<PAGE> 1
As filed with the Securities and Exchange Commission on December 16, 1999
Registration No. 333-91139
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------------
AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
BAMBOO.COM, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7379 52-2129710
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
124 UNIVERSITY AVENUE
PALO ALTO, CA 94301
(650) 325-6787
(Address, Including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
-------------------------
<TABLE>
<S> <C>
LEONARD B. MCCURDY JAMES M. PHILLIPS
CHAIRMAN AND CHIEF EXECUTIVE CHAIRMAN AND CHIEF EXECUTIVE
OFFICER OFFICER
BAMBOO.COM, INC. INTERACTIVE PICTURES CORPORATION
124 UNIVERSITY AVENUE 1009 COMMERCE PARK DRIVE
PALO ALTO, CA 94301 OAK RIDGE, TN 37830
(650) 325-6787 (423) 482-3000
</TABLE>
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
-------------------------
COPIES TO:
<TABLE>
<S> <C> <C>
DAVID W. FERGUSON, ESQ. MATTHEW S. HEITER, ESQ. J. PORTER DURHAM, ESQ.
DAVIS POLK & WARDWELL VICE PRESIDENT AND GENERAL COUNSEL ROGER D. BAILEY, ESQ.
1875 CHARLESTON ROAD INTERACTIVE PICTURES CORPORATION JOSEPH E. DUDEK, ESQ.
MOUNTAIN VIEW, CA 94043 165 MADISON AVE. BAKER, DONELSON, BEARMAN & CALDWELL
(650) 316-3808 MEMPHIS, TN 38103 633 CHESTNUT ST.
(901) 577-8117 CHATTANOOGA, TN 37450
(423) 209-4124
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT AND CERTAIN
OTHER CONDITIONS UNDER THE MERGER AGREEMENT ARE MET OR WAIVED.
-------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
-------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) UNIT PRICE(2) FEE(3)
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<S> <C> <C> <C> <C>
Common Stock $.001 Par Value................. 24,763,830 N/A $402,480,072 $111,889
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the maximum number of shares of bamboo.com common stock issuable
in connection with the merger in exchange for shares of IPIX common stock,
based on (i) the maximum number of IPIX shares exchangeable in the merger
(ii) 1,526,279 shares of IPIX common stock issuable pursuant to exercisable
options to purchase shares of IPIX common stock and (iii) the exchange ratio
applicable in the merger of 1.369 shares of bamboo.com common stock for each
share of IPIX common stock).
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and Rule 457(c) of the Securities Act, based on
the market value of IPIX shares to be canceled in the merger, as established
by the average of the high and low sales prices of IPIX shares on November
16, 1999 on the National Association of Securities Dealers Automated
Quotations system (the "NASDAQ"), which was $22.25.
(3) A fee of $111,889 was previously paid by the Registrant in connection with
the filing of the joint proxy statement/prospectus on November 17, 1999.
Pursuant to Rule 457(b) under the Securities Act, such fee is being credited
against the registration fee and, accordingly, no additional fee is being
paid in connection with this amended joint proxy statement/prospectus.
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<PAGE> 2
(bamboo.com Logo)
NOTICE OF SPECIAL MEETING
TO BE HELD ON JANUARY 19, 2000
TO THE SHAREHOLDERS OF BAMBOO.COM, INC.:
You are cordially invited to attend the special meeting of shareholders (the
"bamboo.com Special Meeting") of bamboo.com, Inc. ("bamboo.com") that will be
held at Sheraton Palo Alto Hotel, 625 El Camino Real, Palo Alto, CA 94301 on
January 19, 2000, starting at 10:00 AM local time. At the bamboo.com Special
Meeting, you will be asked to vote on the following proposals:
1. To consider and vote upon the issuance of bamboo.com shares in connection
with the Agreement and Plan of Merger (the "Merger Agreement"), dated as
of October 25, 1999, between bamboo.com and Interactive Pictures
Corporation ("IPIX") as described in the joint proxy
statement/prospectus. Pursuant to the Merger Agreement, a subsidiary of
bamboo.com will be merged with and into IPIX, and each IPIX shareholder
will receive 1.369 shares of bamboo.com for each share of IPIX common
stock held.
2. To amend bamboo.com's Restated Certificate of Incorporation to increase
the number of shares of common stock authorized for issuance from 70
million shares to 150 million shares, contingent upon completion of the
merger.
3. To amend the Amended and Restated 1998 Employee, Director and Consultant
Stock Plan to increase the number of shares of common stock which may be
added annually to the amount already reserved for issuance thereunder
from 1,400,000 to 2,800,000 shares, contingent upon completion of the
merger.
4. To amend the 1999 Employee Stock Purchase Plan to increase the number of
shares of common stock which may be added annually to the amount already
reserved for issuance thereunder from 700,000 to 1,400,000 shares,
contingent upon completion of the merger.
5. To transact such other business as may properly come before the
bamboo.com Special Meeting, including any adjournment or postponement
thereof.
Only shareholders of record at the close of business on December 6, 1999 are
entitled to notice of and to vote at the bamboo.com Special Meeting and at any
adjournment and postponement thereof.
Your vote as a shareholder of bamboo.com is important. You may vote your
shares by either (1) marking, signing, dating and returning the enclosed proxy
card as promptly as possible; (2) dialing 1-800-240-6326 and casting your vote
in accordance with the instructions given to you on the telephone; or (3)
casting your vote via the Internet in accordance with the instructions given to
you at www.eproxy.com/bamb. A postage prepaid envelope is enclosed.
You may also vote in person at the bamboo.com special meeting even if you
use one of the three options above.
By Order of the Board of Directors
A. HUNTER FARRELL
A. Hunter Farrell
Assistant Secretary
<PAGE> 3
(IPIX LOGO)
NOTICE OF SPECIAL MEETING
TO BE HELD ON JANUARY 19, 2000
TO THE SHAREHOLDERS OF IPIX:
You are cordially invited to attend the special meeting of shareholders
(the "IPIX Special Meeting") of Interactive Pictures Corporation ("IPIX") that
will be held at IPIX's California office located at Civic Center Tower, 675
North First Street, Suite 975, San Jose, CA 95112 on January 19, 2000 starting
at 10:00 AM local time. At the IPIX Special Meeting, you will be asked to vote
on the following proposals:
1. To approve and adopt the Agreement and Plan of Merger (the "Merger
Agreement") dated as of October 25, 1999 between IPIX and bamboo.com,
Inc. ("bamboo.com"). Pursuant to the Merger Agreement, a subsidiary of
bamboo.com will be merged with and into IPIX, and each IPIX shareholder
will receive 1.369 shares of bamboo.com common stock for each share of
IPIX common stock held;
2. To amend IPIX's 1997 Equity Compensation Plan to increase by 1,000,000
the number of shares of common stock that may be issued thereunder; and
3. To transact such other business as may properly come before the IPIX
Special Meeting, including any adjournment or postponement thereof.
Only shareholders who own shares of common stock at the close of business
on December 6, 1999 are entitled to notice of and to vote at the IPIX Special
Meeting.
Your vote as a shareholder of IPIX is important. You may vote your shares
by either (1) marking, signing, dating and returning the enclosed proxy card as
promptly as possible; (2) dialing the toll free number on the enclosed proxy
card and casting your vote in accordance with the instructions given to you on
the telephone; or (3) casting your vote via the Internet at the web address set
forth on the enclosed proxy card. A postage prepaid envelope is enclosed for
your use.
You may also vote in person at the IPIX Special Meeting even if you use one
of the three options above.
By Order of the Board of Directors
/s/ MATTHEW S. HEITER
Matthew S. Heiter
Secretary
<PAGE> 4
(bamboo.com Logo) (IPIX Logo)
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of bamboo.com and IPIX have approved a merger that
provides for the combination of the two companies. We believe that the combined
company will be the premier provider of immersive imaging for the Internet,
combining superior technology with quality service and support.
If we complete the merger, IPIX's shareholders will receive 1.369 shares of
bamboo.com common stock for each IPIX share that they own. Current bamboo.com
shareholders will continue to own their existing shares after the merger.
In connection with the merger, we are asking bamboo.com shareholders to
approve the following: the issuance of bamboo.com shares; the amendment of
bamboo.com's Restated Certificate of Incorporation; and the amendments of the
Amended and Restated 1998 Employee, Director and Consultant Stock Plan and the
1999 Employee Stock Purchase Plan. We are asking IPIX shareholders to approve
the merger agreement and the merger and the amendment to IPIX's 1997 Equity
Compensation Plan.
We cannot complete the merger unless shareholders of both companies approve
the necessary transactions.
The dates, times and places of the meetings are:
For bamboo.com shareholders:
Wednesday, January 19, 2000
10:00 AM, Pacific Time
Sheraton Palo Alto Hotel
625 El Camino Real
Palo Alto, CA 94301
For IPIX shareholders:
Wednesday, January 19, 2000
10:00 AM, Pacific Time
Civic Center Tower,
675 North First Street
Suite 975
San Jose, CA 95112
THIS JOINT PROXY STATEMENT/PROSPECTUS PROVIDES YOU WITH DETAILED
INFORMATION ABOUT THE MERGER. PLEASE READ THIS DOCUMENT CAREFULLY.
/s/ LEONARD B. MCCURDY
- ------------------------------------------------------
Leonard B. McCurdy
Chairman and Chief Executive Officer
bamboo.com, Inc.
/s/ JAMES M. PHILLIPS
- ------------------------------------------------------
James M. Phillips
Chairman and Chief Executive Officer
Interactive Pictures Corporation
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE BAMBOO.COM COMMON STOCK TO BE ISSUED UNDER THIS
JOINT PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This joint proxy statement/prospectus is dated December 16, 1999 and is first
being mailed to shareholders on or about December 20, 1999.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE
MERGER............................ 1
WHO CAN HELP ANSWER YOUR
QUESTIONS......................... 3
SUMMARY............................. 4
SELECTED FINANCIAL DATA............. 10
RISK FACTORS RELATING TO THE
MERGER............................ 16
RISK FACTORS RELATING TO THE
BUSINESS, FINANCES AND OPERATIONS
OF THE COMBINED COMPANY........... 18
STATEMENT CONCERNING FORWARD-LOOKING
STATEMENTS........................ 26
THE MERGER.......................... 27
General........................... 27
Background of the Merger.......... 28
Our Reasons for the Merger........ 30
Additional Considerations of the
bamboo.com Board of
Directors...................... 30
Additional Considerations of the
IPIX Board of Directors........ 32
Accounting Treatment.............. 34
Material Federal Income Tax
Consequences of the Merger..... 34
Regulatory Matters................ 36
No Appraisal or Dissenters'
Rights......................... 36
Federal Securities Laws
Consequences; Stock Transfer
Restriction Agreements......... 36
OPINION OF BAMBOO.COM'S FINANCIAL
ADVISOR........................... 38
OPINION OF IPIX'S FINANCIAL
ADVISOR........................... 46
INTERESTS OF RELATED PERSONS IN THE
MERGER............................ 52
THE MERGER AGREEMENT................ 54
General........................... 54
Timing of Closing................. 54
Conversion of Shares.............. 54
IPIX Stock Options................ 55
The Board of Directors of the
Combined Company and Related
Matters........................ 55
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Representations and Warranties.... 56
Covenants Regarding Conduct of
Business Before the Merger..... 56
Conditions to Consummation of the
Merger......................... 58
Termination....................... 58
Termination Fees and Expenses..... 59
Amendment or Waiver of the Merger
Agreement...................... 59
Stock Option Agreements........... 59
THE SHAREHOLDERS'
MEETINGS.......................... 61
COMPARISON OF SHAREHOLDERS'
RIGHTS............................ 66
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF BAMBOO.COM....... 73
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF IPIX............. 80
BUSINESS OF BAMBOO.COM.............. 89
BUSINESS OF IPIX.................... 103
DESCRIPTION OF BAMBOO.COM CAPITAL
STOCK............................. 117
AMENDMENT TO BAMBOO.COM'S RESTATED
CERTIFICATE OF INCORPORATION...... 120
SHARES ELIGIBLE FOR FUTURE SALE..... 121
MANAGEMENT OF THE COMBINED
COMPANY........................... 122
PRINCIPAL SHAREHOLDERS OF
BAMBOO.COM........................ 139
PRINCIPAL SHAREHOLDERS OF IPIX...... 142
BAMBOO.COM RELATED PARTY
TRANSACTIONS...................... 145
IPIX RELATED PARTY TRANSACTIONS..... 148
</TABLE>
i
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LEGAL MATTERS....................... 150
EXPERTS............................. 150
FUTURE SHAREHOLDER PROPOSALS........ 150
WHERE YOU CAN FIND MORE
INFORMATION....................... 150
INDEX TO FINANCIAL STATEMENTS....... F-1
LIST OF ANNEXES
Annex A -- Agreement and Plan of
Merger......................... A-1
Annex B -- Stock Option Agreement:
bamboo.com grantee and IPIX
issuer......................... B-1
Annex C -- Stock Option Agreement:
IPIX grantee and bamboo.com
issuer......................... C-1
Annex D -- Opinion of Robertson
Stephens....................... D-1
Annex E -- Opinion of J.P. Morgan
Securities Inc................. E-1
Annex F -- Amendment to
bamboo.com's Restated
Certificate of Incorporation... F-1
Annex G -- bamboo.com, Inc. 1999
Employee Stock Purchase Plan... G-1
Annex H -- bamboo.com, Inc.
Amended and Restated 1998
Employee, Director and
Consultant Stock Plan.......... H-1
Annex I -- Interactive Pictures
Corporation Amended and
Restated 1997 Equity
Compensation Plan.............. I-1
</TABLE>
ii
<PAGE> 7
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHEN AND WHERE ARE THE SHAREHOLDER MEETINGS?
A: bamboo.com's meeting will be held at the Sheraton Palo Alto Hotel, 625 El
Camino Real, Palo Alto, CA 94301 on January 19, 2000, starting at 10:00 AM
local time. IPIX's meeting will be held at the Civic Center Tower, 675 North
First Street, Suite 975, San Jose, CA 95112 on January 19, 2000, starting at
10:00 AM local time.
Q: WHAT AM I BEING ASKED TO VOTE UPON?
A: bamboo.com shareholders: you are being asked to approve:
- the issuance of bamboo.com common stock pursuant to the merger agreement;
- the amendment of bamboo.com's certificate of incorporation to increase
the authorized number of shares of bamboo.com common stock from 70
million to 150 million. If approved, the amendment to the certificate of
incorporation will take effect only if the merger is completed;
- the amendment of the Amended and Restated 1998 Employee, Director and
Consultant Plan to increase the number of shares which may be added
annually to the amount already reserved for issuance from 1,400,000 to
2,800,000 shares. If approved, the amendment will take effect only if the
merger is completed; and
- the amendment of the 1999 Employee Stock Purchase Plan to increase the
number of shares which may be added annually to the amount already
reserved for issuance from 700,000 to 1,400,000 shares. If approved, the
amendment will take effect only if the merger is completed.
IPIX shareholders: you are being asked to approve:
- the merger agreement and the merger, which provides that IPIX will become
a wholly-owned subsidiary of bamboo.com; and
- the amendment of the 1997 Equity Compensation Plan to increase by
1,000,000 the number of shares which may be issued.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: IPIX shareholders will receive 1.369 shares of bamboo.com common stock for
each IPIX common share they hold. bamboo.com shareholders will continue to
hold their bamboo.com shares.
The number of shares of bamboo.com common stock to be issued in connection
with the merger is fixed and will not be adjusted based upon changes in the
value of these shares. As a result, the value of the shares IPIX
shareholders receive in the merger will not be known at the time you vote on
the merger and may go up or down as the market price of bamboo.com common
stock goes up or down.
Q: HOW DOES MY BOARD OF DIRECTORS RECOMMEND THAT I VOTE ON THE PROPOSALS?
A: bamboo.com shareholders: the bamboo.com board of directors unanimously
recommends that you vote FOR:
- the issuance of shares of bamboo.com common stock pursuant to the merger
agreement;
- the amendment to bamboo.com's certificate of incorporation;
- the amendment to the Amended and Restated 1998 Employee, Director and
Consultant Plan; and
- the amendment to the bamboo.com 1999 Employee Stock Purchase Plan.
IPIX shareholders: the IPIX board of directors unanimously recommends that
you vote FOR:
- the approval of the merger agreement and the merger; and
- the amendment to the 1997 Equity Compensation Plan.
1
<PAGE> 8
Q: WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSALS?
A: bamboo.com shareholders: the proposals to be voted upon by the bamboo.com
shareholders will require the following votes:
- holders of a majority of the outstanding shares of bamboo.com common
stock must approve the amendment to bamboo.com's certificate of
incorporation to increase the authorized number of shares of bamboo.com
common stock; and
- holders of a majority of the shares of bamboo.com common stock present
and voting at the special meeting must approve the other proposals,
including the issuance of bamboo.com shares in connection with the
merger.
A: IPIX shareholders: the proposals to be voted upon by the IPIX shareholders
will require the following votes:
- holders of a majority of the outstanding shares of IPIX common stock must
approve the merger agreement and the merger; and
- holders of a majority of the shares represented at the special meeting
must approve the amendment to 1997 Equity Compensation Plan.
Q: WHAT DO I NEED TO DO NOW?
A: Just indicate on your proxy card how you want to vote, sign it and mail it
in the enclosed return envelope, or vote via telephone or the Internet, as
soon as possible, so that your shares may be represented at your
shareholders' meeting. You may also attend your shareholders' meeting and
vote your shares in person.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: Just send in a later-dated, signed proxy card to your company's secretary or
assistant secretary, as set forth above in the notice of special meeting, or
vote again by telephone or the Internet before your meeting. You can also
attend your meeting in person and vote. You may also revoke your proxy by
sending a notice of revocation to your company's secretary or assistant
secretary, as set forth above in the notice of special meeting at the
address under "The Companies" on page 4, or by telephone or over the
Internet at the phone number or Internet address given in your company's
Notice of Special Meeting above. You can find further details on how to
revoke your proxy on page 62 and 65.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: If you do not provide your broker with instructions on how to vote your
"street name" shares, your broker will not be able to vote those shares for
or against the merger. You should therefore instruct your broker how to vote
your shares, following the directions provided by your broker. Please check
the voting form used by your broker to see if your broker will permit you to
vote by telephone or over the Internet.
If you are a bamboo.com shareholder and do not give voting instructions to
your broker, you will, in effect, be voting against the proposal to amend
bamboo.com's certificate of incorporation, and you will not be able to vote
on the other proposals. If you are an IPIX shareholder and do not give
voting instructions to your broker, you will, in effect, be voting against
the merger.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. If the merger is completed, we will send IPIX shareholders written
instructions for exchanging their stock certificates. bamboo.com
shareholders will keep their existing certificates.
Q: WHEN IS THE MERGER GOING TO BE COMPLETED?
A: We hope to complete the merger as soon as possible after each company's
shareholders approve the transaction at their respective special
shareholders' meetings.
2
<PAGE> 9
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have more questions about the merger, you should contact:
if you are a
BAMBOO.COM SHAREHOLDER:
bamboo.com, Inc.
124 University Avenue
Palo Alto, CA 94301
Attention: Erik Magdanz
Phone Number: (650) 325-6787
if you are an
IPIX SHAREHOLDER:
Interactive Pictures Corporation
1009 Commerce Park Drive
Oak Ridge, TN 37830
Attention: Jeff Puckett
Phone Number: (423) 482-3000
If you would like additional copies of this document,
or if you have questions about the merger, you should contact:
if you are a
BAMBOO.COM SHAREHOLDER:
Georgeson Shareholder Communications, Inc.
17 State Street
New York, NY 10004
Attention: Chuck Garske
For banks & brokers, call collect:
(212) 440-9800
For all others, call toll free:
(800) 223-2064
if you are an
IPIX SHAREHOLDER:
Morrow & Company
445 Park Avenue, 5th Floor
New York, NY 10022
Attention: Bill Poudrier
For banks & brokers, call toll free:
(800) 662-5200, or
call collect:
(212) 754-8000
For all others, call toll free:
(800) 566-9061
3
<PAGE> 10
SUMMARY
This summary contains selected information from this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and to obtain a more complete
description of the legal terms of the merger, you should carefully read this
entire document, including the Annexes, and the documents to which we refer you.
See "Where You Can Find More Information" on page 150.
THE COMPANIES
BAMBOO.COM, INC.
124 UNIVERSITY AVENUE
PALO ALTO, CA 94301
TELEPHONE: (650) 325-6787
bamboo.com is a provider of 360 degrees virtual tours of real estate
properties on the Internet. bamboo.com provides a comprehensive virtual tour
service to real estate agents that includes videotaping the inside and outside
of a home or other property, processing the videotape into a complete virtual
tour and distributing the virtual tour. bamboo.com distributes its virtual tours
to a variety of web sites, including real estate destination sites and Internet
portals. bamboo.com also distributes its virtual tours by e-mail to real estate
agents for easy redistribution to their clients and prospective home buyers.
Utilizing an extensive service provider network of videographers, bamboo.com
offers its virtual tour service in over 4,500 cities, towns, boroughs and
counties across the United States and Canada.
INTERACTIVE PICTURES CORPORATION
1009 COMMERCE PARK DRIVE
OAK RIDGE, TN 37830
TELEPHONE: (423) 482-3000
IPIX is a leader in interactive photography and immersive imaging for the
Internet, using patented technology to create IPIX images which capture the
world as we see it, providing a complete field of view: from ground to sky,
floor to ceiling, horizon to horizon. IPIX's patented technology creates IPIX
images by combining two film or digital photographs taken with a fisheye lens
into one 360 degrees by 360 degrees spherical image. IPIX's software corrects
the distortion inherent in these photographs. A person may view the resulting
image in any direction, and, if desired, save the image utilizing an IPIX key
for posting to a web site, transmitting by e-mail or saving to a disk. IPIX is
also utilizing its patented technology to develop other immersive imaging
products, such as steerable video, an IPIX Webcam and an IPIX-compatible digital
camera for the consumer market.
REASONS FOR THE MERGER (SEE PAGE 30)
We believe that the merger will:
- create the world's premier provider of interactive photography and
immersive imaging for the Internet;
- provide the real estate industry with a complete end-to-end Internet
imaging solution;
- offer business and consumer markets a variety of complete Internet
solutions for visual content, addressing content capture, processing,
formatting, aggregation, hosting and distribution;
- create opportunities to expand utilization of immersive imaging in other
commercial markets;
- enhance the combined company's ability to sell its products and services
in international markets; and
- bring together two knowledgeable and experienced management teams to
enhance the combined company's growth.
For a detailed description of the factors considered by the bamboo.com
board of directors and the IPIX board of directors, see pages 30-33.
4
<PAGE> 11
OUR RECOMMENDATIONS TO SHAREHOLDERS
To bamboo.com Shareholders:
bamboo.com's board of directors believes that the merger is fair to you and
in your best interests and unanimously recommends that you vote FOR the issuance
of bamboo.com shares pursuant to the merger agreement, the amendment to
bamboo.com's Restated Certificate of Incorporation, and the amendments to the
Amended and Restated 1998 Employee, Director and Consultant Stock Plan and the
bamboo.com 1999 Employee Stock Purchase Plan.
To IPIX Shareholders:
IPIX's board of directors believes that the merger is fair to you and in
your best interests and unanimously recommends that you vote FOR the approval of
the merger agreement and the merger and the amendment to the 1997 Equity
Compensation Plan.
THE MERGER
We have attached the merger agreement as Annex A to this joint proxy
statement/prospectus. We encourage you to read this agreement because it is the
legal document that governs the merger.
WHAT IPIX SHAREHOLDERS WILL RECEIVE IN THE MERGER (SEE PAGE 16)
As a result of the merger, IPIX shareholders will receive 1.369 shares of
bamboo.com common stock for each IPIX common share that they own. bamboo.com
will not issue any fractional common shares in the merger. IPIX shareholders
will instead receive cash for any bamboo.com fractional common shares owed to
them.
Example:
- If you own 100 IPIX common shares, after the merger you will receive 136
bamboo.com common shares and a check for the value of .9 bamboo.com
common shares, rounded to the nearest one cent. The value of the
bamboo.com common shares that you receive will fluctuate as the price of
a bamboo.com common share changes.
- On December 15, 1999, the most recent practicable date prior to the
filing of this document, the last reported sales price of bamboo.com
shares on the NASDAQ National Market was $16.06 Applying the 1.369
exchange ratio to the bamboo.com closing price on that date, each holder
of IPIX common shares would be entitled to receive bamboo.com common
shares with a market value of approximately $21.99 for each IPIX share.
The actual value of the bamboo.com common shares to be issued in the
merger, however, will depend on market prices at that time, and may be
more or less than the value given in this example. We urge you to obtain
current price quotations for IPIX and bamboo.com common shares.
WHAT BAMBOO.COM SHAREHOLDERS WILL HOLD AFTER THE MERGER
Current bamboo.com shareholders will continue to own their existing
bamboo.com common shares after the merger. bamboo.com shareholders should not
send in their stock certificates in connection with the merger.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 34)
We intend that the merger qualify as a "tax-free reorganization" for
federal income tax purposes. If the merger qualifies as a tax-free
reorganization, holders of IPIX common shares will generally not recognize any
gain or loss for federal income tax purposes on the exchange of their IPIX
shares for bamboo.com common shares in the merger, except for any gain or loss
recognized in connection with any cash received for a fractional bamboo.com
share. The companies themselves, as well as current holders of bamboo.com common
shares, will not recognize gain or loss as a result of the merger. It is a
condition to the obligations of IPIX and
5
<PAGE> 12
bamboo.com to complete the merger that each
receive a legal opinion from its outside counsel that the merger will be a
tax-free reorganization for federal income tax purposes.
THE FEDERAL INCOME TAX CONSEQUENCES DESCRIBED ABOVE MAY NOT APPLY TO ALL
HOLDERS OF IPIX COMMON SHARES. YOUR TAX CONSEQUENCES WILL DEPEND ON YOUR OWN
SITUATION. YOU SHOULD CONSULT YOUR TAX ADVISOR SO AS TO FULLY UNDERSTAND THE TAX
CONSEQUENCES OF THE MERGER TO YOU.
COMPARATIVE MARKET PRICE INFORMATION (SEE PAGE 15)
bamboo.com common shares and IPIX common shares are both listed on the
NASDAQ National Market under the symbols "BAMB" and "IPIX." On October 25, 1999,
the last full trading day before the public announcement of the proposed merger,
the last reported sale price of bamboo.com common shares on the NASDAQ National
Market was $16.25 and the last reported sale price of IPIX common shares on the
NASDAQ National Market was $21.375. On December 15, 1999, the most recent
practicable date prior to the filing of this document, the last reported sale
price for bamboo.com common shares was $16.06 and $23.69 for IPIX common shares.
LISTING OF BAMBOO.COM COMMON SHARES
The bamboo.com common shares that will be issued to IPIX shareholders in
the merger will be listed on the NASDAQ National Market under a new name and new
symbol that will be agreed upon by the parties prior to the completion of the
merger.
OWNERSHIP OF BAMBOO.COM AFTER THE MERGER
bamboo.com will issue approximately 22,712,598 million bamboo.com common
shares to IPIX shareholders in the merger. IPIX shareholders will own
approximately 50.6% of the outstanding bamboo.com common shares after the
merger. This information is based on the number of bamboo.com and IPIX common
shares outstanding on December 6, 1999, and does not take into account stock
options or convertible securities of IPIX or bamboo.com.
SHAREHOLDER VOTE REQUIRED
For bamboo.com shareholders: Pursuant to the rules of the NASDAQ National
Market, the issuance of bamboo.com shares in connection with the merger
agreement must be approved by at least a majority of shares present in person or
by proxy and entitled to vote at the bamboo.com special meeting. The amendments
to the Amended and Restated 1998 Employee, Director and Consultant Stock Plan
and the 1999 Employee Stock Purchase Plan must also be approved by a majority of
the shares present.
The amendment to bamboo.com's restated certificate of incorporation must be
approved by a majority of the outstanding shares.
For IPIX shareholders: The merger and the merger agreement must be
approved by a majority of all outstanding shares entitled to vote at the IPIX
shareholders meeting. The amendment to IPIX's 1997 Equity Compensation Plan must
be approved by a majority of the holders present at the IPIX special meeting.
NO APPRAISAL OR DISSENTERS' RIGHTS (SEE PAGE 36)
Under both Delaware and Tennessee law, the holders of bamboo.com and IPIX
common shares have no right to an appraisal of the value of their shares in
connection with the merger.
DIRECTORS AND MANAGEMENT OF THE COMBINED COMPANY AFTER THE MERGER (SEE PAGE 55)
Following the merger, the combined company's board of directors will have
nine members, including four of the current bamboo.com directors designated by
bamboo.com, four of the current members of IPIX's board of directors designated
by IPIX, and a ninth member who will be agreed upon
6
<PAGE> 13
by the chairman of IPIX and the chairman of bamboo.com.
Following the merger, the combined company's executive officers are
expected to be:
- James M. Phillips, chairman and chief executive officer of IPIX, who will
become chairman and chief executive officer;
- Leonard B. McCurdy, chairman and chief executive officer of bamboo.com
and Laban P. Jackson, Jr., a director of IPIX, who will become vice
chairmen;
- Jeffrey D. Peters, president and chief operating officer of IPIX, will
become president;
- John J. Kalec, chief financial officer of IPIX, who will become chief
financial officer; and
- Mark R. Searle, chief operating officer of bamboo.com, who will become
chief operating officer.
INTERESTS OF THE DIRECTORS AND OFFICERS OF BAMBOO.COM AND IPIX IN THE MERGER
(SEE PAGE 52)
Directors and officers of IPIX and bamboo.com have interests in the merger
that are different from, or in addition to, yours as a shareholder. If we
complete the merger, a number of directors and members of the existing senior
management of each of IPIX and bamboo.com will be designated as members of the
initial board of directors and senior management of the combined company. The
combined company will continue to provide indemnification arrangements and
directors and officers liability insurance for existing directors and officers
of IPIX similar to those provided before the merger.
SHARE OWNERSHIP OF MANAGEMENT AND DIRECTORS
On December 6, 1999, the record date for bamboo.com's shareholders'
meeting, directors and executive officers of bamboo.com and their affiliates
owned and were entitled to vote 12,863,640 bamboo.com common shares, or
approximately 58% of the bamboo.com common shares outstanding on that date.
On December 6, 1999, the record date for IPIX's shareholders' meeting,
directors and executive officers of IPIX and their affiliates owned and were
entitled to vote 5,675,494 IPIX common shares, or approximately 34.2% of the
IPIX common shares outstanding on that date.
Each of the directors and executive officers and their related shareholders
of bamboo.com and IPIX intend to vote their shares in favor of the merger.
ACCOUNTING TREATMENT (SEE PAGE 34)
We intend that the merger qualify as a "pooling of interests," which means
that we will treat our companies as if they had always been combined for
accounting and financial reporting purposes.
REGULATORY APPROVALS (SEE PAGE 36)
Although the transactions contemplated in the merger agreement did not
require any filing under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, the United States Department of Justice and the Federal Trade
Commission have the authority to challenge the merger on antitrust grounds
before or after we complete the merger.
CONDITIONS TO THE MERGER (SEE PAGE 58)
We will complete the merger only if specific conditions are satisfied or,
in some cases, waived, including the following:
- approval by the shareholders of bamboo.com and IPIX;
- absence of any law or court order prohibiting the merger; and
- receipt of opinions of bamboo.com's and IPIX's outside counsel that the
merger will be a tax-free reorganization for federal income tax purposes.
