
permitted to be given under this Agreement will be in writing, will be delivered
personally or by mail or express delivery, postage prepaid, and will be deemed
given upon actual delivery or, if mailed by registered or certified mail, on the
third business day following deposit in the mails, addressed as follows:
If to Broadbase: Broadbase Software, Inc.
181 Constitution Drive
Menlo Park, California 94025
Attention: Chuck Bay
Phone: (650) 614-8300
Fax: (650) 614-8301
with a copy to: Fenwick & West LLP
Two Palo Alto Square
Palo Alto, California 94306
Attention: David K. Michaels
Phone: (650) 494-0600
Fax: (650) 494-1417
If to Panopticon: Panopticon, Inc.
955 Alma Street; Suite B
Palo Alto, CA 94301
Attention: Stanley Kim
Phone: (650) 833-5960
Fax: (650) 833-5961
with a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Steven E. Bochner
Phone: (650) 493-9300
Fax: (650) 493-6811
or to such other address as the party in question may have furnished to the
other party by written notice given in accordance with this Section 13.12.
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13.13 Time is of the Essence. The parties hereto acknowledge
and agree that time is of the essence in connection with the execution, delivery
and performance of this Agreement.
13.14 Counterparts. This Agreement may be executed in
counterparts, each of which will be an original as regards any party whose name
appears thereon and all of which together will constitute one and the same
instrument. This Agreement will become binding when one or more counterparts
hereof, individually or taken together, bear the signatures of both parties
reflected hereon as signatories.
[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BROADBASE SOFTWARE, INC. PANOPTICON, INC.
By: /s/ RUSTY THOMAS By: /s/ STANLEY KIM
---------------------------------- --------------------------------
Rusty Thomas, Stanley Kim
Executive Vice President and President and Chief Executive
Chief Financial Officer Officer
BRIDGE ACQUISITION CORP.
By: /s/ ERIC WILLGOHS
-----------------------------------
Eric Willgohs, President
[SIGNATURE PAGE TO
AGREEMENT AND PLAN OF MERGER]
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<PAGE> 54
EXHIBIT LIST
A-1. Agreement of Merger
A-2. Certificate of Merger
B. Form of Voting Agreement and Irrevocable Proxy
C. Form of Employment Agreement
D. Escrow Agreement
E. Panopticon Financial Statements (omitted)
F. Form of Panopticon Invention Assignment and Confidentiality
Agreement
G. Convertible Promissory Note
<PAGE> 55
EXHIBIT A-1
AGREEMENT OF MERGER
This Agreement of Merger (this "AGREEMENT") is entered into as of
September 15, 2000, by and among Bridge Acquisition Corp., a Delaware
corporation ("BRIDGE") and Panopticon, Inc., a California corporation
("PANOPTICON").
RECITALS
A. Broadbase Software, Inc., a Delaware corporation, and the parent of
Bridge ("BROADBASE"), Bridge and Panopticon have entered into an Agreement and
Plan of Merger, dated as of July 6, 2000 (the "PLAN OF MERGER"), that provides
for the statutory merger of Bridge with and into Panopticon.
B. The Boards of Directors of Broadbase, Bridge and Panopticon have
determined it to be advisable and in the respective interests of Broadbase,
Bridge and Panopticon and their stockholders and shareholders, respectively,
that Bridge be merged with and into Panopticon in a reverse triangular merger
(the "MERGER") in accordance with the California General Corporation Law
("CALIFORNIA LAW") and the Delaware General Corporation Law ("DELAWARE LAW") so
that Panopticon will be the surviving corporation of the Merger and will be a
wholly-owned subsidiary of Broadbase subsequent to the Merger.
NOW, THEREFORE, Bridge and Panopticon hereby agree as follows:
1. TERMS OF THE MERGER. The effective time of the Merger will be the
time and date on which this Agreement and any required officers' certificates
are filed with the office of the California Secretary of State in accordance
with Section 1108(c) of California Law (the "EFFECTIVE TIME"). On the terms and
subject to the conditions of this Agreement, Bridge will be merged with and into
Panopticon in a statutory merger pursuant to this Agreement in accordance with
applicable provisions of California Law as follows:
(a) Conversion of Panopticon Securities. In connection with
the Merger, Broadbase will issue up to an aggregate of 3,179,810 fully paid
and nonassessable shares of Broadbase common stock in exchange for all of
the securities (including shares of common stock, preferred stock, options,
warrants and other rights) of Panopticon outstanding immediately prior to
the Effective Time.
(i) Conversion of Panopticon Shares. Except as set
forth in Section 1(c), each share of Panopticon common stock and
Panopticon Series A Preferred Stock that is issued and outstanding
immediately prior to the Effective Time, other than shares, if any, for
which dissenters' rights have been or may be perfected in compliance
with applicable law, will, by virtue of the Merger and at the Effective
Time, and without further action on the part of any holder thereof, be
converted into and represent the right to receive 0.3475 shares of
Broadbase common stock (the "CONVERSION RATIO").
(ii) Dissenting Shares. Notwithstanding anything to
the contrary contained in this Agreement, any shares of Panopticon
common stock or Panopticon Series A Preferred Stock that, as of the
Effective Time, are or may become "dissenting shares" within the
meaning of Section 1300(b) of the California Corporations Code shall
not be converted into or represent the right to receive Broadbase
common stock in accordance with Section 1(a) (or cash in lieu of
<PAGE> 56
fractional shares in accordance with Section 1(a)(v)), and the holder
or holders of such shares shall be entitled only to such rights as may
be granted to such holder or holders in Chapter 13 of the California
General Corporation Law; provided, however, that if the status of any
such shares as "dissenting shares," shall not be perfected, or if any
such shares lose their status as "dissenting shares," then, as of the
later of the Effective Time or the time of the failure to perfect such
status or the loss of such status, such shares shall automatically be
converted into and shall represent only the right to receive (upon
surrender of the certificate or certificates representing such shares)
Broadbase common stock in accordance with Section 1(a)(i) (and cash in
lieu of fractional shares in accordance with Section 1(a)(v)).
(iii) Conversion of Panopticon Options and Warrants.
(A) Panopticon Options. Upon the Effective
Time of the Merger, each option to purchase Panopticon common
stock (a "PANOPTICON OPTION") that is outstanding immediately
prior to the Effective Time (whether vested or unvested, and
whether an incentive or a nonqualified stock option) will be
assumed by Broadbase and converted into an option (a "BROADBASE
OPTION") to purchase that number of shares of Broadbase common
stock that is equal to the number of shares of Panopticon common
stock that could be purchased pursuant to the Panopticon Option,
multiplied by the Conversion Ratio, rounded down to the nearest
whole number. The per share exercise price for each Broadbase
Option shall be equal to the exercise price per share of such
Panopticon Option immediately prior to the Effective Time, divided
by the Conversion Ratio, rounded up to the nearest whole cent. No
cash will be paid in lieu of fractional shares that are rounded
down.
(B) Panopticon Warrants. Upon the Effective
Time of the Merger, each warrant to purchase Panopticon capital
stock (a "PANOPTICON WARRANT") that is outstanding immediately
prior to the Effective Time will be assumed by Broadbase and
converted into a warrant (a "BROADBASE WARRANT") to purchase that
number of shares of Broadbase common stock that could be purchased
pursuant to the Panopticon Warrant, multiplied by the Conversion
Ratio, rounded down to the nearest whole number. The per share
exercise price of each Broadbase Warrant shall be equal to the
exercise price per share of such Panopticon Warrant immediately
prior to the Effective Time, divided by the Conversion Ratio,
rounded up to the nearest whole cent. No Broadbase Warrants or
Broadbase common stock shall be issued with respect to the
Panopticon Warrant held by Kindling I LLC issued August 15, 1999
(with respect to the remaining shares subject to such warrant) and
all other Panopticon Warrants which, by their terms, will never
become exercisable.
(iv) Adjustments for Capital Changes. If prior to the
Merger, Broadbase recapitalizes either through a split-up of the
outstanding shares of Broadbase common stock into a greater number, or
through a combination of such outstanding shares into a lesser number,
or reorganizes, reclassifies or otherwise changes such outstanding
shares into the same or a different number of shares of other classes
(other than through a split-up or combination of shares provided for in
the previous clause), or declares a dividend on its outstanding shares
payable in shares or securities convertible into shares or sets a
record date with respect to any of the foregoing that is before the
Effective Time, the calculation of the Conversion Ratio will be
adjusted appropriately.
(v) No Fractional Shares. Notwithstanding the above
conversion formulas, no fractional shares of Broadbase common stock
will be issued in connection with the Merger.
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In lieu thereof, a Panopticon shareholder who would otherwise be
entitled to receive a fraction of a share of Broadbase common stock
(excluding with respect to the Panopticon Options and Panopticon
Warrants) will instead receive in cash in an amount equal to the
product obtained by multiplying (i) the closing price of Broadbase
common stock on the Nasdaq National Market on the last trading day
before the Effective Time, by (ii) the fraction of a share of Broadbase
common stock which such holder would otherwise be entitled to receive.
(b) Escrow. Broadbase will deduct, on a pro rata basis from
the number of shares to be issued to each Panopticon shareholder, ten
percent (10%) of the shares of Broadbase common stock issuable in the
Merger to the holders of Panopticon common stock immediately prior to the
Effective Time, rounded to the nearest whole share (the "ESCROW SHARES").
An escrow agent will hold the Escrow Shares and dividends as collateral for
Panopticon's indemnification obligations and release shares to satisfy
valid claims, pursuant to Article 12 of the Plan of Merger. The escrow
agent will continue to hold Escrow Shares and dividends not released in
satisfaction of claims until the first anniversary of the Closing Date
(such period is referred to as the "ESCROW PERIOD"). Stock dividends that
are issued in order to effect a stock split of Broadbase common stock on
Escrow Shares paid during the Escrow Period shall also be held in escrow
until such Escrow Shares are released.
(c) Shares of Panopticon Held By Broadbase or Bridge. Each
share of Panopticon common stock held by Broadbase or Bridge immediately
prior to the Effective Time will, at the Effective Time, be cancelled,
without consideration and will not be converted into Broadbase common
stock.
(d) Conversion of Bridge Shares. Each share of Bridge common
stock that is issued and outstanding immediately prior to the Effective
Time will, by virtue of the Merger and without further action on the part
of the sole stockholder of Bridge, be converted into and become one share
of Panopticon common stock that is issued and outstanding immediately after
the Effective Time, and the shares of Panopticon common stock into which
the shares of Bridge common stock are so converted shall be the only shares
of Panopticon common stock that are issued and outstanding immediately
after the Effective Time.
2. EFFECTS OF THE MERGER. As of the Effective Time: (a) the
separate existence of Bridge will cease and Bridge will be merged with and into
Panopticon, and Panopticon will be the surviving corporation of the Merger; (b)
the Articles of Incorporation of Panopticon will be amended and restated as set
forth in Exhibit A; (c) pursuant to Section 1(a), each share of Panopticon
common stock and Panopticon preferred stock outstanding immediately prior to the
Effective Time will be converted into Broadbase common stock and each Panopticon
Option and Panopticon Warrant will be converted into a Broadbase Option or
Broadbase Warrant, as applicable, except as otherwise provided in Section
1(a)(iii); (d) each share of Bridge common stock outstanding immediately prior
to the Effective Time will be converted into one outstanding share of Panopticon
common stock; (e) the sole director of Bridge prior to the Effective Time will
become the sole director of the surviving corporation and the officers of Bridge
will become the officers of the surviving corporation; and (f) the Merger will,
at and after the Effective Time, have all of the effects provided by applicable
law.
3. FURTHER ASSURANCES. Bridge agrees that if, at any time after the
Effective Time, Broadbase or Panopticon considers that any further deeds,
assignments or assurances are reasonably necessary or desirable to vest, perfect
or confirm in Panopticon title to any property or rights of Bridge as provided
herein, Broadbase, Panopticon and all of their officers are hereby authorized by
Bridge to execute and deliver all such proper deeds, assignments and assurances
and do all other things necessary or desirable to vest, perfect or confirm title
to such property or rights in Panopticon or Broadbase and
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otherwise to carry out the purposes of this Agreement, in the name of Bridge or
otherwise.
[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date and year first above written.
BRIDGE ACQUISITION CORP. PANOPTICON, INC.
By: /s/ ERIC WILLGOHS By: /s/ STANLEY KIM
-------------------------- ------------------------------
Eric Willgohs, Stanley Kim,
President and Secretary President
By: /s/ STEPHEN BOCHNER
------------------------------
Stephen Bochner,
Secretary
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<PAGE> 60
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
PANOPTICON, INC.
ARTICLE I
The name of the corporation is Panopticon, Inc.
ARTICLE II
The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
The liability of the directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
Unless applicable law otherwise provides, any amendment, repeal or modification
of this Article III shall not adversely affect any right of any director under
this Article III that existed at or prior to the time of such amendment, repeal
or modification.
ARTICLE IV
The corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through bylaw
provisions, agreements with agents, vote of shareholders or disinterested
directors or otherwise, in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to the applicable
limits on such excess indemnification set forth in Section 204 of the California
Corporations Code. Unless applicable law otherwise provides, any amendment,
repeal or modification of any provision of this Article IV shall not adversely
affect any contract or other right to indemnification of any agent of the
corporation that existed at or prior to the time of such amendment, repeal or
modification.
ARTICLE V
The corporation is authorized to issue only one class of shares of
stock, which shall be designated "Common Stock" and which shall have no par
value. The total number of shares of Common Stock the corporation is authorized
to issue is one thousand (1,000) shares.
<PAGE> 61
EXHIBIT A-2
CERTIFICATE OF MERGER
FOR THE MERGER OF
BRIDGE ACQUISITION CORP.
WITH AND INTO
PANOPTICON, INC.
-----------------------------------------------
PURSUANT TO SECTION 252 OF THE
DELAWARE GENERAL CORPORATION LAW
-----------------------------------------------
Panopticon, Inc., a California corporation ("PANOPTICON"), does hereby
certify to the following facts relating to the merger (the "MERGER") of Bridge
Acquisition Corp., a Delaware corporation ("BRIDGE"), with and into Panopticon,
with Panopticon to be the surviving corporation of the Merger (the "SURVIVING
CORPORATION"):
FIRST: Panopticon and Bridge are the constitutent corporations in the Merger.
Panopticon is a corporation incorporated pursuant to the laws of the
State of California, and Bridge is a corporation incorporated pursuant
to the laws of the State of Delaware.
SECOND: An Agreement and Plan of Merger has been approved, adopted, certified,
executed and acknowledged by Panopticon and by Bridge in accordance
with the provisions of Section 252 of the Delaware General Corporation
Law (the "DGCL").
THIRD: The Surviving Corporation will be Panopticon, Inc.
FOURTH: Upon the effectiveness of the Merger, the articles of incorporation of
Panopticon shall be amended and restated to read in its entirety as set
forth in Exhibit A attached hereto.
FIFTH: The executed Agreement and Plan of Merger is on file at the principal
place of business of Panopticon, the Surviving Corporation, at 955 Alma
Street, Suite B; Palo Alto, CA 94301.
SIXTH: A copy of the executed Agreement and Plan of Merger will be furnished
by Panopticon, the Surviving Corporation, on request and without cost,
to any stockholder of any constituent corporation of the Merger.