7
<PAGE> 14
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 58)
Our boards of directors can jointly agree to terminate the merger agreement
at any time before completing the merger. In addition, either bamboo.com or IPIX
can terminate the merger agreement if:
- the merger is not completed by June 30, 2000 (however, a party in
material breach of its obligations under the merger agreement cannot
terminate it for this reason);
- a court order prohibits the merger;
- bamboo.com or IPIX shareholders do not approve the merger;
- the other company materially breaches any of its representations or
warranties under the merger agreement, resulting in its inability to
satisfy a condition to the completion of the merger by June 30, 2000;
- the other company materially breaches any of its covenants or agreements
under the merger agreement and fails to cure that breach within a twenty
(20) day period;
- the other company recommends to its shareholders that they accept another
takeover proposal;
- the other company's board of directors withdraws, modifies or changes its
approval of the merger agreement or its recommendation to its
shareholders or fails to call and properly convene a shareholders'
meeting to vote upon the merger; or
- the other company is the subject of an exchange or tender offer for 30%
or more of its voting shares and the board of directors of the other
company does not recommend to its shareholders not to tender their shares
into the exchange or tender offer.
TERMINATION FEES AND EXPENSES (SEE PAGE 59)
The merger agreement obligates bamboo.com or IPIX to pay to the other party
a termination fee of $16.0 million if:
- the merger agreement is terminated for certain of the reasons described
above under "Termination of the Merger Agreement;"
- prior to the holding of its special shareholders' meeting or the
termination of the merger agreement, it is publicly announced or becomes
publicly known that either company is the subject of a takeover proposal;
and
- during the term of the merger agreement or within 225 days of its
termination, a takeover actually occurs.
STOCK OPTION AGREEMENTS
In connection with the merger agreement, bamboo.com and IPIX entered into
two stock option agreements: IPIX granted bamboo.com an option to purchase 19.9%
of IPIX's common shares at a price of $22.25 per share, and bamboo.com granted
IPIX an option to purchase 19.9% of bamboo.com's common shares at a price of
$16.25 per share. The stock options become exercisable in the event that the
issuer of the option becomes the subject of a publicly announced third party
takeover proposal. Neither bamboo.com nor IPIX may realize more than a total of
$20 million from the payment of both the $16 million termination fee and the
exercise of the stock option and subsequent sale of the option shares. Both
options terminate:
- upon the consummation of the merger;
- 30 days after the termination of the merger agreement (other than as a
result of the announcement or other release of public information
concerning a proposal by a third party to acquire 30% or more of the
equity or assets, or to undertake a merger involving 30% of the assets,
net revenue or net income of the issuer); or
8
<PAGE> 15
- 180 days after the termination of the merger agreement as a result of an
announcement or release of the information described immediately above.
The termination fees and stock option agreements may make it more difficult
and expensive for IPIX or bamboo.com to consummate an alternative transaction.
We have attached the stock option agreements as Annexes B and C. We encourage
you to read them.
OPINIONS OF FINANCIAL ADVISORS (SEE PAGES 38 TO 51)
In deciding to approve the merger, each of bamboo.com's and IPIX's board of
directors considered the opinion of their financial advisors. bamboo.com
received an opinion from BancBoston Robertson Stephens Inc. ("Robertson
Stephens") and IPIX received an opinion from J.P. Morgan Securities Inc., each
to the effect that the merger exchange ratio was fair from a financial point of
view as of the date of the opinions. We have attached the full text of these
opinions as Annexes D and E. We encourage you to read them.
9
<PAGE> 16
SELECTED FINANCIAL DATA
The following selected historical financial data of bamboo.com and IPIX as
of December 31, 1997 and 1998 and for the each of the three years in the period
ended December 31, 1998 has been derived from audited historical consolidated
financial statements and should be read in conjunction with such financial
statements and related notes included herein. Historical operating information
for periods prior to January 1, 1996 and balance sheet data prior to December
31, 1997 for both companies are derived from audited financial statements not
included herein. Information as of September 30, 1998 and 1999 and for the nine
month periods ended September 30, 1998 and 1999 are derived from unaudited
consolidated financial statements that are included in this document. The
selected pro forma combined financial data of bamboo.com and IPIX is derived
from the unaudited pro forma condensed consolidated financial statements and
should be read in conjunction with such pro forma statements and related notes
included elsewhere in this proxy statement/prospectus.
The pro forma financial information does not purport to represent what the
combined company's financial position or results of operations would actually
have been had the merger occurred at the beginning of the earliest period
presented or to project the combined company's financial position or results of
operations for any future date or period. In addition, it does not incorporate
any benefits from cost savings or synergies of operations of the combined
company.
10
<PAGE> 17
SELECTED HISTORICAL FINANCIAL DATA OF BAMBOO.COM
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- ------------------
1996 1997 1998 1998 1999
------ ------ ------- ------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Revenues...................................... $ -- $ 46 $ 77 $ 60 $ 1,797
Cost of revenues.............................. -- 15 67 54 1,455
------ ------ ------- ------- --------
Gross profit............................. -- 31 10 6 342
Operating expenses:
Sales and marketing......................... 5 10 300 108 11,048
General and administrative.................. 62 122 278 60 4,642
Research and development.................... 24 42 110 64 685
Stock-based compensation.................... -- -- 1162 906 14,810
------ ------ ------- ------- --------
Total.................................... 91 174 1,850 1,138 31,185
------ ------ ------- ------- --------
Loss from operations.......................... (91) (143) (1,850) (1,132) (30,843)
Interest income............................... -- -- -- -- 278
Interest expense.............................. -- -- -- -- (6,629)
------ ------ ------- ------- --------
Net Loss................................. (91) (143) (1,850) (1,132) (37,194)
Beneficial conversion feature of Series B
convertible preferred stock................. -- -- -- -- 1,000
------ ------ ------- ------- --------
Net loss attributable to common
shareholders................................ $ (91) $ (143) $(1,850) $(1,132) $(38,194)
====== ====== ======= ======= ========
Net loss per common share -- basic and
diluted..................................... $(0.04) $(0.05) $ (0.31) $ (0.20) $ (3.88)
Weighted average common shares -- basic and
diluted..................................... 2,284 2,819 5,953 5,553 9,840
====== ====== ======= ======= ========
Balance Sheet Data:
Cash and cash equivalents..................... 131 4 430 138 27,461
Working capital (deficit)..................... 37 (87) 265 84 23,043
Total assets.................................. 150 25 780 193 31,130
Long-term obligations......................... -- -- -- -- 455
Total shareholders' equity (deficit).......... 56 (73) 517 122 25,031
</TABLE>
11
<PAGE> 18
SELECTED HISTORICAL FINANCIAL DATA OF IPIX
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------------------ ---------------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- ------- -------- ------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
Product.......................................... $ 393 $ 699 $ 1,337 $ 2,128 $ 2,712 $ 1,832 $ 5,406
Service.......................................... 492 578 208 318 329 156 --
------- ------- ------- ------- -------- ------- --------
885 1,277 1,545 2,446 3,041 1,988 5,406
------- ------- ------- ------- -------- ------- --------
Cost of revenues:
Product.......................................... 246 312 543 446 1,207 548 2,690
Service.......................................... 475 247 108 316 241 85 --
------- ------- ------- ------- -------- ------- --------
721 659 651 762 1,448 633 2,690
------- ------- ------- ------- -------- ------- --------
Gross profit................................... 164 618 894 1,684 1,593 1,335 2,716
Operating expenses:
Sales and marketing.............................. 283 528 908 2,829 8,387 5,625 12,429
Research and development......................... 531 568 389 1,171 2,668 1,928 2,653
General and administrative....................... 549 1,476 921 2,598 3,864 2,290 4,069
Amortization of product development and patent
costs.......................................... -- -- 71 858 -- -- --
Compensation expense............................. -- -- -- -- -- -- 169
------- ------- ------- ------- -------- ------- --------
Total operating expenses....................... 1,363 2,572 2,289 7,456 14,919 9,843 19,320
------- ------- ------- ------- -------- ------- --------
Interest and other income (expense), net........... 175 189 201 194 101 94 877
Income tax benefit................................. 10 -- -- -- -- -- --
------- ------- ------- ------- -------- ------- --------
Net loss....................................... $(1,014) $(1,765) $(1,194) $(5,578) $(13,225) $(8,394) $(15,727)
======= ======= ======= ======= ======== ======= ========
Net loss per common share -- basic and diluted..... $ (0.19) $ (0.32) $ (0.21) $ (0.89) $ (2.84) $ (1.71) $ (2.28)
======= ======= ======= ======= ======== ======= ========
Weighted average common shares -- basic and
diluted.......................................... 5,375 5,579 5,637 6,287 4,661 4,899 6,913
======= ======= ======= ======= ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
------------------------------------------ --------------------
1994 1995 1996 1997 1998 1998 1999
------ ------ ------ ------ ------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and securities
available-for-sale..................................... $3,592 $3,105 $5,107 $2,826 $1,064 $6,279 $68,213
Working capital (deficit)................................ 3,396 2,819 4,944 (71) (635) 3,533 71,628
Total assets............................................. 5,628 3,918 6,780 4,574 3,989 8,985 76,694
Long-term debt........................................... -- -- -- 29 21 23 15
Total shareholders' equity............................... 5,103 3,407 6,160 582 793 4,682 73,883
</TABLE>
12
<PAGE> 19
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- ------------------
1996 1997 1998 1998 1999
------- ------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA(1):
Revenues................................... $ 1,545 $ 2,491 $ 3,118 $ 2,048 $ 7,203
Gross profit............................... 894 1,714 1,603 1,361 3,058
Net loss(2)................................ (1,284) (5,721) (15,065) (9,526) (53,213)
Net loss applicable to common stock........ (1,284) (5,721) (15,065) (9,526) (54,213)
Net loss per share -- basic and
diluted(3)............................... $ (0.13) $ (0.50) $ (1.22) $ (0.78) $ (2.81)
Weighted average shares
outstanding -- basic and diluted(3)...... 10,001 11,426 12,334 12,260 19,304
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1999
-------------
<S> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and securities available-for-sale.... $ 95,674
Working capital(1).......................................... 94,671
Total assets................................................ 107,824
Long-term debt.............................................. 470
Total shareholders' equity(1)............................... 98,914
</TABLE>
- -------------------------
(1) Does not reflect certain estimated non-recurring charges aggregating
approximately $10,100,000 with respect to legal, accounting and other
expenses associated with the merger or approximately $2,056,000 associated
with the accelerated vesting of a portion of the bamboo.com options upon
consummation of the merger.
(2) The net loss for the nine months ended September 30, 1999 reflects non-cash
compensation charges of approximately $15,271,000 and non-cash interest
expense of approximately $6,629,000 related to bamboo.com's mandatory
redemption of Series C mandatorily redeemable preferred stock upon
consummation of its initial public offering.
(3) Pro forma net loss per share amounts are based on the average number of
common shares of the combined companies outstanding during each period.
Shares of IPIX have been adjusted to the equivalent shares of bamboo.com
using an exchange ratio of 1.369.
13
<PAGE> 20
COMPARATIVE PER SHARE DATA
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ ---------------
1996 1997 1998 1998 1999
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
BAMBOO.COM HISTORICAL PER COMMON SHARE DATA:
Net loss.......................................... $(0.04) $(0.05) $(0.31) $(0.20) $(3.88)
Net loss -- assuming dilution..................... (0.04) (0.05) (0.31) (0.20) (3.88)
Cash dividend..................................... -- -- -- -- --
Book value........................................ 1.17
IPIX HISTORICAL PER COMMON SHARE DATA:
Net loss.......................................... $(0.21) $(0.89) $(2.84) $(1.71) $(2.28)
Net loss -- assuming dilution..................... (0.21) (0.89) (2.84) (1.71) (2.28)
Cash dividends.................................... -- -- -- -- --
Book value........................................ 4.46
COMBINED COMPANY PRO FORMA COMBINED PER BAMBOO.COM
COMMON SHARE DATA(1):
Net loss.......................................... $(0.13) $(0.50) $(1.22) $(0.78) $(2.81)
Net loss -- assuming dilution..................... (0.13) (0.50) (1.22) (0.78) (2.81)
Cash dividends.................................... -- -- -- -- --
Book value........................................ 2.60
COMBINED COMPANY PRO FORMA COMBINED PER IPIX
COMMON SHARE DATA(1):
Net loss.......................................... $(0.18) $(0.68) $(1.67) $(1.07) $(3.85)
Net loss -- assuming dilution..................... (0.18) (0.68) (1.67) (1.07) (3.85)
Cash dividends.................................... -- -- -- -- --
Book value........................................ 3.57
</TABLE>
- -------------------------
(1) Pro forma net loss per share amounts are based on the average number of
common shares of the combined companies outstanding during each period.
Shares of IPIX have been adjusted to the equivalent shares of bamboo.com
using an exchange ratio of 1.369.
14
<PAGE> 21
COMPARATIVE MARKET PRICE INFORMATION
The bamboo.com common stock has been traded since August 26, 1999 on the
NASDAQ National Market under the symbol "BAMB." Prior to August 26, 1999, there
was no public market for the bamboo.com common stock. The IPIX common stock has
been traded since August 5, 1999 on the NASDAQ National Market under the symbol
"IPIX." Prior to August 5, 1999, there was no public market for the IPIX common
stock. Upon consummation of the merger, the combined company's common stock will
trade on the NASDAQ National Market under a new symbol that will be determined
prior to the completion of the merger. The following table sets forth the range
of high and low closing sale prices for bamboo.com common stock and IPIX common
stock as reported on the NASDAQ National Market during each of the quarters
presented.
<TABLE>
<CAPTION>
BAMBOO.COM
COMMON STOCK
--------------------
HIGH LOW
------- -------
<S> <C> <C> <C> <C>
1999
Quarter Ended September 30 (from August 26, 1999*).......... 25 3/8 17 1/4
Quarter Ended December 31 (through December 15, 1999)....... 19 1/2 13 7/16
</TABLE>
<TABLE>
<CAPTION>
IPIX
COMMON STOCK
--------------------
HIGH LOW
------- -------
<S> <C> <C> <C> <C>
1999
Quarter Ended September 30 (from August 5, 1999*)........... 25 9/16 14 1/2
Quarter Ended December 31 (through December 15, 1999)....... 24 1/4 20 1/4
</TABLE>
- -------------------------
* First trading date following the initial public offering.
As of December 6, 1999, there were approximately 213 holders of record of
bamboo.com common stock and 127 holders of record of IPIX common stock.
Neither bamboo.com nor IPIX has ever declared or paid any cash dividends on
its common stock. It is the present policy of the bamboo.com board of directors
and the IPIX board of directors to retain all earnings to support operations and
to finance expansion of their respective businesses; therefore, neither
bamboo.com nor IPIX anticipates that the combined company will declare or pay
dividends on its common stock in the foreseeable future. The declaration and
payment of cash dividends in the future will be at the combined company's board
of directors' discretion and will depend on earnings, financial condition,
capital needs and other factors deemed pertinent by the combined company's board
of directors.
Set forth below are the last reported sale prices of bamboo.com common
stock and IPIX common stock on October 25, 1999, the last trading day prior to
the public announcement of the execution of the merger agreement, and on
December 15, 1999, the latest practicable trading day prior to the date of this
joint proxy statement/prospectus, as reported on the NASDAQ National Market.
<TABLE>
<CAPTION>
OCTOBER 25, 1999 DECEMBER 15, 1999
---------------- -----------------
<S> <C> <C>
bamboo.com Common Stock................................ 16 1/4 16 1/16
IPIX Common Stock...................................... 21 3/8 23 11/16
</TABLE>
15
<PAGE> 22
RISK FACTORS RELATING TO THE MERGER
In addition to the risks relating to the businesses of bamboo.com and IPIX
which are described below, you should carefully consider the following risk
factors relating to the merger in determining whether to vote in favor of the
merger. You should also consider the risk factors that will generally have an
impact on the combined company's financial condition, results of operations and
business after the merger, including those described under "Information
Regarding Forward-looking Statements."
IPIX SHAREHOLDERS WILL RECEIVE BAMBOO.COM COMMON SHARES IN THE MERGER THAT
WILL FLUCTUATE IN VALUE.
In the merger, IPIX's shareholders will receive 1.369 bamboo.com common
shares for each IPIX common share. The market price of the bamboo.com common
shares to be issued in the merger will fluctuate as a result of changes in the
business, operations or prospects of bamboo.com or IPIX or market assessments of
the impact of the merger. Because the market price of bamboo.com common shares
fluctuates, the value of the bamboo.com common shares that IPIX shareholders
will receive will depend upon the market price of those shares at the time of
the merger. There can be no assurance as to this value. For historical and
current market prices of bamboo.com shares, see "Comparative Market Price
Information" on page 15.
During the period from August 25, 1999, the date of bamboo.com's initial
public offering to December 15, 1999, the most recent practicable date prior to
the filing of the document, the high of the NASDAQ National Market Index was
approximately 136% greater than its low, whereas the highest closing price of a
bamboo.com common share was approximately 189% greater than its lowest closing
price. You should not view these facts, however, as necessarily indicating the
future market performance or volatility of bamboo.com common shares. The actual
performance and volatility of bamboo.com common shares and/or the financial
markets could be significantly more or less than that indicated by the above
facts, on an absolute or a relative basis.
WE MAY EXPERIENCE DIFFICULTIES IN COMBINING THE OPERATIONS OF THE TWO
COMPANIES.
The merger involves the integration of two companies that have previously
operated independently. The companies must integrate their management teams as
well as numerous systems, including those involving management information,
sales, accounting and finance, billing, employee benefits, payroll and research
and development. Specifically, the two companies have a number of information
systems that are dissimilar. The companies will have to integrate, or, in some
cases, replace, these systems. In addition, bamboo.com and IPIX have entered
into strategic alliances with the same party pursuant to which each of the
companies is required to make payments under these agreements. After the merger,
we may have to continue making these payments, some of which may overlap. If we
are not successful in integrating the operations of our two companies, the value
of the bamboo.com shares received in the merger will fall.
16
<PAGE> 23
OFFICERS AND DIRECTORS HAVE POTENTIAL CONFLICTS OF INTEREST IN THE MERGER.
In considering the recommendations of the bamboo.com and IPIX boards of
directors that the shareholders approve the merger, you should be aware that
some of the directors and officers of each company may have interests in the
merger different from or in addition to yours. For example, four of the current
members of the board of directors of each company will become members of the
board of directors of the combined company. See "Interests of Related Persons in
the Merger" on page 52.
17
<PAGE> 24
RISK FACTORS RELATING TO THE BUSINESS, FINANCES AND OPERATIONS OF
THE COMBINED COMPANY
THE FUTURE PROFITABILITY OF THE COMBINED COMPANY IS UNCERTAIN BECAUSE BOTH
BAMBOO.COM AND IPIX HAVE A LIMITED OPERATING HISTORY AND OUR QUARTERLY RESULTS
MAY FLUCTUATE, WHICH COULD CAUSE THE PRICE OF OUR COMMON STOCK TO DROP.
bamboo.com and IPIX believe that their quarterly operating results could
vary significantly in the future and that quarter-to-quarter comparisons should
not be relied upon as indications of future performance. In some future
quarterly periods the operating results may fall below the expectations of
securities analysts and investors, which could significantly harm or depress the
trading price of our common stock. Among the factors which could significantly
affect our future performance are:
- the rate at which we can recruit, train and integrate employees;
- cyclical economic swings in the real estate market (caused by
various factors, such as changes in interest rates, changes in
economic conditions and seasonal changes in certain geographic
regions) could decrease demand for our services and products;
- the introduction of new or enhanced products and services or changes
in pricing policies by us or our competitors;
- our ability to manage multiple relationships among various
customers, suppliers and strategic partners;
- the uncertainty of market acceptance of our products, services and
brand;
- our ability to expand sales, marketing and customer service
operations;
- our ability to maintain our research and development activities; and
- economic conditions specific to the Internet or all or a portion of
the technology sector.
BAMBOO.COM AND IPIX HAVE BOTH INCURRED SUBSTANTIAL LOSSES, AND THEIR EXPENSES
CONTINUE TO INCREASE; THUS, WE MAY NEVER BECOME PROFITABLE.
bamboo.com and IPIX have incurred net losses and experienced negative cash
flow and expect their operating losses and negative cash flow to continue.
Although their revenues have increased over the past years, bamboo.com and IPIX
may not be able to sustain future revenue growth. In addition, bamboo.com's and
IPIX's expenses continue to increase as they expand their sales and marketing
efforts, increase the number of employees and invest in product development.
Further, as of September 30, 1999, on a pro forma basis, the combined company
had an accumulated deficit of $80.3 million. Accordingly, we cannot offer any
assurances that revenues will ever exceed expenses or that we will become
profitable.
OUR FUTURE SUCCESS IS DEPENDENT ON KEY DISTRIBUTION PARTNERS.
The ability to distribute virtual tours widely over the Internet is vital
to our business. bamboo.com's virtual tours can currently be viewed through the
web sites of bamboo.com's
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distribution partners, which include real estate destination sites such as
REALTOR.com, Microsoft HomeAdvisor, HomeSeekers.com, and Homes.com. Through
agreements between its partners and third parties, bamboo.com's virtual tours
may also be viewed on America Online, @Home Network, Excite, GO
Network/Infoseek, MSN, NBC.com, Netscape Netcenter and Yahoo! In addition, IPIX
virtual tours may be viewed on many of these same Internet sites. We must
continue to have access to these sites and maintain existing relationships. If
we lose any of our distribution partners or if any of our distribution partners
loses its relationship with any major Internet portal, our business could be
seriously harmed.
BAMBOO.COM DEPENDS ON THIRD-PARTY RELATIONSHIPS FOR ASSISTANCE IN MARKETING AND
HOSTING VIRTUAL TOURS.
In addition to its relationships with major Internet distribution partners,
bamboo.com depends on establishing and maintaining commercial relationships with
traditional real estate brokerage companies, multiple listing services (MLS) and
MLS technology providers. We expect to continue to encounter competition for
these relationships with real estate brokerage companies.
bamboo.com depends upon a third party Internet service provider to host and
maintain its production servers. As part of its service, bamboo.com's web
servers host virtual tours for some of its distribution partners. The
performance of its web hosting facility systems is critical to bamboo.com
business and its reputation. Any system failure, including network, software or
hardware failure, that causes an interruption in the delivery of virtual tours
or a decrease in responsiveness of web site service could result in reduced
revenue, and could be harmful to the reputation and brand. bamboo.com's Internet
service provider does not guarantee that its Internet access will be
uninterrupted, error free or secure. Any disruption in the Internet access
provided by such provider could significantly harm bamboo.com's business. In the
future, bamboo.com may experience interruptions from time to time. bamboo.com's
insurance may not adequately compensate for any losses that may occur due to any
failures in the system or interruptions in the service.
Our web servers must be able to accommodate a high volume of traffic, and
we may in the future experience slower response times for a variety of reasons.
If we are unable to add additional software and hardware to accommodate
increased demand, this could cause unanticipated system disruptions and result
in slower response times. Real estate agents, home sellers and home buyers may
become dissatisfied by any system failure that interrupts our ability to provide
virtual tours or results in slower response time.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, AND THESE RIGHTS
MAY BE CHALLENGED BY OTHERS, WHICH COULD SUBJECT US TO SIGNIFICANT LIABILITY FOR
DAMAGES AND INVALIDATION OF OUR INTELLECTUAL PROPERTY RIGHTS.
We rely on a combination of patent, trademark and trade secret laws,
non-disclosure agreements and other contractual provisions to protect our
intellectual property rights. Our success is heavily dependent upon our ability
to enforce and protect these rights, and we cannot assure you that we will be
successful in protecting these rights. Also, our patents, service marks, or
trademarks may be challenged and invalidated or circumvented. IPIX has been
involved in litigation relating to the protection of intellectual property
rights and could be involved in future litigation as third parties develop
products that we believe infringe on patent and other intellectual property
rights. IPIX is currently involved in
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litigation in which our rights to technology have been challenged. A
determination against IPIX in this lawsuit would have a material adverse effect
on our business. The market for online virtual tours is relatively new, but it
is already competitive and characterized by the entrance of companies that may
have or may develop online virtual tours similar to those of bamboo.com and
IPIX. In addition, there are relatively low barriers to entry to the market for
online virtual tours similar to those of bamboo.com and IPIX. Also, we cannot
assure you that any claims, trademarks, service marks and issued patents or
pending patent applications will be of sufficient scope or strength. Further, we
cannot assure that any claims, trademarks, service marks, patents or patent
applications will be registered or issued in all countries where our products
can be sold or where our technologies can be licensed to provide meaningful
protection against any commercial damage to us. In particular, we are exposed to
patent infringement in foreign markets because our patents are protected under
United States patent laws that may not extend to foreign uses.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our processes and devices that we regard as
proprietary. A party who is able to copy or gain unauthorized use of our
processes and devices could misappropriate proprietary information or circumvent
the use of IPIX keys. We have experienced attempts to misappropriate our
technology, and we expect that those attempts may continue. We may be required
to expend significant capital and resources to prevent any further attempts.
Policing unauthorized use of our proprietary information is difficult, and we
cannot assure you that the steps we take will prevent misappropriation of our
technologies. If we are unable to protect our intellectual property rights, we
could face increased competition in the market for our products and
technologies. Any increased competition could negatively affect our sales and
ability to expand our business.
OUR MARKET IS HIGHLY COMPETITIVE, AND OUR BUSINESS MAY FAIL IF WE ARE UNABLE TO
COMPETE SUCCESSFULLY.
The market for immersive imaging products and services is highly
competitive, and we expect this competitiveness to continue. Our primary
competitors are Apple Computer, Inc., Be Here Corporation, Black Diamond, Inc.,
Cyclovision, Inc., iMove Corporation and MGI. Each of these companies develops
and markets imaging products and services that provide a panoramic image
experience. In addition, the market for on-line real estate tours is
characterized by low barriers to entry and thus, more competitors may appear. We
compete with these companies on the basis of price, ease of use and picture
resolution. Some of our competitors offer their products at lower prices and
with greater picture resolution than we do. Our real estate tours also compete
with traditional methods used by real estate agents to market properties for
sale including classified ads, brochures and still photos.
We cannot assure you that others will not develop technologies that are
similar or superior to our technologies, duplicate our technologies or design
around our patents. To compete effectively, we must:
- introduce new versions of and enhancements to our products;
- price our products at appropriate and competitive levels; and
- provide strong marketing support to promote our products.
Some of our competitors have greater financial, marketing, distribution and
technical resources than we do. In addition, we compete with other companies in
the traditional two-
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dimensional photography industry. Traditional photographs have significant and
established customer acceptance. Our success will be dependent on our ability to
compete with companies offering similar immersive imaging products and with
companies in the traditional photography industry. If we are unable to compete
effectively, our business may fail.
WE MAY REQUIRE ADDITIONAL FUNDING WHICH MAY NOT BE AVAILABLE ON FAVORABLE TERMS
OR AT ALL.
Although bamboo.com and IPIX each believe that, following the merger, the
cash balances, cash equivalents and cash generated from operations will be
adequate to fund our operations for at least the next twelve months, these
sources may prove to be inadequate. After these twelve months, we may require
additional funds to support our working capital requirements or for other
purposes and may seek to raise additional funds through public or private equity
financing, bank debt financing or from other sources. Adequate funds may not be
available when needed or may not be available on favorable terms. If we raise
additional funds by issuing equity securities, existing shareholders may be
diluted. If funding is insufficient at any time in the future, we may not be
able to develop or enhance our products or services, take advantage of business
opportunities or respond to competitive pressures, any of which could harm our
business. Our future capital requirements depend upon many factors, including
the following:
- the occurrence, timing, size and success of future acquisitions;
- the cost of transitioning customers to a new brand or building brand
awareness for a new company;
- the extent to which we develop and upgrade our technology;
- the rate at which we expand our operations both domestically and
internationally; and
- the response of competitors to our product and service offerings.
OUR ANTICIPATED RAPID GROWTH WILL CONTINUE TO PLACE SIGNIFICANT STRAIN ON OUR
MANAGEMENT SYSTEMS AND RESOURCES.
Over the last twelve months, the employee base of bamboo.com and IPIX has
grown significantly, and we expect that the number of our employees will
continue to increase in the future. This growth has placed, and is expected to
continue to place, a significant strain on our management and resources. To
manage the expected growth of operations and personnel, we must continue
improving or replacing existing operational, accounting and information systems,
procedures and controls. We need to rapidly expand, train, integrate and manage
our growing employee base, particularly our technical, accounting, financial and
sales and marketing organizations. We cannot assure you that we will be able to
manage our growth successfully, and our failure to do so could cause our
business to fail.
WE ARE RELIANT ON OUR CUSTOMERS' AWARENESS OF OUR BRAND AND MAY HAVE TO EXPEND
SIGNIFICANT RESOURCES TO MAINTAIN OR ACCOMPLISH OUR BRAND AWARENESS.
We believe that establishing and maintaining our brand of immersive imaging
is important to our efforts to increase our customer base. We intend to make
significant
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expenditures in creating and maintaining distinct brand loyalty through
traditional media advertising campaigns such as print, billboards and television
and by increasing sales and marketing activities. In addition, we are
considering establishing a new web site through which we would sell
IPIX-compatible digital cameras in an attempt to enhance IPIX key sales.
Establishment of this new web site could involve significant expenditures on our
part. If customers do not perceive our existing products to be of high quality
or if we introduce new products or enter into new business ventures that are not
favorably received or ultimately successful, the value of our brand could be
diluted, in turn decreasing the attractiveness of our products. If we fail to
increase our revenue as a result of our branding efforts or fail to promote our
brand successfully, or if we incur excessive expenses in an attempt to promote
and maintain our brand without a corresponding increase in sales, our business
could be harmed.
IF THE USE OF VIRTUAL TOURS IN ONLINE REAL ESTATE LISTINGS DOES NOT ACHIEVE
WIDESPREAD MARKET ACCEPTANCE, OUR BUSINESS WILL NOT GROW.
Our success will depend in large part on widespread market acceptance of
immersive imaging services and of virtual tours to display properties online. If
the online market for these products develops more slowly than expected, or if
our services do not achieve widespread market acceptance, our business will grow
more slowly than expected. The development of an online market for virtual tours
of real estate has only recently begun, is rapidly evolving and likely will be
characterized by an increasing number of market entrants. Our future growth, if
any, will depend on the following critical factors:
- the growth of the Internet as a tool used in the process of buying and
selling products marketed with the help of immersive imaging services,
particularly residential real estate;
- our ability to successfully and cost-effectively market our products to a
sufficiently large number of real estate agents, other real estate
professionals and other end-users; and
- our ability to consistently deliver high quality products and fast and
convenient service at competitive prices.
IF IPIX'S PRODUCTS ARE NOT ACCEPTED BY THE BUSINESS AND CONSUMER MARKETS, OUR
FUTURE GROWTH WOULD BE LIMITED.
IPIX currently sells its products only to the business market. IPIX is
dependent upon the continued and expanded use of its products by the business
market and the acceptance of its products by the individual consumer. IPIX has
only made limited sales to individual consumers and cannot assure that they will
be willing to purchase and use its products. Thus, both the timing and growth of
market acceptance for IPIX's products are subject to a high level of
uncertainty. Acceptance of IPIX's products will be highly dependent on a number
of factors, including:
- the availability, quality and price of competing products;
- the development of technologies that will facilitate the use of IPIX's
products by businesses and consumers;
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- the ease-of-use and performance of IPIX's products; and
- the success of our marketing efforts.
WE ARE DEPENDENT ON KEY MANAGEMENT PERSONNEL FOR FUTURE SUCCESS.
Our future success depends on our ability to attract and retain key
management, scientific, technical and other personnel. In addition, we must
recruit additional qualified management, scientific, technical, marketing and
sales and support personnel for our operations. Competition for this type of
personnel is intense, and there can be no assurances that we will be successful
in attracting or retaining personnel. In addition, some members of our
management team are not bound by non-compete agreements if they are no longer
employed by us. The loss of the services of one or more members of our
management group or the inability to hire additional qualified personnel as
needed will limit our ability to grow the business.
OUR SUCCESS IS DEPENDENT ON OUR ABILITY TO ADAPT TO TECHNOLOGICAL CHANGES, AND
IF WE FAIL TO ADAPT TO TECHNOLOGICAL CHANGES, OUR PRODUCTS MAY BECOME OBSOLETE.
We compete in a market characterized by rapidly changing technology,
evolving industry standards, frequent new service and product announcements,
introductions and enhancements and changing customer demands. These market
characteristics are intensified by the emerging nature of the Internet and the
multitude of companies offering Internet-based products and services. Thus, our
success depends on our ability to adapt to rapidly changing technologies, to
adapt our products to evolving industry standards and to continually improve the
performance, features and reliability of our products in response to competitive
products and shifting demands of the marketplace. In addition, we must quickly
integrate bamboo.com's technology with IPIX technology to maintain and expand
our market share in the future. In addition, widespread changes in Internet,
networking or telecommunications technologies or other technological alterations
could require substantial expenditures to modify our products or infrastructure.
Failure to adapt to new technology in any of these areas could have a material
adverse effect on our business, results of operations and financial condition.
WE MAY NOT BE SUCCESSFUL IN EXPANDING OUR PRODUCTS AND SERVICES INTO
INTERNATIONAL MARKETS.
A part of both bamboo.com's and IPIX's long-term strategy has been to
expand into international markets. However, bamboo.com's and IPIX's products and
services may not be successful in international markets. In addition, the
success of any additional foreign operations initiated will be substantially
dependent upon our entering and succeeding in those markets. If the merger is
completed, we may not be successful in establishing and managing additional
international operations. We may experience difficulty in managing international
operations as a result of competition, technical problems, distance, language or
cultural differences. We can not assure you that we will be able to successfully
market our products in foreign markets.
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As we expand our international efforts, we will be subject to a number of
risks, including the following:
- failure of foreign countries to rapidly adopt the Internet and
digital imaging;
- unexpected changes in regulatory requirements, especially regarding
the Internet;
- slower payment and collection of accounts receivable than in our
domestic market; and
- political and economic instability.
WE ARE SUSCEPTIBLE TO BREACHES OF ONLINE COMMERCE SECURITY.
A party able to circumvent our security measures could misappropriate
proprietary database information or cause interruptions in operations. As a
result, we may need to expend significant capital and other resources to protect
against such security breaches or to alleviate problems caused by such breaches,
which could harm the business.
PROBLEMS RELATING TO THE YEAR 2000 COMPUTER PROBLEM COULD DISRUPT OUR BUSINESS.
The year 2000 issue is the potential for system and processing failures of
date-related data and is the result of computer-controlled systems using two
digits rather than four to define the applicable year. For example, computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities.
Although bamboo.com and IPIX do not have formal contingency plans to
address year 2000 issues, IPIX has completed its year 2000 compliance assessment
and bamboo.com is in the process of assessing internal readiness for year 2000.
bamboo.com and IPIX use multiple software systems for internal business
purposes, including accounting, e-mail, human resources, sales tracking and
customer service. Most of these applications have been purchased within the
preceding 14 months, and both companies have made inquiries concerning year 2000
compliance with the vendors of these systems. While bamboo.com and IPIX have
sought verbal assurance that the applications of these third parties are year
2000 compliant, neither company generally has any specific contractual rights
with third party providers should their equipment or software fail due to year
2000 issues. If this third party equipment or software does not operate properly
with regard to year 2000, bamboo.com and IPIX may incur unexpected expenses to
remedy any problems.
The most reasonably likely scenario is a failure related to one or several
of bamboo.com's and IPIX's external service providers including
telecommunications providers, utilities or Internet commerce systems which
bamboo.com and IPIX rely upon on a daily basis. A failure could cause any of the
following:
- protracted interruption of electrical power to our operations and
Internet host servers which could materially adversely impact our ability
to enable online transactions and other services;
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- significant or widespread failure of our software products and services
provided to third-parties; or
- significant or widespread failure of third-party computer systems with
which our systems interface.
We are not able to predict to what extent our businesses may be affected if
our systems or the systems that operate in conjunction with them experience a
material year 2000 failure. Known or unknown errors or defects that affect the
operation of our software and systems could result in delay or loss of revenue,
interruption of services, cancellation of customer contracts, diversion of
development resources, damage to reputation, increased service or warranty
costs, and litigation costs. The worst-case scenario is that the Internet fails
and we are unable to deliver our products and services.
BAMBOO.COM HAS RISKS ASSOCIATED WITH ITS CALL CENTER AND PROCESSING CENTER IN
CANADA, WHICH COULD RESULT IN DELAYS AND INCREASED OPERATING EXPENSES AND TAXES.
bamboo.com's call center and processing center are currently located in
Toronto, Canada. There are risks associated with the operations in Canada,
including the following:
- videotapes could be delayed in customs and cause a backlog of processing;
- the overnight courier service could have problems delivering the
videotapes from the United States to Canada in a consistently timely
fashion;
- future government regulations in the United States or Canada could limit
or increase expenses related to cross-border transactions; and
- tariffs, domestic or international taxes or currency exchange rates may
increase bamboo.com's operating costs.
A SIGNIFICANT AMOUNT OF BAMBOO.COM'S AND IPIX'S SALES COMES FROM A FEW
COMMERCIAL MARKETS.
Currently, a significant portion of IPIX's revenues is derived from
businesses in the real estate and corporate and e-commerce commercial markets.
All of bamboo.com's revenue is derived from sales of virtual tours to the real
estate market. Customers from these markets represented 62% of IPIX's total
revenues for 1998 and 100% of bamboo.com's total revenues for 1998, 75% of
IPIX's total revenues for the first nine months of 1999 and 100% of bamboo.com's
total revenues for the first nine months of 1999. In addition, 13% of IPIX's
total revenues for 1998 were derived from sales of products to Sumitomo
Corporation, IPIX's Japanese distributor. Our inability to continue to sell
services and products to customers in these commercial markets could result in a
significant reduction in our total revenues and negatively affect our ability to
become profitable. The volume of services and products that we sell to customers
within these and other commercial markets is likely to vary from year to year.
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STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this joint proxy
statement/prospectus about bamboo.com, IPIX and the combined company that are
subject to risks and uncertainties. Forward-looking statements include the
information regarding:
<TABLE>
<S> <C>
synergies capital productivity
efficiencies returns on capital employed
cost savings capital spending
revenue enhancements the timetable for completing
the merger
</TABLE>
Our forward-looking statements are also identified by such words as
"anticipates," "believes," "estimates," "expects," "intends" or similar
expressions.
In making these statements, we believe that our expectations are based on
reasonable assumptions. Yet you should understand that the following important
factors (some of which are beyond bamboo.com's and IPIX's control), in addition
to those discussed elsewhere in this joint proxy statement/prospectus, could
affect our future results after completion of the merger. These factors could
also cause the results or other outcomes to differ materially from those
expressed in our forward-looking statements:
- materially adverse changes in economic or industry conditions
generally or in the markets served by our companies;
- political developments and law and regulations, such as legislative or
regulatory requirements, particularly concerning the Internet;
- the development and use of new technology;
- changes in operating conditions and costs;
- access to capital markets;
- our ability to integrate the businesses of bamboo.com and IPIX
successfully after the merger;
- the challenges inherent in diverting management's focus and resources
from other strategic opportunities and from operational matters during
the integration process; and
- the actions of competitors.
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THE MERGER
GENERAL
We are furnishing this document to holders of bamboo.com common shares and
holders of IPIX common shares in connection with the solicitation of proxies by
bamboo.com's board of directors and by IPIX's board of directors at their
respective special shareholder meetings and at any adjournments or postponements
of either meeting.
bamboo.com Proposals
At the bamboo.com special shareholders' meeting, bamboo.com will ask its
shareholders to vote on the following proposals:
1. to consider and vote upon the issuance of bamboo.com shares in
connection with the merger agreement between bamboo.com, Inc. and IPIX as
described in this joint proxy statement/prospectus; and
2. to amend bamboo.com's restated certificate of incorporation to
increase the number of shares of common stock authorized for issuance from
70 million shares to 150 million shares, contingent upon completion of the
merger.
3. to amend the Amended and Restated 1998 Employee, Director and
Consultant Stock Plan to increase the number of shares of common stock
which may be added annually to the amount already reserved for issuance
thereunder from 1,400,000 to 2,800,000 shares, contingent upon completion
of the merger.
4. to amend the bamboo.com 1999 Employee Stock Purchase Plan to
increase the number of shares of common stock which may be added annually
to the amount already reserved for issuance thereunder from 700,000 to
1,400,000 shares, contingent upon completion of the merger.
5. to transact such other business as may properly come before the
special meeting, including any adjournment or postponement of the
bamboo.com special meeting.
IPIX Proposals
At the IPIX special shareholders' meeting, IPIX will ask its shareholders
to vote on the following proposals:
1. to approve and adopt the merger agreement and the merger. Pursuant
to the merger agreement, a subsidiary of bamboo.com will be merged with and
into IPIX, and each shareholder of IPIX will receive 1.369 shares of
bamboo.com for each share of common stock of IPIX they own;
2. to amend IPIX's 1997 Equity Compensation Plan to increase by
1,000,000 the number of shares of common stock that may be issued
thereunder; and
3. to transact such other business as may properly come before the
special meeting, including any adjournment or postponement of the IPIX
special meeting.
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BACKGROUND OF THE MERGER
In May and June of 1999, representatives of IPIX and bamboo.com held
preliminary discussions regarding a possible technology licensing arrangement.
The two companies spoke generally of a possible commercial relationship or
technology sharing arrangement. These preliminary discussions did not lead to
any agreements or understandings, and the parties did not pursue further
discussions at that time.
On August 5, 1999, IPIX completed its initial public offering, and on
August 25, 1999, bamboo.com completed its initial public offering.
In late September 1999, representatives of IPIX and bamboo.com had a
telephonic conversation and agreed to arrange a meeting regarding a possible
technology licensing agreement or similar arrangement. On October 4 and October
5, 1999, members of bamboo.com's management met with management of IPIX to
discuss the possibility of such a transaction. The chief executive officers of
the two companies also discussed the possibility of a broader business
combination.
On October 8, 1999, the parties executed a confidentiality agreement
pursuant to which the companies agreed to exchange certain non-public
information regarding their businesses.
On October 12, 1999, the IPIX chairman and chief executive officer, James
M. Phillips, met with bamboo.com management to discuss the merits of a possible
merger of the two companies. Over the next five days, IPIX and bamboo.com
through their financial advisors negotiated the governance and related issues
that would need to be addressed in a merger transaction.
From October 18 to October 21, representatives of IPIX and bamboo.com,
together with their advisers, held numerous further discussions regarding the
strategic rationale and the corporate management and governance structure for a
merger of the two companies. In addition, the parties discussed the terms of a
draft merger agreement and various other issues related to the possible merger,
including the structure of the transaction, tax and accounting issues and the
economic terms of the transaction.
At a special meeting of the IPIX board of directors on October 22, 1999,
IPIX's management discussed with the IPIX board an overview of the business of
bamboo.com and the strategic rationale for the business combination as well as
the nature of discussions between the two companies. IPIX's financial adviser,
J.P. Morgan Securities Inc. (J.P. Morgan), reviewed with the IPIX board the
current status of negotiations with bamboo.com, including the proposed structure
of the merger, governance issues and the exchange ratio. Outside counsel for
IPIX then discussed regulatory issues related to the proposed merger, the status
of the due diligence review and a general review of the terms and conditions of
the draft merger agreement.
On October 22, 1999, the bamboo.com board of directors held a telephonic
meeting at which executive management of bamboo.com described the negotiations
to date, the strategic and economic reasons for the transaction and various
other matters. IPIX's chairman and chief executive officer, together with IPIX's
chief financial officer and a representative of J.P. Morgan, made a presentation
to the bamboo.com board of directors regarding the possible merger transaction.
From October 22, 1999 to October 25, 1999, the parties continued to
negotiate the economic terms of the transaction and the provisions of the merger
agreement.
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On October 24, 1999, the IPIX board of directors held a special meeting at
which IPIX's executive management, outside legal counsel and J.P. Morgan updated
the IPIX board on matters relating to the proposed merger. J.P. Morgan described
the financial aspects of the proposed merger, the exchange ratio and the
proposed structure of the merger and the financial implications that the
proposed merger would have on the two companies. Outside counsel for IPIX
discussed the terms and conditions of the draft merger agreement, the status of
the due diligence review of, and the negotiations with, bamboo.com, fiduciary
duties of the IPIX board in considering the proposed merger and other legal
matters. After extensive discussion, the IPIX board authorized management to
continue to pursue the proposed merger.
On October 25, 1999, at a special meeting, the bamboo.com board held a
telephonic meeting at which it received detailed presentations from senior
management of bamboo.com, outside legal counsel and Robertson Stephens.
Robertson Stephens discussed the economic terms of the proposed merger, the
exchange ratio and the proposed structure of the merger. Robertson Stephens
delivered to the bamboo.com board its opinion to the effect that, as of that
date and based upon and subject to certain matters stated in its opinion, the
exchange ratio in the merger was fair from a financial point of view to
bamboo.com. Outside counsel for bamboo.com described the fiduciary duties of the
bamboo.com board in connection with the proposed merger, reviewed the terms and
conditions of the merger agreement and described regulatory consents required to
consummate the proposed merger. Following an extended review and discussion by
the bamboo.com board, the bamboo.com board unanimously determined that the
merger is in the best interest of the shareholders of bamboo.com, approved the
merger agreement and the merger and unanimously resolved to recommend that
shareholders of bamboo.com vote to approve issuance of bamboo.com common stock
pursuant to the terms of the merger agreement.
On October 25, 1999, at a special meeting, the IPIX board held a telephonic
meeting at which IPIX's executive management, J.P. Morgan and outside legal
counsel reviewed the terms of the definitive merger agreement and the related
documents. At this meeting, J.P. Morgan reviewed with the IPIX board of
directors the financial analysis performed by J.P. Morgan in connection with its
evaluation of the exchange ratio. J.P. Morgan delivered to the IPIX board its
opinion to the effect that, as of such date and based upon and subject to
certain matters stated in such opinion, the consideration to be received by
IPIX's shareholders in the merger with bamboo.com was fair from a financial
point of view to the shareholders. Outside counsel for IPIX described the
fiduciary duties of the IPIX board in connection with the proposed merger,
reviewed the terms and conditions of the merger agreement and described
regulatory consents required to consummate the proposed merger. After extensive
discussions, the IPIX board unanimously determined that the merger is in the
best interest of the shareholders of IPIX, approved the merger agreement and the
merger and unanimously resolved to recommend that shareholders of IPIX vote to
approve the merger agreement.
Following the October 25, 1999 meetings of the IPIX board and bamboo.com
board, the merger agreement and related documents were executed by the parties.
On the morning of October 26, 1999, the parties issued a joint press release
announcing the execution of the definitive merger agreement.
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<PAGE> 36
OUR REASONS FOR THE MERGER
We believe that the merger will benefit the two companies and their
shareholders for the following reasons:
- World's premier provider of immersive imaging. We believe that the
combination of IPIX's patented immersive imaging technology with
bamboo.com's extensive sales and service network will create the world's
premier provider of interactive photography and immersive imaging for the
Internet.
- A complete real estate solution. The combined company will be able to
offer an end-to-end Internet imaging solution for the real estate
industry. The merger will combine the sales forces of both bamboo.com and
IPIX and the technologies offered by both companies to permit us to
provide the real estate industry with a complete virtual tour solution.
- Internet visual content for business and consumer markets. We believe
the combined company could become a significant Internet infrastructure
company by providing key visualization solutions across the Internet. Our
visual solutions would include content capture, including still images,
webcam and steerable video, and content processing, hosting and
distribution, in which we host images for our customers and facilitate
their distribution through e-mail and other applications.
- Increase in sales to other commercial markets. The combined company will
utilize bamboo.com's extensive sales and service infrastructure to expand
sales of its products and services to other commercial markets. IPIX
presently offers immersive imaging solutions to other commercial markets
such as travel and hospitality, electronic publishing, corporate and
e-commerce and education and entertainment. The addition of the
bamboo.com sales force permits us to expand our efforts into these
markets.
- Enhancement of international presence. IPIX has established a sales
office in London, England through which it services the European market.
IPIX has also entered into a distribution arrangement with a Japanese and
Australian distributor. IPIX intends to grow its sales in these and other
international markets. bamboo.com has initiated efforts to expand its
service offerings internationally. The merger will permit the two
companies to combine their resources and enhance their international
efforts.
- Experienced management team. The merger will allow two knowledgeable and
experienced management teams to work together to achieve the same goals.
Both of our companies have gained extensive experience in the development
and negotiation of strategic relationships and other business development
within our industry. We believe a combination of these human resources
will strengthen and accelerate our business development efforts.
ADDITIONAL CONSIDERATIONS OF THE BAMBOO.COM BOARD OF DIRECTORS
At its meeting on October 25, 1999, bamboo.com's board of directors
unanimously
- determined that the merger agreement, the merger, the stock option
agreement, and the related transactions are fair to and in the best
interests of bamboo.com and its shareholders;
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<PAGE> 37
- approved the merger agreement, the merger, the stock option agreements
and related transactions; and
- determined to recommend that the shareholders of bamboo.com approve the
merger, including the issuance of bamboo.com common shares in connection
with the merger.
In approving the transaction and making these recommendations, bamboo.com's
board of directors consulted with bamboo.com's management as well as its outside
legal counsel and financial advisor, and it carefully considered the following
material factors:
- all the reasons described above under "Our Reasons for the Merger,"
including the near- and longer-term synergies and productivity
improvements expected to be available to the combined company;
- information concerning the business, assets, capital structure, financial
performance and condition and prospects of bamboo.com and IPIX, focusing
in particular on the quality of IPIX's assets and the compatibility of
the two companies' operations;
- current and historical prices and trading information with respect to
each company's common shares, which assisted the board of directors in
its conclusion that the merger was fairly priced;
- the possibility, as alternatives to the merger, of pursuing an
acquisition of or a business combination or joint venture with an entity
other than IPIX and the bamboo.com board's conclusion that a transaction
with IPIX is more feasible and is expected to yield greater benefits than
the likely alternatives. The bamboo.com board reached this conclusion for
reasons including IPIX's interest in pursuing a transaction with
bamboo.com, bamboo.com's view that the transaction could be acceptably
completed from a timing and regulatory standpoint, and bamboo.com
management's assessment of the alternatives and the expected benefits of
the merger and compatibility of the companies, as described under "Our
Reasons for the Merger" above;
- the composition and strength of the expected senior management of the
combined company and the familiarity of the companies and their similar
corporate cultures;
- the likelihood of the enhancement of the strategic position of the
combined company beyond that which bamboo.com could achieve on its own;
- the opinion of Robertson Stephens to bamboo.com's board of directors
that, as of the date of its opinion and on the basis of and subject to
the matters stated in that opinion, the exchange ratio provided for in
the merger was fair to bamboo.com from a financial point of view. We have
described Robertson Stephens' opinion in detail under the heading
"Opinion of bamboo.com's Financial Advisor;"
- the terms and structure of the merger and the terms and conditions of the
merger agreement, including the exchange ratio for the merger, the size
of the termination fees and the circumstances in which they are payable
and the ability of both companies to negotiate with third parties that
make acquisition proposals and to accept superior proposals (see "The
Merger Agreement -- Conditions to Consummation of the Merger" and "The
Merger Agreement -- Termination");
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<PAGE> 38
- the intended accounting treatment for the merger as a "pooling of
interests," which results in combined financial statements prepared on a
basis consistent with the underlying view that shareholder interests in
the two companies have simply been combined, and in the preservation of
the historical cost approach for both bamboo.com and IPIX;
- the intended treatment of the merger as a tax-free reorganization for
U.S. federal income tax purposes; and
- the grant to bamboo.com of an option to acquire IPIX common shares
exercisable under certain circumstances pursuant to the stock option
agreement (see "The Merger Agreement -- Stock Option Agreements").
In view of the number and wide variety of factors considered in connection
with its evaluation of the merger and the complexity of these matters,
bamboo.com's board of directors did not find it practicable to, nor did it
attempt to, quantify, rank or otherwise assign relative weights to the specific
factors that it considered. In addition, the board of directors did not
undertake to make any specific determination as to whether any particular factor
was favorable or unfavorable to the board of directors' ultimate determination
or assign any particular weight to any factor, but conducted an overall analysis
of the factors described above, including through discussions with and
questioning of bamboo.com's management and management's analysis of the proposed
merger based on information received from bamboo.com's legal, financial and
accounting advisors. In considering the factors described above, individual
members of bamboo.com's board of directors may have given different weight to
different factors. bamboo.com's board of directors considered all these factors
together and, on the whole, considered them to be favorable to, and to support,
its determination.
RECOMMENDATION OF BAMBOO.COM'S BOARD OF DIRECTORS
BAMBOO.COM'S BOARD OF DIRECTORS BELIEVES THAT THE TERMS OF THE MERGER ARE
FAIR TO AND IN THE BEST INTERESTS OF BAMBOO.COM AND ITS SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS TO ITS SHAREHOLDERS THAT THEY VOTE "FOR" THE PROPOSALS TO
AMEND THE BAMBOO.COM CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED BAMBOO.COM COMMON SHARES AND TO ISSUE BAMBOO.COM COMMON SHARES IN THE
MERGER.
ADDITIONAL CONSIDERATIONS OF THE IPIX BOARD OF DIRECTORS
At its meeting on October 25, 1999, IPIX's board of directors voted
unanimously to enter into the merger agreement and to recommend that IPIX
shareholders vote to approve the merger and the merger agreement.
In the course of reaching its decision to adopt the merger agreement,
IPIX's board of directors consulted with IPIX's management, as well as its
outside legal counsel and financial advisor, and carefully considered the
following material factors:
- all the reasons described above under "Our Reasons for the Merger,"
including the near- and longer-term synergies and productivity
improvements expected to be available to the combined company;
- information concerning the business, operations, competitive
position and prospects of IPIX and bamboo.com both individually and
on a combined basis;
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<PAGE> 39
- analyses and other information with respect to IPIX and bamboo.com
and current industry and economic conditions and trends presented to
IPIX's board of directors by management;
- the presentations of J.P. Morgan and the opinion of J.P. Morgan
that, as of the date of J.P. Morgan's opinion, the consideration to
be received by IPIX's shareholders in the merger was fair to them
from a financial point of view. We have described J.P. Morgan's
opinion in detail under the heading, "Opinion of IPIX's Financial
Advisor;"
- the amount and form of the consideration to be received by IPIX
shareholders in the merger and information on the historical trading
ranges of IPIX common shares and bamboo.com common shares;
- the intended accounting treatment for the merger as a "pooling of
interests;"
- the intended treatment of the merger as a tax-free reorganization
for U.S. federal income tax purposes;
- the role that IPIX's current management is expected to play in the
management of the combined company and the intention of the combined
company to maximize the management resources of both companies;
- that four members of IPIX board would become directors of the
combined company and that IPIX's chairman and chief executive
officer would become chairman and chief executive officer of the
combined company, as described under "The Merger Agreement -- The
Board of Directors of the Combined Company and Related Matters;" and
- the interests that the executive officers and directors of IPIX may
have in connection with the merger that may be different from, or in
addition to, their interests as shareholders of IPIX generally (see
"Interests of Related Persons in the Merger").
In view of the number and wide variety of factors considered in connection
with its evaluation of the merger and the complexity of these matters, IPIX's
board of directors did not find it practicable to, nor did it attempt to,
quantify, rank or otherwise assign relative weights to the specific factors it
considered. In addition, the IPIX board did not undertake to make any specific
determination as to whether any particular factor was favorable or unfavorable
to its ultimate determination or assign any particular weight to any factor, but
conducted an overall analysis of the factors described above, including through
discussions with and questioning of IPIX's management and management's analysis
of the proposed merger based on information received from IPIX's legal,
financial and accounting advisors. In considering the factors described above,
individual members of the board of directors may have given different weight to
different factors. IPIX's board of directors considered all these factors
together and, on the whole, considered them to be favorable to, and to support,
its determination.
RECOMMENDATION OF IPIX'S BOARD OF DIRECTORS
IPIX'S BOARD OF DIRECTORS BELIEVES THAT THE TERMS OF THE MERGER ARE FAIR TO
AND IN THE BEST INTERESTS OF IPIX AND ITS SHAREHOLDERS AND UNANIMOUSLY
RECOMMENDS TO ITS
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<PAGE> 40
SHAREHOLDERS THAT THEY VOTE "FOR" THE PROPOSAL TO APPROVE AND ADOPT THE MERGER
AND THE MERGER AGREEMENT.
ACCOUNTING TREATMENT
Although the consummation of the merger is not conditioned upon the
transactions contemplated by the merger agreement being treated as a "pooling of
interests," both companies have agreed not to take any action that would
jeopardize "pooling of interests" treatment.
Under the "pooling of interests" accounting method, the assets and
liabilities of IPIX and bamboo.com will be carried forward to the combined
company at their historical recorded bases. Results of operations of the
combined company will include the results of both bamboo.com and IPIX for the
entire fiscal year in which the merger occurs. The reported balance sheet
amounts and results of operations of the separate companies for prior periods
will be restated, as appropriate, to reflect the combined financial position and
results of operations for the combined company. We present these restated
amounts under the heading "Selected Unaudited Pro Forma Combined Financial
Data."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion summarizes the material United States federal
income tax consequences of the merger. This discussion is based on the Internal
Revenue Code of 1986, as amended, applicable Treasury regulations,
administrative interpretations and court decisions as in effect as of the date
of this joint proxy statement/prospectus, all of which may change, possibly with
retroactive effect.
This discussion does not address all aspects of federal income taxation
that may be important to an IPIX shareholder in light of that shareholder's
particular circumstances or to an IPIX shareholder subject to special rules,
such as:
- a shareholder who is not a citizen or resident of the United States;
- a shareholder who does not hold its IPIX common stock as a capital asset;
- a financial institution or insurance company;
- a tax-exempt organization;
- a dealer or broker in securities;
- a shareholder that holds its IPIX common stock as part of a hedge,
appreciated financial position, straddle or conversion transaction; or
- a shareholder who acquired its IPIX common stock pursuant to the exercise
of options or otherwise as compensation.
Tax Opinions. bamboo.com has received an opinion of Davis Polk & Wardwell,
and IPIX has received an opinion of Baker, Donelson, Bearman & Caldwell
(together with Davis Polk & Wardwell, "tax counsel"), each dated as of the date
of this joint proxy statement/prospectus, that, based on the law as of that
date:
- the merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code;
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<PAGE> 41
- bamboo.com, its merger subsidiary and IPIX will each be a party to that
reorganization within the meaning of Section 368(b) of the Internal
Revenue Code; and
- as a result of the merger, no gain or loss will be recognized for federal
income tax purposes by the merger subsidiary, or (in the case of the
Davis Polk & Wardwell opinion) by bamboo.com or any shareholder of
bamboo.com, or (in the case of the Baker, Donelson, Bearman & Caldwell
opinion) by IPIX or any shareholder of IPIX (except with respect to any
cash received for a fractional share of bamboo.com).
It is a condition to the obligation of each of bamboo.com and IPIX to
complete the merger that the relevant tax counsel confirm its opinion as of the
closing date. Neither bamboo.com nor IPIX intends to waive this condition.
The opinions of tax counsel regarding the merger have each relied, and the
confirmation opinions regarding the merger as of the closing date will each
rely, on (1) representations and covenants made by bamboo.com and IPIX,
including those contained in certificates of officers of bamboo.com and IPIX,
and (2) specified assumptions, including an assumption regarding the completion
of the merger in the manner contemplated by the merger agreement. In addition,
the opinions of tax counsel have assumed, and tax counsel's ability to provide
the closing date opinions will depend on, the absence of changes in existing
facts or in law between the date of this joint proxy statement/prospectus and
the closing date. If any of those representations, covenants or assumptions is
inaccurate, tax counsel may not be able to provide one or more of the required
closing date opinions. In addition, the tax consequences of the merger could
differ from those described in the opinions that tax counsel have delivered. Tax
counsel's opinions neither bind the IRS nor preclude the IRS or the courts from
adopting a contrary position. Neither bamboo.com nor IPIX intends to obtain a
ruling from the IRS on the tax consequences of the merger.
The discussion that follows is based on, and represents, the opinions of
tax counsel that are described above.
Federal Income Tax Treatment of the Merger. The merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code, and bamboo.com, its merger subsidiary and
IPIX will each be a party to that reorganization within the meaning of Section
368(b) of the Internal Revenue Code. None of bamboo.com, its merger subsidiary
or IPIX will recognize any gain or loss for federal income tax purposes as a
result of the merger.
Federal Income Tax Consequences to IPIX Shareholders. For federal income
tax purposes:
- A holder of IPIX common stock will not recognize any gain or loss upon
its exchange in the merger of its shares of IPIX common stock for shares
of bamboo.com common stock;
- When a holder of IPIX common stock receives cash instead of a fractional
share of bamboo.com common stock, the holder will be required to
recognize gain or loss, measured by the difference between the amount of
cash received instead of that fractional share and the portion of the tax
basis of that holder's shares of IPIX common stock allocable to that
fractional share. This gain or loss will be capital gain or loss, and
will be long-term capital gain or loss if the share of IPIX common
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<PAGE> 42
stock exchanged for that fractional share of bamboo.com common stock was
held for more than one year at the effective time of the merger;
- A holder of IPIX common stock will have a tax basis in the bamboo.com
common stock received in the merger equal to (1) the tax basis of the
IPIX common stock surrendered by that holder in the merger, less (2) any
tax basis of the IPIX common stock surrendered that is allocable to any
fractional share of bamboo.com common stock for which cash is received;
and
- The holding period for shares of bamboo.com common stock received in
exchange for shares of IPIX common stock in the merger will include the
holding period for the shares of IPIX common stock surrendered in the
merger.
Federal Income Tax Consequences to bamboo.com Shareholders. For federal
income tax purposes, holders of bamboo.com common stock will not recognize gain
or loss as a result of the merger.
This discussion of material federal income tax consequences is intended to
provide only a general summary, and is not a complete analysis or description of
all potential federal income tax consequences of the merger. This discussion
does not address tax consequences that may vary with, or are contingent on,
individual circumstances. In addition, it does not address any non-income tax or
any foreign, state or local tax consequences of the merger. ACCORDINGLY, WE
STRONGLY ENCOURAGE EACH IPIX SHAREHOLDER TO CONSULT HIS OR HER OWN TAX ADVISOR
TO DETERMINE THE PARTICULAR UNITED STATES FEDERAL, STATE, LOCAL OR FOREIGN
INCOME OR OTHER TAX CONSEQUENCES TO THE SHAREHOLDER OF THE MERGER.
REGULATORY MATTERS
Although the transactions contemplated in the merger agreement did not
require any filing under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, the United States Department of Justice and the Federal Trade
Commission have the authority to challenge the merger on antitrust grounds
before or after we complete the merger. No other regulatory approvals are
required to complete the merger.
NO APPRAISAL OR DISSENTERS' RIGHTS
Under the applicable provisions of the Tennessee Business Corporation Act,
IPIX's shareholders will not be entitled to dissenters' rights or appraisal in
connection with the merger. Under the applicable provisions of the Delaware
General Corporation Law, bamboo.com's shareholders will not be entitled to
dissenters' rights or appraisal in connection with the merger.