SEVENTH: The Surviving Corporation agrees that it may be served with process in
the State of Delaware in any proceeding for enforcement of any
obligation of Bridge or the Surviving Corporation, including any suit
or other proceeding to enforce the right of any stockholders as
determined in appraisal proceedings pursuant to Section 262 of the
DGCL. The Surviving Corporation irrevocably appoints the
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Delaware Secretary of State as its agent to accept service of process
in any such suit or other proceedings. A copy of any such service of
process should be mailed to Broadbase, attn: General Counsel, 181
Constitution Drive, Menlo Park, California 94025.
EIGHTH: This Certificate of Merger shall become effective at 4:15 p.m. Eastern
Time on September 15, 2000.
IN WITNESS WHEREOF, Panopticon has caused this Certificate to be
executed by its duly authorized President as of September 15, 2000.
PANOPTICON, INC.,
a California corporation
By: /s/ STANLEY KIM
------------------------------------------
Stanley Kim,
Chief Executive Officer and President
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ARTICLES OF INCORPORATION
OF
PANOPTICON, INC.
ARTICLE I
The name of the corporation is Panopticon, Inc.
ARTICLE II
The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
The liability of the directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
Unless applicable law otherwise provides, any amendment, repeal or modification
of this Article III shall not adversely affect any right of any director under
this Article III that existed at or prior to the time of such amendment, repeal
or modification.
ARTICLE IV
The corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through bylaw
provisions, agreements with agents, vote of shareholders or disinterested
directors or otherwise, in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to the applicable
limits on such excess indemnification set forth in Section 204 of the California
Corporations Code. Unless applicable law otherwise provides, any amendment,
repeal or modification of any provision of this Article IV shall not adversely
affect any contract or other right to indemnification of any agent of the
corporation that existed at or prior to the time of such amendment, repeal or
modification.
ARTICLE V
The corporation is authorized to issue only one class of shares of
stock, which shall be designated "Common Stock" and which shall have no par
value. The total number of shares of Common Stock the corporation is authorized
to issue is one thousand (1,000) shares.
<PAGE> 64
EXHIBIT B
VOTING AGREEMENT AND IRREVOCABLE PROXY
THIS VOTING AGREEMENT AND IRREVOCABLE PROXY, dated as of July 6, 2000
(this "AGREEMENT"), is entered into by and between Broadbase Software, Inc., a
Delaware corporation ("BROADBASE"), and ___________ ("STOCKHOLDER") .
RECITALS
A. Concurrently herewith, Broadbase, Panopticon, Inc., a California
corporation ("PANOPTICON") and Bridge Acquisition Corp., a Delaware corporation
("MERGER SUB") have entered into an Agreement and Plan of Merger, of even date
herewith (as such agreement may hereafter be amended from time to time, the
"MERGER AGREEMENT"; initially capitalized and other terms used but not defined
herein shall have the meanings ascribed to them in the Merger Agreement),
pursuant to which Merger Sub will merge with and into Panopticon (the "MERGER");
B. Stockholder Beneficially Owns (as defined herein) such number of
shares of Panopticon common stock and/or preferred stock as are indicated on the
final page of this Agreement (the "SHARES");
C. As an inducement and a condition to entering into the Merger
Agreement and consummating the Merger, Broadbase has requested that Stockholder
agree, and Stockholder has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained
herein, the parties hereto hereby agree as follows:
1. DEFINITIONS.
(a) "BENEFICIALLY OWN," "BENEFICIALLY OWNED" or "BENEFICIAL
OWNERSHIP" with respect to any Shares shall mean Stockholder's having record or
beneficial ownership of such Shares or having, through any agreement or
arrangement, the power to direct the voting with respect to, or otherwise
enables Stockholder to legally act in a binding manner with respect to, such
Shares as contemplated hereby.
(b) "THIRD PARTY" means any person (which includes a "person"
as such term is defined in Section 13(d)(3) of the Exchange Act) other than
Broadbase or any affiliate thereof.
(c) "THIRD PARTY ACQUISITION" means the occurrence of any of
the following events: (i) the acquisition of Panopticon by merger or otherwise
by any Third Party; (ii) the acquisition by a Third Party of any material
portion (which shall include ten percent (10%) or more) of the assets of
Panopticon, other than the sale or license of its products in the ordinary
course of business; (iii) the acquisition by a Third Party of ten percent (10%)
or more of the outstanding shares of Panopticon's capital stock (other than any
such acquisition resulting from the exercise or conversion of any stock option,
stock warrant, convertible debt instrument and/or other security of Panopticon
that is outstanding on the date of this Agreement); (iv) the adoption by
Panopticon of a plan of liquidation or the declaration or payment of an
extraordinary dividend; (v) the repurchase by Panopticon of more than ten
percent (10%) of the outstanding Shares (other than pursuant to rights of
refusal or similar rights held by Panopticon as of the date of this Agreement or
pursuant to repurchase options held by Panopticon that
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are exercisable in connection with the termination of a person's employment or
services with or to Panopticon or any of its subsidiaries); or (vi) the
acquisition (or any group of acquisitions) by Panopticon by merger, purchase of
stock or assets, joint venture or otherwise, of a direct or indirect ownership
interest or investment in any business (or businesses) whose annual revenues,
net income or assets is equal to or greater than ten percent (10%) of the most
recent annual revenues, net income or assets of Panopticon, respectively.
2. VOTING AGREEMENT.
(a) Stockholder hereby agrees with Broadbase that, (except as
may be otherwise agreed to in writing by Broadbase) at any meeting of
Panopticon's shareholders, however called, or in connection with any written
consent of Panopticon's shareholders, as to which any of the matters described
below in this Section 2 is put to the vote or written consent of Panopticon's
shareholders, Stockholder shall vote the Shares Beneficially Owned by
Stockholder, whether now owned or hereafter acquired prior to such vote: (i) in
favor of approval of the Merger Agreement, the Merger and any actions required
in furtherance of the transactions contemplated thereby; (ii) against any action
or agreement that would result in a breach in any material respect of (A) any
representation or warranty of Panopticon under the Merger Agreement that would
have a Material Adverse Effect on Panopticon or (B) any other agreement,
covenant or obligation of Panopticon under the Merger Agreement; and (iii)
against: (A) any Third Party Acquisition, (B) any change in a majority of the
individuals who, as of the date hereof, constitute the Board of Directors of
Panopticon, unless such change results from an election to replace any such
individual who ceases to be a member of the Board of Directors of Panopticon due
to such individual's death, disability or resignation from Panopticon's Board of
Directors for reasons unrelated to any matter that Stockholder agrees to vote
against hereunder, (C) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving Panopticon and any
Third Party, (D) a sale, lease, transfer or disposition of any assets of
Panopticon's business outside the ordinary course of business, or any assets
which are material to its business whether or not in the ordinary course of
business, (E) any reorganization, recapitalization, dissolution or liquidation
of Panopticon, (F) any change in the present capitalization of Panopticon or any
amendment of Panopticon's Certificate of Incorporation, Bylaws or other charter
documents not contemplated by the Merger Agreement or not consented to in
writing by Broadbase, (G) any other material change in Panopticon's corporate
structure other than the approval of stock options disclosed in Panopticon's
representations and warranties in the Merger Agreement or in any Disclosure
Schedule thereto) or any other change materially affecting Panopticon's
business, (H) any other action or proposal which is made in opposition to or in
competition with consummation of the Merger, or which is intended, or could
reasonably be expected, to impede, interfere with, delay, postpone or materially
adversely affect the Merger or any of the other transactions contemplated by the
Merger Agreement, or any of the transactions contemplated by this Agreement.
Stockholder shall not enter into any agreement or understanding with any person
the effect of which would be inconsistent or violative of the provisions and
agreements contained herein.
(b) Stockholder agrees that any shares of capital stock of
Panopticon that Stockholder purchases or with respect to which Stockholder
otherwise acquires Beneficial Ownership or over which Stockholder exercises
voting power at any time after the execution of this Agreement and prior to the
date of termination of this Agreement pursuant to Section 8 shall be subject to
the terms and conditions of this Agreement to the same extent as if they
constituted Shares on the date hereof; provided, however, nothing in this
Agreement shall be construed to obligate Stockholder to exercise any options or
warrants to purchase shares of Panopticon common stock or preferred stock that
may be held by Stockholder.
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<PAGE> 66
3. IRREVOCABLE PROXY.
(a) Subject to the terms and conditions of this Agreement, and
effective upon the issuance of a permit by the California Commissioner of
Corporations or the availability of an exemption under Section 4(2) of the
Securities Act of 1933, as amended, or Regulation D thereunder, with respect to
the securities to be issued in the Merger, the Stockholder hereby constitutes
and appoints Broadbase, which shall act by and through Rusty Thomas and Eric
Willgohs (each, a "PROXY HOLDER") or either of them, with full power of
substitution, its true and lawful proxy and attorney-in-fact to vote at any
meeting (and any adjournment or postponement thereof) of Panopticon's
stockholders called for purposes of considering whether to approve the Merger
Agreement, the Merger or any of the other transactions contemplated by the
Merger Agreement, or any Third Party Acquisition, or to execute a written
consent of stockholders in lieu of any such meeting, all Shares Beneficially
Owned by Stockholder as of the date of such meeting or written consent (i) in
favor of the approval of the Merger Agreement, the Merger and the other
transactions contemplated by the Merger Agreement, with such modifications to
the Merger Agreement as the parties thereto may make, or (ii) against any Third
Party Acquisition or any other transaction or proposal described in clause (ii)
or (iii) of Section 2, as the case may be.
(b) The proxy and power of attorney granted herein shall be
irrevocable during the term of this Agreement, shall be deemed to be coupled
with an interest sufficient in law to support an irrevocable proxy and shall
revoke all prior proxies granted by Stockholder. Stockholder shall not grant any
proxy to any person which conflicts with the proxy granted herein, and any
attempt to do so shall be void. The power of attorney granted herein is a
durable power of attorney and shall survive the insolvency, liquidation, death
or incapacity of Stockholder. The proxy and power of attorney granted herein
shall be binding upon the successors and assigns of Stockholder. Stockholder
authorizes the Proxy Holders to file this proxy and any substitution or
revocation of substitution with the Secretary of Panopticon and with any
Inspector of Elections at any meeting of the shareholders of Panopticon.
(c) If Stockholder fails for any reason to vote his, her or
its Shares in accordance with the requirements of Section 2, then the Proxy
Holder shall have the right to vote the Shares at any meeting of Panopticon's
shareholders and in any action by written consent of Panopticon's shareholders
in accordance with the provisions of this Section 3. The vote of the Proxy
Holder shall control in any conflict between the Proxy Holder's vote of such
Shares and a vote by Stockholder of such Shares.
4. WAIVERS.
(a) Appraisal Rights. Stockholder hereby agrees not to
exercise any rights of appraisal and any dissenters' rights that Stockholder may
have (whether under applicable law or otherwise) or could potentially have or
acquire in connection with the Merger.
(b) Other Rights. Stockholder hereby waives any rights of
first refusal, rights of first offer, rights to notice, rights of co-sale,
tag-along rights, information rights, registration rights, preemptive rights,
rights of redemption or repurchase, and similar rights of Stockholder under any
agreement, arrangement of understanding applicable to the Shares, in each case
as the same may apply to the execution and delivery of the Merger Agreement and
the consummation of the Merger and the other actions and transactions
contemplated by the Merger Agreement.
5. DIRECTOR MATTERS EXCLUDED. Broadbase acknowledges and agrees
that no provision of this Agreement (including without limitation the provisions
of Section 6(f)) shall limit or otherwise
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restrict Stockholder (or its representatives) with respect to any act or
omission that Stockholder (or its representatives) may undertake or authorize in
his or her capacity as a director of Panopticon, including, without limitation,
any vote that Stockholder (or its representatives) may make as a director of
Panopticon with respect to any matter presented to the Board of Directors of
Panopticon.
6. OTHER COVENANTS, REPRESENTATIONS AND WARRANTIES. Stockholder
hereby represents and warrants to Broadbase as follows:
(a) Ownership of Shares. Stockholder is the Beneficial Owner
of all the Shares. On the date hereof, the Shares constitute all of the Shares
Beneficially Owned by Stockholder. Stockholder has voting power with respect to
the matters set forth in Section 2 with respect to all of the Shares, with no
limitations, qualifications or restrictions on such rights.
(b) Other Rights. Stockholder is not entitled to any rights of
first refusal, rights of first offer, rights to notice, rights of co-sale,
tag-along rights, information rights, registration rights, preemptive rights,
rights of redemption or repurchase or similar rights under any agreement,
arrangement of understanding applicable to the Shares, except as disclosed in
the Panopticon Disclosure Letter (as defined in the Merger Agreement).
(c) Power and Authority; Due Execution and Delivery.
Stockholder has all requisite legal capacity, power and authority to execute and
deliver this Agreement and to perform Stockholder's obligations hereunder. This
Agreement has been duly executed and delivered by Stockholder and constitutes a
legal, valid and binding obligation of Stockholder, enforceable against
Stockholder in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
(d) No Conflict. The execution and delivery of this Agreement
by Stockholder do not, and the performance of this Agreement by Stockholder will
not: (i) conflict with or violate any order, decree or judgment applicable to
Stockholder or by which Stockholder or any of Stockholder's properties or Shares
is bound or affected; (ii) violate any agreement to which Stockholder is a party
or is subject including, without limitation, any voting agreement or voting
trust; or (iii) result in any breach of or constitute a default (with notice or
lapse of time, or both) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of any
lien, restriction, adverse claim, option on, right to acquire, or any
encumbrance or security interest in or to, any of the Shares pursuant to, any
written, oral or other agreement, contract or legally binding commitment to
which Stockholder is a party or by which Stockholder or any of Stockholder's
properties (including but not limited to the Shares) is bound or affected.
(e) Restriction on Transfer, Proxies and Non-Interference.
During the term of this Agreement, except as expressly contemplated by this
Agreement or the Merger Agreement, Stockholder shall not, directly or
indirectly: (i) offer for sale, sell, transfer, tender, pledge, encumber, assign
or otherwise dispose of, or enter into any contract, option or other arrangement
or understanding with respect to, or consent to the offer for sale, sale,
transfer, tender, pledge, encumbrance, assignment or other disposition of, any
or all of the Shares or any interest therein unless the transferee shall execute
a signature page to this Irrevocable Proxy and Voting Agreement and shall agree
to be bound to the provisions hereof; (ii) grant any proxies or powers of
attorney or deposit any Shares into a voting trust or enter into a voting
agreement with respect to any Shares; or (iii) take any action that would make
any representation or warranty of Stockholder contained in this Section 6 untrue
or incorrect or have the
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effect of preventing or disabling Stockholder from performing any of
Stockholder's obligations under this Agreement.
In addition, Stockholder acknowledges that any shares of
Broadbase common stock issued to Stockholder as a result of the Merger shall
bear legends restricting transfers (i) to the extent required by Rule 145 under
the Securities Act of 1933, if applicable, and (ii) to the extent that such
shares are bound by contractual restrictions on resale or a right of repurchase.
(f) Other Potential Acquirors. Stockholder: (i) shall
immediately cease any existing discussions or negotiations, if any, with any
persons (other than Broadbase and its affiliates) conducted heretofore with
respect to any acquisition of all or any material portion of the assets of, or
any equity interest in, Panopticon, or any business combination with Panopticon,
in his, her or its capacity as a stockholder of Panopticon; (ii) from and after
the date hereof until the earlier of (A) the termination of the Merger Agreement
in accordance with its terms and (B) the Effective Time, shall not, in such
capacity as a stockholder of Panopticon, directly or indirectly, initiate,
solicit or knowingly encourage (including, without limitation, by way of
furnishing nonpublic information or assistance), or take any other action to
facilitate knowingly, any inquiries or the making of any Third Party
Acquisition; and (iii) shall promptly notify Broadbase of any proposals for, or
inquiries with respect to, a potential Third Party Acquisition received by
Stockholder or of which Stockholder otherwise has knowledge.
(g) Accuracy; Reliance by Broadbase. The representations and
warranties of Stockholder contained in this Agreement are accurate in all
respects as of the date of this Agreement and will be accurate in all respects
as of the date of the consummation of the Merger as if made on that date.
Stockholder understands and acknowledges that Broadbase is entering into the
Merger Agreement in reliance upon Stockholder's execution and delivery of this
Agreement.
7. STOP TRANSFER. Stockholder agrees with, and covenants to,
Broadbase that Stockholder shall not request that Panopticon register the
transfer (book-entry or otherwise) of any certificate or uncertificated interest
representing any Shares, unless such transfer is made pursuant to and in
compliance with this Agreement. In the event of a dividend or distribution of
capital stock of Panopticon, or any change in Panopticon common stock or
preferred stock by reason of any stock dividend, split-up, recapitalization,
combination, exchange of shares or the like, the term "Shares" shall be deemed
to refer to and include the Shares as well as all such shares of Panopticon's
capital stock issued or distributed pursuant to such stock dividends and
distributions and any shares of Panopticon's capital stock into which or for
which any or all of the Shares may be so changed or exchanged.
8. TERMINATION. The proxy granted pursuant to Section 3 and
Stockholder's covenants and agreements contained herein with respect to the
Shares shall terminate upon the earliest to occur of: (a) the termination of the
Merger Agreement or (b) the Effective Time.
9. MISCELLANEOUS.
(a) Entire Agreement. This Agreement, together with the Merger
Agreement, constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
(b) Assignment. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
party; provided, however, that Broadbase may, in
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its sole discretion, assign its rights and obligations hereunder to any wholly
owned subsidiary of Broadbase.
(c) Amendments, Waivers Etc. This Agreement may not be
amended, changed, supplemented or otherwise modified or terminated, except upon
the execution and delivery of a written agreement executed by the parties
hereto. No waiver by a party hereto of any of its rights hereunder shall be
effective unless and to the extent such waiver is set forth in a writing signed
by such party.
(d) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by hand
delivery, telecopy, or by mail (registered or certified mail, postage prepaid,
return receipt requested) or by any nationally-recognized overnight courier
service, such as Federal Express, providing proof of delivery. Any such notice
or communication shall be deemed to have been delivered and received (i) in the
case of hand delivery, on the date of such delivery, (ii) in the case of
telecopy, on the date seat if confirmation of receipt is received and such
notice is also promptly mailed by registered or certified mail (return receipt
requested); (iii) in the case of a nationally-recognized overnight courier
service, in circumstances under which such courier guarantees next business day
delivery, on the next business day after the date when sent, and (iv) the case
of mailing, on the third business day following that on which the piece of mail
containing such communication is posted. All communications hereunder shall be
delivered to the respective parties at the following addresses:
If to Stockholder: [name of Stockholder]
c/o Panopticon, Inc.
955 Alma Street; Suite B
Palo Alto, CA 94301
Phone: (650) 833-5960
Fax: (650) 833-5961
with a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Steve Bochner
Phone: (650) 493-9300
Fax: (650) 493-6811
If to Broadbase: Broadbase Software, Inc.
181 Constitution Drive
Menlo Park, California 94025
Attention: Eric Willgohs
Phone: (650) 614-8300
Fax: (650) 614-8301
with a copy to: Fenwick &West, LLP
Two Palo Alto Square
Palo Alto, CA 94036
Attention: David K. Michaels
Phone: (650) 494-0600
Fax: (650) 494-1417
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or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the matter set forth above.
(e) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision had
never been contained herein.
(f) Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damage for
which it would not have an adequate remedy at law for money damages, and
therefore each of the parties hereto agrees that in the event of any such breach
the aggrieved party shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in equity.
(g) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to rosin upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof shall not constitute a waiver by such
party of its right to exercise any such other right, power or remedy or to
demand such compliance.
(h) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of California, without giving
effect to the principles of conflicts of law.
(i) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but alt of which,
taken together, shall constitute one and the name Agreement.
[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY.]
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IN WITNESS WHEREOF, Broadbase and Stockholder have caused this
Agreement to be duly executed as of the date first above written.
BROADBASE SOFTWARE, INC. STOCKHOLDER
By:
--------------------------------- -----------------------------------
Rusty Thomas, [Name of Stockholder]
Executive Vice President and
Chief Financial Officer
Shares of Panopticon common stock
Beneficially Owned: ____________
Shares of Panopticon preferred stock
Beneficially Owned: ____________
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EXHIBIT C
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of ____________, 2000, by
and between ________________ (the "Employee") and BROADBASE SOFTWARE, INC., a
Delaware corporation (the "Company"). This Agreement shall be effective at the
effective time of the merger (the "Merger") contemplated by the Merger Agreement
and Plan of Reorganization dated July 5, 2000, by and among the Company,
Panopticon, Inc., a ____________ corporation ("Panopticon"), and __________
Acquisition Corp., a Delaware Corporation and a wholly owned subsidiary of the
Company (the "Merger Agreement"). This Agreement shall be null and void, and no
parties shall be deemed to have any rights hereunder, unless and until the
Merger is consummated.
1. DUTIES AND SCOPE OF EMPLOYMENT.
(a) POSITION. The Company agrees to employ the
Employee in the position (the "Position") of _______________ of Consulting
Services (the "Employment"). The Employee shall report to the person designated
by the Company.
(b) OBLIGATIONS TO THE COMPANY. During his
Employment, the Employee shall devote his full business efforts and time to the
Company. During his Employment, without the prior written approval of the
Company's Board of Directors, the Employee shall not render services in any
capacity to any other person or entity and shall not act as a sole proprietor or
partner of any other person or entity or as a shareholder owning more than five
percent of the stock of any other corporation, except that the services
identified in Attachment A, with respect to the specified entities, is hereby
approved. The Employee shall have those responsibilities as the Company may
reasonably determine to be consistent with the Employee's position. The Employee
shall comply with the Company's policies and rules, as they may be in effect
from time to time during his Employment.
(c) NO CONFLICTING OBLIGATIONS. The Employee
represents and warrants to the Company that he is under no obligations or
commitments, whether contractual or otherwise, that are inconsistent with his
obligations under this Agreement. The Employee represents and warrants that he
will not use or disclose, in connection with his employment by the Company, any
trade secrets or other proprietary information or intellectual property in which
the Employee or any other person has any right, title or interest and that his
employment by the Company as contemplated by this Agreement will not infringe or
violate the rights of any other person. The Employee represents and warrants to
the Company that he has returned all property and confidential information
belonging to any prior employer.
2. SALARY. The Company shall pay the Employee as
compensation for his services a base salary at a gross annual rate of not less
than $_____,000. Such salary shall be payable in accordance with the Company's
standard payroll procedures. Employee will be eligible for a target bonus of
$__,000 pursuant to the Company's bonus policy.
<PAGE> 73
3. VACATION AND EMPLOYEE BENEFITS. During his Employment, the
Employee shall be eligible for paid vacations in accordance with the Company's
standard policy for similarly-situated employees, as it may be amended from time
to time. During his Employment, the Employee shall be eligible to participate in
the employee benefit plans maintained by the Company for similarly-situated
employees, subject in each case to the generally applicable terms and conditions
of the plan in question and to the determinations of any person or committee
administering such plan.
4. BUSINESS EXPENSES. During his Employment, the Employee
shall be authorized to incur necessary and reasonable travel, entertainment and
other business expenses in connection with his duties hereunder. The Company
shall reimburse the Employee for such expenses upon presentation of an itemized
account and appropriate supporting documentation, all in accordance with the
Company's generally applicable policies.
5. VESTING OF EQUITY IN THE COMPANY. Notwithstanding any
provision in any plan, employment agreement, offer letter or other agreement
between Employee and Panopticon ("Prior Agreements") to the contrary, all of the
Employee's remaining unvested shares of Panopticon common stock, or unvested
options to purchase shares of Panopticon common stock, that are exchanged for
shares of, or options to purchase shares of, Common Stock of the Company on the
date of the Merger ("Restricted Shares") shall remain initially unvested, and
shall at the end of the six month period beginning upon the Effective Time of
the Merger become vested with respect to the number of shares that would have
vested during such six month period pursuant to the vesting schedule in effect
prior to the Merger, and shall thereafter resume vesting in accordance with the
vesting schedule in effect prior to the Merger, for so long as Employee is
continuously providing services to the Company, subject to the provisions of
Section 6. Employee agrees to cancel any right that Employee had to accelerated
vesting of the Restricted Shares as a result of any Prior Agreements. Any
portion of the Restricted Shares that do not vest pursuant to this Section 5
and/or Section 6 shall be forfeited.
6. TERM OF EMPLOYMENT.
(a) EMPLOYMENT AT WILL. Either party may terminate
the Employee's Employment at any time and for any reason (or no reason), and
with or without cause, by giving the other party notice in writing. The
Employee's Employment with the Company shall be "at will," meaning that either
the Employee or the Company shall be entitled to terminate the Employee's
employment at any time and for any reason, with or without cause. Any contrary
representations that may have been made to the Employee shall be superseded by
this Agreement. This Agreement shall constitute the full and complete agreement
between the Employee and the Company on the "at will" nature of the Employee's
Employment, which may only be changed in an express written agreement signed by
the Employee and a duly authorized officer of the Company.
(b) RIGHTS UPON TERMINATION OF EMPLOYMENT. Upon the
termination of the Employee's Employment pursuant to this Section 6, the
Employee shall only be entitled to the compensation, benefits and reimbursements
described in Sections 2, 3, 4, 5 and 6 for the period preceding the effective
date of the termination, and any severance that may be
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provided pursuant to Section 6(d). The payments under this Agreement shall fully
discharge all responsibilities of the Company to the Employee.
(c) TERMINATION OF AGREEMENT. This Agreement shall
terminate when all obligations of the parties hereunder have been satisfied. Any
earlier termination of this employment hereunder shall not limit or otherwise
affect any of the Employee's obligations under Sections 7 and 8.
(d) SEVERANCE AND ACCELERATION OF VESTING.
(1) CASH SEVERANCE. Notwithstanding the foregoing, if
Employee's agreement is terminated within the Noncompetition Term (i)
by Broadbase without "cause", or (ii) by Employee, after "Constructive
Termination" by Broadbase without cause, then Employee shall be
entitled to continue receiving base salary for the remaining period of
the Noncompetition Term, payable on the same schedule as salary is
generally paid for other Broadbase employees.
(2) VESTING ACCELERATION. Notwithstanding the
foregoing, if Employee's agreement is terminated within the
Noncompetition Term (i) by Broadbase without "cause", (ii) by Employee,
after "Constructive Termination" by Broadbase without cause, or (iii)
due to the death or disability of the Employee, then twenty percent
(25%) of the then remaining unvested Restricted Shares shall become
immediately vested and exercisable as of the time of such termination.
The term "CAUSE" shall mean:
(i) Any material breach of this Agreement
between the Employee and the Company, if either (i) such breach is of a
nature which cannot be cured, or (ii) such breach is of a nature which
can be cured but which remains uncured fifteen days after written
notice of breach;
(ii) Any willful misconduct that causes
significant harm to the Company or that is repeated or continues after
written notice from the CEO of the Company;
(iii) Conviction of, or a plea of "guilty"
or "no contest" to, a felony under the laws of the United States or any
state thereof;
(iv) Misappropriation of the assets of the
Company or other acts of fraud or embezzlement; or
(v) The repeated or ongoing abuse of alcohol
or controlled substances that has a repeated or ongoing detrimental
effect upon the Employee's performance of his duties under this
Agreement.
The term "CONSTRUCTIVE TERMINATION" shall mean:
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(i) a reduction in base salary or total
target compensation;
(ii) a change in job location of more than
30 miles without the Employee's written consent; or
(iii) a significant diminution in
responsibilities beneath a level of responsibility reasonably
assignable to the Position.
(e) RELEASE. Subsection (d) above shall not apply
unless the Employee (i) has executed a mutual general release (in a form
prescribed by the Company) of all known and unknown claims that he may then have
against the Company or persons affiliated with the Company and which such claims
are in any way related to such termination, Constructive Termination, or Cause
for either, and (ii) has agreed not to prosecute any legal action or other
proceeding based upon any of such claims.
7. NON-DISCLOSURE. This Agreement is contingent upon the
Employee's execution of the Company's form of Proprietary Information and
Inventions Agreement, a copy of which is attached hereto as EXHIBIT A. If any
provisions of such Proprietary Information and Inventions Agreement are in
conflict with the provisions of this Agreement, the provisions of this Agreement
shall control.
8. NON-COMPETITION, NON-SOLICITATION AND SAVINGS CLAUSE.
(a) NONCOMPETITION TERM. For a period of two years
following the Closing Date (the "NONCOMPETITION TERM"), the Employee hereby
agrees that, except as specifically identified in Attachment A or otherwise with
the written consent of Broadbase, directly or indirectly, individually or as an
employee, partner, officer, director or shareholder or in any other capacity
whatsoever of or for any person, firm, partnership, company or corporation other
than Broadbase or its subsidiaries (other than as a holder of less than 1% of
the outstanding capital stock of a publicly-traded company), he shall not:
(i) Own, manage, operate, sell, control or
participate in the ownership, management, operation, sales or control
of or be connected in any manner with any business engaged in: (A)
developing and marketing software in the fields of communication
personalization solutions, customer marketing solutions and
personalized purchase recommendations for e-commerce applications; or
(B) developing any product or providing any service that is
substantially the same as, is based upon or competes in any material
respect with any business described in clause (A) of this paragraph;
(ii) Recruit, attempt to hire, solicit,
assist others in recruiting or hiring, or refer to others concerning
employment, any person who is or was an employee of Panopticon,
Broadbase, or any of Broadbase's other subsidiaries, or induce or
attempt to induce any such employee to terminate his employment with
Panopticon, Broadbase, or any of Broadbase's other subsidiaries (as the
case may be);
(iii) Induce or attempt to induce any person
or entity to curtail or cancel any business or contracts that such
person or entity had with Panopticon,
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Broadbase, or any of Broadbase's other subsidiaries; or
(iv) Contact, solicit or call upon any
customer or supplier of Panopticon, Broadbase, or any of Broadbase's
other subsidiaries, on behalf of any other person or entity for the
purpose of selling or providing any services or products of the type
normally sold or provided by Panopticon, Broadbase, or any of
Broadbase's other subsidiaries.
(b) The agreements set forth in this Section 8 include within
their scope all cities, counties, provinces and states of all countries in
which Broadbase or any of its subsidiaries has engaged in development of
products or sales or otherwise conducted business or selling or licensing
efforts at any time during the two years prior to the Closing Date hereof
or during the Noncompetition Term. The Employee acknowledges that the scope
and period of restrictions and the geographical area to which the
restriction imposed in this Section 8 shall apply are fair and reasonable
and are reasonably required for the protection of Broadbase and that
Section 8(a) accurately describes the business to which the restrictions
are intended to apply.