FEDERAL SECURITIES LAWS CONSEQUENCES; STOCK TRANSFER RESTRICTION AGREEMENTS
This joint proxy statement/prospectus does not cover any resales of
bamboo.com common shares that IPIX's shareholders will receive upon completion
of the merger. No person is authorized to make any use of this document in
connection with a resale of that type.
All bamboo.com common shares that IPIX shareholders receive in the merger
will be freely transferable. However, bamboo.com common shares received by
persons who are deemed to be "affiliates" of IPIX under the Securities Act and
the related SEC rules and regulations at the time of the IPIX shareholders'
meeting will be subject to restrictions on
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resale. These affiliates may resell their bamboo.com common shares only in
transactions permitted by Rule 145 or other provisions under the Securities Act.
Persons who may be deemed to be affiliates of IPIX for these purposes generally
include individuals or entities that control, are controlled by, or are under
common control with IPIX and may include officers, directors and principal
shareholders of IPIX. The merger agreement requires IPIX to use commercially
reasonable efforts to deliver or cause to be delivered to bamboo.com on or prior
to the effective time of the merger from any affiliate an executed letter
agreement to the effect that those persons will not offer or sell or otherwise
dispose of any bamboo.com common shares issued to them in the merger in
violation of the Securities Act or the related SEC rules and regulations.
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OPINION OF BAMBOO.COM'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated October 8, 1999, bamboo.com engaged
Robertson Stephens to render an opinion as to the fairness of the exchange
ratio, from a financial point of view, to bamboo.com.
On October 25, 1999 at a meeting of the bamboo.com board of directors held
to evaluate the proposed merger, Robertson Stephens delivered to the bamboo.com
board its written opinion that, as of that date and based on the assumptions
made, the matters considered and the limitations on the review undertaken
described in the opinion, the exchange ratio was fair, from a financial point of
view, to bamboo.com. The exchange ratio was determined through negotiations
between the respective managements of bamboo.com and IPIX. Although Robertson
Stephens did assist the management of bamboo.com in these negotiations, it was
not asked to, and did not, recommend to bamboo.com that any specific exchange
ratio constituted the appropriate exchange ratio for the merger. Robertson
Stephens assisted bamboo.com's management in the negotiations leading to an
agreement on principal structural terms of the merger.
The full text of the Robertson Stephens opinion, which sets forth, among
other things, assumptions made, matters considered and limitations on the review
undertaken, is attached as Appendix D and is incorporated in this
prospectus/proxy statement by reference. We encourage bamboo.com shareholders
and IPIX shareholders to read the Robertson Stephens opinion in its entirety.
The Robertson Stephens opinion was prepared for the benefit and use of the
bamboo.com board in connection with its evaluation of the merger and does not
constitute a recommendation to shareholders of bamboo.com or IPIX as to how they
should vote, or take any other action, with respect to the merger.
The Robertson Stephens opinion does not address:
- the relative merits of the merger and the other business strategies that
the bamboo.com board has considered or may be considering; or
- the underlying business decision of the bamboo.com board to proceed with
the merger.
The summary of the Robertson Stephens opinion set forth in this
prospectus/proxy statement is qualified in its entirety by reference to the full
text of the Robertson Stephens opinion.
In connection with the preparation of the Robertson Stephens opinion,
Robertson Stephens, among other things:
- reviewed certain publicly available financial statements and other
business and financial information of IPIX and bamboo.com, respectively;
- reviewed certain internal financial statements, forecasts and other
financial and operating data concerning IPIX and bamboo.com,
respectively;
- reviewed with IPIX and bamboo.com certain publicly available estimates of
research analysts relating to IPIX and bamboo.com;
- held discussions with the respective managements of IPIX and bamboo.com
concerning the businesses, past and current operations, financial
condition and future prospects of both IPIX and bamboo.com, independently
and combined, including discussions with the managements of IPIX and
bamboo.com concerning
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<PAGE> 45
synergies that are expected to result from the merger as well as their
views regarding the strategic rationale for the merger;
- reviewed the financial terms and conditions set forth in the merger
agreement;
- reviewed the stock price and trading history of IPIX common stock and
bamboo.com common stock;
- compared the financial terms of the merger with the financial terms, to
the extent publicly available, of other transactions that it deemed
relevant;
- performed a pro forma merger analysis of the combined company;
- prepared an analysis of the relative contributions of IPIX and bamboo.com
to the combined company;
- performed an analysis of the financial performance of IPIX and bamboo.com
and the prices and trading activity of IPIX common stock and bamboo.com
common stock with that of certain other publicly traded companies it
deemed comparable with IPIX and bamboo.com, respectively;
- participated in discussions and negotiations among representatives of
IPIX and bamboo.com and their financial and legal advisors; and
- made such other studies and inquiries, and reviewed such other data, as
it deemed relevant.
In its review and analysis, and in arriving at its opinion, Robertson
Stephens assumed and relied upon the accuracy and completeness of all of the
financial and other information provided to it (including information furnished
to it orally or otherwise discussed with it by the managements of IPIX and
bamboo.com) or publicly available and neither attempted to verify, nor assumed
responsibility for verifying, any of such information. Robertson Stephens relied
upon the assurances of managements of IPIX and bamboo.com that they were not
aware of any facts that would make such information inaccurate or misleading.
Furthermore, Robertson Stephens did not obtain or make, or assume any
responsibility for obtaining or making, any independent evaluation or appraisal
of the properties, assets or liabilities (contingent or otherwise) of IPIX or
bamboo.com, nor was Robertson Stephens furnished with any such evaluation or
appraisal.
With respect to the financial forecasts and projections (and the
assumptions and bases therefor) for each of IPIX and bamboo.com that Robertson
Stephens reviewed, upon the advice of the managements of IPIX and bamboo.com,
Robertson Stephens assumed that such forecasts and projections:
- had been reasonably prepared in good faith on the basis of reasonable
assumptions;
- reflected the best available estimates and judgments as to the future
financial condition and performance of bamboo.com and IPIX, respectively;
and
- will be realized in the amounts and in the time periods estimated.
In this regard, Robertson Stephens noted that each of bamboo.com and IPIX
face exposure to the year 2000 problem. Robertson Stephens did not undertake any
independent analysis to evaluate the reliability or accuracy of the assumptions
made with respect to the potential effect that the year 2000 problem might have
on their respective forecasts.
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In addition, Robertson Stephens assumed that:
- the merger will be consummated upon the terms set forth in the merger
agreement without material alteration thereof and that the merger will be
treated as a tax-free reorganization pursuant to the Internal Revenue
Code of 1986, as amended; and
- the historical financial statements of each of IPIX and bamboo.com
reviewed by it had been prepared and fairly presented in accordance with
U.S. generally accepted accounting principles consistently applied.
Robertson Stephens relied as to all legal matters relevant to rendering its
opinion on the advice of counsel.
Although developments following the date of the Robertson Stephens opinion
may affect the opinion, Robertson Stephens assumed no obligation to update,
revise or reaffirm its opinion. The Robertson Stephens opinion is necessarily
based upon market, economic and other conditions as in effect on, and
information made available to Robertson Stephens as of, the date of the
Robertson Stephens opinion. It should be understood that subsequent developments
may affect the conclusion expressed in the Robertson Stephens opinion and that
Robertson Stephens disclaims any undertaking or obligation to advise any person
of any change in any matter affecting the opinion which may come or be brought
to its attention after the date of the opinion. The Robertson Stephens opinion
is limited to the fairness, from a financial point of view and as of the date
thereof, of the exchange ratio to bamboo.com. Robertson Stephens does not
express any opinion as to:
- the value of any employee agreement or other arrangement entered into in
connection with the merger;
- any tax or other consequences that might result from the merger; or
- what the value of bamboo.com common stock will be when issued to IPIX's
shareholders pursuant to the merger or the price at which the shares of
bamboo.com common stock that are issued pursuant to the merger may be
traded in the future.
The following is a summary of the material financial analyses performed by
Robertson Stephens in connection with rendering the Robertson Stephens opinion.
The summary of the financial analyses is not a complete description of all of
the analyses performed by Robertson Stephens. Certain of the information in this
section is presented in a tabular form. In order to better understand the
financial analyses performed by Robertson Stephens, these tables must be read
together with the text of each summary. The Robertson Stephens opinion is based
upon the totality of the various analyses performed by Robertson Stephens and no
particular portion of the analyses has any merit standing alone.
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Historical Exchange Ratio Analyses. Robertson Stephens compared the
average ratio of the closing price of IPIX common stock to the closing price of
bamboo.com common stock over various periods ending October 22, 1999. The
following table sets forth the average ratio of the closing prices of IPIX
common stock compared to bamboo.com common stock for the various periods ending
October 22, 1999:
<TABLE>
<CAPTION>
AVERAGE RATIO OF CLOSING PRICE OF
IPIX COMMON STOCK
COMPARED TO BAMBOO.COM COMMON
PERIOD ENDING OCTOBER 22, 1999 STOCK
------------------------------ -----------------------------------
<S> <C>
1 trading day................................ 1.331x
5 trading days............................... 1.412x
10 trading days............................... 1.369x
20 trading days............................... 1.315x
30 trading days............................... 1.231x
41 trading days............................... 1.184x
</TABLE>
Based on the average ratios set forth above for the 1-trading day,
10-trading day and 30-trading day periods ending October 22, 1999, the following
tables illustrate the range of equity valuations, equity valuations per share
and exchange ratios implied for each of bamboo.com and IPIX by applying a 5%
discount and a 10% premium to the period average exchange ratio and using the
market capitalization and closing share price of the other party as of October
22, 1999:
<TABLE>
<CAPTION>
IMPLIED
IMPLIED BAMBOO.COM
BAMBOO.COM EQUITY VALUE IMPLIED
EQUITY VALUE PER SHARE EXCHANGE RATIO
----------------- ------------------- --------------
<S> <C> <C> <C>
1-trading day ratio of 1.331x.... $400-$463 million $14.77-$17.11 1.264x-1.464x
10-trading day average ratio of
1.369x......................... $410-$475 million $15.16-$17.55 1.301x-1.506x
30-trading day average ratio of
1.231x......................... $460-$532 million $15.97-$19.65 1.170x-1.354x
</TABLE>
<TABLE>
<CAPTION>
IMPLIED IPIX IMPLIED IPIX EQUITY IMPLIED
EQUITY VALUE VALUE PER SHARE EXCHANGE RATIO
----------------- ------------------- --------------
<S> <C> <C> <C>
1-trading day ratio of 1.331x.... $379-$438 million $20.54-$23.79 1.264x-1.464x
10-trading day average ratio of
1.369x......................... $401-$464 million $21.76-$25.20 1.301x-1.506x
30-trading day average ratio of
1.231x......................... $409-$473 million $22.19-$25.69 1.170x-1.354x
</TABLE>
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Precedent Mergers of Equals Analysis. Using publicly available
information, Robertson Stephens analyzed the consideration offered and the
implied transaction value multiples paid or proposed to be paid in selected
merger of equals transactions in the technology industry, including:
- Earthlink Network, Inc./Mindspring Enterprises (September 23, 1999)
- WebMD, Inc./Healtheon Corporation (May 20, 1999)
- Airtouch Communications/Vodafone Group plc (January 18, 1999)
- GTE Corp./Bell Atlantic (July 28, 1998)
- Ameritech/SBC Communications (May 11, 1998)
- NYNEX/Bell Atlantic (April 22, 1996)
- Pacific Telesis/SBC Communications (April 1, 1996)
In analyzing these "precedent transactions," Robertson Stephens compared,
among other things, the total consideration in such transactions as a multiple
of estimated next twelve month ("NTM") revenues. All multiples for the precedent
transactions were based on public information available at the time of the
announcement. Based on this information and other publicly available
information, the following tables illustrate the implied equity valuations, the
implied equity valuations per share and the implied exchange ratios for each of
bamboo.com and IPIX derived from applying a range of multiples for each company
that Robertson Stephens derived from the precedent transactions:
<TABLE>
<CAPTION>
IMPLIED
BAMBOO.COM IMPLIED BAMBOO.COM
ESTIMATED NTM MULTIPLE BAMBOO.COM EQUITY VALUE IMPLIED
REVENUES RANGE EQUITY VALUE PER SHARE EXCHANGE RATIO
------------- ----------- ----------------- ------------- --------------
<S> <C> <C> <C> <C>
$19.0 million 10.0x-30.0x $190-$570 million $7.02-$21.05 1.027x-3.081x
</TABLE>
<TABLE>
<CAPTION>
IMPLIED
IPIX IMPLIED IPIX EQUITY
ESTIMATED NTM MULTIPLE IPIX VALUE PER IMPLIED
REVENUES RANGE EQUITY VALUE SHARE EXCHANGE RATIO
------------- ----------- ----------------- ------------- --------------
<S> <C> <C> <C> <C>
$25.4 million 10.0x-30.0x $254-$762 million $13.79-$41.37 0.849x-2.546x
</TABLE>
No transaction compared in the precedent transaction analysis is identical
to the merger. Accordingly, an analysis of the results of the foregoing is not
entirely multiples in the precedent transactions or the transactions to which
they are being compared.
42
<PAGE> 49
Contribution Analysis. Based upon Wall Street financial analyst estimates
for bamboo.com and IPIX, Robertson Stephens analyzed the respective
contributions of bamboo.com and IPIX to the estimated revenues of the combined
company for calendar year 2000 and calendar year 2001. The following table
illustrates the equity valuations, equity valuations per share and exchange
ratios for IPIX implied based upon IPIX's relative contribution to estimated
revenues and the market capitalization of bamboo.com as of October 22, 1999:
<TABLE>
<CAPTION>
IMPLIED
BAMBOO.COM IPIX IMPLIED IPIX EQUITY IMPLIED
-------------------- -------------------- IPIX EQUITY VALUE PER EXCHANGE
AMOUNT % AMOUNT % VALUE SHARE RATIO
------------- ---- ------------- ---- ------------ --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
2000 estimated
revenues............. $19.0 million 42.8% $25.4 million 57.2% $620 million $33.68 2.073
2001 estimated
revenues........... $50.0 million 48.5% $53.0 million 51.5% $506 million $27.47 1.690
</TABLE>
Robertson Stephens also compared the relative contributions of bamboo.com
and IPIX to the pro forma revenues of the combined companies to the relative pro
forma ownership interests in the combined company, as set forth in the following
table:
<TABLE>
<CAPTION>
PERCENTAGE OF
COMBINED ENTITY
-----------------
BAMBOO.COM IPIX
---------- ----
<S> <C> <C>
1999 revenues............................................... 33.2% 66.8%
2000 estimated revenues..................................... 42.8 57.2
2001 estimated revenues..................................... 48.5 51.5
Pro forma ownership of primary shares....................... 48.8 51.2
Pro forma ownership of fully diluted shares................. 51.8 48.2
</TABLE>
Comparable Companies Analysis. Using publicly available information,
Robertson Stephens compared certain trading multiples of the following publicly
traded companies in the Internet industry to the relevant trading multiples of
bamboo.com and IPIX, as set forth in the table below:
<TABLE>
<CAPTION>
<S> <C>
- - Autoweb.com, Inc. - Marimba, Inc.
- - Backweb Technologies Ltd. - Mpath
- - InsWeb Corporation - Netegrity, Inc.
- - JFAX.com, Inc. - RealNetworks, Inc.
- - Mapquest.com, Inc. - WebTrends Corporation
</TABLE>
<TABLE>
<CAPTION>
TOTAL CAPITALIZATION
AS A MULTIPLE OF 2000 REVENUE
2000 REVENUES GROWTH RATE
-------------------- ------------
<S> <C> <C>
Comparable Companies:
Mean.......................................... 13.4x 101%
High.......................................... 42.7x 273
Low........................................... 4.0x 37
bamboo.com...................................... 21.7x 437
IPIX............................................ 13.0x 256
</TABLE>
No company compared in the comparable companies analysis is identical to
bamboo.com or IPIX. Accordingly, an analysis of the results of the foregoing is
not entirely mathematical; rather, it involves complex considerations and
judgments concerning
43
<PAGE> 50
differences in financial and operating characteristics and other factors that
could affect the acquisition, public trading and other values of the comparable
companies or the company to which they are being compared.
Pro Forma Analysis. Robertson Stephens analyzed certain pro forma effects
resulting from the merger, including, among other things, the impact of the
merger on the projected revenues per share and earnings per share of the
combined company for fiscal year 2000 and fiscal year 2001. The following table
summarizes the results of such analysis, without consideration of any synergies
that may result from the merger:
<TABLE>
<S> <C>
Fiscal year 2000 estimated revenue per share accretion...... 21.0%
Fiscal year 2000 estimated earnings per share accretion..... 5.2
Fiscal year 2001 estimated revenue per share accretion...... 6.6
Fiscal year 2001 estimated earnings per share dilution...... (1.1)
</TABLE>
The actual results achieved by the combined company may vary from projected
results and the variations may be material.
Other Factors and Comparative Analyses. In rendering its opinion,
Robertson Stephens considered certain other factors and conducted certain other
comparative analyses, including, among other things a review of:
- the history of trading prices and volume for bamboo.com common stock for
the period from August 26, 1999 to October 22, 1999;
- the history of trading prices and volume for IPIX common stock for the
period from August 5, 1999 to October 22, 1999; and
- selected published analysts' reports on bamboo.com and IPIX.
While the foregoing summary describes certain analyses and factors that
Robertson Stephens deemed material in its presentation to the bamboo.com board,
it is not a comprehensive description of all analyses and factors considered by
Robertson Stephens. The preparation of a fairness opinion is a complex process
that involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of these methods to the
particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Robertson Stephens believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all analyses
and factors, would create an incomplete view of the evaluation process
underlying the Robertson Stephens opinion. Several analytical methodologies were
employed and no one method of analysis should be regarded as critical to the
overall conclusion reached by Robertson Stephens. Each analytical technique has
inherent strengths and weaknesses, and the nature of the available information
may further affect the value of particular techniques. The conclusions reached
by Robertson Stephens are based on all analyses and factors taken as a whole and
also on application of Robertson Stephens' own experience and judgment. Such
conclusions may involve significant elements of subjective judgment and
qualitative analysis. Robertson Stephens therefore gives no opinion as to the
value or merit standing alone of any one or more parts of the analysis that it
performed. In performing its analyses, Robertson Stephens considered general
economic, market and financial conditions and other matters, many of which are
beyond the control of bamboo.com and IPIX. The analyses performed by Robertson
Stephens are not necessarily indicative of actual values or future results,
which may be significantly more or less favorable than those suggested by such
analyses.
44
<PAGE> 51
Accordingly, analyses relating to the value of a business do not purport to be
appraisals or to reflect the prices at which the business may actually be
purchased. Furthermore, no opinion is being expressed as to the prices at which
shares of bamboo.com common stock or IPIX common stock may be traded at any
future time.
The engagement letter between Robertson Stephens and bamboo.com provides
that, for its services, Robertson Stephens is entitled to receive a transaction
fee equal to 0.8% of the aggregate transaction value payable upon completion of
the merger and a fee of $250,000 payable upon delivery of its opinion, which fee
shall be credited against the transaction fee. bamboo.com has also agreed to
reimburse Robertson Stephens for certain of its out-of-pocket expenses,
including legal fees, and to indemnify and hold harmless Robertson Stephens and
its affiliates and any director, employee or agent of Robertson Stephens or any
of its affiliates, or any person controlling Robertson Stephens or its
affiliates for certain losses, claims, damages, expenses and liabilities
relating to or arising out of services provided by Robertson Stephens as
financial advisor to bamboo.com. The terms of the fee arrangement with Robertson
Stephens, which bamboo.com and Robertson Stephens believe are customary in
transactions of this nature, were negotiated at arm's length between bamboo.com
and Robertson Stephens, and the bamboo.com board was aware of such fee
arrangements, including the fact that a significant portion of the fees payable
to Robertson Stephens is contingent upon completion of the merger. In the
ordinary course of its business, Robertson Stephens may trade in bamboo.com's
securities and IPIX's securities for its own account and the account of its
customers and, accordingly, may at any time hold a long or short position in
bamboo.com's securities or IPIX's securities.
Robertson Stephens was retained based on Robertson Stephens' experience as
a financial advisor in connection with mergers and acquisitions and in
securities valuations generally.
Robertson Stephens is an internationally recognized investment banking
firm. As part of its investment banking business, Robertson Stephens is
frequently engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of securities, private placements and other purposes.
45
<PAGE> 52
OPINION OF IPIX'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated October 15, 1999, IPIX retained J.P.
Morgan as its exclusive financial advisor and to deliver a fairness opinion in
connection with the proposed merger. At the meeting of IPIX's board of directors
on October 25, 1999, J.P. Morgan gave its oral opinion to the board, which was
subsequently confirmed in writing, that, as of that date and based upon and
subject to the various considerations set forth in the opinion, the
consideration to be received by IPIX's shareholders in the proposed merger was
fair from a financial point of view to the shareholders. IPIX's board of
directors did not limit J.P. Morgan in any way in the investigations it made or
the procedures it followed in giving its opinion
We have attached as Annex E to this document the full text of J.P. Morgan's
written opinion. This opinion sets forth the assumptions made, matters
considered and limits on the review undertaken. We incorporate J.P. Morgan's
opinion into this document by reference and urge you to read the opinion in its
entirety. J.P. Morgan addressed its opinion to the IPIX board of directors. The
opinion addresses only the consideration to be received in the merger and is not
a recommendation to any IPIX shareholder as to how that shareholder should vote
at IPIX's Special Meeting.
In arriving at its opinion, J.P. Morgan reviewed:
- the merger agreement;
- publicly available information concerning the business of IPIX and
bamboo.com and of other companies engaged in businesses comparable to
those of IPIX and bamboo.com and the reported market prices for other
companies' securities deemed comparable;
- publicly available terms of various transactions involving companies
comparable to IPIX and the consideration received for such companies;
- current and historical market prices of IPIX common stock and bamboo.com
common stock;
- the audited financial statements of IPIX and bamboo.com for the fiscal
year ended December 31, 1998;
- unaudited financial statements of IPIX for the period ended June 30,
1999;
- various agreements with respect to outstanding indebtedness or
obligations of IPIX and bamboo.com;
- various internal financial analyses and forecasts prepared by IPIX and
bamboo.com and their respective managements; and
- the terms of other business combinations that J.P. Morgan deemed
relevant.
J.P. Morgan also held discussions with various members of the management of
IPIX and bamboo.com regarding numerous aspects of the merger, the past and
current business operations of IPIX and bamboo.com, the financial condition and
future prospects and operations of IPIX and bamboo.com, the effects of the
merger on the financial condition and future prospects of IPIX and bamboo.com,
and other matters that J.P. Morgan believed necessary or appropriate to its
inquiry. In addition, J.P. Morgan visited various representative facilities of
bamboo.com and reviewed other financial studies and analyses
46
<PAGE> 53
and considered other information that it considered appropriate for the purposes
of its opinion.
J.P. Morgan relied upon and assumed, without independent verification, the
accuracy and completeness of all information that was publicly available or that
was furnished to it by IPIX and bamboo.com or otherwise reviewed by J.P. Morgan.
J.P. Morgan is not responsible or liable for that information or its accuracy.
J.P. Morgan has not conducted any valuation or appraisal of any assets or
liabilities, nor have any valuations or appraisals been provided to J.P. Morgan.
In relying on financial analyses and forecasts provided to it, J.P. Morgan has
assumed that they have been reasonably prepared based on assumptions reflecting
the best currently available estimates and judgments by management as to the
expected future results of operations and financial condition of IPIX and
bamboo.com to which those analyses or forecasts relate. J.P. Morgan has also
assumed that the merger will have the tax consequences described in discussions
with, and materials furnished to J.P. Morgan by, representatives of IPIX, and
that the parties will complete the merger and other transactions contemplated by
the merger agreement as described in that agreement. J.P. Morgan relied as to
all legal matters relevant to rendering its opinion upon the advice of counsel.
The projections furnished to J.P. Morgan for IPIX and bamboo.com were
prepared by the respective managements of each company. Neither IPIX nor
bamboo.com publicly discloses internal management projections of the type
provided to J.P. Morgan in connection with J.P. Morgan's analysis of the merger,
and such projections were not prepared with a view toward public disclosure.
These projections were based on numerous variables and assumptions that are
inherently uncertain and may be beyond the control of the companies, including,
but not limited to, factors related to general economic and competitive
conditions and prevailing interest rates. Accordingly, actual results could vary
significantly from those set forth in the projections.
As is customary in the rendering of fairness opinions, J.P. Morgan based
its opinion on economic, market and other conditions as in effect on, and the
information made available to J.P. Morgan as of, the date of its opinion.
Subsequent developments may affect J.P. Morgan's opinion, and J.P. Morgan does
not have any obligation to update, revise or reaffirm its opinion. J.P. Morgan
expressed no opinion as to the price at which IPIX's or bamboo.com's common
stock will trade at any future time.
In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of the material financial analyses that J.P. Morgan
utilized in providing its opinion. We have presented some of the summaries of
financial analyses in tabular format. In order to understand the financial
analyses used by J.P. Morgan more fully, you should read the tables together
with the text of each summary. The tables alone do not constitute a complete
description of J.P. Morgan's financial analyses.
Exchange Ratio and Implied Ownership. J.P. Morgan reviewed the ratios of
the closing prices of IPIX's common stock divided by the corresponding prices of
bamboo.com's common stock for the period from August 26, 1999 to October 22,
1999. The daily implied market exchange ratio over this period ranged from
approximately 0.855x to 1.469x, with an average exchange ratio of 1.183x.
47
<PAGE> 54
The following table presents the difference between the exchange ratio in
the merger and the average implied exchange ratios for each of the periods
covered:
<TABLE>
<CAPTION>
IMPLIED EXCHANGE
RATIO BASED ON AVERAGE
CLOSING PRICE DURING PERIOD THE EXCHANGE RATIO DIFFERENCE
--------------------------- ------------------ ----------
<S> <C> <C> <C>
October 22, 1999............. 1.331x 1.369x 2.9%
5-day........................ 1.412x 1.369x -3.1
10 day....................... 1.369x 1.369x 0
20 day....................... 1.312x 1.369x 4.3
30 day....................... 1.231x 1.369x 11.2
August 26, 1999.............. 1.182x 1.369x 15.7
</TABLE>
The following table compares IPIX's pro forma ownership of the combined
companies based on gross shares outstanding as of October 22, 1999 and on the
implied exchange ratios at points in time since August 26, 1999 to IPIX's pro
forma ownership based on the exchange ratio that was agreed to on October 22,
1999 and the gross shares outstanding on October 22, 1999:
<TABLE>
<CAPTION>
OWNERSHIP BASED
ON EXCHANGE RATIO
------------------------
DAYS PRIOR TO OCTOBER 22, 1999 IPIX BAMBOO.COM
- ------------------------------ ---- -----------------
<S> <C> <C>
0 (Announcement)...................................... 49.6% 50.4%
- - 5 (10/18/99).......................................... 51.3 48.7
- -10 (10/11/99).......................................... 49.0 51.0
- -20 (9/27/99)........................................... 47.2 52.8
- -30 (9/13/99)........................................... 38.8 61.2
- -42 (8/26/99)........................................... 45.8 54.2
Ownership based on the exchange ratio................... 50.4 49.6
</TABLE>
Contribution Analysis. J.P. Morgan performed a contribution analysis using
IPIX's and bamboo.com's internal projections as well as published Wall Street
research for 1999, 2000, and 2001. Revenue and gross profit for IPIX and
bamboo.com were projected to be positive, whereas net income for IPIX and
bamboo.com was projected to be negative. The following table presents the
contribution analysis of IPIX to the combined company:
<TABLE>
<CAPTION>
CONTRIBUTIONS TO CONTRIBUTION TO CONTRIBUTION TO
ESTIMATED GROSS REVENUE NET INCOME
------------------ ------------------ ------------------
1999 2000 2001 1999 2000 2001 1999 2000 2001
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Analyst estimates............ 67% 57% 49% 80% 58% 49% 39% 55% 50%
Internal projections......... 69 55 44 82 59 43 48 47 60
</TABLE>
48
<PAGE> 55
Selected Public Trading Multiples. Using publicly available information,
J.P. Morgan compared selected financial data of IPIX and bamboo.com with similar
data for selected publicly traded companies engaged in businesses which J.P.
Morgan judged to be reasonably comparable to bamboo.com. The purpose of this
analysis was to provide information regarding the fairness of the proposed
merger consideration based upon a comparison of specific financial information
of bamboo.com with several comparable companies. These companies were:
- Inktomi, Inc.
- VeriSign, Inc.
- RealNetworks, Inc.
J.P. Morgan selected these companies because they engage in businesses
reasonably comparable to those of IPIX and bamboo.com. J.P. Morgan measured
publicly available financial performance through the twelve months ended June
30, 1999, as well as financial projections by the equity analysts covering each
comparable company. The following table presents the stock price as a percentage
of 52 week high and revenue multiples of IPIX, bamboo.com, Inktomi, Verisign,
and RealNetworks:
<TABLE>
<CAPTION>
REVENUE MULTIPLES
STOCK PRICE (AS A % (BASED ON PROJECTED
OF 52 WEEK HIGH) 2000 REVENUES)
------------------- -------------------
<S> <C> <C>
IPIX......................................... 80% 16.9x
bamboo.com................................... 59 24.4x
Inktomi...................................... 65 49.2x
Verisign..................................... 84 53.0x
RealNetworks................................. 74 46.9x
</TABLE>
IPIX projected a revenue multiple for 2000 of 16.9x, compared to
bamboo.com's multiple of 24.4x. It should be noted that no company utilized in
the analysis above is identical to either IPIX or bamboo.com. In evaluating
Internet enabling technology companies, J.P. Morgan made judgments and
assumptions with regard to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of IPIX or bamboo.com, such as the impact of competition on the business
of IPIX and bamboo.com and the industry generally, industry growth and the
absence of any material change in the financial condition and prospects of IPIX
and bamboo.com or the industry or in the financial markets in general.
Mathematical analysis (such as determining the average or the median) is not in
itself a meaningful method of using selected Internet company data.
Comparable Transaction Analysis. Using publicly available information,
J.P. Morgan examined the following transactions:
- Yahoo!/GeoCities
- At Home Corporation/Excite, Inc.
- Yahoo!/Broadcast.com
- Doubleclick/NetGravity
49
<PAGE> 56
The comparable transaction analysis yielded the following range and the
mean for the multiple of latest twelve month revenues and multiple of projected
twelve month revenues:
<TABLE>
<CAPTION>
RANGE MEAN
------------- ------
<S> <C> <C>
Multiple of latest twelve month revenues.................. 29.9x-255.5x 120.2x
Multiple of projected twelve month revenues............... 13.9x- 90.6x 50.0x
</TABLE>
It should be noted that no transaction utilized in the analysis above is
identical to the merger. IPIX and bamboo.com are two similar sized companies
that provide Internet enabling technology. Mathematical analysis (such as
determining the mean or the median) is not in itself a meaningful method of
using selected Internet transaction data.
This summary does not purport to be a complete description of the analyses
or data presented by J.P. Morgan. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. J.P. Morgan believes that one must consider its opinion,
this summary and its analyses as a whole. Selecting portions of this summary and
these analyses, without considering the analyses as a whole, could create an
incomplete view of the processes underlying the analyses and opinion. In
arriving at its opinion, J.P. Morgan considered the results of all of the
analyses as a whole. No single factor or analysis was determinative of J.P.
Morgan's fairness determination. Rather, the totality of the factors considered
and analyses performed operated collectively to support its determination. J.P.