(c) It is the desire and intent of the parties that the
provisions of this Section 8 shall be enforced to the fullest extent
permissible under applicable law. If any provision of this Agreement or any
part of any such provision is held under any circumstances to be invalid or
unenforceable by any arbitrator or court of competent jurisdiction, then:
(i) such provision or part thereof shall, with respect to such
circumstances and in such jurisdiction, be modified by such arbitrator or
court to conform to applicable laws so as to be valid and enforceable to
the fullest possible extent; (ii) the invalidity or unenforceability of
such provision or part thereof under such circumstances and in such
jurisdiction shall not affect the validity or enforceability of such
provision or part thereof under any other circumstances or in any other
jurisdiction; (iii) the invalidity or unenforceability of such provision or
part thereof shall not affect the validity or enforceability of the
remainder of such provision or the validity or enforceability of any other
provision of this Section 8. Each provision of this Section 8 is separable
from every other provision of this Section 8, and each part of each
provision of this Section 8 is separable from every other part of such
provision.
(d) The Employee acknowledges that any breach of the covenants
of Section 8 will result in immediate and irreparable injury to Broadbase and,
accordingly, consents to the application of injunctive relief and such other
equitable remedies for the benefit of Broadbase as may be appropriate in the
event such a breach occurs or is threatened. The foregoing remedies shall be in
addition to all other legal remedies to which Broadbase may be entitled
hereunder, including, without limitation, monetary damages.
9. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. This Agreement shall be
binding upon any successor (whether direct or indirect and whether by purchase,
lease, merger, consolidation, liquidation or otherwise) to all or substantially
all of the Company's business and/or assets. For
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all purposes under this Agreement, the term "Company" shall include any
successor to the Company's business and/or assets which becomes bound by this
Agreement.
(b) EMPLOYEE'S SUCCESSORS. This Agreement and all
rights of the Employee hereunder shall inure to the benefit of, and be
enforceable by, the Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
10. MISCELLANEOUS PROVISIONS.
(a) NOTICE. Notices and all other communications
contemplated by this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered or when mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid. In the case of the
Employee, mailed notices shall be addressed to him at the home address which he
most recently communicated to the Company in writing. In the case of the
Company, mailed notices shall be addressed to its corporate headquarters, and
all notices shall be directed to the attention of its Secretary.
(b) MODIFICATIONS AND WAIVERS. No provision of this
Agreement shall be modified, waived or discharged unless the modification,
waiver or discharge is agreed to in writing and signed by the Employee and by an
authorized officer of the Company (other than the Employee). No waiver by either
party of any breach of, or of compliance with, any condition or provision of
this Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.
(c) WHOLE AGREEMENT. No other agreements,
representations or understandings (whether oral or written and whether express
or implied) which are not expressly set forth in this Agreement have been made
or entered into by either party with respect to the subject matter hereof. This
Agreement, the Merger Agreement and Plan of Reorganization and the Proprietary
Information and Inventions Agreement contain the entire understanding of the
parties with respect to the subject matter hereof. This Agreement shall
supersede in its entirety the offer letter or other agreement executed by the
Employee and Panopticon and any Restricted Stock Purchase Agreement between the
Employee and Panopticon to the extent inconsistent herewith.
(d) WITHHOLDING TAXES. All payments made under this
Agreement shall be subject to reduction to reflect taxes or other charges
required to be withheld by law.
(e) CHOICE OF LAW AND SEVERABILITY. This Agreement
shall be interpreted in accordance with the laws of the State of California
(except their provisions governing the choice of law). If any provision of this
Agreement becomes or is deemed invalid, illegal or unenforceable in any
jurisdiction by reason of the scope, extent or duration of its coverage, then
such provision shall be deemed amended to the extent necessary to conform to
applicable law so as to be valid and enforceable or, if such provision cannot be
so amended without materially altering the intention of the parties, then such
provision shall be stricken and the remainder of this Agreement shall continue
in full force and effect. Should there ever occur any conflict between any
provision contained in this Agreement and any present or future statute,
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<PAGE> 78
law, ordinance or regulation contrary to which the parties have no legal right
to contract, then the latter shall prevail but the provision of this Agreement
affected thereby shall be curtailed and limited only to the extent necessary to
bring it into compliance with applicable law. All the other terms and provisions
of this Agreement shall continue in full force and effect without impairment or
limitation.
(f) ARBITRATION. Any controversy or claim arising out
of or relating to this Agreement or the breach thereof, or the Employee's
Employment or the termination thereof, with the exception of any controversy or
claim arising out of or relating to Section 8, shall be settled by arbitration
in San Francisco, California in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association. The
decision of the arbitrator shall be final and binding on the parties, and
judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The parties hereby agree that the arbitrator shall
be empowered to enter an equitable decree mandating specific enforcement of the
terms of this Agreement. The Company and the Employee shall share equally all
fees and expenses of the arbitrator. Any controversy or claim arising out of or
relating to Section 8 shall be settled in the appropriate federal or state court
in the State of California. The Company and the Employee hereby consent to
personal jurisdiction of the state and federal courts located in the State of
California for any action or proceeding arising from or relating to this
Agreement or relating to any arbitration in which the parties are participants.
(g) NO ASSIGNMENT. This Agreement and all rights and
obligations of the Employee hereunder are personal to the Employee and may not
be transferred or assigned by the Employee at any time. The Company may assign
its rights under this Agreement to any entity that assumes the Company's
obligations hereunder in connection with any sale or transfer of all or a
substantial portion of the Company's assets to such entity.
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(h) COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Company by its duly authorized officer, as of the
day and year first above written.
-----------------------------------------
NAME:
BROADBASE SOFTWARE, INC.
By
---------------------------------------
Title:
-----------------------------------
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EXHIBIT D
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made and entered into as of September 7, 2000
by and among Broadbase Software, Inc., a Delaware corporation ("BROADBASE"),
Stanley Kim, as representative (the "REPRESENTATIVE") of all of the holders of
common stock (the "SHAREHOLDERS") of Panopticon, Inc., a California corporation
("PANOPTICON"), and State Street Bank and Trust Company of California, N.A. (the
"ESCROW AGENT").
RECITALS
A. Broadbase, Panopticon and Bridge Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of Broadbase ("MERGER SUB"), have
entered into an Agreement and Plan of Merger (the "MERGER AGREEMENT") dated as
of July 6, 2000, pursuant to which Merger Sub will merge with and into
Panopticon in a reverse triangular merger (the "MERGER"), with Panopticon to be
the surviving corporation of the Merger. Capitalized terms used in this
Agreement and not otherwise defined herein, including without limitation
"DAMAGES," "EFFECTIVE TIME," "ESCROW SHARES," "ESCROW PERIOD," "EXCHANGE AGENT"
and "INDEMNIFIED PERSONS," shall have the meanings given to such terms in the
Merger Agreement, a copy of which is attached hereto;
B. Section 2.2 of the Merger Agreement provides that, at the Effective
Time, Broadbase will be entitled to withhold from the Shareholders a certain
percentage of the shares of Broadbase common stock issuable to the Shareholders
at the Effective Time for the purpose of securing the Shareholders'
indemnification obligations to Broadbase and the other Indemnified Persons
pursuant to the terms and conditions set forth in Article 12 of the Merger
Agreement and in this Agreement;
C. The Representative is entering into this Agreement on behalf of the
Shareholders as a material inducement and consideration for Broadbase to enter
into the Merger Agreement and to consummate the transactions contemplated
therein and as a material inducement and condition precedent to consummation of
the Merger; and
D. The parties desire to set forth in this Agreement the terms and
conditions pursuant to which the Escrow Shares shall be deposited in, held in
and delivered from an escrow account.
NOW, THEREFORE, in consideration of the facts stated in the foregoing
recitals and the mutual promises hereinafter set forth, the parties hereby agree
as follows:
<PAGE> 81
1. ESCROW AND INDEMNIFICATION
1.1 Establishment of Escrow.
(a) Deposit of Escrow Shares. On the Closing Date,
Broadbase will deposit with the Exchange Agent the Exchange Shares,
including shares to be subsequently held in escrow. The Exchange Agent will
give the Escrow Agent prompt written notice of the Closing Date and
Effective Time of the Merger. Promptly after the Closing, Broadbase will
provide the Escrow Agent with a spreadsheet listing each Shareholder and
their interest in the Escrow Shares, and the Exchange Agent will issue to
the Escrow Agent the Escrow Shares to be withheld from the Shareholders
upon the surrender of their Panopticon Certificates (including any
Additional Escrow Shares, as defined in Section 2.1(b)), each registered in
the name of the applicable Shareholder.
(b) Delivery of Stock Powers. Promptly after the
Effective Time, but in any event within ten (10) business days after
receipt of the letter of transmittal from the Exchange Agent, each
Shareholder will deliver to the Escrow Agent three duly endorsed stock
powers (each a "STOCK POWER") substantially in the form attached as Exhibit
A and bearing a "medallion" signature guarantee. In the event any
Additional Escrow Shares are issued, or if the Escrow Agent reasonably
requires an additional Stock Power to effect a transfer, each Shareholder
will, upon request, promptly execute and deliver an additional Stock Power
to the Escrow Agent.
(c) Legends. Stock certificates representing Escrow
Shares will (until they are released to the Shareholders or Broadbase in
accordance with this Agreement) bear the following legend indicating that
they are subject to this Agreement (in addition to any other legends which
might be applicable to such shares):
"THE SECURITIES REPRESENTED HEREBY MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED ONLY IN ACCORDANCE WITH THE TERMS
OF AN ESCROW AGREEMENT AMONG THE ISSUER, THE HOLDER THEREOF AND STATE
STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A. A COPY OF SUCH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE ISSUER."
(d) Investments of Cash. The Escrow Agent shall
invest cash, if any, held in the Escrow, other than amounts immediately
distributable by the Escrow Agent, in the SSgA U.S. Treasury Money Market
Fund. For tax reporting and withholding purposes, the income on such
investments shall be allocated to the Shareholders in accordance with their
proportionate interests in the Escrow Shares as set forth in the Escrow
Ledger (defined in Section 2.2).
1.2 Indemnification. Broadbase and the other Indemnified
Persons are entitled to be indemnified by the Shareholders pursuant to the terms
of Article 12 of the Merger Agreement against any Damages during the Escrow
Period. Each of the Shareholders has agreed to the use of the Escrow Shares as
collateral for these indemnity obligations, subject to the terms and limitations
set forth in Article 12 of the Merger Agreement and in this Agreement.
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2. OWNERSHIP INTERESTS IN AND RELEASE OF
THE ESCROW SHARES
2.1 Shareholders' Interests in the Escrow Shares.
(a) Individual Shareholder Interests. The Escrow
Shares shall be evidenced by certificates issued in the name of each
Shareholder. All of the Escrow Shares shall be deemed to be issued and
outstanding capital stock of Broadbase.
(b) Dividends. If Broadbase declares any cash
dividends, dividends payable in other property or other distributions of
any kind with respect to Escrow Shares held by the Escrow Agent, Broadbase
will issue such distributions directly to the Shareholders. Tax-free
(pursuant to Section 305(a) of the Code) stock dividends declared on the
Escrow Shares during the Escrow Period in order to effect a stock split of
Broadbase common stock ("ADDITIONAL ESCROW SHARES") will be delivered
promptly to the Escrow Agent, held in escrow and distributed to the
Shareholders in the same manner and in the same proportions as the Escrow
Shares. For all purposes of this Agreement, the Additional Escrow Shares
will be treated the same as the Escrow Shares. Unless and until the Escrow
Agent receives certificates representing Additional Escrow Shares, it may
assume without inquiry that no Additional Escrow Shares have been, or are
required to be, issued and that the stock certificates that the Escrow
Agent possesses represent all of the Escrow Shares.
(c) Voting and Other Rights of Ownership. While the
Escrow Shares remain in the possession of the Escrow Agent, each
Shareholder beneficially owning Escrow Shares will retain and will be able
to exercise with respect to such Escrow Shares: (i) voting rights, and (ii)
all other incidents of ownership of such Escrow Shares which are not
inconsistent with the terms of this Agreement. Subject to the rights of
Broadbase under the Merger Agreement and this Agreement, all beneficial
interest in the Escrow Shares shall be the property of the Shareholders
from and after the Closing, and Broadbase shall have no interest therein.
None of the rights of the Shareholders hereunder shall be transferable
except as otherwise provided by law. Each of the Shareholders shall be
obligated for all federal, state or local taxes applicable to such
Shareholder's interest in the Escrow Shares.
(d) No Transfers or Encumbrances. Prior to the
Release Date (or the release of the Escrow Shares, with respect to shares
held with respect to pending Claims pursuant to Section 2.3(b) of this
Agreement), Shareholders may not sell, assign or otherwise transfer, nor
place any Encumbrance on, any Escrow Shares or any beneficial interest
therein, except: (i) transfers made for estate planning purposes, and (ii)
transfers by operation of law or laws of descent and distribution. In the
case of any permitted transfer, the transferee will be subject to all terms
and provisions of this Agreement. Also, prior to the Release Date (or the
release of the Escrow Shares, with respect to shares held with respect to
pending Claims pursuant to Section 2.3(b) of this Agreement), no Escrow
Shares nor any beneficial interest therein shall be taken or reached by any
legal or equitable process in satisfaction of any debt or other liability
of a Shareholder, except to satisfy such Shareholder's obligations under
Article 12 of the Merger Agreement. The Escrow Agent shall have no
responsibility for determining or enforcing compliance with this paragraph,
other than by retaining possession of the Escrow Shares.
(e) Right of Escrow Agent to Transfer Shares.
Notwithstanding the other provisions of this Section 2.1, the Escrow Agent
shall have the power to effect any transfer of Escrow Shares required by
this Agreement or necessary for administrative purposes. Broadbase
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shall cooperate with the Escrow Agent in promptly issuing, or causing its
transfer agent to promptly issue, such stock certificates as shall be required
to effect such transfers.
2.2 Escrow Ledger. The Escrow Agent shall create and maintain
a written record of each Shareholder's interest in the Escrow shares (the
"ESCROW LEDGER"). The Escrow Agent shall adjust the Escrow Ledger to reflect
changes in each Shareholder's interests in the Escrow Shares. This duty will
continue until the Escrow Agent is required to deliver each Shareholder's Escrow
Shares pursuant to Section 2.3. Absent manifest error, all of the Escrow Agent's
determinations as to the Escrow Ledger shall be binding and conclusive on all
parties to this Agreement. Adjustments to the Escrow Ledger shall include, but
are not limited to, the following:
(a) Adjustments for Capital Changes. The Escrow Agent
shall adjust the Escrow Ledger to reflect the Escrow Agent's receipt of
Additional Escrow Shares pursuant to Section 2.1(b).
(b) Adjustments for Claims. The Escrow Agent shall
denote Escrow Shares that become subject to pending Contested Claims of
Broadbase or other Indemnified Persons in each Shareholder's account in the
Escrow Ledger. The Escrow Agent shall deduct Escrow Shares that are charged
and allocated to each Shareholder's account pursuant to Article 4 in
satisfaction of Claims by Broadbase or other Indemnified Persons.
2.3 Release of Escrow Shares to Shareholders.
(a) Release of Escrow Shares Generally. On the first
anniversary of the Closing Date (the "RELEASE DATE"), in accordance with
Section 2.3(c), the Escrow Agent shall certify the Escrow Share balances
reflected in the Escrow Ledger as of that date and direct the Exchange
Agent to release the appropriate number of Escrow Shares to each
Shareholder as designated in the Escrow Ledger, which shall equal such
Shareholder's original Escrow Shares and Additional Escrow Shares, minus:
(i) any Escrow Shares attributable to such Shareholder that were returned
to Broadbase in accordance with Article 4 in satisfaction of a Claim(s) by
Broadbase or another Indemnified Person(s), and (ii) any Escrow Shares
attributable to such Shareholder that are subject to pending Claims of
Broadbase or other Indemnified Persons, to be held pursuant to Section
2.3(b). The Escrow Agent will direct the Exchange Agent to remove the
legend described in Section 1.1(c) from all Escrow Shares distributed by
it.
(b) Escrow Shares Subject to Pending Claims.
(i) Upon the Release Date and thereafter,
the Escrow Agent shall continue to hold any Escrow Shares that are
subject to pending Claims until the ten business day period in Section
4.2 expires. At that time, the Escrow Agent shall, as appropriate,
either instruct the Exchange Agent to distribute the Escrow Shares
subject to such claim pursuant to Section 4.2, or continue to hold the
Escrow Shares subject to such Claim pursuant to Section 2.3(b)(ii).
(ii) Upon the Release Date and thereafter,
the Escrow Agent shall continue to hold any Escrow Shares that are
subject to Contested Claims of Broadbase or other Indemnified Persons,
as designated in the Escrow Ledger, until the Escrow Agent receives
written notice of resolution of each specific Claim pursuant to Section
4.3(c). After the Escrow Agent receives such notice, in accordance with
Section 2.3(c), the Escrow Agent shall: (a) either deliver or instruct
the Exchange Agent to deliver to each Shareholder the number of Escrow
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Shares, if any, due to each Shareholder in accordance with the
resolution of the Claim; (b) if applicable, charge and allocate Escrow
Shares against each Shareholder's account in satisfaction of the
resolution of the Claim and either return or instruct the Exchange
Agent to return such Escrow Shares back to Broadbase; and (c) notify
the Representative in writing of any deduction of Escrow Shares as
promptly as reasonably practicable. The Escrow Agent shall make the
appropriate entries in the Escrow Ledger.
(c) Procedure for Release and Delivery. Within seven
(7) days after the Release Date (or with respect to Escrow Shares held
pursuant to Section 2.3(b), within seven (7) days after the Escrow Agent's
receipt of written notice of a resolution of a Claim pursuant to Section
4.3(c)), the Escrow Agent shall instruct the Exchange Agent to deliver the
Escrow Shares to each Shareholder by mailing (by registered or certified
mail, return receipt requested) to the address set forth opposite each
Shareholder's name on the Escrow Ledger (or such other address as provided
in writing by the Representative to the Escrow Agent). No fractional Escrow
Shares will be delivered. Broadbase shall have provided to the Escrow Agent
prior to the expiration of the Escrow Period, and the Escrow Agent shall
distribute to each Shareholder at the time Escrow Shares, if any, are
distributed to each Shareholder, cash in lieu of any fractions of Escrow
Shares in an amount equal to the product of such fraction multiplied by the
value of an Escrow Share as determined in accordance with Section 4.5. The
Escrow Agent need not invest cash on hand pending distribution.
3. CLAIMS
3.1 "Claim" Defined. As used herein, the term "CLAIM"
means a claim for indemnification under Article 12 of the Merger Agreement made
by Broadbase or by any other Indemnified Person. Broadbase agrees that it will
make Claims only as permitted by Article 12 of the Merger Agreement.
3.2 Notice of Claim.
(a) When a Notice of Claim is Required. An officer of
Broadbase shall execute and deliver written notice of a Claim (a "NOTICE OF
CLAIM") to the Representative and the Escrow Agent as promptly as
reasonably practicable, and in no event after the Release Date, upon:
(i) Broadbase's discovery of any inaccuracy,
misrepresentation, breach of or default in connection with any of the
provisions of Section 12.2 of the Merger Agreement; or
(ii) Broadbase's receipt of written notice
of an order or proceeding brought by any third person against Broadbase
and/or any Indemnified Person that is based upon or includes assertions
that would, if true, constitute an inaccuracy, misrepresentation,
breach of or default in connection with any of the provisions of
Section 12.2 of the Merger Agreement (a "THIRD PARTY PROCEEDING");
(b) Failure to Provide Notice of Claim. Failure to
provide such notice in a timely manner shall not reduce Broadbase's
indemnification rights or the indemnification obligations of the
Shareholders in this Agreement and under the Merger Agreement, unless the
failure to provide such timely notice impairs the indemnifying party's
ability to defend the Claim, and then only to the extent of such
impairment, and except as set forth in Section 3.2(c) below.
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(c) All claims for Damages under Article 12 of the
Merger Agreement must be initiated prior to the expiration of the Escrow
Period.
3.3 Contents of Each Notice of Claim. Each Notice of Claim
given by Broadbase pursuant to Section 3.2 shall be set forth in writing and
shall contain the following information to the extent it is reasonably available
to Broadbase:
(a) Statement of Damages. The statement of damages
shall include: (i) the amount of Damages that Broadbase believes has
actually been incurred by Broadbase and/or any other Indemnified Person in
connection with the Claim, reduced by any recovery under policies of
insurance, and (ii) Broadbase's good faith estimate of the reasonably
foreseeable maximum amount of the alleged Damages that will ultimately be
incurred by Broadbase and/or any other Indemnified Person in connection
with such Claim, including without limitation any Damages from a potential
Third Party Proceeding.
(b) Statement of Basis for Damages. The statement of
basis for damages shall include: (i) a brief description, in reasonable
detail, of the facts, circumstances or events giving rise to the alleged
Damages based on Broadbase's or any other affected Indemnified Person's
good faith belief, and (ii) if applicable, specific references to the
provisions of the Merger Agreement alleged to have been breached.
3.4 Requirement of Resolution of Claims. The Escrow Agent
shall not act regarding any of the Escrow Shares held pursuant to a Notice of
Claim until such Notice of Claim has been resolved in accordance with Article 4
and, in the case of a Contested Claim, it receives appropriate notice pursuant
to Section 4.3(c).
4. RESOLUTION OF CLAIMS
Any Notice of Claim received by the Representative and the Escrow Agent
pursuant to Article 3 shall be resolved as follows:
4.1 Third Party Proceedings. Broadbase shall have the right,
at the Shareholders' expense (to be paid in Escrow Shares subject to the
provisions of Section 12 of the Merger Agreement), to select counsel in
connection with conducting the defense or handling each Third Party Proceeding
and defend or handle such Third Party Proceeding in such manner as Broadbase may
deem reasonably appropriate (including without limitation consent to an entry of
judgement or settlement of such Third Party Proceeding); provided, however, that
Broadbase shall keep the Representative timely apprised of the status of such
Third Party Proceeding. The reasonable costs and expenses incurred by Broadbase
in connection with such defense (including but not limited to reasonable
attorneys' fees, other professionals' and experts' fees and court or arbitration
costs) shall be included in the Damages for which Broadbase may seek indemnity
pursuant to a Claim made by Broadbase or an Indemnified Person hereunder. If
Broadbase defends or handles the Third Party Proceeding, the Representative and
the Shareholders shall cooperate with Broadbase and shall be entitled to
participate in the defense or handling of the Third Party Proceeding with their
own counsel and at their own expense.
4.2 Uncontested Claims. If, within ten business days after the Escrow
Agent and the Representative receives a Notice of Claim, the Representative does
not contest such Notice of Claim (an "UNCONTESTED CLAIM") in a written notice
delivered to the Escrow Agent pursuant to Section 4.3, then the Escrow Agent
shall: (a) immediately charge and allocate against each Shareholder's accounts
in the
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<PAGE> 86
Escrow Ledger the number of Escrow Shares required, pursuant to Section 4.5, to
satisfy the amount of Damages specified in such Notice of Claim (reduced by any
recovery to date under policies of insurance not reflected in the Notice of
Claim); (b) update the Escrow Ledger to reflect the effect of the deduction
pursuant to Section 2.2(b); and (c) notify the Representative in writing of the
deduction of Escrow Shares as promptly as reasonably practicable. The number of
Escrow Shares deducted hereunder shall be charged to and allocated among the
Shareholders pro rata according to each Shareholder's percentage share, as set
forth in the Escrow Ledger, except as otherwise provided for in Section 12.2 of
the Merger Agreement.
4.3 Contested Claims. If Broadbase and the Escrow Agent
receive a written notice contesting all, or a portion of, a Notice of Claim
within the ten business day period described in Section 4.2 (a "CONTESTED
CLAIM"), then the parties will work together in good faith to resolve their
dispute for up to thirty (30) days. If the Contested Claim is still not
resolved, then: (a) such Contested Claim shall be resolved by binding
arbitration in accordance with Section 13.10 of the Merger Agreement, and (b)
the Escrow Agent shall continue to hold the number of Escrow Shares sufficient,
pursuant to Section 4.5, to satisfy the maximum potential award to all
Indemnified Persons under such Claim. Any portion of the Notice of Claim that is
not contested by the Representative in accordance with the foregoing provisions
of this Section 4.3 shall be resolved as an Uncontested Claim in accordance with
Section 4.2. In addition to the provisions of Section 13.10 of the Merger
Agreement, resolution of Contested Claims shall be subject to the following
additional provisions:
(a) Award.
(i) Upon the conclusion of any arbitration
proceedings hereunder, the arbitrator shall render findings of fact and
conclusions of law and a final written arbitration award setting forth
the basis and reasons for any decision reached (the "FINAL AWARD") and
shall deliver such documents to the Escrow Agent, the Representative
and Broadbase. The Final Award shall constitute a conclusive
determination of all issues in question, binding upon the
Representative, the Shareholders and Broadbase, and shall not be
contested by the Representative, the Shareholders or Broadbase.
(ii) To the extent that the Final Award
determines that Broadbase or any other Indemnified Person has actually
incurred Damages in connection with the Contested Claim through the
date of the Final Award ("INCURRED DAMAGES"), the Final Award will set
forth and award to Broadbase the amount of such damages, reduced by any
recovery under policies of insurance to date that were not specified in
the Notice of Claim. In addition, the Final Award will set forth an
additional amount of Damages equal to the reasonably foreseeable amount
of alleged Damages that the arbitrator determines (based on the
evidence submitted by the parties in the arbitration) are reasonably
likely to be incurred by Broadbase and any other Indemnified Person as
a result of the facts giving rise to the Contested Claim ("ESTIMATED
DAMAGES"), which amount of Estimated Damages may, without limitation,
include the amount of damages claimed by a third party in an action
brought against any Indemnified Person based on alleged facts which, if
true, would give rise to Damages. The Escrow Agent will continue to
hold Escrow Shares representing the Estimated Damages, in accordance
with Section 4.5, in escrow, including, if appropriate, beyond the
expiration of the Escrow Period, until and to the extent that: (A) the
arbitrator deems that Broadbase has actually incurred such Estimated
Damages, reduced by any recovery under policies of insurance to date
that were not specified in the Notice of Claim; (B) the arbitrator
deems that Broadbase will not actually incur any additional Estimated
Damages; or (C) the parties come to a written settlement agreement
pursuant to Section 4.4.
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Both Incurred Damages and Estimated Damages owed to Indemnified Persons
are deemed to be Damages for purposes of this Agreement. Upon issuance
and delivery of the Final Award pursuant to Section 4.3(a)(i), and
subject to receipt by the Escrow Agent of a written notice of
resolution of the Claim pursuant to Section 4.3(c), Broadbase will
immediately be entitled to recover the amount of any Incurred Damages
awarded to Broadbase under such Final Award.
(b) Timing. The Representative, Broadbase and the
arbitrator shall conclude each arbitration pursuant to this Section 4.3 as
promptly as practicable. Time is of the essence with regards to all aspects
of this Agreement.
(c) Notice of Resolution of Claim. The Escrow Agent
shall not deliver Escrow Shares held pursuant to a Contested Claim until
the Escrow Agent receives appropriate notice. Such notice must consist of:
(i) written notice of the resolution of such Claim executed by both the
Representative and Broadbase; (ii) a written settlement agreement pursuant
to Section 4.4; (iii) delivery to the Escrow Agent of an appropriate final
non-appealable order by a court of competent jurisdiction; or (iv) delivery
to the Escrow Agent of a copy of the Final Award of an arbitrator or court.
The Escrow Agent shall act on such notice without further inquiry in
accordance with Sections 2.3(b) and (c).
(d) Multiplicity of Claims. The assertion of any
single Claim for indemnification hereunder will not bar Broadbase from
asserting other Claims hereunder.
4.4 Settled Claims. If a Claim (including a Contested Claim)
is settled by a written settlement agreement executed by the Representative and
Broadbase, then the Representative and Broadbase shall promptly deliver such
written settlement agreement to the Escrow Agent with written instructions on
the appropriate charges or adjustments to be made to the Escrow Ledger, and the
Escrow Agent shall promptly release and/or return the Escrow Shares subject to
such claim in accordance with Sections 2.3(b) and 2.3(c). Any settlement which
is effected without the consent of the Representative, which consent shall not
be unreasonably withheld or delayed, shall not be determinative of the amount of
Damages for which indemnification may be sought.
4.5 Determination of Number of Escrow Shares for Claims.
Unless a specific number of Escrow Shares is specified, or unless any claim
asserts that a different allocation should be made pursuant to Section 12.2 of
the Merger Agreement, any amount owed to Broadbase under this Agreement will be
immediately payable to Broadbase, subject to Section 4.3(c), by deducting pro
rata from each Shareholder's account in the Escrow Ledger the number of Escrow
Shares equal to: (a) the Damages for that Claim, divided by, (b) the closing
price per share of Broadbase common stock as quoted on the Nasdaq National
Market, and reported in The Wall Street Journal, for the trading day immediately
preceding the Closing Date (subject to adjustment for changes in Broadbase
capital stock as set forth in a certificate of Broadbase delivered to the Escrow
Agent).
4.6 Election of Remedies. Broadbase may institute Claims
against the Escrow Shares and in satisfaction thereof may elect to have such
Escrow Shares deducted from the Escrow Ledger, after any notice to the
Representative required hereunder, without making any other claims directly
against the Shareholders and without rescinding or attempting to rescind the
transactions consummated pursuant to the Merger Agreement. Broadbase need not
exhaust any other remedies that may be available to it but may proceed directly
in accordance with the provisions of this Agreement.