Morgan based the analyses on assumptions that it deemed reasonable, including
assumptions concerning general business and economic conditions which impact the
companies' growth rates, labor costs and price competition and industry-specific
factors similar to those set forth under the heading "Risk Factors Relating to
the Business, Finances and Operations of the Combined Company" on pages 18
through 25 of this document. This summary sets forth under the description of
each analysis the other principal assumptions upon which J.P. Morgan based that
analysis. J.P. Morgan's analyses are not necessarily indicative of actual values
or actual future results that either company or the combined company might
achieve, which values may be higher or lower than those indicated. Analyses
based upon forecasts of future results are inherently uncertain, as they are
subject to numerous factors or events beyond the control of the parties and
their advisors. Accordingly, these forecasts and analyses are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than suggested by those analyses. Therefore, none of IPIX, bamboo.com,
J.P. Morgan or any other person assumes responsibility if future results are
materially different from those forecasted.
As a part of its investment banking business, J.P. Morgan and its
affiliates are continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, investments for passive
and control purposes, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements, and valuations for estate,
corporate and other purposes. IPIX selected J.P. Morgan with respect to the
merger on the basis of its experience and familiarity with IPIX.
For services rendered in connection with the merger, IPIX has agreed to pay
J.P. Morgan (a) a fee of $500,000 upon announcement of the merger, (b) a fee of
$500,000 upon delivery of the fairness opinion and (c) a fee of 1% of the
transaction value of the merger, less the amount of the other fees described
above, subject to a minimum transaction fee of $2,000,000, which is payable upon
closing of the merger. J.P. Morgan estimates that this transaction fee will be
$4,100,000. In addition, IPIX has agreed to reimburse J.P. Morgan for its
expenses incurred in connection with its services, including
50
<PAGE> 57
the fees and disbursements of counsel, and will indemnify J.P. Morgan against
certain liabilities, including liabilities arising under the federal securities
laws.
An affiliate of J.P. Morgan owns 116,278 shares of IPIX common stock. In
addition, J.P. Morgan has acted as placement agent for IPIX in raising private
equity and acted as lead underwriter in IPIX's initial public offering, for
which J.P. Morgan received customary compensation. In the ordinary course of
their businesses, J.P. Morgan and its affiliates may actively trade the debt and
equity securities of IPIX or bamboo.com for their own accounts or for the
accounts of customers and, accordingly, they may hold long and/or short
positions in those securities at any given time.
51
<PAGE> 58
INTERESTS OF RELATED PERSONS IN THE MERGER
In considering the recommendations of IPIX's board of directors with
respect to the merger agreement, IPIX shareholders should be aware that some of
its directors and members of management have interests in the merger that are
different from, or in addition to, the interests of IPIX shareholders generally.
A description of the individuals is set forth below. IPIX's board of directors
was aware of these interests and considered them, among other matters, in
approving the merger.
BOARD OF DIRECTORS
bamboo.com has agreed that, as of the closing, four directors of IPIX will
be elected to the combined company's board who will serve with four of the
current directors of bamboo.com. Also, the chairmen of IPIX and bamboo.com have
agreed to select and nominate a mutually agreeable candidate as the ninth member
of the combined company's board of directors. Currently, Leonard B. McCurdy,
Kevin B. McCurdy, John Moragne and Philip Sanderson for bamboo.com and James M.
Phillips, Laban P. Jackson, Jr., John S. Hendricks and John Trezevant for IPIX
have been identified as persons who will be nominated to the combined company's
board of directors. See "The Merger Agreement -- The Board of Directors of the
Combined Company and Related Matters" on page 55.
STOCK OPTIONS
Pursuant to the terms of bamboo.com's Amended and Restated 1998 Employee,
Director and Consultant Stock Plan, as a result of the merger some bamboo.com
options will become fully vested and exercisable. The following table sets forth
the number of bamboo.com options that will become fully vested and exercisable
for the following executive officers of bamboo.com.
<TABLE>
<CAPTION>
NAME AND TITLE OF BAMBOO.COM OFFICERS ACCELERATED VESTING OF OPTIONS (NO. OF SHARES)
------------------------------------- ----------------------------------------------
<S> <C>
Randall I. Bresee, Chief Financial
Officer 52,500
Mark R. Searle, Chief Operating Officer 42,000
Andrew J. Aicklen, Vice President and
General Manager, Canadian Operations 33,600
</TABLE>
INDEMNIFICATION AND INSURANCE
Under the merger agreement, we will
- indemnify and hold harmless present or former directors or officers of
IPIX or its subsidiaries for all acts or omissions occurring prior to the
effective time of the merger, including the transactions contemplated by
the merger agreement, to the same extent these persons are indemnified
and held harmless in IPIX's charter or bylaws as of the date of the
merger agreement, and
- provide, for a period of six years after the effective time of the
merger, an insurance and indemnification policy that grants IPIX's
officers and directors in office immediately prior to the effective time
of the merger coverage substantially equivalent to IPIX's policy in
effect as of the date of the merger agreement.
52
<PAGE> 59
See "The Merger Agreement -- Covenants Regarding Conduct of Business Before
the Merger -- Indemnification" on page 56 and "Comparison of Shareholders'
Rights -- Limitation of Liability; Indemnification" on page 67.
53
<PAGE> 60
THE MERGER AGREEMENT
The following is a summary of the merger agreement, a copy of which is
attached as Annex A and is incorporated into this joint proxy/prospectus by
reference. Shareholders of bamboo.com and IPIX are urged to read the merger
agreement in its entirety for a more complete description of the terms and
conditions of the merger.
GENERAL
The merger agreement provides that, following the approval of the issuance
of shares by the shareholders of bamboo.com, the approval of the merger and the
merger agreement by the shareholders of IPIX, and the satisfaction or waiver of
the other conditions to the merger, a wholly-owned subsidiary of bamboo.com
formed under the laws of the state of Tennessee will merge with and into IPIX,
with IPIX surviving the merger as a wholly-owned subsidiary of bamboo.com. Under
the merger agreement, bamboo.com will cause the bamboo.com common shares to be
issued in connection with the merger to be approved for listing on the NASDAQ
National Market, under a symbol to be determined, subject to official notice of
issuance, prior to the effective time of the merger.
TIMING OF CLOSING
The closing will occur as soon as practicable after the conditions set
forth in the merger agreement have been satisfied or waived. We expect that, as
promptly as practicable after the closing, we will file articles of merger with
the Secretary of State of the State of Tennessee, at which time the merger will
become effective.
CONVERSION OF SHARES
The merger agreement provides that each IPIX common share, issued and
outstanding immediately prior to the time the merger will become effective will
be converted into the right to receive 1.369 shares of common shares of
bamboo.com. Based upon the number of outstanding shares of bamboo.com common
stock and IPIX common stock as of the record date, the shareholders of IPIX
immediately prior to the consummation of the merger will own approximately 50.6%
of the outstanding shares of bamboo.com common shares immediately following
consummation of the merger. If any shareholder of IPIX would be entitled to
receive a number of shares of bamboo.com that includes a fraction, then, in lieu
of a fractional share, the holder will be entitled to receive cash in an amount
equal to the fractional share of bamboo.com common share multiplied by the fair
market value of a bamboo.com common share, as determined by the bamboo.com board
of directors at the effective time.
The outstanding shares of bamboo.com and its subsidiary will remain
outstanding after the effective time and will be unaffected by the merger.
Prior to the effective time, bamboo.com will deposit with an exchange agent
the certificates representing the appropriate number of bamboo.com common shares
that will be issued to the holders of IPIX common shares and the cash to be paid
for the fractional shares.
As soon as practicable after the effective time, the exchange agent will
mail a letter of transmittal that contains instructions for the surrender of the
certificates to each holder of a certificate or certificates representing IPIX
common shares that will be exchanged for
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bamboo.com common shares. Upon surrender of a certificate and other required
documents, the holder of a certificate or certificates of IPIX common shares
will receive a certificate representing bamboo.com shares and, if applicable, a
check for the cash consideration of fractional bamboo.com shares.
IPIX STOCK OPTIONS
At the effective time, each outstanding IPIX stock option, regardless of
the extent vested and exercisable, shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under the IPIX
stock option, the same number of bamboo.com shares as the holder of the IPIX
option would have been entitled to receive pursuant to the merger agreement, had
the holder exercised the IPIX option in full immediately prior to the effective
time of the merger, rounded up to the nearest whole number. The price per share
shall equal: the aggregate exercise price for the IPIX shares otherwise
purchasable pursuant to the option, divided by the aggregate number of whole
bamboo.com shares purchasable pursuant to the IPIX option; provided, however,
that in the case of any stock option that qualifies as an incentive stock option
under section 422 of the Internal Revenue Code, the option price, number of
shares purchasable pursuant to the option and the terms and conditions of the
exercise of such option shall be determined in order to comply with Section
424(a) of the Internal Revenue Code.
As soon as practicable after the effective time, bamboo.com will notify the
holders of IPIX options, subject to the adjustments referred to above, that the
rights of the holders of IPIX options will continue on the same terms and
conditions.
bamboo.com will take all necessary action to implement the above, including
the reservation, issuance and listing of a sufficient number of bamboo.com
common shares for delivery upon exercise of these substitute options. bamboo.com
will prepare and file a registration statement on an appropriate form, or a
post-effective amendment to a previously filed registration statement, with
respect to the bamboo.com common shares subject to the IPIX options. Where
applicable, bamboo.com will use its reasonable best efforts to have the
registration statement declared effective and to maintain such effectiveness.
THE BOARD OF DIRECTORS OF THE COMBINED COMPANY AND RELATED MATTERS
We will take the necessary corporate action so that, at or prior to the
effective date of the merger:
- Our board of directors will consist of nine persons.
- Four persons designated by IPIX will become directors. They are expected
to be James M. Phillips, Laban P. Jackson, Jr., John S. Hendrick, and
John Trezevant.
- Four current directors of bamboo.com will remain directors. They are
expected to be Leonard B. McCurdy, Kevin B. McCurdy, John Moragne and
Philip Sanderson.
- The chairmen of IPIX and bamboo.com have agreed to select and nominate a
ninth member of the combined company's board of directors. This member of
the board of directors is intended to be an independent director and may
not own more than 3% of either company's common stock at the time of
his/her selection.
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- Our executive officers will be the following:
- James M. Phillips, chairman and chief executive officer of IPIX, will
become chairman and chief executive officer;
- Leonard B. McCurdy, chairman and chief executive officer of
bamboo.com, and Laban P. Jackson, Jr. will become vice chairmen;
- Jeffrey D. Peters, president and chief operating officer of IPIX, will
become president;
- John J. Kalec, chief financial officer of IPIX, will become chief
financial officer; and
- Mark R. Searle, chief operating officer of bamboo.com, will become
chief operating officer.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary mutual representations and
warranties of bamboo.com and IPIX, relating to, among other things:
- corporate organization;
- capitalization;
- corporate authorization;
- SEC filings;
- information;
- consents and approvals;
- absence of default;
- no undisclosed liabilities;
- litigation;
- employee benefit plans;
- environmental matters;
- tax matters;
- title to property;
- intellectual property;
- insurance;
- material contracts;
- vote required;
- tax and accounting treatment;
- affiliates;
- business practices;
- insiders interests;
- brokers;
- no existing discussions;
- anti-takeover statutes and charter provisions; and
- year 2000 compliance.
COVENANTS REGARDING CONDUCT OF BUSINESS BEFORE THE MERGER
Interim Operations of bamboo.com and IPIX. bamboo.com and IPIX have agreed
to conduct their business in the ordinary course consistent with past practice
and to use their reasonable best efforts to preserve intact their present
business organizations and relationships with third parties. The companies have
also agreed with some restrictions not to take any action outside the parameters
specified in the merger agreement such as:
- amending their organizational documents;
- entering into any significant transaction;
- issuing or disposing of equity securities, options or other securities
convertible into or exercisable for equity securities, except to a
limited extent to new employees and consultants;
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- splitting, combining or reclassifying their capital stock;
- making capital expenditures, except in the ordinary course of business;
and
- taking any other action that would make any representation or warranty by
either company inaccurate in any material respect.
Reasonable Efforts Covenant. bamboo.com and IPIX have agreed to cooperate
with each other and use their reasonable best efforts to take all actions and do
all things necessary or advisable under the merger agreement and applicable laws
to complete the merger and the other transactions contemplated by the merger
agreement.
No Solicitation. bamboo.com and IPIX have agreed that they and their
subsidiaries, officers, directors, employees, investment bankers, attorneys,
accountants, consultants or other agents or advisors will not take action to
solicit or encourage an offer for an alternative takeover transaction.
Restricted actions include a party:
- engaging in any discussion or negotiations with any potential bidder in
which a party discloses any nonpublic information relating to IPIX,
bamboo.com or any of their respective subsidiaries; or
- giving access to their properties, books or records to any potential
bidder.
These actions are permitted in response to an unsolicited offer so long as,
before doing so, the board of directors determines in good faith, after
consulting with its financial advisor and outside counsel and taking into
account all the terms and conditions of the offer, that the offer is a superior
proposal.
Employee Benefit Plans. bamboo.com and IPIX have agreed to provide after
the effective time to their employees and the employees of their subsidiaries,
employee benefit plans that are not less favorable than those currently
provided.
Indemnification. The combined company will indemnify, defend and hold
harmless each person who was at the date of the merger agreement, or had been
prior to that date, or who becomes prior to the effective time, a director,
officer or employee of bamboo.com or IPIX. This indemnification will cover the
losses, expenses, claims, damages or liabilities or amounts paid in settlement,
arising at or prior to the effective time that are:
- based on, or arising out of the fact that such person is or was a
director, officer or employee of IPIX or bamboo.com; or
- based on, arising out of or pertaining to the transactions contemplated
by the merger agreement.
For a period of six years after the effective time, the combined company
will maintain the policies of directors' and officers' liability insurance
maintained by IPIX and bamboo.com for the benefit of those persons who are
covered by the policies at the effective time, unless the insurance coverage is
not available at commercially reasonable rates. In that case, the combined
company will purchase coverage that may be obtained at commercially reasonably
rates and is no less broad than coverage purchased for persons who are then
serving as directors or officers of the combined company.
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Other Covenants. The merger agreement contains additional mutual
covenants, including covenants relating to preparation and distribution of this
document, cooperation regarding filings with governmental and other agencies and
organizations and obtaining any governmental or third-party consents or
approvals, public announcements, further assurances, access to information,
mutual notification of particular events, confidential treatment of non-public
information, coordination of shareholders' meetings and the preservation of the
intended tax or accounting treatment of the merger.
CONDITIONS TO CONSUMMATION OF THE MERGER
bamboo.com and IPIX will complete the merger only if the conditions
specified in the merger agreement are either satisfied or waived. The conditions
are the following:
- the bamboo.com and IPIX shareholders approve the merger;
- there is no law or court order prohibiting the merger;
- bamboo.com's registration statement on Form S-4, which includes this
joint proxy statement/prospectus, is declared effective by the SEC;
- the representations and warranties made by bamboo.com and IPIX remain
accurate in all material respects;
- each of bamboo.com and IPIX has performed in all material respects all
covenants under the merger agreement;
- bamboo.com and IPIX have each received opinions from their counsel as to
the tax matters relating to the merger; and
- there has been no event or change to bamboo.com or IPIX that has had a
material adverse affect on either of the two companies.
TERMINATION
The merger agreement may be terminated at any time prior to the effective
time of the merger, whether before or after approval of the matters presented in
connection with the merger by the bamboo.com shareholders or the IPIX
shareholders, in any of the following ways:
(a) by mutual written consent of bamboo.com and IPIX;
(b) there is a permanent legal prohibition to completing the merger;
(c) the merger has not been completed by June 30, 2000; provided,
however, that neither bamboo.com nor IPIX can terminate the merger
agreement under this clause if its breach of any obligation under the
merger agreement has resulted in the failure of the merger to occur on or
before that date;
(d) by either bamboo.com or IPIX if:
- there has been a breach of any representation or warranty on the
part of one company, or if any representation or warranty of one
company shall have become untrue, and those events have a material
adverse effect on the other company so that the conditions to the
merger could not be met;
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- there has been a breach by a company of any of its covenants or
agreements having a material adverse effect on the other company or
the merger, and the party in breach has not cured the breach within
20 business days after it has been notified;
- the board of a company shall have recommended a superior proposal
to its shareholders;
- the board of a company withdraws, modifies or changes its approval
or recommendation of the merger agreement or fails to call, give
notice of, or hold a shareholders meeting to vote upon the merger;
- a company convenes a meeting of its shareholders to vote upon the
merger and fails to obtain the requisite vote of its shareholders;
or
- a tender or exchange offer for outstanding shares of a company
representing 30% or more of the combined power to vote for the
election of that company's directors is commenced, and the board of
directors of that company does not recommend to the shareholders
not to tender their shares into the tender or exchange offer.
TERMINATION FEES AND EXPENSES
The merger agreement obligates bamboo.com or IPIX to pay to the other party
a termination fee of $16.0 million if:
- the merger agreement is terminated for the reasons described in
subsection (d) of "Termination" above;
- prior to the holding of its special shareholders' meeting or the
termination of the merger agreement, it is publicly announced or becomes
publicly known that either company is the subject of a takeover proposal;
and
- during the term of the merger agreement or within 225 days of its
termination, a takeover actually occurs.
AMENDMENT OR WAIVER OF THE MERGER AGREEMENT
The parties may amend the merger agreement or waive any of its terms and
conditions before the effective time. However, after the shareholders of
bamboo.com and IPIX have approved the merger, the parties may not amend the
merger agreement if the amendment would require shareholder approval.
STOCK OPTION AGREEMENTS
In connection with the merger agreement, bamboo.com and IPIX entered into
two stock option agreements: IPIX granted bamboo.com an option to purchase 19.9%
of IPIX's common shares at a price of $22.25 per share, and bamboo.com granted
IPIX an option to purchase 19.9% of bamboo.com's common shares at a price of
$16.25 per share. The prices are adjustable under various circumstances. The
stock options become exercisable in the event that the issuer of the option
becomes the subject of a publicly announced third party takeover proposal.
Neither bamboo.com nor IPIX may realize more than a total of $20
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million from the payment of both the $16 million termination fee and the
exercise of the stock option and subsequent sale of the option shares. Both
options terminate
- upon the consummation of the merger;
- 30 days after the termination of the merger agreement (other than as a
result of the announcement of or other release of public information
concerning a proposal by a third party to acquire 30% or more of the
equity or assets, or to undertake a merger involving 30% of the assets,
net revenue or net income of the issuer); or
- 180 days after the termination of the merger agreement as a result of an
announcement or release of the information described immediately above.
The termination fees and stock option agreements may make it more difficult
and expensive for IPIX or bamboo.com to consummate an alternative transaction.
bamboo.com and IPIX have agreed to list any shares issued upon the exercise
of the options on the NASDAQ National Market. Each company has also granted to
the other customary rights to register the sale of any shares issued upon the
exercise of the options under the federal securities laws.
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THE SHAREHOLDERS' MEETINGS
THE BAMBOO.COM SPECIAL MEETING
General
This joint proxy statement/prospectus is being furnished to the
shareholders of bamboo.com in connection with the solicitation of proxies on
behalf of the bamboo.com board of directors for use at the special meeting to be
held on Wednesday, January 19, 2000, at the time and place specified in the
accompanying notice of special meeting of shareholders, and at any adjournment
or postponement thereof. The purpose of the special meeting is to consider and
vote upon proposals to:
- approve the issuance of bamboo.com common stock pursuant to the Agreement
and Plan of Merger dated October 25, 1999 by and between bamboo.com and
IPIX;
- amend bamboo.com's Restated Certificate of Incorporation to increase the
amount of common stock authorized for issuance thereunder from 70 million
shares to 150 million shares, contingent upon completing the merger;
- amend the Amended and Restated 1998 Employee, Director and Consultant
Stock Plan to increase the number of shares of common stock which may be
added annually to the amount already reserved for issuance thereunder
from 1,400,000 shares to 2,800,000 shares, contingent upon completion of
the merger;
- amend the 1999 Employee Stock Purchase Plan to increase the number of
shares of common stock which may be added annually to the amount already
reserved for issuance thereunder from 700,000 shares to 1,400,000 shares,
contingent upon completion of the merger; and
- transact such other business as may properly come before the special
meeting.
Each copy of this joint proxy statement/prospectus mailed to holders of
bamboo.com common stock is accompanied by a form of proxy for use at the special
meeting. This joint proxy statement/prospectus is also furnished to IPIX
stockholders as a prospectus in connection with the issuance to them of shares
of the combined company's common stock upon consummation of the merger.
THE BOARD OF DIRECTORS OF BAMBOO.COM HAS APPROVED THE ISSUANCE OF SHARES
PURSUANT TO THE MERGER AGREEMENT, THE AMENDMENT OF THE CERTIFICATE OF
INCORPORATION AND THE AMENDMENTS OF THE AMENDED AND RESTATED 1998 EMPLOYEE,
DIRECTOR AND CONSULTANT STOCK PLAN AND THE 1999 EMPLOYEE STOCK PURCHASE PLAN AND
RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE FOREGOING ACTIONS.
Record Date; Quorum
The bamboo.com board of directors has fixed the close of business on
December 6, 1999 as the record date for the determination of the holders of
bamboo.com common stock entitled to receive notice of and to vote at the special
meeting. The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of bamboo.com common stock entitled to vote at the
special meeting is necessary to constitute a quorum.
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Vote Required
As of the record date for the special meeting, there were 20,399,210 shares
of bamboo.com common stock outstanding, each of which is entitled to one vote on
the merger agreement and each other matter properly submitted at the special
meeting. Holders of bamboo.com common stock as of the record date of the special
meeting are entitled to one vote per share of bamboo.com common stock on each
matter to be considered at the special meeting. Approval of the issuance of
shares pursuant to the merger agreement, the amendment of bamboo.com's
certificate of incorporation and the amendments of the Amended and Restated 1998
Employee, Director and Consultant Stock Plan and the 1999 Employee Share
Purchase Plan by the shareholders of bamboo.com requires the affirmative vote of
the holders of a majority of the shares of bamboo.com common stock voting at the
special meeting.
Voting of Proxies
Shares of bamboo.com common stock represented by a proxy properly signed
and received at or prior to the special meeting, unless subsequently revoked,
will be voted in accordance with the instructions thereon.
Shareholders of bamboo.com will not be entitled to present any matter for
consideration at the special meeting, and no business is to be acted upon at the
special meeting other than as set forth in the notice of special meeting of
shareholders accompanying this joint proxy statement/prospectus.
Shares of bamboo.com common stock represented at the special meeting by a
properly executed, dated and returned proxy will be treated as present at the
special meeting for purposes of determining a quorum, without regard to whether
the proxy is marked as casting a vote or abstaining. For voting purposes at the
special meeting, only shares affirmatively voted in favor of approval of the
proposals presented at the special meeting will be counted as favorable votes
for such approval. Any broker non-votes and abstaining votes will not be counted
in favor of approval of the proposals presented at the special meeting. Since
applicable law requires approval of a majority of the shares voting at the
special meeting, abstentions will have the same effect as votes cast against the
proposals.
The persons named as proxies by a shareholder may propose and vote for one
or more adjournments of the special meeting to permit further solicitations of
proxies in favor of approval of the proposals presented at the special meeting;
however, no proxy that is voted against the approval of the proposals will be
voted in favor of any such adjournment. An adjournment proposal requires the
affirmative vote of a majority of the votes cast by holders of bamboo.com common
stock and, therefore, broker non-votes and abstentions will have no effect.
Revocability of Proxies
The grant of a proxy on the enclosed form does not preclude a shareholder
from voting in person. A shareholder may revoke a proxy at any time prior to its
exercise by submitting a signed written revocation to the assistant secretary of
bamboo.com, by submitting a signed proxy bearing a later date or by appearing at
the special meeting and voting in person. Attendance at the special meeting will
not, in and of itself, constitute revocation of a proxy.
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Solicitation of Proxies
bamboo.com will bear the cost of the solicitation of proxies from its
shareholders, including the costs of preparing, filing, printing and
distributing this joint proxy statement/prospectus and any other solicitation
materials that are used. In addition to solicitation by mail, the directors,
officers and employees of bamboo.com may solicit proxies from shareholders of
bamboo.com by telephone, the Internet or by other means of communication.
Such directors, officers and employees will not be additionally compensated
but may be reimbursed for reasonable out-of-pocket expenses in connection with
such solicitation. Arrangements will also be made with brokerage houses and
other custodians, nominees and fiduciaries for the forwarding of solicitation
material to the beneficial owners of stock held of record by such persons, and
bamboo.com will reimburse such custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses in connection therewith.
In addition, bamboo.com has retained Georgeson Shareholders' Communications
Inc. to assist in the solicitation of proxies by bamboo.com for an estimated fee
of $7,000 plus reasonable out-of-pocket costs and expenses. Any questions or
requests regarding proxies or related materials may be directed to Georgeson
Shareholders' Communications Inc. For bankers and brokers, call collect at
212-440-9800. For all others, call toll-free at
800-223-2064.
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE
TO THE BAMBOO.COM SHAREHOLDERS. ACCORDINGLY, BAMBOO.COM SHAREHOLDERS ARE URGED
TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE PRE-PAID ENVELOPE.
SHAREHOLDERS SHOULD NOT SEND BAMBOO.COM COMMON STOCK CERTIFICATES WITH
THEIR PROXY CARDS. IF THE PROPOSALS PRESENTED AT THE SHAREHOLDER MEETING ARE
APPROVED BY THE SHAREHOLDERS AND THE MERGER IS CONSUMMATED, CURRENT SHAREHOLDERS
WILL CONTINUE TO HOLD THEIR EXISTING SHARES OF BAMBOO.COM COMMON STOCK.
THE IPIX SPECIAL MEETING
General
This joint proxy statement/prospectus is being furnished to the
shareholders of IPIX in connection with the solicitation of proxies on behalf of
the IPIX board of directors for use at the special meeting to be held on
Wednesday, January 19, 2000, at the time and place specified in the accompanying
notice of special meeting of shareholders, and at any adjournment or
postponement thereof. The purpose of the special meeting is to consider and vote
upon proposals to:
- approve and adopt the merger agreement;
- amend the 1997 Equity Compensation Plan to increase by 1,000,000 the
number of shares of common stock that may be issued thereunder; and
- transact such other business as may properly come before the special
meeting.
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Each copy of this joint proxy statement/prospectus mailed to holders of
IPIX common stock is accompanied by a form of proxy for use at the special
meeting. This joint proxy statement/prospectus is also furnished to bamboo.com
shareholders in connection with the proposed merger.
THE BOARD OF DIRECTORS OF IPIX HAS APPROVED THE MERGER AGREEMENT AND
RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Record Date; Quorum
The IPIX board of directors has fixed the close of business on December 6,
1999 as the record date for the determination of the holders of IPIX common
stock entitled to receive notice of and to vote at the special meeting. The
presence, in person or by proxy, of the holders of a majority of the outstanding
shares of IPIX common stock entitled to vote at the special meeting is necessary
to constitute a quorum.
Vote Required
As of the record date for the special meeting, there were 16,590,649 shares
of IPIX common stock outstanding, each of which is entitled to one vote on the
merger agreement and each other matter properly submitted at the special
meeting. Holders of IPIX common stock as of the record date of the special
meeting are entitled to one vote per share of IPIX common stock on each matter
to be considered at the special meeting. Approval and adoption of the merger
agreement requires the affirmative vote of the holders of a majority of the
outstanding shares of IPIX common stock. Approval of the amendment to the 1997
Equity Compensation Plan requires the affirmative vote of a majority of the IPIX
shareholders present at the special meeting.
Voting of Proxies
Shares of IPIX common stock represented by a proxy properly signed and
received at or prior to the special meeting, unless subsequently revoked, will
be voted in accordance with the instructions indicated on the proxy.
Shares of IPIX common stock represented at the special meeting by a
properly executed, dated and returned proxy will be treated as present at the
special meeting for purposes of determining a quorum, without regard to whether
the proxy is marked as casting a vote or abstaining. For voting purposes at the
special meeting, only shares affirmatively voted in favor of approval and
adoption of the merger agreement and the amendment to the 1997 Equity
Compensation Plan will be counted as favorable votes. Any broker non-votes and
abstaining votes will not be counted in favor of approval and adoption of the
merger agreement or the amendment. Since applicable law requires the affirmative
vote of a majority of the outstanding shares to approve the merger agreement,
broker non-votes and abstentions will have the same effect as votes cast against
the merger. Broker non-votes and abstentions, while counted for purposes of
establishing a quorum, will not affect the shareholders' vote on the proposal to
increase the number of shares issuable under the 1997 Equity Compensation Plan.
The persons named as proxies by a stockholder may propose and vote for one
or more adjournments of the special meeting to permit further solicitations of
proxies in favor of approval of the proposals; however, no proxy that is voted
against the approval of the proposals will be voted in favor of any such
adjournment. An adjournment proposal
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requires the affirmative vote of a majority of the votes cast by holders of IPIX
common stock and, therefore, broker non-votes and abstentions will have no
effect.
Revocability of Proxies
The grant of a proxy on the enclosed form does not preclude a stockholder
from voting in person. A stockholder may revoke a proxy at any time prior to its
exercise by submitting a signed written revocation to the secretary of IPIX, by
submitting a signed proxy bearing a later date or by appearing at the special
meeting and voting in person at the special meeting. No special form of
revocation is required. Attendance at the special meeting will not, in and of
itself, constitute revocation of a proxy.
Solicitation of Proxies
IPIX will bear the cost of the solicitation of proxies from its
stockholders, including the costs of preparing, filing, printing and
distributing this joint proxy statement/prospectus and any other solicitation
materials that are used. In addition to solicitation by mail, the directors,
officers and employees of IPIX may solicit proxies from stockholders of IPIX by
telephone, the Internet or by other means of communication.
Directors, officers and employees will not be additionally compensated but
may be reimbursed for reasonable out-of-pocket expenses in connection with any
proxy solicitation. Arrangements will also be made with brokerage houses and
other custodians, nominees and fiduciaries for the forwarding of solicitation
material to the beneficial owners of stock held of record by those persons, and
IPIX will reimburse all custodians, nominees and fiduciaries for their
reasonable out-of-pocket expenses in connection with these actions.
In addition, IPIX has retained Morrow and Company to assist in the
solicitation of proxies by IPIX for a fee of not more than $7,500 plus
reasonable out-of-pocket costs and expenses. Any questions or requests regarding
proxies or related materials may be directed to Morrow and Company. For bankers
and brokers, call toll free at 800-662-5200. For all others, call toll free at
800-566-9061.
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE
TO THE IPIX SHAREHOLDERS. ACCORDINGLY, IPIX SHAREHOLDERS ARE URGED TO READ AND
CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE PRE-PAID ENVELOPE.
SHAREHOLDERS SHOULD NOT SEND IPIX COMMON STOCK CERTIFICATES WITH THEIR
PROXY CARDS. IF THE MERGER AGREEMENT IS APPROVED BY THE SHAREHOLDERS AND THE
MERGER IS CONSUMMATED, TRANSMITTAL FORMS AND INSTRUCTIONS WILL BE SENT TO IPIX
SHAREHOLDERS FOR THE EXCHANGE OF SHARES OF IPIX COMMON STOCK FOR THE COMBINED
COMPANY'S COMMON STOCK.
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COMPARISON OF SHAREHOLDERS' RIGHTS
IPIX is a Tennessee corporation subject to the provisions of the Tennessee
Business Corporations Act, or the TBCA. bamboo.com is a Delaware corporation
subject to the provisions of the Delaware General Corporation Law, or the DGCL.