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5. THE ESCROW AGENT
5.1 Limitation of Escrow Agent's Liability/Responsibility. In
performing any of its duties under this Escrow Agreement, the Escrow Agent shall
not be liable to any party for damages, losses or expenses, except in the event
of gross negligence or willful misconduct on its part. In no event shall the
Escrow Agent be liable for punitive, consequential or incidental damages. The
Escrow Agent shall not incur any such liability for any action taken or omitted
in reliance upon any instrument, including any written statement or affidavit
provided for in this Escrow Agreement that the Escrow Agent shall in good faith
believe to be genuine; nor will the Escrow Agent be liable or responsible for
forgeries, fraud, impersonations, or determining the scope of any agent's
authority. In addition, the Escrow Agent may consult with legal counsel of its
choice in connection with its duties under this Escrow Agreement and shall be
fully protected in any act taken, suffered, or permitted by it in good faith in
accordance with the advice of counsel. The Escrow Agent is not responsible for
determining and verifying the authority of any person acting or purporting to
act on behalf of any party to this Escrow Agreement. The Escrow Agent undertakes
to perform such duties as are specifically set forth in this Escrow Agreement,
and the Escrow Agent shall not be liable except for the performance of such
duties as are specifically set forth in this Escrow Agreement. No implied
covenants or obligations shall be read into this Escrow Agreement against the
Escrow Agent.
5.2 Indemnification of the Escrow Agent.
(a) For the purposes of this Section 5.2, references
to the Escrow Agent shall include the Escrow Agent's officers, directors,
employees, counsel and agents.
(b) Each party to this Agreement other than the
Escrow Agent (each an "INDEMNIFYING PARTY" and together the "INDEMNIFYING
PARTIES") will severally reimburse, indemnify and hold harmless the Escrow
Agent from and against any damage, liability or loss suffered, incurred by,
or asserted against the Escrow Agent (including amounts paid in settlement
of any action, suit, proceeding, or claim brought or threatened to be
brought and including reasonable expenses of legal counsel, collectively,
"Loss") arising out of, in connection with or based upon any act or
omission by the Escrow Agent relating in any way to this Agreement or the
Escrow Agent's services hereunder. This indemnity will exclude any
indemnification for any Loss arising in whole or in part, directly or
indirectly, from any fraud, gross negligence or willful misconduct on the
Escrow Agent's part. Anything in this Agreement to the contrary
notwithstanding, in no event will the Escrow Agent be liable for special,
indirect or consequential loss or damage of any kind whatsoever (including
but not limited to lost profits) suffered by another party to this
Agreement or by any Shareholder, even if the Escrow Agent has been advised
of the likelihood of such loss or damage and regardless of the form of
action. The Escrow Agent's right to indemnification hereunder will survive
the Escrow Agent's resignation or removal as the Escrow Agent and will
survive the termination of this Agreement by lapse of time or otherwise.
(c) Each Indemnifying Party may participate at its
own expense in the defense of any claim or action that may be asserted
against the Escrow Agent related to this Agreement, and if the Indemnifying
Parties so elect, the Indemnifying Parties may assume the defense of such
claim or action; provided, however, that, if there exists a conflict of
interest that would make it inappropriate, in the sole discretion of the
Escrow Agent, for the same counsel to represent both Escrow Agent and the
Indemnifying Parties, the Escrow Agent's retention of separate counsel will
be reimbursable as provided in Section 5.3(b).
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(d) The Escrow Agent will notify each Indemnifying
Party by letter, or by telephone or telecopy confirmed by letter, of any
receipt by Escrow Agent of a written assertion of a claim against the
Escrow Agent arising out of this Agreement, or any action commenced against
the Escrow Agent arising out of this Agreement, within five (5) business
days after the Escrow Agent's receipt of written notice of such claim.
However, the Escrow Agent's failure to so notify each Indemnifying Party
will not operate in any manner whatsoever to relieve an Indemnifying Party
from any liability that it may have to the Escrow Agent under this Section
5.3 or otherwise unless such failure by the Escrow Agent to give such
notice materially prejudices such Indemnifying Party.
5.4 Compensation and Expenses of Escrow Agent. All fees and
expenses of the Escrow Agent incurred in the ordinary course of performing its
responsibilities hereunder shall be paid by Broadbase upon receipt of a written
invoice by Escrow Agent in accordance with Exhibit B.
5.5 Resolution of Conflicting Demands. In the event
conflicting demands are made or conflicting notices are served upon the Escrow
Agent with respect to the Escrow Shares or the Escrow Ledger, the Escrow Agent
shall have the right, at the Escrow Agent's election, to either: (a) give
written notice to the other parties to this Agreement that it has received
conflicting instructions from Broadbase and the Representative and is refraining
from taking action until it receives instructions consented to in writing by
both Broadbase and the Representative, or (b) resign so that a successor escrow
agent can be appointed pursuant to Section 5.6. In the further event that the
Escrow Agent gives written notice under "(a)" above and does not receive
instructions consented to in writing by both Broadbase and the Representative
within thirty (30) calendar days, then the Escrow Agent may file a suit in
interpleader and obtain an order from a court of competent jurisdiction located
in San Mateo County, California, requiring the parties to interplead and
litigate in such court their several claims and rights among themselves. In this
case, the Escrow Agent shall thereby be fully released and discharged from all
further obligations imposed upon it under this Agreement with respect to the
matters that are the subject of such interpleader suit, and Broadbase shall pay
the Escrow Agent all costs, expenses and reasonable attorneys' fees expended or
incurred by the Escrow Agent pursuant to the exercise of Escrow Agent's rights
under this paragraph.
5.6 Successor Escrow Agent.
(a) In the event the Escrow Agent becomes unavailable
or unwilling to continue in its capacity as Escrow Agent hereunder, the
Escrow Agent may resign and be discharged from its duties hereunder by
giving notice of resignation to the parties to this Agreement, specifying a
date not less than thirty (30) days following such notice date of when such
resignation shall take effect and refunding to Broadbase any prepaid but
unearned fees previously paid by Broadbase to the Escrow Agent hereunder.
Broadbase shall designate a successor Escrow Agent reasonably satisfactory
to the Representative prior to the expiration of such ten day period by
giving written notice to the Escrow Agent and the Representative. If no
successor escrow agent is named by Broadbase, then the Escrow Agent may
apply to a court of competent jurisdiction for the appointment of a
successor Escrow Agent. In either case, the Escrow Agent shall promptly
transfer the Escrow Shares and Escrow Ledger to the designated successor
Escrow Agent.
(b) In the event Escrow Agent is merged with,
acquired or otherwise combined with another entity, or Escrow Agent
transfers all or substantially all of its corporate trust business
(including the escrow contemplated by this Agreement) to another
institution, the successor as a result of such transaction will be the
Escrow Agent hereunder without any further action by the parties hereto.
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6. THE REPRESENTATIVE
6.1 Duties as Provided in Merger Agreement. From and after the
deposit of the Escrow Shares as provided in Article 1, the Shareholders shall be
represented by the Representative, or, upon written notice to the Escrow Agent,
by his successor appointed in accordance with Section 12.7(d) of the Merger
Agreement. The Representative (a) shall have the duties and obligations set
forth in Section 12.7(a) of the Merger Agreement, (b) shall not be liable to the
Shareholders in connection with the performance of his duties and obligations
under this Agreement except as set forth in Section 12.7(b) of the Merger
Agreement, and (c) shall be indemnified by the Shareholders in connection with
the performance of the his duties and obligations under this Agreement as
provided in Section 12.7(c) of the Merger Agreement.
6.2 No Compensation; Reimbursement for Expenses. Except as
stated in Section 12.7(c) of the Merger Agreement and in this paragraph, the
Representative shall not be entitled to receive any compensation for his
services in connection with this Agreement. Any out-of-pocket costs and expenses
reasonably incurred by the Representative in connection with actions taken
pursuant to the terms of this Agreement shall be paid by the Shareholders in
proportion to their percentage share set forth in the Escrow Ledger promptly
upon the Representative's written request to the Shareholders and, at the
Representative's option, may be taken by the Representative from the Escrow
Shares reflected in the Escrow Ledger after the final resolution of all Claims
made under this Agreement.
6.3 Tax Reporting Documentation. The Representative agrees to
use reasonable best efforts to obtain for the Escrow Agent certified tax
identification numbers for each of the Shareholders consisting of appropriate
Forms W-9 (or Forms W-8, in the case of non-U.S. persons) and other forms and
documents that the Escrow Agent may reasonably request (collectively, "TAX
REPORTING DOCUMENTATION") to the Escrow Agent within 30 days after the date of
such request. The parties hereto understand that, if such Tax Reporting
Documentation is not so certified to the Escrow Agent, the Escrow Agent may be
required by the Code, as it may be amended from time to time, to withhold a
portion of the interest earned on the investment of monies or other property
held by the Escrow Agent pursuant to this Agreement.
7. MISCELLANEOUS
7.1 Term of Escrow Agreement. This Escrow Agreement shall
terminate upon the distribution by the Escrow Agent of all Escrow Shares and
other property held in escrow.
7.2 Entire Agreement. This Agreement, the Merger Agreement and
the exhibits hereto and thereto constitute the entire understanding and
agreement of the parties with respect to the subject matter of this Agreement
and supersede all prior agreements or understandings, written or oral, between
the parties with respect to the subject matter hereof. As between the Escrow
Agent and the other parties hereto, all such parties agree that the Escrow
Agent's duties are defined only in this Agreement, any contrary provisions of
the Merger Agreement notwithstanding.
7.3 Further Assurances. Each party agrees to cooperate fully
with the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances, as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
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7.4 Assignment; Binding Nature. Broadbase may not assign all
or any of its rights and obligations hereunder without the prior written consent
of the Escrow Agent and the Representative, which consent shall not be
unreasonably withheld. Except for assignments in connection with permitted
transfers of Escrow Shares under Section 2.1(d) of this Agreement, neither the
Shareholders, nor the Representative on their behalf, may assign any of rights
or obligations of the Shareholders hereunder, nor may their rights or
obligations be assigned by operation of law, without the prior written consent
of Broadbase. This Agreement and shall be binding upon, and inure to the benefit
of, the parties hereto and their respective successors and permitted assigns.
7.5 Absence of Third Party Beneficiary Rights. No provisions
of this Escrow Agreement are intended, nor shall be interpreted, to provide or
create any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, Shareholder, partner of any party hereto or any
other person or entity unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof shall be solely between the parties
to this Escrow Agreement.
7.6 Construction of Agreement. This Agreement has been
negotiated by the respective parties hereto and their attorneys and have been
reviewed by each party hereto. Accordingly, no ambiguity in the language of this
Agreement will be construed for or against either party.
7.7 Section Headings. A reference to a section, article or
exhibit will mean a section in, article in or exhibit to this Agreement unless
otherwise explicitly set forth. The titles and headings herein are for reference
purposes only and will not in any manner limit the construction of this
Agreement, which will be considered as a whole.
7.8 Amendment. This Agreement may be amended by the written
agreement of Broadbase, the Escrow Agent and the Representative; provided,
however, that, if the Escrow Agent does not agree to an amendment agreed upon by
Broadbase and the Representative, then the Escrow Agent shall resign and
Broadbase shall appoint a successor Escrow Agent in accordance with the
provisions of Section 5.6. No amendment of the Merger Agreement shall increase
or alter the Escrow Agent's duties, responsibilities or liability hereunder
without the Escrow Agent's written agreement.
7.9 Waiver. No waiver by any party hereto of any condition or
of any breach of any provision of this Agreement shall be effective unless it is
set forth in a writing signed by such party. No waiver by any party of any such
condition or breach, in any one instance, shall be deemed to be a further or
continuing waiver of any such condition or breach or a waiver of any other
condition or breach of any other provision contained herein. The failure of any
party to enforce any of the provisions hereof will not be construed to be a
waiver of the right of such party thereafter to enforce such provisions.
7.10 Severability. If any provision of this Agreement or its
application will for any reason and to any extent be invalid or unenforceable,
the remainder of this Agreement and application of such provision to other
persons or circumstances will be interpreted so as to effect the intent of the
parties hereto. The parties will replace such void or unenforceable provision of
this Agreement with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of the void or
unenforceable provision.
7.11 Governing Law. The validity of this Agreement the
construction of its terms, and the interpretation and enforcement of the rights
and duties of the parties of this Agreement will be exclusively governed by and
construed in accordance with the internal laws of the State of California, as
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applied to agreements entered into solely between residents of and to be
performed entirely in the State of California, without reference to that body of
law relating to conflicts of law or choice of law.
7.12 Other Remedies. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy will not preclude the exercise
of any other.
7.13 Notices. No notice or other communication shall be deemed
given unless sent in the manner, and to the persons, specified in this Section
7.13. All notices and other communications hereunder will be in writing and win
be deemed given (a) upon receipt if delivered personally (or if mailed by
registered or certified mail), (b) the day after dispatch if sent by overnight
courier; or (c) upon dispatch if transmitted by facsimile (and confirmed by a
copy delivered in accordance with clause (a) or (b)), addressed to the parties
at the following addresses:
If to Broadbase: Broadbase Software, Inc.
181 Constitution Drive
Menlo Park, California 94025
Attention: General Counsel
Phone: (650) 614-8300
Fax: (650) 614-8301
with a copy to: Fenwick & West LLP
Two Palo Alto Square
Palo Alto, California 94306
Attention: David K. Michaels
Phone: (650) 494-0600
Fax: (650) 494-1417
If to the Escrow Agent: State Street Bank and Trust Company of
California, N.A.
633 West 5th Street, 12th Floor
Los Angeles, CA 90071
Attention: Corporate Trust Administration
(Broadbase/Panopticon 2000 escrow)
Phone: (213) 362-7373
Fax: (213) 362-7357
If to the Representative: Stanley Kim
c/o Panopticon, Inc.
955 Alma Street; Suite B
Palo Alto, CA 94301
Phone: (650) 833-5960
Fax: (650) 833-5961
Any party may change its address for such communications by giving notice
thereof to the other parties. Notwithstanding the foregoing, notices addressed
to the Escrow Agent shall be effective only upon receipt except that a notice
faxed to Escrow Agent shall be deemed received on such day provided that (i)
such fax was transmitted prior to 5:00 P.M. Pacific Standard Time on such date
and (ii) there exists written confirmation of such transmittal. If any Claim,
objection thereto or any other document of any
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<PAGE> 93
kind is required to be delivered to the Escrow Agent and any other person, the
Escrow Agent may assume without inquiry that such Claim notice, objection or
other document was received by such other person on the date on which it was
received by the Escrow Agent.
7.14 Counterparts. This Escrow Agreement may be executed in
any number of counterparts, each of which shall constitute an original and all
of which together shall constitute one and the same instrument.
[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY.]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
BROADBASE SOFTWARE, INC. REPRESENTATIVE
By: /s/ RUSTY THOMAS /s/ STANLEY KIM
------------------------------------ ----------------------------------
Rusty Thomas, Stanley Kim
Executive Vice President and
Chief Financial Officer
ESCROW AGENT
STATE STREET BANK AND TRUST
COMPANY OF CALIFORNIA, N.A.
/s/ MARK HENSON
---------------------------------------
(Duly Authorized Signature)
Mark Henson
---------------------------------------
(Printed Name)
Assistant Vice President
---------------------------------------
(Title)
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<PAGE> 95
STOCK POWER AND ASSIGNMENT CERTIFICATE
In connection with the merger (the "MERGER") of Bridge Acquisition
Corp., a wholly owned subsidiary of Broadbase Software, Inc. ("BROADBASE"), with
and into Panopticon, Inc. ("PANOPTICON"), the undersigned is receiving shares of
Broadbase common stock in respect of the shares of Panopticon common stock held
by the undersigned immediately prior to the Merger.
FOR VALUE RECEIVED, and pursuant to that certain Agreement and Plan of
Merger dated as of July 6, 2000 (the "MERGER AGREEMENT") and that certain Escrow
Agreement dated as of September 7, 2000 (the "ESCROW AGREEMENT") executed in
connection with the Merger, the undersigned hereby assigns and transfers unto
State Street Bank and Trust Company of California., N.A., as Escrow Agent (the
"AGENT") pursuant to the Merger Agreement and the Escrow Agreement:
__________ shares of Broadbase common stock represented
by stock certificate No. ____ tendered
herewith (the "SHARES")
The undersigned hereby irrevocably appoints the Agent, as
attorney-in-fact, with full power of substitution and re-substitution, to hold
any and all certificates for such Shares in escrow and to transfer such Shares
on the books of Broadbase solely to the extent provided in the Escrow Agreement.
THIS STOCK POWER AND ASSIGNMENT CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF THE ESCROW AGREEMENT AND THE MERGER AGREEMENT AND MAY ONLY BE USED
STRICTLY IN ACCORDANCE THEREWITH.
Dated: ________, 2000
---------------------------------------
(Signature)
---------------------------------------
(Printed Name)
Signature guarantee:
----------------------------------
<PAGE> 96
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
Schedule of Fees for Escrow Services
<TABLE>
<CAPTION>
<S> <C>
Broadbase Software, Inc./Panopticon, Inc.
ACCEPTANCE FEE: $750.00
This one-time charge, payable at closing, includes acceptance and assumption of
responsibility and duties as Escrow Agent; review and comment on the form of agreement;
and establishment of account(s) in accordance with governing document.
LEGAL COUNSEL: AT COST
ESCROW AGENT FEE: $3,500.00
Payable at funding and annually thereafter, if applicable. Compensates State Street for
administrative services in accordance with the Escrow Agreement.
ADDITIONAL FEES, IF APPLICABLE:
PRO-RATA PERCENTAGE: Should the Escrow Agreement require pro-rata
distribution of principal cash or investment income to the
beneficiaries, STATE STREET WILL ASSESS an additional $100, for each
beneficiary pro-rata distribution, which may be offset at State
Street's discretion against each distribution.
DIRECTED SALE: State Street will charge $500.00, plus broker
commission, for each Directed Sale. In addition, if State Street is
required to retain the proceeds from the Directed Sale, an annual fee
of $250.00 will be charged to open and maintain a segregated account.
THE FEES ASSOCIATED WITH A DIRECTED SALE, SHAREHOLDER ACCOUNTING AND
INVESTMENT FEES, IF ANY, WILL BE PAID FROM THE PROCEEDS OF SUCH SALE.
CLAIMS (if applicable):
Uncontested $500.00
Contested BILLED AT COST
WIRE TRANSFER FEE (This fee will be deducted from wire amount, if applicable)
International $40.00
Domestic $20.00
INVESTMENT FEE: $65.00
Per security purchased (i.e. Treasuries, Agencies, etc.)
INVESTMENT IN STATE STREET INVESTMENT VEHICLES: 40 BASIS POINTS (.0040)
(Calculated on the Average Daily Net Assets)
</TABLE>
<PAGE> 97
INVESTMENT VEHICLES:
SSgA Prime Money Market Fund
SSgA US Treasury Money Market Fund
SSgA Tax Free Money Market Fund
OUT-OF-POCKET EXPENSE: AT COST
NOTE: Neither submission nor receipt of this bid shall constitute acceptance
by State Street of the transaction, which is the subject of this bid,
and State Street reserves the right to modify this bid if the actual
transaction differs from the assumptions used in preparing this bid.
This bid only indicates State Street's willingness to participate in
the solicitation process. This bid is not to be amended without the
prior written consent of State Street. Any disagreement between the
parties as to the contents of this bid shall be resolved by reference
to the original records of State Street.
DATED: SEPTEMBER 6, 2000
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<PAGE> 98
EXHIBIT F
PANOPTICON, INC.
PROPRIETARY INFORMATION AGREEMENT
As an employee of Panopticon, Inc., its subsidiary or its affiliate
(together, the "Company"), and in consideration of the compensation now and
hereafter paid to me, I agree to the following:
I. MAINTAINING CONFIDENTIAL INFORMATION
A. Company Information. I agree at all times during the term
of my employment and thereafter to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation without the express written authorization of the Board of Directors
of the Company, any trade secrets, confidential knowledge, data or other
proprietary information relating to products, processes, know-how, designs,
formulas, developmental or experimental work, computer programs, data bases,
other original works of authorship, customer lists, business plans, financial
information or other subject matter pertaining to any business of the Company or
any of its clients, consultants or licensees.
B. Former Employer Information. I agree that I will not,
during my employment with the Company, improperly use or disclose any
proprietary information or trade secrets of my former or concurrent employers or
companies, if any, and that I will not bring onto the premises of the Company
any unpublished document or any property belonging to my former or concurrent
employers or companies, if any, unless consented to in writing by said employers
or companies.
C. Third Party Information. I recognize that the Company has
received and in the future will receive from third parties their confidential or
proprietary information subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. I agree that I owe the Company and such third parties, during the term
of my employment and thereafter, a duty to hold all such confidential or
proprietary information in the strictest confidence and not to disclose it to
any person, firm or corporation (except as necessary in carrying out my work for
the Company consistent with the Company's agreement with such third party) or to
use it for the benefit of anyone other than for the Company or such third party
(consistent with the Company's agreement with such third party) without the
express written authorization of the Board of Directors of the Company.
II. RETAINING AND ASSIGNING INVENTIONS AND ORIGINAL WORKS
A. Inventions and Original Works Retained by Me. I have
attached hereto, as Exhibit A, a list describing all inventions, original works
of authorship, developments, improvements and trade secrets which were made by
me prior to my employment with the Company, which belong to me, which relate to
the Company's proposed business and products, and which are not assigned to the
Company; or, if no such list is attached, I represent that there are no such
inventions.
B. Inventions and Original Works Assigned to the Company. I
agree that I will promptly make full written disclosure to the Company, will
hold in trust for the sole right and benefit of the Company, and will assign to
the Company all my right, title and interest in and to any and all inventions,
original works of authorship, developments, improvements or trade secrets which
I may solely or jointly conceive or develop or reduce to practice, or cause to
be conceived or developed or reduced to practice, during the period of time I am
in the employ of the Company. I recognize, however, that Section 2870 of
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<PAGE> 99
the California Labor Code (as set forth in Exhibit B attached hereto) exempts
from this provision any invention as to which I can prove the following:
1. It was developed entirely on my own time;
and
2. No equipment, supplies, facilities or trade
secrets of the Company were used in its
development; and
3. It either:
a. does not relate, at the time the
invention was conceived or reduced
to practice, to the Company's
business or to the Company's actual
or demonstrably anticipated
research and development; or
b. does not result from any work
performed by me for the Company.
I acknowledge that all original works of authorship which are
made by me (solely or jointly with others) within the scope of my employment and
which are protestable by copyright are "works made for hire," as that term is
defined in the United States Copyright Act (17 USCA, Section 101).
C. Maintenance of Records. I agree to keep and maintain adequate and
current written records of all inventions and original works of authorship made
by me (solely or jointly with others) during the term of my employment with the
Company. The records will be in the form of notes, sketches, drawings, and any
other format that may be specified by the Company. The records will be available
to and remain the sole property of the Company at all times.
D. Inventions Assigned to the United States. I agree to assign to the
United States government all my right, title and interest in and to any and all
inventions, original works of authorship, developments, improvements or trade
secrets whenever such full title is required to be in the United States by a
contract between the Company and the United States or any of its agencies.
E. Obtaining Patent Letters and Copyright Registrations. I agree that
my obligation to assist the Company to obtain United States or foreign patent
letters and copyright registrations covering inventions and original works of
authorship assigned hereunder to the Company shall continue beyond the
termination of my employment, but the Company shall compensate me at a
reasonable rate for time actually spent by me at the Company's request on such
assistance. If the Company is unable because of my mental or physical incapacity
or for any other reason to secure my signature to apply for or to pursue any
application for any United States or foreign patent letters or copyright
registrations covering inventions or original works of authorship assigned to
the Company as above, then I hereby irrevocably designate and appoint the
Company and its duly authorized officers and agents as my agent and attorney in
fact, to act for and in my behalf and stead to execute and file any such
applications and to do all other lawfully permitted acts to further the
prosecution and issuance of patent letters or copyright registrations thereon
with the same legal force and effect as if executed by me. I hereby waive and
quitclaim to the Company any and all claims, of any nature whatsoever, which I
now or may hereafter have for infringement of any patents or copyrights,
resulting from any such application for patent letters or copyright
registrations assigned hereunder to the Company.
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<PAGE> 100
F. Exception to Assignments. I understand that the provisions of this
Agreement requiring assignment to the Company do not apply to any invention
which qualifies fully under the provisions of Section 2870 of the California
Labor Code, a copy of which is attached hereto as Exhibit B. I will advise the
Company promptly in writing of any inventions, original works of authorship,
developments, improvements or trade secrets that I believe meet the criteria in
Subparagraphs II(B)(1) through (3) above; and I will at that time provide to the
Company in writing all evidence necessary to substantiate that belief. I
understand that the Company will keep in confidence and will not disclose to
third parties without my consent any confidential information disclosed in
writing to the Company relating to inventions that qualify fully under the
provisions of Section 2870 of the California Labor Code.
III. CONFLICTING EMPLOYMENT. I agree that during the term of my employment with
the Company, I will not engage in any other employment, occupation, consulting
or other business activity directly related to the business in which the Company
is now involved or becomes involved during the term of my employment, nor will I
engage in any other activities that conflict with my obligations to the Company.
IV. RETURNING COMPANY DOCUMENTS. I agree that, at the time of leaving the employ
of the Company, I will deliver to the Company (and will not keep in my
possession or deliver to anyone else) any and all devices, records, data, notes,
reports, proposals, lists, correspondence, specifications, drawings, blueprints,
sketches, materials, equipment, other documents or property, or reproductions of
any aforementioned items belonging to the Company, its successors or assigns. In
the event of the termination of my employment, I agree to sign and deliver the
"Termination Certification" attached hereto as Exhibit C.
V. REPRESENTATIONS. I agree to execute any proper oath or verify any proper
document required to carry out the terms of this Agreement. I represent that my
performance of all the terms of this Agreement will not breach any agreement to
keep in confidence proprietary information acquired by me in confidence or in
trust prior to my employment by the Company. I have not entered into, and I
agree I will not enter into, any oral or written agreement in conflict herewith.
VI. GENERAL PROVISIONS.
A. Governing Law. This Agreement will be governed by the laws of the
State of California.
B. Entire Agreement. This Agreement sets forth the entire agreement and
understanding between the Company and me relating to the subject matter herein
and merges all prior discussions between us. No modification of or amendment to
this Agreement, nor any waiver of any rights under this agreement, will be
effective unless in writing signed by the party to be charged. Any subsequent
change or changes in my duties, salary or compensation will not affect the
validity or scope of this Agreement.
C. Severability. If one or more of the provisions in this Agreement are
deemed void by law, then the remaining provisions will continue in full force
and effect.
D. Successors and Assigns. This Agreement will be binding upon my
heirs, executors, administrators and other legal representatives and will be for
the benefit of the Company, its successors and its assigns.
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<PAGE> 101
The foregoing Proprietary Information Agreement is hereby executed as of June
____, 1998
Print Name:
Witness
Proprietary Information Agreement
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<PAGE> 102
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
<TABLE>
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Title Date Identifying Number or Brief Description
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</TABLE>
Name of Employee: ______________
<PAGE> 103
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS
"(a) Any provision in an employment agreement which provides that an employee
shall assign, or offer to assign, any of his or her rights in an invention to
his or her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's equipment,
supplies, facilities, or trade secret information except for those inventions
that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer.
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to require an
employee to assign an invention otherwise excluded from being required to be
assigned under subdivision (a), the provision is against the public policy of
this state and is unenforceable."
<PAGE> 104
PANOPTICON, INC.
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I failed to
return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to Panopticon, Inc., its subsidiaries, affiliates, successors or
assigns (together, the "Company").
I further certify that I have complied with all the terms of the Company's
Proprietary Information Agreement signed by me, including the reporting of any
inventions and original works of authorship (as defined therein), conceived or
made by me (solely or jointly with others) covered by that Agreement.
I further agree that, in compliance with the Proprietary Information Agreement,
I will preserve as confidential all trade secrets, confidential knowledge, data
or other proprietary information relating to products, processes, know-how,
designs, formulas, developmental or experimental work, computer programs, data
bases, other original works of authorship, customer lists, business plans,
financial information or other subject matter pertaining to any business of the
Company or any of its clients, consultants or licensees.
Date:
-------------------
-------------------------------
Print Name:
<PAGE> 105
EXHIBIT G
THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR, IF
REASONABLY REQUIRED BY THE ISSUER OF THIS NOTE, AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER OF THIS NOTE THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.
CONVERTIBLE PROMISSORY NOTE
$ Menlo Park, California
----------
-----------
FOR VALUE RECEIVED, the undersigned Panopticon, Inc., a California
corporation ("BORROWER") promises to pay to the order of Broadbase Software,
Inc., a Delaware corporation ("LENDER"), or the assignee of Lender (including
Lender, the "HOLDER") at Lender's office at 181 Constitution Drive, Menlo Park,
California, or at such other place as Holder may designate, in lawful money of
the United States of America and in immediately available funds, the principal
sum of ______, with interest thereon, to be computed from the date of its
disbursement as set forth herein. Capitalized terms not defined in the text are
defined in Section VI hereof.
I. LOAN AND REPAYMENT
(a) Loan. Lender shall loan to Borrower the amount set forth
above, provided that (i) the loaned funds may be used by Borrower only for
operating purposes, and (ii) Borrower shall have given Lender a written
affirmation that Borrower has not met either of the default conditions in
Sections IV(a)(ii) or (iii) hereof. Borrower may from time to time during the
term of this Note partially or wholly repay its outstanding borrowing, subject
to all of the limitations, terms and conditions of this Note and of any document
executed in connection with or governing this Note. The unpaid principal balance
of this obligation at any time shall be the total amount advanced hereunder by
Holder less the amount of principal payments made hereon by or for any Borrower,
which balance may be endorsed hereon from time to time by Holder.
(b) Repayment. Subject to Section III and Section IV(b) below,
the outstanding balance of this Note shall be due and payable on demand of
Holder at any time on or after November 15, 2000; provided, however, that in the
event that Lender terminates the Merger Agreement pursuant to Section 11.1(b) or
the provisions specifically enumerated in Section 11.4 of the Merger Agreement,
then this Note shall become due and payable by Borrower, subject to Section III
and Section IV(b) below, upon the earliest to occur of: (i) Borrower's next
equity financing of at least $5 million, (ii) an Acquisition of Borrower, or
(iii) the date that is six months after the date of such termination.
(c) Advance. Borrower shall provide Lender with Borrower's
wire instructions for Lender to send the advance.
<PAGE> 106
(d) Application of Payments. Each payment made on this Note
shall be credited first, to any interest then due and second, to the outstanding
principal balance hereof.
(e) Prepayment. Borrower may prepay principal on any portion
of this Note at any time, in any amount and without penalty, upon two days'
written notice to Holder.