Shareholders of IPIX, upon consummation of the merger, will become shareholders
of bamboo.com, whose rights will then be governed by the certificate of
incorporation and bylaws of bamboo.com and by the DGCL. The following is a
summary of the material differences in the rights of the shareholders of IPIX
and the rights of the shareholders of bamboo.com and is qualified in its
entirety by reference to the governing law and the certificate of incorporation
or charter and bylaws of bamboo.com and IPIX.
AUTHORIZED CAPITAL
The authorized capital stock of bamboo.com consists of:
- 150,000,000 shares of bamboo.com common stock (subject to shareholder
approval at the special meeting);
- 7,421,536 shares of Class B common stock; and
- 5,001,100 shares of preferred stock.
The authorized capital stock of IPIX consists of:
- 100,000,000 shares of IPIX common stock; and
- 10,000,000 shares of preferred stock.
REQUIRED VOTE FOR AUTHORIZATION OF SPECIAL ACTIONS
The DGCL generally provides that the recommendation of a corporation's
board of directors and an approval of the majority of the outstanding shares of
a corporation's common stock entitled to vote is generally required to affect a
merger or consolidation, to amend a certificate of the corporation in most
instances and to sell, lease or exchange all or substantially all of the
corporation's assets. An authorization by the bamboo.com board, followed by the
affirmative vote of a majority of the outstanding shares of bamboo.com stock, is
required for an amendment to the bamboo.com certificate of incorporation. The
bamboo.com bylaws may be adopted, amended or repealed by a majority of the votes
casts by shareholders entitled to vote or by a majority vote of the directors.
The TBCA provides that the recommendation of a corporation's board of
directors and the affirmative vote of a majority of the outstanding shares of
common stock entitled to vote would generally be required to approve a merger,
share exchange, amendment to the charter or a transaction to sell, lease,
exchange or otherwise dispose of substantially all of a corporation's assets. In
accordance with the TBCA, submission by a corporation's board of directors of
these types of actions, may be conditioned on any basis, including, without
limitation, conditions regarding a supermajority voting requirement or that no
more than a predetermined number of shares indicate that they will seek
dissenters' rights if those rights are available.
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The vote of a majority of the outstanding shares of IPIX common stock is
required to amend the IPIX charter. The IPIX bylaws may be adopted, amended or
repealed by a majority of the outstanding shares of IPIX common stock entitled
to vote or by a majority vote of the board of directors. However, the IPIX
charter provides that the affirmative vote of two-thirds (2/3) of the shares
entitled to vote at an election of directors is required to adopt an amendment
to the charter or bylaws that alters:
- the composition or the rights and privileges of the board of directors;
or
- the ability of the officers or directors to call a special meeting of the
shareholders.
NUMBER OF DIRECTORS; REMOVAL OF DIRECTORS
The number of directors of bamboo.com is determined by the bylaws and is
presently five persons. The board of directors of bamboo.com is divided into
three (3) classes, each as nearly equal in number as possible, with one class
being elected annually to a three (3) year term. Any director may be removed
with or without cause by the holders of the majority of the outstanding shares
of bamboo.com common stock entitled to vote on the matter.
The number of directors of IPIX is determined by the bylaws and is
presently six members. The board of directors of IPIX is divided into three (3)
classes, each as nearly equal in number as possible, with one class being
elected annually to a three (3) year term. Any director may be removed for
cause, and only for cause, with the approval of the holders of the majority of
the outstanding share of IPIX common stock entitled to vote on the matter or the
affirmative majority of the entire board of directors then in office.
LIMITATION OF LIABILITY; INDEMNIFICATION
As permitted by Delaware law, the bamboo.com certificate of incorporation
contains a provision that eliminates the personal liability of directors to the
corporation or to its shareholders for damages for breaches of duty, except
where the director's acts or omission:
- were in breach of the director's duty of loyalty to bamboo.com or its
shareholders;
- were not in good faith or involved intentional misconduct or a knowing
violation of the law;
- resulted in a violation of a statute prohibiting certain dividend
payments or stock purchases or redemptions; or
- involved transactions from which the director derived an improper
personal benefit.
The bamboo.com certificate of incorporation and bylaws provide that the
corporation will indemnify its directors, officers, employees or agents for any
liability incurred in their official capacity to the maximum extent permissible
under Delaware law. Under Delaware law, a corporation may indemnify any person
made or threatened to be made a party to any action or proceeding (other than
shareholder derivative suits) because he or she is or was a director, officer,
employee or agent of the corporation or is or was serving at the
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request of the corporation, as a director, officer, employee or agent of another
corporation or firm. In order to be indemnified, the director, officer, employee
or agent
- must act in good faith and in a manner he or she reasonably believed to
be in, and not opposed to, the best interest of the corporation, and
- in respect to a criminal proceeding, he or she had no reasonable cause to
believe that his or her conduct was unlawful.
In the case of shareholder derivative suits under Delaware law, the
corporation may also indemnify if the director, officer, employee or agent acted
in good faith and in a manner the director reasonably believed to be in, and not
opposed to, the best interest of the corporation. Unless a court finds that an
individual is fairly and reasonably entitled to indemnity, the corporation
cannot indemnify an individual in shareholder derivative suits where there is
any claim, issue or matter in which the individual has been found liable to the
corporation.
Under the DGCL, a corporation must indemnify a director or officer who
successfully defends himself or herself in a proceeding to which he or she was a
party because of his or her position as a director or officer for expenses
actually or reasonably incurred by the person. Expenses incurred by an officer
or director in defending any civil or criminal proceeding may be paid by the
corporation in advance of the final disposition of the proceeding upon receipt
of an undertaking by or on behalf of the director or officer to repay the amount
if it is ultimately determined that he or she is not entitled to be indemnified
by the corporation. The indemnification and expense advancement provisions under
Delaware law described above are not exclusive of other rights of
indemnification and advancement that a director or officer may be granted by a
corporation in its bylaws or by a vote of shareholders or disinterested
directors or by an agreement.
As permitted by Tennessee law, the IPIX charter contains a provision that
eliminates the personal liability of directors to the corporation or to its
shareholders for damages for breaches of duty. However, a director may be
personally liable where his acts or omissions:
- are in breach of the director's duty of loyalty to IPIX or its
shareholders;
- were not in good faith or involved intentional misconduct or a knowing
violation of the law;
- resulted in a violation of a statute prohibiting dividend payments, stock
purchases or redemptions; or
- involved transactions from which the director derived an improper
personal benefit.
The IPIX charter provides that the corporation will indemnify its
directors, officers, employees or agents for any liability incurred in their
official capacity to the maximum extent permissible under Tennessee law. Under
Tennessee law, a corporation may indemnify any person made, or threatened to be
made, a party to any action or proceeding (other than a shareholder derivative
suit) because he or she is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or firm. In order to
be indemnified, the director, officer, employee or agent:
- must have acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interest of the
corporation; and
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- with respect to a criminal proceeding, he or she did not have
reasonable cause to believe that his or her conduct was unlawful.
In the case of shareholder derivative suits under Tennessee law, the
corporation cannot indemnify an individual where there is any claim, issue or
matter in which the individual has been found liable to the corporation.
Under the TBCA, a corporation must indemnify a director or officer who
successfully defends himself or herself in a proceeding to which he or she was a
party because of his or her position as a director or officer against expenses
actually and reasonably incurred by the person. Expenses incurred by an officer
or director in defending any civil or criminal proceeding may be paid by the
corporation in advance of the final disposition of the proceeding upon:
- receipt of an undertaking by or on behalf of the director or officer
to repay the amount if it shall ultimately be determined that he or
she is not entitled to be indemnified by the corporation;
- a written affirmation of the director's or officer's good faith belief
that the director or officer has acted in good faith, reasonably
believes the director's or officer's conduct was in the best interest
of the corporation and had no reasonable cause to believe that the
director's or officer's conduct was unlawful; and
- a determination is made that facts then known to those making the
determination would not preclude indemnification under the TBCA.
The indemnification and expense advancement provisions under Tennessee law
described above are not exclusive of other rights of indemnification and
advancement that a director or officer may be granted by a corporation in its
bylaws or by a vote of shareholders or disinterested directors or by an
agreement.
ANNUAL MEETINGS OF SHAREHOLDERS; SPECIAL MEETINGS OF SHAREHOLDERS
The annual meeting of bamboo.com shareholders must be held on a date and at
a place fixed by the bamboo.com board of directors. A special meeting of the
shareholders may be called at any time by the board of directors, the chairman
of the board or the president. bamboo.com shareholders do not have the right to
call a special meeting of the shareholders.
The annual meeting of IPIX shareholders must be held on a date and at a
place fixed by the IPIX board of directors. A majority of the IPIX board of
directors, the chairman of the board, the chief executive officer or the
president may call a special meeting of the shareholders for any purpose. The
special meeting may be held at the place, on the date and at the time that the
board determines. IPIX shareholders do not have the right to call a special
meeting of the shareholders.
SHAREHOLDER INSPECTION RIGHTS AND SHAREHOLDER LISTS
Under the DGCL, any bamboo.com shareholder is entitled to inspect and copy
books and records, including the corporation's stock ledger, and a list of the
shareholders. These inspection and copying rights are permitted as long as the
inspection is for a proper purpose and must be accomplished during the usual
hours of business.
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Under the TBCA, any IPIX shareholder is entitled to inspect and copy the
minutes of shareholder meetings, the charter, the bylaws, annual reports and
other records of the corporation during regular business hours at the
corporation's principal office. Any inspection and copying is permitted if the
shareholder gives the corporation written notice of his or her demand at least
five (5) business days before the date on which he or she wishes to inspect or
copy the records. In addition, upon five (5) days written notice, a shareholder
may inspect and copy:
- accounting records of the corporation;
- the record of shareholders and excerpts from minutes of any meeting of
the corporation's board of directors;
- records of any action of a committee of the corporation's board of
directors while acting in place of the board of directors on behalf of
the corporation;
- minutes of any meeting of the shareholders; and
- records of action taken by the shareholders or board of directors without
a meeting.
A shareholder may only copy the records and documents described above if he
makes a demand in good faith and for a proper purpose. In addition, the demand
must describe with reasonable particularity the shareholder's purpose for
inspecting and copying these types of records and documents.
SHAREHOLDER ACTION WITHOUT A MEETING
bamboo.com's certificate of incorporation provides that its shareholders
may act only at duly called annual or special meetings of shareholders, not by
written consent. The bylaws further provide that special meetings of
bamboo.com's shareholders may be called only by the president, chief executive
officer or chairman of the board of directors or a majority of the board of
directors.
Under IPIX's charter, action required or permitted by the TBCA to be taken
at a shareholders' meeting may be taken without a meeting. If all shareholders
entitled to vote on the action consent to taking the action without a meeting,
the affirmative vote of the number of shares that would be necessary to
authorize or take the action at a meeting is the act of the shareholders. A
unanimous written consent, however, is unattainable by a public company in most
circumstances.
SHAREHOLDER PROPOSALS
A bamboo.com shareholder wishing to bring business before the annual
shareholders' meeting must provide written notice by first class mail, postage
prepaid, to the corporation's secretary at the principal executive offices of
the corporation. The notice must be received between ninety (90) and one-hundred
and twenty (120) days prior to the annual meeting. The shareholder's written
notice must include:
- the name and record address of the shareholder;
- the number of shares owned beneficially or of record by the shareholder;
- a brief description of the business to be discussed and the reasons why
it should be discussed at the annual meeting;
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- a description of all arrangements and understandings between the
shareholder and any other person or persons, including names, in
connection with the proposal;
- disclosure of any material interest that the shareholder has in the
subject matter of the proposal; and
- a representation that the shareholder intends to appear in person or by
proxy at the shareholders' meeting to present the proposal.
An IPIX shareholder wishing to bring business before the annual
shareholders' meeting must provide written notice by first class mail, postage
prepaid, to the corporation's secretary at the principal executive offices of
the corporation. The notice must be received not later than:
- for an annual meeting of the shareholders, for elections, one-hundred
twenty (120) calendar days in advance of the anniversary date of the
proxy statement for the previous year's annual meeting; or
- for a special meeting of the shareholders for the election of directors,
the close of business on the tenth (10th) day following the date on which
notice of the meeting is first to be given to shareholders.
The IPIX shareholder's written notice must include:
- the name and record address of the shareholder;
- the number and class of shares of stock owed beneficially or of record by
the shareholder;
- a representation that the shareholder is a record or beneficial owner of
at least one (1%) or $2,000.00 in market value of IPIX stock entitled to
vote at the meeting, has held the stock for at least one year and will
continue to own the stock through the date of the meeting;
- a brief discussion of the business to be discussed as well as the reasons
why it should be discussed at the annual meeting;
- a description of all arrangements or understandings between the
shareholder or any other person or persons, including names, in
connection with the proposal; and
- disclosure of any material interest that the shareholder has in the
subject matter of the proposal.
CONTROL SHARE ACQUISITION ACT
The Tennessee Control Share Acquisition Act, or TCSAA, strips a purchaser's
shares of voting rights any time an acquisition of shares in a covered Tennessee
corporation brings the purchaser's voting power to one-fifth, one-third or a
majority of all voting power. The purchaser's voting rights can be established
only by a majority vote of the other shareholders. The purchaser may demand a
special meeting of shareholders to conduct such a vote. The purchaser can demand
such a meeting before making a control share acquisition only if it holds at
least 10% of outstanding shares and announces a good faith intention to make the
control share acquisition. A target corporation may or may not redeem the
purchaser's shares if the shares are not granted voting rights. The TCSAA
applies only to a corporation that has adopted a provision in its charter or
bylaws expressly
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declaring that the TCSAA will apply. IPIX has not adopted any provision in its
charter or bylaws electing protection under the TCSAA.
The United States Court of Appeals for the Sixth Circuit has held that the
TCSAA is unconstitutional as it applies to target corporations organized under
the laws of states other than Tennessee.
The DGCL contains no similar provisions with respect to control share
acquisitions.
INVESTOR PROTECTION ACT
Tennessee's Investor Protection Act, or TIPA, applies to tender offers
directed at offeree corporations that have substantial assets in Tennessee and
that are either incorporated in or have a principal office in Tennessee. The
TIPA requires an offeror making a tender offer for an offeree corporation to
file with the Commissioner of Commerce and Insurance a registration statement.
When the offeror intends to gain control of the offeree company, the
registration statement must indicate any plans the offeror has for the offeree.
The Commissioner may require additional information material to the takeover
offer and may call for hearings. The TIPA does not apply to an offer that the
offeree company's board of directors recommends to shareholders.
In addition to requiring the offeror to file a registration statement with
the Commissioner, the TIPA requires the offeror and the offeree company to
deliver to the Commissioner all solicitation materials used in connection with
the tender offer. The TIPA prohibits fraudulent or deceptive acts or practices
by either side, and gives the Commissioner standing to apply for equitable
relief to the Chancery Court of Davidson County, Tennessee, or to any other
chancery court having jurisdiction whenever it appears to the Commissioner that
the offeror, the offeree company, or any of its respective affiliates has
engaged in or is about to engage in a violation of the TIPA. Upon proper
showing, the chancery court may grant injunctive relief. The TIPA further
provides civil and criminal penalties for violations.
The United States Court of Appeals for the Sixth Circuit has held that the
TIPA is unconstitutional to the extent that it applies to target corporations
organized under the laws of states other than Tennessee.
The DGCL contains no similar provisions with respect to investor
protection.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF BAMBOO.COM
The following discussion should be read in conjunction with the
consolidated financial statements and the notes to those statements included
elsewhere in this prospectus. The following discussion contains forward-looking
statements that reflect bamboo.com's plans, estimates and beliefs. bamboo.com's
actual results could differ materially from those discussed in these
forward-looking statements.
OVERVIEW
bamboo.com is a provider of 360 degrees virtual tours of real estate
properties on the Internet. bamboo.com provides a comprehensive service to real
estate agents and other entities that includes videotaping the inside and
outside of homes or other property, processing the videotape into a complete
virtual tour, and distributing the virtual tour to sites on the Internet. Our
virtual tours allow users to look around a room or specific area of a home or
other property as if they were actually present. bamboo.com's virtual tours
provide enhanced visual content, and a majority of our virtual tours are
integrated with multiple listing service information by real estate web sites,
thereby adding significant value to home buyers, home sellers and real estate
agents. Users are able to quickly view bamboo.com's virtual tours over a basic
dial up connection to the Internet using a standard Java-enabled web browser and
without special plug-in software to download or install. If a user's web browser
is unable to view Java applets, bamboo.com's View Always system will
automatically display still images in HTML. bamboo.com also distributes its
virtual tours via email in one convenient self-contained file.
In November 1995, bamboo.com incorporated in Ontario, Canada as Visual
Dynamics Software Corporation. From inception through December 1996, Visual
Dynamics Software Corporation focused on the development of our proprietary
hardware and software technology. Visual Dynamics Software Corporation changed
its name to Visdyn Software Corporation in December 1996. During 1997, Visdyn
Software Corporation continued its product development efforts and began
deriving initial revenues from the sale of virtual tours, primarily for city
locations in Toronto, Canada. During 1998, Visdyn Software Corporation began
providing a comprehensive virtual tour service for the residential real estate
market in Canada. In September 1998, Visdyn Software Corporation changed its
name to Jutvision Corporation, moved its headquarters from Toronto to Palo Alto,
California and began implementing a service provider network of videographers
throughout the United States. On January 1, 1999, Jutvision Corporation
reorganized its business as a Delaware corporation and began deriving revenues
from the sale of virtual tours to the real estate industry in the United States.
Jutvision Corporation changed its name to bamboo.com, Inc. in April 1999.
All of bamboo.com's revenues are derived from the sale of its virtual
tours. Revenues are recognized at the time a virtual tour is delivered.
bamboo.com calculates a provision for returns based on historical experience and
makes appropriate reserves at the time revenues are recognized. To date, returns
have been immaterial. In the existing home resale market, bamboo.com sells its
comprehensive virtual tour service to real estate agents. This service includes
videotaping the property, processing the videotape into a virtual tour,
distributing the virtual tour to web sites on the Internet and delivering it by
e-mail to the real estate agent. bamboo.com's virtual tours can then be viewed
for free by consumers, including homebuyers and home sellers.
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bamboo.com's cost of revenues consists primarily of the costs of
videographers used to capture virtual tour images, video tape shipping charges,
virtual tour processing and Internet hosting activities.
bamboo.com's research and development expenses consist primarily of
compensation and related costs for research and development personnel. Costs
incurred in the research and development of new releases and enhancements of
bamboo.com's virtual tour product are expensed as incurred. bamboo.com expects
that research and development costs will continue to increase in the future as
bamboo.com further develops and enhances its virtual tour products including
those intended for sales channels other than real estate.
bamboo.com's sales and marketing expenses consist primarily of compensation
and related costs for sales and marketing personnel, marketing programs, public
relations, promotional materials, travel and related expenses for attending
trade shows. bamboo.com's expenses also include costs relating to third party
sponsorship fees. bamboo.com expects its sales and marketing expenses to
increase substantially as bamboo.com continues to promote awareness of
bamboo.com. bamboo.com plans to continue advertising through print and
Internet-based media outlets, engaging in direct marketing campaigns, providing
complimentary virtual tours to targeted potential customers from time to time
and hiring additional sales and marketing personnel. bamboo.com expects that
sales and marketing expenses will also increase as bamboo.com expands its
domestic sales efforts and develops its international sales channels. Sales and
marketing expenses may also increase as bamboo.com continues to develop
relationships with additional third party sales channels.
General and administrative expenses consist primarily of compensation and
related expenses for administrative, information technology personnel, finance
and accounting personnel, professional services and related fees, occupancy
costs and other expenses. General and administrative expenses may increase in
the future as bamboo.com expands in existing facilities or relocates to new
facilities that better address any growth that bamboo.com may experience.
bamboo.com also expects general and administrative expenses to increase as
bamboo.com hires additional personnel and incurs costs related to the
anticipated growth in its business and cost of operating as a public company.
As of September 30, 1999, bamboo.com had an accumulated deficit of $40.3
million. bamboo.com has yet to achieve significant revenues, and its ability to
generate significant revenues is uncertain. Therefore, bamboo.com believes that
period-to-period comparisons of its financial results are not necessarily
meaningful and you should not rely upon them as an indication of its future
performance. bamboo.com has incurred substantial costs to create, introduce and
enhance its virtual tour service infrastructure, to build brand awareness and to
establish its strategic relationships. bamboo.com expects operating losses and
negative cash flows to continue for the foreseeable future, as bamboo.com
intends to significantly increase its operating expenses to grow its business.
bamboo.com may also incur additional costs and expenses related to entrance into
new markets, future marketing, branding and acquisition of new businesses or
technology to respond to our rapidly changing industry. These costs could
adversely affect bamboo.com's future financial condition or operating results.
From time to time in the past, bamboo.com has granted stock options to
employees and consultants and expects to do so in the future. As of September
30, 1999, bamboo.com recorded aggregate unearned employee stock-based
compensation of $15.8 million in connection with the grant of options to
employees and directors. This amount is being amortized over the vesting period,
generally two, three or four years, of the
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underlying options. Amortization of the amount during the nine months ended
September 30, 1999 amounted to $11.3 million. The remaining charge as of
September 30, 1999 will be amortized as follows: $1.4 million for the remainder
of 1999; $1.6 million in 2000; $1.2 million in 2001; $280,000 in 2002 and
$20,000 in 2003. Additionally, during the nine months ended September 30, 1999,
bamboo.com recorded unearned stock-based compensation for restricted common
stock granted to a service provider of approximately $1,269,000. Amortization of
the fair value of this restricted common stock resulted in stock-based
compensation of approximately $605,000 during the nine months ended September
30, 1999. Quarterly amortization associated with the restricted common stock is
subject to significant increase or decrease in future quarters based upon future
changes in the fair value of bamboo.com's common stock.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1999 Compared to the Nine Months Ended September
30, 1998
Net Revenues. Net revenues increased $1.7 million to $1.8 million for the
nine month period ended September 30, 1999 from $60,000 for the nine month
period ended September 30, 1998. This increase is attributable to moving
bamboo.com's corporate headquarters to the U.S., putting in place a direct sales
forces and the focused execution of our business plan across the U.S. and
Canada.
Cost of Revenues. Cost of revenues increased $1.4 million to $1.5 million
for the nine month period ended September 30, 1999 from $54,000 for the nine
month period ended September 30, 1998. The increase in cost of revenues for the
nine month period ended September 30, 1999 is attributable to bamboo.com's
increased tour volume during the same period.
Research and Development. Research and development increased $621,000 to
$685,000 for the nine month period ended September 30, 1999 from $64,000 for the
nine month period ended September 30, 1998. The net increase is primarily
attributable to an increase in personnel costs associated with expanding
bamboo.com's research and development efforts.
Sales and Marketing. Sales and marketing increased $10.9 million to $11.0
million for the nine month period ended September 30, 1999 from $108,000 for the
nine month period ended September 30, 1998. This increase is primarily
attributable to the hiring of additional sales and marketing personnel, the
costs relating to bamboo.com's third party partner programs and advertising and
branding through various media outlets.
General and Administrative. General and administrative expenses increased
$4.5 million to $4.6 million for the nine month period ended September 30, 1999
from $60,000 for the nine month period ended September 30, 1998. This increase
was primarily attributable to increases in professional services and related
fees, increased personnel and related costs, and expansion of leased facilities.
Amortization of Deferred Stock Compensation. Amortization of deferred
stock compensation increased $13.9 million to $14.8 million for the nine month
period ended September 30, 1999, from $1.0 million for the nine month period
ended September 30, 1998. This amount represents the allocated portion of the
difference between the deemed fair value of bamboo.com's common stock and the
exercise price of stock options granted by bamboo.com to employees, and the fair
value of options and restricted stock granted to consultants.
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Other Income (Expense), Net. Net other income increased to $278,000 for
the nine month period ended September 30, 1999. There was no net other income
for the nine month period ended September 30, 1998. The increase is primarily
attributable to the increase in interest income due to the increased balances in
bamboo.com's investment portfolio.
Interest Expense In June 1999, bamboo.com entered into an agreement to
sell 1,100 shares of its Series C redeemable preferred stock and 1.2 million
shares of its common stock for total gross proceeds of $11.0 million. The $11.0
million of proceeds was allocated $4.4 million to the Series C redeemable
preferred stock and $6.6 million to the common stock, based on their relative
fair values. The shares of the Series C redeemable preferred stock were redeemed
in accordance with their original terms upon bamboo.com's initial public
offering by payment of their face value of $11.0 million. Consequently
bamboo.com recorded an interest expense of $6.6 million, which represented
primarily the original discount on the Series C redeemable preferred stock.
YEARS ENDED DECEMBER 31, 1998 AND 1997
Total revenues increased as bamboo.com expanded its virtual tour service
offering across Canada. bamboo.com's cost of revenues increased from the year
ended December 31, 1997 as the result of increased volume as well as expanded
capacity in its processing center in Toronto, Canada. bamboo.com also had an
increase in sales and marketing expenses from the prior year as it expanded
sales activity in additional regions in Canada. General and administrative
expenses increased from the prior year primarily due to increased staffing
levels necessary to support its expanding operations. bamboo.com's research and
development expenses increased from the prior year due to the use of additional
contracted development support personnel.
YEARS ENDED DECEMBER 31, 1997 AND 1996
bamboo.com did not begin generating revenues until the introduction of its
first product in the quarter ended March 31, 1997 and therefore did not have
revenues in fiscal year 1996. bamboo.com's sales and marketing, general and
administrative and research and development expenses all increased from the year
ended December 31, 1996 primarily due to increased staffing levels and the use
of additional contracted personnel necessary to support its expanding operations
and the initial launch of bamboo.com's virtual tour product.
INCOME TAXES
bamboo.com recorded net losses of $91,000, $143,000 and $1.8 million in
1996, 1997 and 1998, respectively. Accordingly, no provision for income taxes
was recorded in any of these years. The resulting deferred tax asset,
representing such net operating loss carry-forwards, has been reduced in full by
a valuation allowance as it is more likely than not that the deferred tax asset
will not be realized. At December 31, 1998, the Company had accumulated income
tax losses of $1.9 million available in Canada for carry-forward to reduce
taxable income of future years.
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LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1999, bamboo.com's principal sources of liquidity
include approximately $27.5 million of cash and cash equivalents. In August
1999, bamboo.com sold shares of common stock in its initial public offering,
generating net proceeds of approximately $26.7 million after offering expenses.
Net cash used in operating activities in the nine months ended September
30, 1999 was $11.2 million. This was primarily due to a net loss of $15.8
million after adjusting for non-cash interest expense of $6.6 million
stock-based compensation of $14.8 million. Increase in accounts payable, accrued
liabilities and deferred revenue generated cash from operations of $5.3 million
although this was offset by increases in accounts receivable of $915,000. Net
cash used in investing activities for the nine months ended September 30, 1999
was $2.2 million, all of which related to the purchase of capital equipment. Net
cash provided by financing activities for the nine months ended September 30,
1999 was $40.4 million. This was primarily generated from the sale of common
stock in the company's Initial public offering which raised $26.7 million after
offering expenses and by the sale of both common and preferred stock to
investors which generated an additional $11.6 million, net of the redemption of
the Series C redeemable preferred stock.
Net cash used in operating activities was $63,000 in 1996, $124,000 in 1997
and $649,000 in 1998. In 1996 and 1997, bamboo.com's net losses of $91,000 and
$143,000, respectively, were partially offset by depreciation of $12,000 and
$11,000 respectively and increases in accounts payable of $16,000 between 1995
and 1996 and of $8,000 between 1996 and 1997. In addition, accrued liabilities
increased by $7,000 between 1996 and 1997, respectively. In 1998, bamboo.com's
$1.8 million net loss included non-cash charges as a result of depreciation,
issuance of common stock and options in exchange for services rendered and
warrant commitment of $32,000, $907,000 and $168,000, respectively. The loss was
also partially offset by net changes in assets and liabilities totaling $84,000.
The main components of this net change were increases in accounts payable,
accrued liabilities and prepaid and other current assets of $127,000, $94,000
and $83,000, respectively. Investments in capital assets were $30,000, $6,000
and $219,000 in the years ended December 31, 1996, 1997 and 1998, respectively,
substantially all of which was used to acquire property and equipment. Cash and
cash equivalents were $430,000 at December 31, 1998.
bamboo.com currently anticipates that its current cash, cash equivalents
and investments, which include the net proceeds from our initial public
offering, will be sufficient to meet its anticipated cash needs for working
capital and capital expenditures for at least the next 12 months. Thereafter,
cash generated from operations, if any, may not be sufficient to satisfy our
liquidity requirements. bamboo.com may therefore need to sell additional equity
or raise funds by other means. Any additional financings, if needed, might not
be available on reasonable terms or at all. Failure to raise capital when needed
could seriously harm our business and operating results. If additional funds are
raised through the issuance of equity securities, the percentage of ownership of
our stockholders would be reduced. Furthermore, these equity securities might
have rights, preferences or privileges senior to our common stock.
YEAR 2000 ISSUE
The year 2000 issue is the potential for system and processing failures of
date-related data and is the result of the computer-controlled systems using two
digits rather than four
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to define the applicable year. For example, computer programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities.
Although bamboo.com does not have formal contingency plans to address year
2000 issues, bamboo.com continues to assess its internal readiness for year
2000. bamboo.com uses multiple software systems for internal business purposes,
including accounting, email, human resources, sales tracking and customer
service. All of these applications have been purchased within the preceding 12
months, and bamboo.com has made inquiries concerning year 2000 compliance with
the vendors of these systems. Each of these vendors has assured bamboo.com that
its applications are year 2000 compliant, but bamboo.com has not done any
operational testing to confirm compliance. bamboo.com depends on third party
providers for web hosting and payroll services. While bamboo.com has received
verbal assurance that the applications of these third parties are year 2000
compliant, bamboo.com generally does not have any specific contractual rights
with third party providers should their equipment or software fail due to year
2000 issues. If this third party equipment or software does not operate properly
with regard to year 2000, bamboo.com may incur unexpected expenses to remedy any
problems.
bamboo.com is unable to predict to what extent its business may be affected
if bamboo.com's systems or the systems that operate in conjunction with them
experience a material year 2000 failure. Known or unknown errors or defects that
affect the operation of bamboo.com's software and systems could result in delay
or loss of revenue, interruption of services, cancellation of distribution
contracts, diversion of development resources, damage to bamboo.com's
reputation, increased service or warranty costs, and litigation costs, any of
which could harm its business.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use," which provides guidance on accounting
for the cost of computer software developed or obtained for internal use.
Statement of Position 98-1 is effective for financial statements for fiscal
years beginning after December 15, 1998. The adoption of SOP 98-1 has not had a
material impact on bamboo.com's reported results of operations, financial
position or cash flows.
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities."
This standard requires companies to expense the costs of start-up activities and
organization costs as incurred. In general, Statement of Position 98-5 is
effective for fiscal years beginning after December 15, 1998. The adoption of
Statement of Position 98-5 has not had a material impact on bamboo.com's
reported results of operations, financial position or cash flows.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." Statement of Financial Accounting Standards No. 133
establishes new standards of accounting and reporting for derivative instruments
and hedging activities. Statement of Financial Accounting Standards No. 133
requires that all derivatives be recognized at fair value in the statement of
financial position, and that the corresponding
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gains or losses be reported either in the statement of operations or as a
component of comprehensive income, depending on the type of hedging relationship
that exists. Statement of Financial Accounting Standards No. 133 will be
effective for fiscal years beginning after June 15, 2000. bamboo.com does not
currently hold derivative instruments or engage in hedging activities.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
bamboo.com is exposed to financial market risk, including changes in
foreign currency exchange rates and interest rates. Most of bamboo.com's revenue
and capital spending is transacted in U.S. dollars. However, the expenses and
capital spending of its Canadian subsidiary are transacted in Canadian dollars.