II. INTEREST
(a) Interest. The outstanding principal balance of this Note
shall bear interest (computed on the basis of a 365-day year, actual days
elapsed) at a fixed rate per annum equal to the "PRIME Rate" as reported in the
Wall Street Journal in effect on the first day of the Note ("REGULAR INTEREST").
(b) Payment of Interest. Interest accrued on this Note shall
be payable on the Due Date.
(c) Default Interest. From and after the maturity date of this
Note, or from and after the occurrence of an Event of Default (as defined
below), the outstanding principal balance of this Note shall, at the election of
Holder, bear interest until paid in full at an increased rate per annum
(computed on the basis of a 365-day year, actual days elapsed) equal to the
lesser of four percent (4%) above the rate of interest from time to time
applicable to this Note or the highest rate of interest permitted under
applicable usury laws (either, as applicable, "DEFAULT INTEREST"). The
imposition of such Default Interest shall be effective as of the date of notice
to Borrower from Holder making such election and specifying such Event of
Default, provided, however, that such Default Interest shall not apply if
Borrower, within ten (10) days of the date of such notice, either (i) cures the
Event of Default or (ii) pays all outstanding principal and Regular Interest
through the date of such payment.
III. CONVERSION; ADJUSTMENT
(a) Conversion
(i) Upon Failure to Pay Amount Due. At any time on or
after the Due Date, Holder has the right, at Holder's option, prior to the
repayment of principal and interest by Borrower, to convert the principal
and accrued interest on this Note, in whole or in part, into Conversion
Stock at the Conversion Price; provided, however, that Holder shall not be
entitled to receive the stock certificate representing the shares of
Conversion Stock to be issued upon conversion of this Note until the
original of this Note is surrendered to Borrower.
(ii) Upon Lender's Next Equity Financing. At any time
upon or after the closing of the next equity financing of Borrower, Holder
has the right, at Holder's option, prior to the repayment of principal and
interest by Borrower, to convert the principal and accrued interest on this
Note, in whole or in part, into shares of Next Equity Stock at the Next
Equity Price; provided, however, that Holder shall not be entitled to
receive the stock certificate representing the shares of Next Equity Stock
to be issued upon conversion of this Note until the original of this Note
is surrendered to Borrower. Borrower and Lender will take all steps
necessary or advisable to effect such result.
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<PAGE> 107
(iii) Issuance of Conversion Stock or Next Equity
Stock. As soon as practicable after conversion of this Note, Borrower at
its expense will cause to be issued in the name of and delivered to Holder,
a certificate or certificates for the number of shares of Conversion Stock
or Next Equity Stock, as applicable, to which the Lender shall be entitled
upon such conversion (bearing such legends as may be required by applicable
state and federal securities laws in the opinion of legal counsel of
Borrower, by Borrower's articles of incorporation or bylaws, or by any
agreement between Borrower and Lender), together with any other securities
and property to which Holder is entitled upon such conversion under the
terms of this Note. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date that this Note shall
have been surrendered for conversion, accompanied by written notice of
election to convert. No fractional shares will be issued upon conversion of
this Note. If upon any conversion of this Note a fraction of a share would
otherwise result, then in lieu of such fractional share the Borrower will
pay the cash value of that fractional share, calculated on the basis of the
Conversion Price or Next Equity Price, as applicable.
(b) Adjustment Provisions. The number and character of shares
of Conversion Stock (which term for purposes of this Section III(b) shall
include Next Equity Stock, if applicable) issuable upon conversion of this Note
(or any shares of stock or other securities or property at the time receivable
or issuable upon conversion of this Note) and the Conversion Price (which term
for purposes of this Section III(b) shall, if applicable, instead mean the Next
Equity Price) therefore, are subject to adjustment upon occurrence of the
following events between the date this Note is issued and the date it is
converted:
(i) Adjustment for Stock Splits, Stock Dividends,
Recapitalizations, etc. The Conversion Price of this Note and the number of
shares of Conversion Stock issuable upon conversion of this Note (or any
shares of stock or other securities at the time issuable upon conversion of
this Note) shall each be proportionally adjusted to reflect any stock
dividend, stock split, reverse stock split, combination of shares,
reclassification, recapitalization or other similar event affecting the
number of outstanding shares of Conversion Stock (or such other stock or
securities).
(ii) Adjustment for Other Dividends and
Distributions. In case Borrower shall make or issue, or shall fix a record
date for the determination of eligible holders entitled to receive, a
dividend or other distribution payable with respect to the Conversion Stock
that is payable in (A) securities of Borrower (other than issuances with
respect to which adjustment is made under Section III(b)(i), or (B) assets
(other than cash dividends paid or payable solely out of retained
earnings), then, and in each such case, Holder, upon conversion of this
Note at any time after the consummation, effective date or record date of
such event, shall receive, in addition to the shares of Conversion Stock
issuable upon such exercise prior to such date, the securities or such
other assets of Borrower to which Holder would have been entitled upon such
date if Holder had converted this Note immediately prior thereto (all
subject to further adjustment as provided in this Note).
(iii) Adjustment for Reorganization, Consolidation,
Merger. In case of any reorganization of Borrower (or of any other
corporation the stock or other securities of which are at the time
receivable on the conversion of this Note), after the date of this Note, or
in case, after such date, Borrower (or any such corporation) shall
consolidate with or merge into another corporation or convey all or
substantially all of its assets to another corporation, then, and in each
such case, Holder, upon the conversion of this Note (as provided in Section
III(a)) at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to
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<PAGE> 108
receive, in lieu of the stock or other securities and property receivable
upon the conversion of this Note prior to such consummation, the stock or
other securities or property to which Holder would have been entitled upon
the consummation of such reorganization, consolidation, merger or
conveyance if Holder had converted this Note immediately prior thereto, all
subject to further adjustment as provided in this Note, and the successor
or purchasing corporation in such reorganization, consolidation, merger or
conveyance (if other than Borrower) shall duly execute and deliver to
Holder a supplement hereto acknowledging such corporation's obligations
under this Note; and in each such case, the terms of the Note shall be
applicable to the shares of stock or other securities or property
receivable upon the conversion of this Note after the consummation of such
reorganization, consolidation, merger or conveyance.
(iv) Conversion of Stock. In case all the authorized
Conversion Stock of Borrower is converted, pursuant to Borrower's
certificate of incorporation, into Borrower's common stock or other
securities or property, or the Conversion Stock otherwise ceases to exist,
then, in such case, Holder, upon conversion of this Note at any time after
the date on which the Conversion Stock is so converted or ceases to exist
(the "TERMINATION DATE"), shall receive, in lieu of the number of shares of
Conversion Stock that would have been issuable upon such exercise
immediately prior to the Termination Date (the "FORMER NUMBER OF SHARES OF
CONVERSION STOCK"), the stock and other securities and property to which
Holder would have been entitled to receive upon the Termination Date if the
Lender had converted this Note with respect to the Former Number of Shares
of Conversion Stock immediately prior to the Termination Date (all subject
to further adjustment as provided in this Note).
(v) Notice of Adjustments. Borrower shall promptly
give written notice of each adjustment or readjustment of the Conversion
Price or the number of shares of Conversion Stock or other securities
issuable upon conversion of this Note. The notice shall describe the
adjustment or readjustment and show in reasonable detail the facts on which
the adjustment or readjustment is based.
(vi) No Change Necessary. The form of this Note need
not be changed because of any adjustment in the Conversion Price or in the
number of shares of Conversion Stock issuable upon its conversion.
(vii) Reservation of Stock. If at any time the number
of shares of Conversion Stock or other securities issuable upon conversion
of this Note shall not be sufficient to effect the conversion of this Note,
Borrower will use best efforts to take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but
unissued shares of Conversion Stock or other securities issuable upon
conversion of this Note as shall be sufficient for such purpose.
IV. DEFAULT
(a) Events of Default. The occurrence of any of the following
shall constitute an "EVENT OF DEFAULT" under this Note:
(i) Borrower shall fail to pay when due any
principal, interest, fees or other amounts payable under this Note.
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<PAGE> 109
(ii) Any representation or warranty made by Borrower
under shall fail the condition of Section 10.1 of the Merger Agreement.
(iii) Any failure to comply with a material
obligation of this Note, or any failure to perform or comply in with any
material covenant made by Borrower in the Merger Agreement, provided that,
any such failure shall not be deemed an Event of Default if cured within
ten (10) days of the earlier of (A) Borrower's notification to Lender of
such failure or (B) five (5) business days following Borrower's initial
awareness of such failure.
(iv) Borrower shall suffer or consent to or apply for
the appointment of a receiver, trustee, custodian or liquidator of itself
or any of its property, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the benefit of
creditors; Borrower shall file a voluntary petition in bankruptcy, or
seeking reorganization, in order to effect a plan or other arrangement with
creditors or any other relief under the Bankruptcy Reform Act, Title 11 of
the United States Code, as amended or recodified from time to time
("BANKRUPTCY CODE"), or under any state or federal law granting relief to
debtors, whether now or hereafter in effect; or any involuntary petition or
proceeding pursuant to the Bankruptcy Code or any other applicable state or
federal law relating to bankruptcy, reorganization or other relief for
debtors is filed or commenced against Borrower and not dismissed within 90
days, or Borrower shall file an answer admitting the jurisdiction of the
court and the material allegations of any involuntary petition; or Borrower
shall be adjudicated a bankrupt, or an order for relief shall be entered
against Borrower by any court of competent jurisdiction under the
Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors.
(b) Remedies. Upon the occurrence of any Event of Default, the
holder of this Note, at the holder's option, may declare all sums of principal
and interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. Borrower shall pay to the holder immediately
upon demand the full amount of all payments, advances, charges, costs and
expenses, including reasonable attorneys' fees (to include outside counsel fees
and all allocated costs of the holder's in-house counsel), expended or incurred
by the holder in connection with the enforcement of the holder's rights and/or
the collection of any amounts which become due to the holder under this Note,
and the prosecution or defense of any action in any way related to this Note,
including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Lender or any other person) relating to
Borrower or any other person or entity.
V. REPRESENTATIONS AND WARRANTIES OF THE BORROWER
Borrower hereby represents and warrants to Lender that the
statements in the following paragraphs of this Section V are all true and
complete:
(a) Organization, Good Standing and Qualification. Borrower
has been duly incorporated and organized, and is validly existing in good
standing, under the laws of the State of California. Borrower has the corporate
power and authority to own and operate its properties and assets and to carry on
its business as currently conducted and as presently proposed to be conducted.
-5-
<PAGE> 110
(b) Due Authorization. All corporate action on the part of
Borrower's directors and shareholders necessary for the authorization,
execution, delivery of, and the performance of all obligations of Borrower under
the Note has been taken, and the Note when executed and delivered will
constitute the valid and legally binding obligation of Borrower, enforceable in
accordance with its terms, except as may be limited by (i) applicable
bankruptcy, insolvency, reorganization or other laws of general application
relating to or affecting the enforcement of creditor's rights generally and (ii)
the effect of rules of law governing the availability of equitable remedies.
(c) Corporate Power. Borrower has the corporate power and
authority to execute and deliver the Note to be purchased by the Lender
hereunder, to issue the Note and to carry out and perform all its obligations
under this Note.
(d) Valid Issuance.
(i) The Notes when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration provided
for herein, will be duly and validly issued, fully paid and nonassessable.
(ii) The offer and sale of the Notes solely to the
Lender in accordance with this Note are exempt from the registration and
prospectus delivery requirements of the U.S. Securities Act of 1933, as
amended, and the securities registration and qualification requirements of
the currently effective provisions of the securities laws of the state of
California.
VI. DEFINITIONS
The following definitions shall apply for all purposes of this
Note:
(a) "ACQUISITION" means any transaction or series of related
transactions that results in the holders of record of an entity's capital stock
immediately prior to the transaction or transactions holding less than fifty
percent (50%) of the voting power of such entity immediately after the
transaction or transactions, including the acquisition of such entity by another
entity and any reorganization (other than a reincorporation of such entity under
the laws of the state of Delaware), merger, consolidation or share exchange, or
which results in the sale of all or substantially all of the assets of such
entity.
(b) "CONVERSION PRICE" means the value per share of Borrower's
common stock as calculated by multiplying (i) the "Conversion Ratio" (as defined
in the Merger Agreement) by (ii) 28.30357142 (the seven (7) day average closing
sale price of Lender's common stock ending on June 30, 2000). The Conversion
Price is subject to adjustment as provided herein.
(c) "CONVERSION STOCK" means either Borrower's common stock or
Series A Preferred Stock, the selection of security to be made by Borrower. The
number and character of shares of Conversion Stock are subject to adjustment as
provided herein and the term "Conversion Stock" shall include stock and other
securities and property at any time receivable or issuable upon conversion of
this Note in accordance with its terms.
(d) "DUE DATE" means the date the outstanding balance under
this Note becomes due and payable in accordance with Section I(b) hereof.
(e) "MERGER AGREEMENT" means that certain Agreement and Plan
of Merger dated
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<PAGE> 111
July 6, 2000 between Lender, a wholly-owned subsidiary of Lender and Borrower.
(f) "NEXT EQUITY PRICE" means the price per share of the Next
Equity Stock issued in Borrower's next equity financing. The Next Equity Price
is subject to adjustment as provided herein.
(g) "NEXT EQUITY STOCK" means shares of equity securities
issued in Borrower's next equity financing. The number and character of shares
of Next Equity Stock are subject to adjustment as provided herein and the term
"Next Equity Stock" shall include stock and other securities and property at any
time receivable or issuable upon conversion of this Note in accordance with its
terms.
(h) "NOTE" means this Convertible Promissory Note.
VII. MISCELLANEOUS
(a) Transfer; Successors and Assigns. Holder may assign this
Note, together with its rights and obligations hereunder, at its sole discretion
without the consent of Borrower. Borrower may not assign this Note, nor any of
its rights or obligations hereunder, without the prior written consent of
Holder. The terms and conditions of this Note shall inure to the benefit of and
be binding upon the respective successors and assigns of the parties.
(b) Governing Law. This Note and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(c) Notices. Any notice or other communication required or
permitted by this Note will be in writing, will be delivered personally or by
mail or express delivery, postage prepaid, and will be deemed given upon actual
delivery or, if mailed by registered or certified mail, on the third business
day following deposit in the mails, addressed at such party's address as set
forth in the Merger Agreement, or to such other address as the party in question
may have furnished to the other party by written notice given in accordance with
this Section VII(c).
(d) Amendments and Waivers. Any term of this Note may be
amended only with the written consent of Holder and Borrower. Any amendment or
waiver effected in accordance with this Section VII(d) shall be binding upon
Holder and Borrower and each transferee of this Note.
(e) Entire Agreement. This Note and the Merger Agreement and
the exhibits thereto constitute the entire understanding and agreement of the
parties hereto with respect to the subject matter hereof and supersede all prior
and contemporaneous agreements or understandings, inducements or conditions,
express or implied, written or oral, between the parties with respect to the
subject matter hereof. The express terms hereof control and supersede any course
of performance or usage of trade inconsistent with any of the terms hereof.
[THE REMAINDER OF THIS PAGE WAS LEFT BLANK INTENTIONALLY.]
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IN WITNESS WHEREOF, the Borrower has caused this Note to be signed in
its name as of the date first above written.
BORROWER:
By:
----------------------------
Name:
--------------------------
Title:
--------------------------
AGREED AND ACKNOWLEDGED:
LENDER:
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
[SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE]
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