Results of operations from bamboo.com's Canadian subsidiary are not material to
the results of its operations; therefore, bamboo.com believes that foreign
currency exchange rates should not materially affect its overall financial
position, results of operations or cash flows. bamboo.com's exposure to market
risk for changes in interest rates relates primarily to its cash and cash
equivalent balances and bamboo.com's bank line of credit. bamboo.com does not
use derivative financial instruments in bamboo.com's investment portfolio, and
bamboo.com's investment portfolio only includes highly liquid instruments with
an original maturity of generally less than three months. bamboo.com is subject
to fluctuating interest rates that may impact, adversely or otherwise, its
results of operations or cash flows for cash and cash equivalents. The table
below presents principal amounts, related weighted average interest rates and
expected cash flows from market risk sensitive instruments.
Balances as of September 30, 1999:
<TABLE>
<CAPTION>
AVERAGE INTEREST
------------------
AMOUNT RATE
----------- ----
<S> <C> <C>
Assets
Cash and cash equivalents................................. $27,461,000 5.7%
</TABLE>
All highly liquid investments with a maturity of three months or less at
the date of purchase are considered to be cash equivalents. bamboo.com does not
invest in instruments with total maturities or remaining maturities at date of
purchase in excess of 90 days. For the nine months ended September 30, 1999, the
weighted average interest rate on bamboo.com's investment portfolio was
approximately 4.9%.
<TABLE>
<CAPTION>
AVERAGE INTEREST
-----------------
AMOUNT RATE
--------- -----
<S> <C> <C>
Liabilities
Bank line of credit (variable; at prime).................. $ -- 8.25%
</TABLE>
At September 30, 1999, bamboo.com had not drawn on its $1 million variable
rate bank line of credit.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF IPIX
OVERVIEW
As a leader in interactive photography and immersive imaging for the
Internet, IPIX's images allow viewers to Step Inside the Picture. Its patented
technology changes the way people create and view images, immersing them in a
360 degrees by 360 degrees spherical environment. IPIX images capture the world
as we see it, providing a complete field of view -- from ground to sky, floor to
ceiling, horizon to horizon. Viewers can easily navigate the image on a personal
computer screen by moving a cursor inside the image.
IPIX was founded in 1986 at the Oak Ridge National Laboratory in Tennessee
to develop remote robotic systems for the United States Department of Defense,
the Department of Energy, NASA and others. Its efforts in this field led IPIX to
the invention of technology which removes the distortion inherent in fisheye
photographic images and corrects the viewing perspective. IPIX obtained a patent
for this technology in 1991 and continued to improve upon it through special
projects for third parties. In 1994, Motorola, Inc. provided equity capital
which permitted IPIX to further refine its technology. In 1996, Motorola and
Discovery Communications, Inc. provided additional equity capital to enable IPIX
to explore potential commercial application of its technology. James M.
Phillips, IPIX's chairman and chief executive officer, joined IPIX in the spring
of 1997 to commence commercialization of its technology. Over the next two
years, IPIX obtained additional equity capital, which it used to build an
experienced management team to implement its business model. Since the latter
part of 1998, IPIX has continued to seek new commercial applications for its
products by positioning itself to take advantage of the acceleration in the
availability of digital cameras and significant growth in the popularity of the
Internet. IPIX has targeted the following domestic and international commercial
markets: real estate, travel and hospitality, electronic publishing, corporate
and e-commerce and education and entertainment. It has also entered into
strategic relationships with digital camera manufacturers Kodak, Nikon and
Olympus and received favorable outcomes in legal proceedings relating to its
patents.
Product revenues are generated by the sale of IPIX keys, IPIX kits and
studio work and the license of archived IPIX images. These revenues are
recognized upon the shipment or delivery of products to IPIX's customers.
Service revenues historically were generated by research and development
projects although IPIX has de-emphasized this business and is currently not
engaged in any of these projects. IPIX intends to focus its initial efforts on
establishing an installed base of IPIX kits as well as building brand
recognition through its studio work. IPIX intends to leverage this installed
base to sell IPIX keys and generate recurring revenue. For the nine months ended
September 30, 1999, IPIX sold 120,571 keys compared to 40,902 keys in all of
1998. IPIX continues to examine and refine its business model and commercial
applications to reflect a constantly changing business environment which
includes improvement of digital cameras, growing use of the Internet and new
product offerings by its competitors.
IPIX sells its keys at different prices based on the potential number of
viewers, useful life and utility of the IPIX image. For example, an IPIX image
that is likely to be viewed by a large audience, has a lengthy useful life and
contributes significantly to the overall experience, commands a higher price. In
addition, IPIX can further refine its IPIX key pricing through several
modifications. IPIX keys can be modified so that the IPIX image
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may be displayed only in a particular file format or resolution, may be
incorporated into multimedia presentations, has a limited creation and viewing
lifetime and may be posted to a specific web site or distributed by e-mail. For
example, an IPIX key that creates a high resolution IPIX image to be utilized on
a widely-viewed CD-ROM encyclopedia with an unlimited life will command a higher
price than an IPIX key that creates an IPIX image to be posted on a used-auto
web site, where the image's lifetime is limited and will be viewed only by a
select and small audience. IPIX will continue to examine its pricing strategy
for IPIX keys to meet current and changing market conditions.
International sales accounted for 26% of IPIX's total revenues for fiscal
year 1996, 25% of its total revenues for fiscal year 1997 and 21% of its total
revenues for fiscal year 1998. International sales accounted for 30% of total
sales for the nine months ended September 30, 1998 and 21% for the nine months
ended September 30, 1999. IPIX anticipates that international sales may continue
to account for a significant portion of its revenue in the future. A substantial
portion of IPIX's international sales are denominated in U.S. dollars. As a
result, changes in the values of foreign currencies relative to the value of the
U.S. dollar can render its products comparatively more expensive. Although IPIX
has not been negatively impacted in the past by foreign currency changes, these
conditions could negatively impact its international sales in future periods.
In the second half of 1998, IPIX introduced digital camera kits, which
resulted in an increase in its relative cost of revenues. In addition, IPIX made
a significant investment to expand its marketing, distribution and brand
awareness in 1998. IPIX's distribution system includes a direct sales force, a
telemarketing group and an online order fulfillment system. Research and
development expenses have also increased as it continues to enhance its existing
products and develop future applications of its technology, such as its IPIX
Webcam and steerable video product offering, V360. IPIX expects these
investments and costs to continue as it develops additional product offerings
and explores new commercial applications.
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RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the percent
relationship to total revenues of select items in its statements of operations.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- ----------------
1996 1997 1998 1998 1999
----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
REVENUES
Product......................... 86.5% 87.0% 89.2% 92.2% 100.0%
Service......................... 13.5 13.0 10.8 7.8 --
----- ------ ------ ------ ------
100.0 100.0 100.0 100.0 100.0
COST OF REVENUES
Product......................... 35.1 18.2 39.7 27.5 49.7
Service......................... 7.0 12.9 7.9 4.3 --
----- ------ ------ ------ ------
42.1 31.1 47.6 31.8 49.7
----- ------ ------ ------ ------
OPERATING EXPENSES
Sales and marketing............. 58.8 115.7 275.8 282.9 229.9
Research and development........ 25.2 47.9 87.7 97.0 49.1
General and administrative...... 59.6 106.2 127.1 115.2 75.3
Amortization of product
development and patent
costs........................ 4.6 35.1 -- -- --
Non-cash compensation expense... -- -- -- -- 3.1
----- ------ ------ ------ ------
Total operating expenses..... 148.2 304.9 490.6 495.1 357.4
----- ------ ------ ------ ------
Interest and other income
(expense), net.................. 13.0 7.9 3.3 4.7 16.2
----- ------ ------ ------ ------
Net loss................... (77.3)% (228.1)% (434.9)% (422.2)% (290.9)%
===== ====== ====== ====== ======
</TABLE>
Nine Months Ended September 30, 1999 Compared to the Nine Months Ended September
30, 1998
Revenues. Total revenues increased to $5,406,000 in the first nine months
of 1999, compared to $1,988,000 in the first nine months of 1998, an increase of
$3,418,000 or 171.9%. Product revenues increased to $5,406,000 from $1,832,000,
an increase of $3,574,000. This increase was due primarily to an increase in
sales of IPIX keys and kits to customers in the corporate and e-commerce and
real estate markets and, to a lesser extent, an increase in international sales.
IPIX sold 120,571 keys in the first nine months of 1999, compared to 30,346 keys
in the first nine months of 1998, an increase of 90,225 keys. IPIX did not have
service revenues in the first nine months of 1999, compared to $156,000 in the
first nine months of 1998.
Cost of Revenues. Cost of product revenues consists primarily of the costs
of the studio and the digital camera and related hardware included in IPIX kits.
Cost of product revenues increased to $2,690,000 in the nine months ended
September 30, 1999, compared to $548,000 in the nine months ended September 30,
1998, an increase of $2,142,000. Cost of product revenues as a percentage of
product revenues increased from 29.9% in the first nine months of 1998 to 49.8%
in the first nine months of 1999. This increase was due primarily to the costs
of the digital camera and related hardware included in IPIX kits
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which were not available in the first half of 1998. Cost of service revenues
consists primarily of labor costs. In the first nine months of 1998, cost of
service revenues was $85,000 or 54.5% of service revenues. IPIX did not incur
any cost of service revenues in the nine months ended September 30, 1999.
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries and commissions paid to direct sales, marketing and telemarketing
groups, expenses relating to advertising and public relations and studio
expenses incurred for production of demonstration products. Sales and marketing
expenses increased to $12,429,000 in the first nine months of 1999, compared to
$5,625,000 in the first nine months of 1998, an increase of $6,804,000, or
121.0%. This increase was due primarily to a significant increase in sales force
and advertising expenses.
Research and Development. Research and development expenses consist
primarily of compensation and other expenses related to the ongoing support of
existing product lines and development costs associated with future product
introductions. Research and development expenses increased to $2,653,000 in the
first nine months of 1999, compared to $1,928,000 in the first nine months of
1998, an increase of $725,000, or 37.6%. This increase was due primarily to
increased staffing and associated costs in research and development efforts.
General and Administrative Expenses. General and administrative expenses
consist primarily of salaries and related costs of the executive, finance and
human resource departments and outside professional service fees. General and
administrative expenses increased to $4,069,000 in the first nine months of
1999, compared to $2,290,000 in the first nine months of 1998, an increase of
$1,779,000, or 77.7%. This increase was due primarily to personnel and related
costs.
Interest and Other Income (Expense). Interest and other income (expense)
consists primarily of interest earned on investments of cash, net of interest
paid on borrowed funds. Net interest and other income increased to $877,000 in
the first nine months of 1999, compared to $94,000 in the first nine months of
1998, a change of $783,000. This change was due primarily to increased earnings
on cash investments and a reduction in the amount of indebtedness.
Year Ended December 31, 1998 Compared to the Year Ended December 31, 1997
Revenues. Total revenues increased to $3,041,000 in 1998, compared to
$2,446,000 in 1997, an increase of $595,000 or 24.3%. Product revenues increased
to $2,712,000 in 1998, compared to $2,128,000 in 1997, an increase of $584,000
or 27.4%. The increase in total revenues and product revenues was due primarily
to an increase in the sale of IPIX keys, IPIX kits and studio work to an
expanded base of corporate and e-commerce customers. Service revenues remained
essentially unchanged, increasing to $329,000 in 1998, from $318,000 in 1997.
Cost or Revenues. Cost of product revenues increased to $1,207,000 in
1998, compared to $446,000 in 1997, an increase of $761,000, or 170.6%. This
increase was due primarily to costs associated with the digital camera and
related hardware included in the IPIX kits, which were not introduced until the
second half of 1998, and an increase in sales. Cost of product revenues for 1998
also included a write-down of obsolete product inventory in the amount of
$220,000. Cost of service revenues decreased to $241,000 in
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1998 compared to $316,000 in 1997. This decrease was due primarily to a 1997
contract for which project costs exceeded associated revenue.
Sales and Marketing. Sales and marketing expenses increased to $8,387,000
in 1998, compared to $2,829,000 in 1997, an increase of $5,558,000, or 196.5%.
This growth principally reflected an increase in salary and related expenses
directly attributable to the establishment of a direct sales force and an
increase in advertising and public relations expense.
Research and Development. Research and development expenses increased to
$2,668,000 in 1998, compared to $1,171,000 in 1997, an increase of $1,497,000,
or 127.8%. This increase was due primarily to increased staffing and associated
costs relating to the introduction of Java based applications in support of the
continued development of new product offerings, including V360 and IPIX Webcam
products.
General and Administrative Expenses. General and administrative expenses
increased to $3,864,000 in 1998, compared to $2,598,000 in 1997, an increase of
$1,266,000, or 48.7%. This increase was due primarily to legal fees associated
with litigation relating to protecting IPIX's patents and an increase in
salaries and other expenses as a result of an increase in employees.
Amortization of Product Development and Patent Costs. During 1997, IPIX
revised the estimated economic lives of capitalized product development costs
from five years to one year and patent costs from seven years to three years.
This change resulted in additional amortization expense of $650,000 in 1997. In
1998, product development and patent costs were insignificant, and therefore,
IPIX did not capitalize those costs.
Interest and Other Income (Expense). Net interest and other income
(expense) in 1998 was $101,000, compared to $194,000 in 1997, a decrease of
$93,000 or 47.9%. This decrease was primarily due to increased interest incurred
on indebtedness issued in the fourth quarter of 1997, which more than offset an
increase in interest income.
Year Ended December 31, 1997 Compared to the Year Ended December 31, 1996
Revenues. Total revenues increased to $2,446,000 in 1997, compared to
$1,545,000 in 1996, an increase of $901,000, or 58.3%. Product revenues
increased to $2,128,000 in 1997, compared to $1,337,000 in 1996, an increase of
$791,000 or 59.2%. This increase resulted primarily from increased sales of IPIX
kits, IPIX keys and studio work in the real estate and international markets.
Service revenues increased to $318,000 in 1997, compared to $208,000 in 1996, an
increase of $110,000 or 52.9%. This increase was primarily due to an increase in
research and development services provided to the Department of Defense.
Cost of Revenues. Cost of product revenues decreased to $446,000 in 1997,
compared to $543,000 in 1996, a decrease of $97,000, or 17.9%. This decrease was
due primarily to a shift in product mix to higher margin IPIX keys and license
revenue. Cost of service revenues increased to $316,000 in 1997, compared to
$109,000 in 1996, an increase of $207,000 or 189.9%. This increase was due
primarily to a 1997 contract for which project costs exceeded associated revenue
and an increase in research and development services provided to the Department
of Defense.
Sales and Marketing. Sales and marketing expenses increased to $2,829,000
in 1997, compared to $908,000 in 1996, an increase of $1,921,000. The increase
was due primarily
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to increased advertising expenses and salaries and related expenses resulting
from an increase in personnel in the sales and studio departments.
Research and Development. Research and development expenses increased to
$1,171,000 in 1997, compared to $389,000 in 1996, an increase of $782,000. This
increase was due primarily to salaries and related expenses resulting from an
increase in personnel conducting research and development projects.
General and Administrative Expenses. General and administrative expenses
increased to $2,598,000 in 1997, compared to $921,000 in 1996, and increase of
$1,677,000 or 182.1%. The increase was due primarily to legal fees related to
litigation concerning patents, an increase in personnel and associated
relocation expense and an increase in bad debt provisions.
Amortization of Product Development and Patent Costs. The amortization of
product development and patent costs increased to $858,000 in 1997, compared to
$71,000 in 1996, an increase of $787,000. This increase was due primarily to the
change in 1997 of the estimated economic lives of capitalized product
development costs from five years to one year and patent costs from seven years
to three years.
Interest and Other Income (Expense). Net interest and other income
(expense) decreased to $194,000 in 1997, compared to $201,000 in 1996, a
decrease of $7,000, or 3.5%.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, IPIX has financed its operations primarily through the
private placements of capital stock and a convertible debenture. In the first
quarter of 1999, IPIX raised $27,000,000 through the sale of its Series D
preferred stock. In August 1999, IPIX raised net proceeds of approximately $63.5
million from its initial public offering of common stock. At September 30, 1999,
IPIX had $2,817,000 of cash and cash equivalents and $65,396,000 in securities
available-for-sale.
Net cash used in operating activities was $8,641,000 for the nine months
ended September 30, 1998 and $19,819,000 for the nine months ended September 30,
1999. Net cash used for operating activities in each of these periods is
primarily a result of net losses.
Net cash used in investment activities was $3,457,000 for the nine months
ended September 30, 1998 and $65,988,000 for the nine months ended September 30,
1999. Net cash used in investing activities was related to the net purchases and
maturities of short-term investments and the acquisition of computer software
and hardware and other equipment.
Net cash provided by financing activities was $12,567,000 for the nine
months ended September 30, 1998 and $87,560,000 for the nine months ended
September 30, 1999. The net cash provided by financing activities for these
periods was due primarily to the sale of shares of common and preferred stock.
In order to comply with certain underwriting compensation rules of the
National Association of Securities Dealers, Inc., IPIX repurchased an aggregate
of 484,367 shares of its common stock upon the consummation of its initial
public offering for an aggregate repurchase price of $3,730,000. This repurchase
transaction was completed in September 1999.
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IPIX anticipates an increase in the rate of capital expenditures and other
expenses consistent with its anticipated growth in personnel, operations and
marketing activities. IPIX anticipates utilizing a portion of the net proceeds
of its recently completed common stock offering to expand its sales and
marketing activities and enhance its research and development through the next
twelve months. IPIX also may use its cash resources to acquire or license
technology, products or business related to its current business. IPIX
anticipates that its operating expenses will continue to grow as IPIX makes
investments in its sales and marketing and distribution capabilities and that
its operating expenses will be a material use of its cash resources for the
foreseeable future.
IPIX believes that the net proceeds from its recently completed initial
public offering of common stock, together with existing cash and cash
equivalents, will be sufficient to meet its anticipated cash needs for working
capital and capital expenditures for at least the next twelve months. After
these twelve months, IPIX may require additional funds to support its working
capital requirements or for other purposes and may seek to raise additional
funds through public or private equity financing, bank debt financing or from
other sources. There can be no assurance that this capital will be available in
amounts or on terms acceptable to IPIX, if at all.
YEAR 2000 READINESS, COSTS OF COMPLIANCE AND EFFECT ON OPERATIONS
IPIX is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches. The year 2000 problem is
pervasive and complex as virtually every computer operation will be affected in
some way by the rollover of the two digit year value of 00. The issue is whether
computer systems will properly recognize date-sensitive information when the
year changes to 2000. Systems that do not properly recognize year 2000
information could generate erroneous data or fail.
State of Readiness
IPIX has completed its year 2000 compliance assessment plan. Its compliance
assessment plan included testing all of its information and non-information
technology as well as its internally developed studio and operation systems.
Based on its testing and assessment, IPIX believes that its information and
non-information technology, as well as internally developed systems, are year
2000 compliant.
In addition, IPIX is in the process of seeking verification from its key
suppliers and distributors that they are year 2000 compliant or, if they are not
presently compliant, to provide a description of their remedial plans. IPIX has
obtained information from various other third-party providers regarding the year
2000 readiness of their systems, and it is continuing to review this
information.
Costs
IPIX's cost of upgrading its systems to become year 2000 compliant was
approximately $40,000.
Risks
If IPIX fails to solve a year 2000 compliance problem with one of its
systems, the result could be a failure or interruption of normal business
operations. Although IPIX
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believes that the potential for significant interruptions to normal operations
should be minimal due to the relative newness of its systems, its business is
exposed to risks associated with the year 2000 problem.
Its primary risks of year 2000 failures are those related to external
service providers including telecommunications, electrical power and Internet
commerce systems that IPIX relies upon daily. The most reasonably likely
worst-case scenario is a failure related to one or several of its external
service providers referenced above. A failure could cause any of the following:
- protracted interruption of electrical power to its operations;
- significant or widespread failure of software products and services
provided to IPIX by third parties; or
- significant or widespread failure of third party computer systems with
which its systems interface.
Contingency Plans
IPIX has not established a contingency plan to mitigate the risks
associated with any inaccuracies to its year 2000 assessment. Although it has
found no material year 2000 problems with its internal systems, and despite its
expectation that year 2000 compliance efforts will result in year 2000 compliant
services, there can be no assurance that its compliance efforts will be
successful. Further, there is no assurance that the various telecommunications
and power delivery systems IPIX relies upon will be year 2000 compliant or that
any contingency plans they have made will be successful. A failure of any of
these systems would have a material adverse effect on its business, results of
operations and financial condition.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 is effective for fiscal years beginning after June 15, 2000. SFAS No.
133 requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designed as part of a hedge transaction and, if so, the type of
hedge transaction. IPIX does not expect that the adoption of SFAS No. 133 will
have a material impact on its reported results of operations, financial position
or cash flows.
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants, AICPA, issued Statement of Position
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 requires all costs related to the development of
internal use software other than those incurred during the application
development stage to be expensed as incurred. Costs incurred during the
application development stage are required to be capitalized and amortized over
the estimated useful life of the software. SOP 98-1 is effective for its fiscal
year ending December 31, 1999. Its adoption has not had a material impact on
IPIX's reported results of operations, financial position or cash flows.
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In March 1998, AICPA issued Statement of Position 98-4, Deferral of the
Effective Date of a Provision of SOP 97-2. SOP 98-4 defers for one year the
application of certain provisions of Statement of Position 97-2, Software
Revenue Recognition. Different informal and nonauthoritative interpretations of
certain provisions of SOP 97-2 have arisen and, as a result, the AICPA issued
SOP 98-9 in December 1998, which is effective for periods beginning after March
15, 1999. SOP 98-9 extends the effective date of SOP 98-4 and provides
additional interpretive guidance. The adoption of SOP 97-2, SOP 98-4 and SOP
98-9 have not had and are not expected to have a material impact on IPIX's
reported results of operations, financial position or cash flows.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities", which is effective for fiscal years beginning after
December 15, 1998. SOP 98-5 provides guidance on the financial reporting of
start-up costs and organization costs. It requires costs of start-up activities
and organization costs to be expensed as incurred. Its adoption has not had a
material impact on IPIX's reported results of operations, financial position or
cash flows.
INFLATION
Inflation has not had a significant impact on IPIX's operations to date.
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BUSINESS OF BAMBOO.COM
OVERVIEW
bamboo.com is a provider of 360 degrees virtual tours of real estate
properties on the Internet. bamboo.com virtual tours provide a more complete
visual representation of a property than traditional still photographs, allowing
viewers to easily pan left or right or zoom in for a closer view. bamboo.com
provides a comprehensive virtual tour service to real estate agents that
includes videotaping the inside and outside of a home or other property,
processing the videotape into a complete virtual tour and distributing the
virtual tour. bamboo.com distributes its virtual tours to a variety of web
sites, including real estate destination sites and Internet portals. bamboo.com
distributes its virtual tours by email to real estate agents for easy
redistribution to their clients and prospective home buyers. Utilizing
bamboo.com's extensive service provider network of videographers, bamboo.com
offers its virtual tour service in over 4,500 cities, towns, boroughs and
counties across the United States and Canada. As the real estate industry
increasingly leverages the geographic reach and rich media potential of the
Internet, bamboo.com believes virtual tours will become a standard method to
market real estate similar to the way still photographs are a standard method
today.
INDUSTRY OVERVIEW
The Real Estate Industry
According to the United States Department of Commerce, the market for all
housing and related products and services was in the aggregate over $900 billion
in 1997, representing 11.5% of the United States gross domestic product and is
one of the largest sectors of the economy. The real estate industry in the
United States is large and diverse, consisting of a variety of segments
including:
- existing home sales;
- new home sales;
- apartment rentals;
- commercial property sales and leases; and
- hotels and other hospitality or specialty properties.
The largest segment of the U.S. real estate industry is the market for
existing home sales. According to the National Association of Realtors, which is
comprised of approximately 720,000 residential and commercial real estate
agents, there were approximately 5 million existing home sales in the United
States in 1998, representing $625 billion in transaction value. In addition to
existing home sales, new U.S. housing sales totaled over 1.6 million units, and
888,000 new homes representing $130 billion in transaction value were sold in
1998, according to the National Association of Home Builders.
The Process of Buying And Selling a Home
Buying or selling a home is the most significant financial transaction most
people undertake in their lifetime. The process is often stressful, complicated
and time-consuming.
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Consequently, most individuals seeking to buy or sell a home hire a real estate
agent to assist them with the process. To facilitate the purchase or sale of an
existing home, real estate agents generally use a regional multiple listing
service, a proprietary network of property listing information which
traditionally has only been available to real estate agents. The real estate
agent typically pays a fee to access a multiple listing service, which enables
the real estate agent to list properties that are for sale and view properties
that are listed by other agents.
When commencing a search for a home, buyers have traditionally sought
information from newspaper classifieds and multiple listing service printouts
provided by real estate agents. The information for a particular home usually
consists of a brief text description of the property and a small exterior
photograph. This limited information requires buyers to engage in the
time-consuming and often frustrating process of scheduling appointments,
traveling to and visiting a property. This inefficient process also forces home
sellers and real estate agents to spend time showing homes to all visitors,
including those who after physically visiting the home are not interested. The
inconvenience and cost associated with the home buying process are compounded
for home buyers who are relocating.
Convergence of the Internet and the Process of Buying and Selling a Home
The Internet has emerged as a global medium for communication, information
exchange and commerce. According to the International Data Corporation, there
were 69 million Internet users worldwide at the end of 1997, and this number is
anticipated to grow to approximately 320 million users by the end of 2002. As a
result of this explosive growth, businesses will have a tremendous opportunity
to conduct commerce over the Internet. International Data Corporation estimates
that commerce over the Internet will increase to more than $400 billion by 2002.
Recognizing the commercial potential of the Internet, a number of
residential real-estate-related web businesses have been established, including
web sites that aggregate multiple listing service data from different regions.
These real estate destination sites enable users to quickly access a wide range
of real estate listings to search for a home using specific criteria, including
location, size and price. As a result, these sites are increasingly becoming an
important part of the home buying process for many consumers. Based on a 1999
study by the U.C. Berkeley Fisher Center for Real Estate and Urban Economics,
bamboo.com believes that a significant portion of existing homes listed for sale
in the United States are listed online and that the number of home buyers using
the Internet to shop for a home is increasing.
The Need for Richer Online Visual Content
While the Internet has improved the process of researching real estate
listings, the information currently available online is typically limited to a
brief text description and a small still photograph of the property. Though the
availability of this information online enhances the efficiency of searching for
a home, it does not utilize the capability of the web to more fully visualize
the experience of visiting a home. As a result, buyers must still engage in the
time-consuming and often frustrating process of scheduling appointments,
traveling to and visiting homes at an early stage of the home buying process
before they can confirm their interest in a particular property.
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THE BAMBOO.COM SOLUTION
bamboo.com is a provider of 360 degrees virtual tours of real estate
properties on the Internet. bamboo.com believes virtual tours will become a
standard method to market real estate online, the way still photographs are a
standard method today. bamboo.com's virtual tours provide enhanced visual
content that allows a buyer to look around a room or specific area of a home or
other property as if they were actually standing inside or outside the property.
bamboo.com's virtual tours are integrated with property listing information by
real estate web sites and multiple listing services, thereby providing a
complete package of information and adding significant value to the home buyer,
home seller and real estate agent. Users are able to quickly view bamboo.com's
virtual tours over a basic dial-up connection to the Internet using a standard
web browser on almost all computer platforms and without special plug-in
software to download or install. bamboo.com also distributes bamboo.com's
virtual tours by email to real estate agents in one convenient, self contained
file. Real estate agents can easily forward bamboo.com's email virtual tours to
prospective home buyers, home sellers and real estate agents. Key elements of
the bamboo.com solution are:
Affordable, Comprehensive Service. bamboo.com delivers an affordable
comprehensive service to real estate agents that includes videotaping the inside
and outside of a home or other property, processing the videotape into a
complete virtual tour and distributing bamboo.com's virtual tours to a variety
of web sites. bamboo.com also distributes bamboo.com's virtual tours to real
estate agents as an attachment to a standard email message, which they can then
forward to home buyers, other real estate agents and home sellers. For
bamboo.com's basic virtual tour service for existing home sales, real estate
agents pay a one-time fee of $99.95 per home. The virtual tour is then
accessible free-of-charge on the Internet for the life of the listing. Utilizing
bamboo.com's extensive network of videographers, bamboo.com currently offers
bamboo.com's virtual tour service in over 4,500 cities, towns, boroughs and
counties across the United States and Canada.
Extensive Network of Internet Affiliates. Users can access bamboo.com's
virtual tours through major destination sites on the Internet. bamboo.com has
agreements to provide its virtual tours to major real estate destination sites
including: REALTOR.com; HomeSeekers.com; Microsoft HomeAdvisor; Homes.com; and
HomeBuilder.com.
These real estate destination web sites provide a broad distribution
network for bamboo.com's virtual tours, but bamboo.com does not currently
receive any significant revenue from these web sites. These web sites also
provide real estate content to Internet portals. As a result, bamboo.com's
virtual tours can currently be viewed on America Online, @Home Network, Excite,
GO Network/Infoseek, Netscape Netcenter and Yahoo! bamboo.com is not a party to
any agreements with these Internet portals and there is no guarantee that the
web sites bamboo.com has agreements with will continue to provide content to
these Internet portals.
Benefits to Home Buyers. bamboo.com's virtual tours provide home buyers
with rich visual information enabling them to view and screen a property, at no
cost, without requiring a visit to the home. This enables buyers to save the
time, expense and inconvenience of scheduling appointments, traveling to and
visiting properties in person. bamboo.com's virtual tours also add new
dimensions to the home buying process by enabling home buyers to show a
potential home to family and friends and revisit the virtual tour.
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Benefits to Home Sellers. bamboo.com's solution enables home sellers to
use the Internet to provide more visual information about their homes and
surrounding property to prospective buyers. Unlike traditional marketing methods
such as local classified ads and multiple listing service printouts,
bamboo.com's visually rich virtual tours allow sellers to take advantage of the
multimedia capabilities of the web. In addition, bamboo.com believes its virtual
tours will reduce the amount of time required by sellers in showing their homes
because buyers are able to view homes before deciding to actually visit the
property.
Benefits to Real Estate Agents. bamboo.com's virtual tours provide real
estate agents with an Internet based tool that allows them to cost-effectively
market properties to a wide audience, thereby providing a value-added service to
both home buyers and home sellers. This enhanced marketing tool also enables
real estate agents to differentiate themselves to potential home sellers and
thereby gain new listings. As home buyers increasingly use the Internet and
virtual tours to screen homes, real estate agents may save time by showing homes
to more qualified buyers. Real estate agents can also more effectively help home
buyers find properties by identifying and e-mailing to a home buyer bamboo.com's
virtual tours that match a buyer's criteria. Alternatively, real estate agents
can also store bamboo.com's email virtual tours on their laptop computers and
display these virtual tours directly to their clients.
Benefits to Websites. bamboo.com's virtual tours provide real estate
destination sites, Internet portals and multiple listing services with rich
visual content which helps to increase the convenience, usefulness and enjoyment
of their users' visits. bamboo.com believes that these benefits promote
increased traffic and repeat usage on these web sites.
THE BAMBOO.COM STRATEGY
bamboo.com's objective is to be the leading global provider of online
virtual tours to the real estate industry. bamboo.com plans to achieve this goal
by pursuing the following key strategies:
Aggressively Grow bamboo.com's Virtual Tour Business. bamboo.com intends
to establish a significant market presence for bamboo.com's 360 degrees virtual
tours by continuing to provide comprehensive services at competitive prices to
the existing home sales market. bamboo.com plans to continue to drive market
share of its virtual tours by utilizing its 103 direct sales professionals to
aggressively market bamboo.com's virtual tours to real estate agents at the
local and regional levels. bamboo.com has recently expanded its service provider
network to include 225 videographers that provide bamboo.com with broad national
coverage in over 4,500 cities, towns, boroughs and counties across the United
States and Canada.
Establish bamboo.com as the Dominant Brand for Online Virtual Tours.
bamboo.com seeks to establish itself as the leading brand for online virtual
tours in all segments of the real estate industry. To achieve this objective,
bamboo.com intends to expand its use of mass market and targeted advertising,
public relations and other marketing activities designed to promote bamboo.com
as a global brand among consumers, real estate agents and other real estate
professionals.
Develop New Relationships. bamboo.com has entered into relationships which
help us sell and distribute bamboo.com's virtual tours and promote the
bamboo.com brand. These relationships include agreements with HomeStore.com,
REALTOR.com,
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HomeSeekers.com, Microsoft HomeAdvisor, Homes.com, and HomeBuilder.com. These
relationships provide us with significant benefits including access to real
estate agents and marketing activities such as banner ads, buttons, logos,
online order pages and direct sales force activities. bamboo.com intends to
enter into additional agreements with real estate destination sites, real estate
brokerage firms, multiple listing services, technology providers and other
entities that will provide us with similar benefits.
Continue to Enhance bamboo.com's Virtual Tour Experience. bamboo.com
intends to continue to develop, acquire and utilize new technologies that will
enhance its virtual tours. Examples of such technological enhancements include
high-resolution zooming functionality, larger image sizes, audio and additional
compression techniques. bamboo.com believes such enhancements have benefitted
and will continue to benefit bamboo.com's constituents by providing an even
richer, more informative experience.
Expand bamboo.com's Virtual Tour Business to Other Real Estate Segments.
bamboo.com intends to expand into other real estate markets that will benefit
from its virtual tour products and services, such as new home sales, apartment
rentals, commercial property sales and leases, as well as hotels and other
hospitality or specialty properties. bamboo.com recently entered into agreements
to provide its virtual tours to other real estate markets.
Pursue E-Commerce Opportunities. As consumers increasingly use the
Internet to research all aspects of shopping for goods and services, bamboo.com
believes that there will be an increased use of visual content to drive commerce
transactions. Categories that will benefit from the use of increased visual
content include, but are not limited to, travel destination sites, hotels,
resorts and rentals. bamboo.com may enter into relationships focused on
providing integrated commerce solutions, which use bamboo.com visual content as
a platform for online sales.
Pursue International Expansion Opportunities. bamboo.com believes there
will be a significant opportunity for its virtual tours as online real estate
marketplaces develop and mature in international markets. bamboo.com intends to
address this opportunity by directly marketing its services, developing new
partnerships and expanding bamboo.com's relationships with existing partners as
they grow internationally.
PRODUCTS AND SERVICES
The Virtual Tour
bamboo.com virtual tours capture 360 degrees images of the interior and
exterior of homes or other real estate. Its virtual tours provide more complete
visual representations of multiple rooms and outdoor areas than traditional
still photographs, allowing viewers to easily pan left or right or zoom in for a
closer look.
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bamboo.com delivers a comprehensive service to real estate agents that
includes videotaping the inside and outside of a home or other property,
processing the videotape into a complete virtual tour, distributing the virtual
tour to sites on the Internet and delivering it by email. bamboo.com's basic
virtual tour for existing homes is priced at $99.95, and includes four 360
degrees scenes delivered to one major real estate destination web site selected
by the real estate agent, as well as sites of the agent, the agent's affiliated
real estate company and the agent's multiple listing service. Each additional
scene and each additional web site link costs the real estate agent $20.00.
bamboo.com's service involves the following six steps:
(1) a real estate agent orders a virtual tour from us by phone, fax,
email or online and selects the web sites that the tour is to be posted on;
(2) bamboo.com's customer service representative receives this order
and dispatches the request to an independent videographer who is part of
the bamboo.com service provider network;
(3) the videographer contacts the real estate agent to schedule the
video shoot of the property;
(4) once the video has been shot, the captured content is sent via
overnight courier to bamboo.com's processing center in Toronto;
(5) bamboo.com's processing center inspects all scenes included in the
video and converts the video into a virtual tour using its proprietary
technology; and
(6) bamboo.com's processing center then posts the virtual tour on the
web to the sites selected by the ordering real estate agent. bamboo.com
also delivers the virtual tour by email to the ordering real estate agent.
Virtual Tours on the Internet
bamboo.com's web-based virtual tour product is viewable using a standard
web browser, without the need for additional software, over a basic dial-up
connection to the Internet. bamboo.com's virtual tours are available on real
estate company web sites, individual real estate agent web sites or on
bamboo.com's broad network of affiliates, which include real estate destination
sites, Internet portals and multiple listing services.
bamboo.com has developed proprietary software which enables bamboo.com's
virtual tours to be viewed on the web. The bamboo.com Java applet enables
bamboo.com's virtual tours to be viewed within web pages. If the user's web
browser is unable to view Java applets, bamboo.com's ViewAlways system will
automatically display still images in HTML.
Email Virtual Tours
In addition to bamboo.com's web-based virtual tour, bamboo.com offers a
self contained virtual tour which can be distributed by email. The email virtual
tour offers all of the features of our web-based virtual tours and can be
customized to include contact information for the real estate agent representing
the seller.
The listing real estate agent receives the email virtual tour from
bamboo.com and is able to widely disseminate the email virtual tour by sending
it directly to potential home
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buyers, other real estate agents and the home seller. The real estate agent can
also use the email tour as a promotional tool by including his or her name and
contact information. The buyer's real estate agent can easily forward email
virtual tours received from sellers' agents to clients, providing a simple and
efficient method for potential buyers to screen numerous homes.
bamboo.com's email virtual tour can be viewed on computers running
Microsoft's Windows 95, Windows 98, Windows CE or Windows NT operating systems
as well as all other major operating systems and platforms including MacIntosh,
Unix and WebTV. The manageable file size of bamboo.com's virtual tour enables a
real estate agent or potential buyer to store virtual tours on a computer and
show or view the tours anytime, without the need for an Internet connection.
KEY RELATIONSHIPS
In order to accelerate the adoption of bamboo.com's virtual tours,
bamboo.com has entered into agreements with real estate destination sites, real
estate brokerage firms, real estate multiple listing services and entities in
the travel, hospitality and consumer products industries.
Real Estate Destination Sites
bamboo.com has entered into agreements to provide bamboo.com's virtual
tours to the major real estate destination web sites, including those described
below. bamboo.com believes these relationships benefit home buyers, home sellers
and real estate agents by providing broad exposure of homes and other properties
on a variety of real estate destination sites and Internet portals.
Through bamboo.com's agreements with these real estate destination web
sites, bamboo.com is obligated to pay sponsorship and other marketing and
technology access fees in an aggregate amount of approximately $14.1 million due
over the three year period ending December 31, 2002. In addition, bamboo.com
also pays transaction fees to some of these real estate destination web sites.
These fees generally range from 3% to 25% of revenues generated from the sale of
its virtual tours. For the nine months ended September 30, 1999, the average
transaction fee paid to these real estate destination web sites was
approximately 9%.
RealSelect, a Subsidiary of HomeStore.com. RealSelect operates REALTOR.com
and HomeBuilder.com. REALTOR.com, the official web site of the National
Association of Realtors, is a leading real estate destination web site that
enables potential home buyers to browse, free of charge, from a searchable
database of existing home listings. REALTOR.com's listings can also be viewed on
America Online, @Home Network, Excite, GO Network/Infoseek, and Netscape
Netcenter. bamboo.com has a multi-year agreement with HomeStore.com and
RealSelect through which bamboo.com is exclusively marketed, promoted and
endorsed on the HomeStore.com, REALTOR.com and HomeBuilder.com web sites.
bamboo.com is required to pay RealSelect monthly fees and fees associated with
sales of bamboo.com's virtual tours.
Cendant Corporation. Cendant has introduced CompleteHome.com, a real
estate Internet portal that will include property listings from the Coldwell
Banker(R), CENTURY 21(R) and ERA(R) real estate brokerage systems. bamboo.com
has entered into a multi-year, non-exclusive, agreement with Cendant under which
bamboo.com virtual tours may be
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displayed on such portal. bamboo.com is required to pay Cendant monthly fees and
fixed fees at specified times during the term of the agreement.
HomeSeekers.com. HomeSeekers.com is a provider of online residential
listing information. bamboo.com has a multi-year agreement with HomeSeekers.com
through which it is the exclusive provider of virtual tours on the
HomeSeekers.com web site. HomeSeekers.com markets, promotes and facilitates
sales of bamboo.com's virtual tours on the HomeSeekers sites, at seminars and
tradeshows, on CD-ROM products and through e-mail and direct marketing.
bamboo.com pays HomeSeekers transaction fees for sales generated by HomeSeekers
as well as for virtual tours posted to the HomeSeekers web site.
Microsoft HomeAdvisor. Microsoft HomeAdvisor is a real estate destination
site which aggregates existing home listings. bamboo.com recently entered into a
short term agreement with Microsoft to provide virtual tours to the HomeAdvisor
site. Under the agreement, bamboo.com is required to pay Microsoft quarterly
sponsorship fees.
Homes.com. Homes.com is a real estate destination site which aggregates
existing home listings and a variety of other real estate listings such as
apartments. Homes.com listings can also be viewed on Yahoo! bamboo.com has a
short term agreement with Homes.com to provide virtual tours of existing homes
on the Homes.com web site. bamboo.com is also the preferred provider of virtual
tour images for rental property listings on Homes.com. bamboo.com pays Homes.com
a quarterly transaction fee on net revenues collected from sales originated by
Homes.com.
The real estate destination web sites bamboo.com has agreements with
provide a broad distribution network for bamboo.com's virtual tours, but
bamboo.com does not currently receive any significant revenue from these web
sites. In addition, bamboo.com is not a party to any agreements with any
Internet portals. There is no guarantee that the real estate destination web
sites bamboo.com has agreements with will continue to provide content to
Internet portals.
Real Estate Brokerage Firms
bamboo.com has entered into distribution and marketing agreements with
major real estate brokerage firms. These agreements assist in providing
bamboo.com's sales force with access to their agents and enable bamboo.com to
feature its virtual tours on their brokerage firms' web sites.
Multiple Listing Service Infrastructure
Multiple listing services aggregate residential real estate listings on a
local or regional basis and are typically controlled by local real estate
boards. These boards are primarily organized as co-operatives whose members
typically are affiliated with local real estate firms. In addition to managing
the listings within a region, multiple listing services also select and control
the software used in uploading, storing and viewing the listings. These
relationships have traditionally allowed multiple listing services to secure
their position as the primary aggregator of all data relating to properties
within their jurisdiction.
bamboo.com has entered into and continues to enter into agreements directly
with multiple listing services as well as companies that develop technology for
the real estate industry. Through these relationships, bamboo.com seeks to
integrate bamboo.com's virtual
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tours into the existing MLS infrastructure to benefit bamboo.com, the multiple
listing services and real estate agents. This integration enables us to directly
market bamboo.com's virtual tour service to real estate agents associated with
these multiple listing services through marketing and promotion agreements.
bamboo.com pays certain of these multiple listing service companies transaction
fees for sales generated by them. In addition, these relationships provide
significant exposure for bamboo.com's virtual tours within the multiple listing
services intranet systems. Below is a list of some of the multiple listing
services and companies that develop technology for the real estate industry with
which bamboo.com has agreements.
<TABLE>
<S> <C>
Multiple Listing Service of Northern
Illinois -- MLSNI.......................... Largest multiple listing service in North
America
Average of 60,600 active listings
27,500 members
Metropolitan Regional Information Systems
Inc. -- MRIS............................... Second largest multiple listing service in
North America
Average of 52,771 active listings
27,941 members
Toronto Real Estate Board -- TREB............ Third largest multiple listing service in
North America
Average of 25,000 active listings
20,000 members
Metrolist, Inc............................... Multiple listing service
State-Wide Multiple Listing Service, Inc..... Multiple listing service
GTE Enterprise Solutions..................... Full service provider of technology to the
real estate industry
Moore Data Management Services............... Full service provider of technology to the
real estate industry
</TABLE>
MLSNI. MLSNI covers the Chicago metropolitan area. bamboo.com has an
agreement with MLSNI to provide virtual tours to its subscribers. Under the
terms of the agreement, MLSNI agrees to promote and assist in facilitating the
sales of bamboo.com's virtual tours on the MLSNI.com web site, in its multiple
listing services system and in its marketing collateral.
MRIS. MRIS operates an online real estate network for licensed real estate
agents in the Maryland, Northern and Central Virginia, Washington, D.C. and
parts of West Virginia and Pennsylvania. bamboo.com has a sales and co-marketing
agreement to be the preferred vendor of virtual tours to its subscribers. Under
the terms of the agreement, MRIS is responsible for facilitating the sales of
bamboo.com's virtual tours to its subscribers and agrees to market and promote
bamboo.com's virtual tours on its web site, print collateral and through its
call center.
TREB. TREB covers the Toronto metropolitan area. bamboo.com has an
agreement with the TREB through which bamboo.com provides virtual tours to its
subscribers. TREB has agreed to exclusively market and promote bamboo.com's
virtual tours in its online and print collateral as well as within its multiple
listing services system.
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Metrolist. Metrolist covers the Denver metropolitan area. bamboo.com has
an agreement with Metrolist through which bamboo.com provides virtual tours to
its subscribers.
State-wide. State-wide covers the state of Rhode Island. bamboo.com has an
agreement with State-wide through which bamboo.com provides virtual tours to its
subscribers.
GTE Enterprise Solutions. GTE Enterprise Solutions is a full service
provider of technology to the real estate industry. The GTE Enterprise Solutions
System 4 is an information database and communications network which integrates
multiple listing services functions. bamboo.com has an agreement with GTE
Enterprise Solutions through which GTE Enterprise Solutions markets, promotes
and facilitates the ordering of bamboo.com's virtual tours on its System 4 MLS
software. Also, under the terms of the agreement, GTE Enterprise Solutions
integrates the viewing of bamboo.com's virtual tours through its System 4 MLS
software.
Moore Data Management Services. Moore Data Management Services is a full
service provider of technology to the real estate industry. bamboo.com has an
agreement with Moore Data Management Services through which the parties will
market, promote and facilitate the ordering of bamboo.com's virtual tours.
Travel and Hospitality
bamboo.com has entered into distribution and marketing agreements with
several companies that provide travel and hospitality services. Under these
agreements, bamboo.com provides virtual tour services to these companies, and
the companies provide marketing on behalf of bamboo.com.
SALES AND MARKETING
bamboo.com is engaged in a number of marketing activities to promote the
bamboo.com brand, develop name recognition and visibility and build bamboo.com's
customer base. These marketing activities include targeting real estate agents,
home sellers and home buyers through print and online advertising, trade shows,
seminars, direct mail and product promotions. bamboo.com sells its virtual tours
to real estate agents through bamboo.com's direct sales force and through
bamboo.com's partners.
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Direct Sales Organization
bamboo.com's direct sales force covers the United States and Canada. As of
November 9, 1999, bamboo.com employed 103 field sales personnel, including 7
regional directors, 8 district sales managers and 88 account executives. The
direct sales force focuses its efforts on real estate agents. Below is a partial
list of real estate brokerage firms whose agents have purchased bamboo.com's
virtual tours:
<TABLE>
<S> <C> <C>
Alain Pinel Fred Sands Realtors RE/MAX International
Arvida Realty Services John L. Scott Real Estate Royal LePage
Better Homes & Gardens Keller Williams Towne and Country Realtor
Century 21 Koenig & Strey Windermere Real Estate
Coldwell Banker Pacific Union
ERA Prudential Real Estate Affiliates
</TABLE>
Revenues from Royal LePage represented 25% and 77% of total revenue for the
years ended December 31, 1997 and 1998, respectively.
bamboo.com's direct sales force is employing the following strategies to
market bamboo.com virtual tours to real estate agents:
- Real Estate Brokerage Workshops. bamboo.com organizes and presents sales
workshops at regional and local real estate brokerage offices.
bamboo.com's direct sales force uses these presentations to educate and
inform the real estate agents about bamboo.com's virtual tours and the
Internet to enhance their ability to win listings and market properties.
- Internet Marketing Advisory Board. bamboo.com has engaged eleven
experienced real estate agents from different brokerage firms and an
Internet consultant to serve on bamboo.com's Internet Marketing Advisory
Board. These individuals help promote bamboo.com, provide input on
bamboo.com's products and services and assist in bamboo.com's approach to
the market. Upon joining the Internet Marketing Advisory Board, members
are granted options to purchase bamboo.com's common stock in
consideration of their services.
- Trade Shows and Conferences. bamboo.com attends trade shows and
conferences across North America. We believe these forums serve as an
excellent selling, networking and branding opportunity.
Additional Marketing and Sales Channels
In addition to bamboo.com's direct sales force, bamboo.com also has
developed, and continues to develop, relationships with real estate destination
sites, real estate brokerage firms and multiple listing services to provide
marketing support in bamboo.com's efforts to sell directly to real estate agents
associated with these companies.
SERVICE PROVIDER NETWORK
bamboo.com's service provider network consists of contract videographers
throughout the United States and Canada. As of November 9, 1999, bamboo.com had
225 trained
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videographers. The videographers are responsible for capturing bamboo.com's
images using a video camera attached to a proprietary tripod and turntable
system. The videographers are generally subject to noncompetition agreements.
TECHNOLOGY
bamboo.com has developed innovative and proprietary technology to support
the creation and delivery of bamboo.com's virtual tours, including a scene image
capture system, processing system and virtual tour viewing technology.
Virtual Tour Scene Capture Device
bamboo.com developed a microprocessor controlled turntable system that
facilitates the creation of bamboo.com's virtual tours. In conjunction with a
standard photographic tripod and a commercially available video camera, a
bamboo.com service provider uses this system to quickly and easily film 360
degrees virtual scenes.
Virtual Tour Video Processing System
bamboo.com has developed a proprietary software system that converts
standard video into a digital file format. bamboo.com's processing software
takes advantage of the adaptive exposure and focus mechanisms in the video
camera to compress the dynamic range of the scene while maintaining
center-of-field focus. This results in a single well-exposed image with
effective depth of field. This image is then enhanced for clarity and color
range using commercially available image processing tools. Finally, the image is
coded for final display with JPEG compression.
Virtual Tour Viewing Technology
bamboo.com has developed proprietary software that enables bamboo.com's
virtual tours to be viewed on the web as well as distributed via email. For
web-based virtual tours, bamboo.com's ViewAlways system automatically identifies
the user's browser and selects either a Java or HTML virtual tour depending on
the browser's ability to view Java applets. If the browser cannot view Java
applets, the property is displayed using HTML and still images. bamboo.com's
ViewAlways technology enables images to be viewed on almost all computer
platforms using a standard web browser. bamboo.com's email virtual tour is based
upon bamboo.com's proprietary standalone viewer platform that was developed
using a combination of Windows and Java software. bamboo.com's email virtual
tour can be viewed on computers running Microsoft's Windows 95, Windows 98,
Windows CE or Windows NT operating systems as well as all other major operating
systems and platforms including MacIntosh, Unix and WebTV.
COMPETITION
While the market for online virtual tours for real estate is relatively
new, it is already competitive and characterized by entrants that may have or
may develop online virtual tours similar to bamboo.com's. In addition, there are
relatively low barriers to entry to bamboo.com's business. Moreover, due to the
low cost of entering the online virtual tours market, competition may intensify
and increase in the future. bamboo.com currently competes with traditional
methods used by real estate agents to market properties for sale, including
classified ads, brochures and still photos. bamboo.com also faces competition
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from companies that have developed virtual tour technology including Be Here
Corporation and Cyclovision, Inc. This competition may limit bamboo.com's
ability to become profitable or result in the loss of market share. bamboo.com
competes on the basis of certain factors, including: quality and breadth of
service, price, brand recognition and distribution. bamboo.com believes that
bamboo.com competes favorably with respect to each of these factors.
Most of bamboo.com's employees are not subject to noncompetition
agreements. In addition, even though most of bamboo.com's key and technical
employees are covered by proprietary rights agreements, bamboo.com's business
model does not involve the use of a large amount of proprietary information. As
a result, bamboo.com is subject to the risk that bamboo.com's employees may
leave and start competing businesses. The emergence of these enterprises will
further increase the level of competition in bamboo.com's market and could harm
bamboo.com's financial performance.
INTELLECTUAL PROPERTY
bamboo.com relies on trademarks and trade secrets, as well as
confidentiality agreements and other contractual restrictions with employees and
third parties, to establish and protect bamboo.com's proprietary rights. Despite
these precautions, bamboo.com cannot be sure that the measures bamboo.com
undertakes will be adequate to protect bamboo.com's proprietary technology or
that they will preclude competitors from independently developing products with
functionality or features similar to bamboo.com's products. bamboo.com cannot be
sure that the precautions bamboo.com takes will prevent misappropriation or
infringement of bamboo.com's technology. bamboo.com has filed three patent
applications in the United States with respect to bamboo.com's video image
processing system technology and with respect to virtual tour display
technology. However, it is possible that patents may not be issued for these
applications. Issued patents may not adequately protect bamboo.com's technology
from infringement or prevent others from claiming that bamboo.com's technology
infringes that of third parties. Failure to protect bamboo.com's intellectual
property could materially harm bamboo.com's business. In addition, bamboo.com's
competitors may independently develop similar or superior technology. It is
possible that litigation may be necessary in the future to enforce bamboo.com's
intellectual property rights, to protect bamboo.com's trade secrets or to
determine the validity and scope of the proprietary right of others. Litigation
could result in substantial costs and diversion of bamboo.com's resources and
could materially harm bamboo.com's business.
bamboo.com has received and may receive in the future notice of claims of
infringement of other parties' proprietary rights. Infringement or other claims
could be asserted or prosecuted against us in the future, and it is possible
that past or future assertions or prosecutions could harm bamboo.com's business.
Any such claims, with or without merit, could be time-consuming, result in
costly litigation and diversion of technical and management personnel, cause
delays in the development and release of bamboo.com's products, or require us to
develop non-infringing technology or enter into royalty or licensing
arrangements. Such royalty or licensing arrangements, if required, may not be
available on terms acceptable to us, or at all. For these reasons, infringement
claims could materially harm bamboo.com's business.
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RESEARCH AND DEVELOPMENT
As of November 9, 1999, bamboo.com had 31 employees engaged in research and
development related to content capture, processing technology and viewer and
user experience enhancements. bamboo.com expended approximately $23,829, $41,567
and $242,917 for the years ended December 31, 1996, 1997 and 1998, respectively,
on research and development. bamboo.com expects to expend resources on research
and development in amounts necessary to continue improvements in content capture
and processing technology and on viewer and user enhancements in amounts
necessary to ensure that bamboo.com's virtual tour business remains competitive.
LEGAL PROCEEDINGS
bamboo.com is not a party to any material legal proceedings.
EMPLOYEES
As of November 9, 1999, bamboo.com employed 171 full-time employees in the
United States, 65 full-time employees in Canada, and 77 full time equivalent
independent contractors in bamboo.com's video processing and customer service
call center in Canada. bamboo.com's employees are not covered by any collective
bargaining agreements. bamboo.com believes that bamboo.com's employee relations
are good. There is significant competition for employees with the managerial,
technical, marketing, sales and other skills required to operate bamboo.com's
business. bamboo.com's success will depend upon bamboo.com's ability to attract,
retain and motivate employees.
FACILITIES
bamboo.com leases office space in Palo Alto, California for bamboo.com's
corporate headquarters. The current leases expire on February 28, 2002 and
September 30, 2003, respectively. bamboo.com also leases office space in Toronto
for bamboo.com's video processing and customer service call center. The current
lease expires in April 2008. bamboo.com also leases office space for
bamboo.com's sales offices and field operations in San Diego, California,
Marshfield, Massachusetts, Naples, Florida and Chicago, Illinois.
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BUSINESS OF IPIX
OVERVIEW
As a leader in interactive photography and immersive imaging for the
Internet, IPIX images allow viewers to Step Inside the Picture. IPIX's patented
technology changes the way people create and view images, immersing them in a
360 degrees by 360 degrees spherical environment. IPIX believes its images
enhance the key elements of a photograph: memory, information and entertainment.
IPIX images capture the world as we see it, providing a complete field of
view -- from ground to sky, floor to ceiling, horizon to horizon. Viewers can
easily navigate the image on a personal computer screen by moving a cursor
inside the image. To accelerate the adoption and enhancement of IPIX images,
IPIX has established strategic relationships with leading camera manufacturers
such as Kodak, Nikon and Olympus as well as technology companies such as IBM,
Intel, AOL and RealNetworks. IPIX estimates that over 4,000 commercial web sites
are utilizing IPIX images.
IPIX's patented technology creates IPIX images by combining two film or
digital photographs taken with a fisheye lens into one 360 degrees by 360
degrees spherical image. IPIX's software corrects the distortion inherent in
these photographs. A person may view the resulting image in any direction, and,
if desired, save the image utilizing an IPIX key for posting to a web site,
transmitting by e-mail or saving to a disk. IPIX images can be downloaded
rapidly and can be viewed and navigated with the IPIX plug-in or a viewer using
JAVA. IPIX is utilizing its patented technology to develop other immersive
imaging products, such as steerable video, IPIX Webcam and an IPIX-compatible
digital camera for the consumer market.
Industry leading companies use IPIX's technology to create virtual tours
and multimedia content to attract and retain visitors on their web sites, which
enhances their marketing and e-commerce initiatives. IPIX has targeted the
following domestic and international commercial markets: real estate, travel and
hospitality, electronic publishing, corporate and e-commerce and education and
entertainment. Among IPIX's customers who are leaders in their industry are
Coldwell Banker, Rent.Net, Carnival Cruise Lines, Swissotel, CNN, Microsoft,
Intel, Ticketmaster and Disney. In addition, IPIX has entered into strategic
relationships with leading customers in their commercial markets such as
Homes.com, Microsoft CarPoint and AOL to promote the use of IPIX images to
members of these targeted commercial markets. IPIX images can be posted to all
of the leading residential real estate web sites, including REALTOR.com, the
official web site of the National Association of Realtors.
INDUSTRY BACKGROUND
Growth of the Internet and e-commerce
The Internet has emerged as a global interactive medium enabling millions
of people worldwide to share information, communicate and conduct business
electronically. The Internet differs from traditional media by its lack of
geographic limitations and its ability to provide instantaneous data
communication. International Data Corporation, or IDC, estimates that the number
of Internet users will grow from approximately 69 million worldwide in 1997 to
approximately 320 million worldwide by the end of 2002. Growing usage of the
Internet has been driven primarily by the rapid proliferation of personal
computers; easier, faster and affordable access to the Internet; increasingly
robust network architectures; and the emergence of compelling content and
applications.
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The emergence of the Internet and secure transaction networks has generated
significant opportunities for businesses to conduct electronic commerce. IDC
estimates e-commerce revenues will grow from approximately $12.4 billion
worldwide in 1997 to $237 billion worldwide by 2001. According to Forrester
Research, on-line leisure travel reservations will grow from 1.3 million trips
in 1997 to 65.5 million trips by 2003. Regarding real estate, Yankee Group
reports that the percentage of homebuyers using the Internet to shop for a home
will increase from 4% in 1997, to over 30% in the year 2000. Additionally,
Forrester Research estimates that on-line classified advertising will grow from
$185 million in 1998 to $2.9 billion in 2003. This widespread deployment and
acceptance of the Internet has introduced rapid changes in the way information
is produced, distributed and consumed.
Demand for Effective On-line Content
The popularity of the Internet has resulted in substantial growth in the
number and types of web sites. According to IDC, the number of web sites is
estimated to grow from 829.4 million in 1998 to 2.7 billion in 2000. New
technologies are allowing web site operators and advertisers to measure a site's
traffic, average time spent on a site and visit-to-purchase ratios. Advertisers
are utilizing this data to measure the effectiveness of Internet advertisements
and to set advertising rates.
This data is causing businesses to demand content and features that will
allow them to attract visitors, increase the amount of time spent on their web
sites and promote e-commerce. According to a Forrester Research survey of online
consumers, 75% of those surveyed stated that content was the most important
factor in attracting and retaining visitors to web sites.
Emergence of Broadband Capability
The transmission of data intensive content over the Internet has been
limited due to historical bandwidth constraints. Increasing availability of
improved delivery systems, such as digital cable modems, satellite delivery
systems and digital subscriber line networks are enabling the use of more
feature-rich multimedia content. Forrester Research predicts that approximately
16 million U.S. households will have broadband connection by the end of 2002,
representing approximately 25% of the homes connected to the Internet.
Growth in the Use of Digital Imaging
Fundamental changes are occurring in the photography industry with the
introduction of the digital camera. The digital camera allows the user to take
pictures and display them digitally, either on a personal computer or over the
Internet, without the need for traditional film development. Because digital
cameras were initially expensive, early adopters of this technology were
professionals and business users. Recently, sales of digital cameras have grown
substantially due to improved performance and lower unit prices. IDC forecasts
that worldwide digital camera shipments will grow from 2.1 million units in 1997
to 15.5 million units in 2002.
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Lack of Interactivity and Realism with Existing Digital Imaging Technology
Companies are increasingly using digital imaging to promote their products
and present information on their web sites. Digital imaging provides businesses
with a powerful, cost-effective medium to maximize the impact of their web
sites.
However, most of the images remain flat two-dimensional images offering a
limited field of view. Technological innovations that enhance realism and
interactivity and contribute to a viewer's retention to that web site will
facilitate the success of e-commerce by potentially leading to increased sales
and advertising rates. Webcams and streaming video are some of the technological
innovations businesses are using to attract and retain visitors to their web
sites.
Specifically, immersive imaging, or the ability to create the viewing
perspective of being inside the image, is becoming increasingly popular with
many web sites. However, image creation with many of the existing immersive
technologies is labor intensive and requires proprietary hardware. Conditions
such as inadequate lighting, subject motion or lack of portability reduce the
effectiveness of the image. As a result, market acceptance of these technologies
has been limited.
For widespread adoption of immersive imaging by businesses and consumers to
occur, new immersive technologies must offer the following benefits:
- ease of creating and viewing an image;
- ease of distributing and sharing the image;
- portability of the capture device;
- cost effectiveness;
- use of standardized technology; and
- platform independence.
THE IPIX SOLUTION
IPIX believes that its 360 degrees by 360 degrees immersive imaging
solution enhances the key elements of a photograph: memory, information and
entertainment. An IPIX image provides more than just a picture. The key benefits
of IPIX's immersive imaging solution are as follows:
- IPIX images provide a more powerful viewing experience by creating a 360
degrees by 360 degrees immersive viewing environment;
- IPIX's technology is easy to use, portable and cost-effective; and
- IPIX's technology is compatible with commercially available digital
cameras and different computer platforms and has low bandwidth
requirements.
IPIX images enhance the photo viewing experience by permitting a person to
view locations from ground to sky, floor to ceiling and horizon to horizon. A
person can navigate the image on a personal computer screen by moving the cursor
within the image. IPIX believes that its images, alone or combined with other
multimedia such as audio, video and
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automation, can provide businesses with more compelling content to attract and
retain visitors to their web sites and promote e-commerce.
IPIX's technology is easy to use, portable and cost-effective. IPIX's
software easily and quickly combines two 185 degrees photographs taken with a
standard digital camera into one immersive image. After using an IPIX key, a
user can post the IPIX image to a web site, view it on a personal computer or
e-mail it with the click of a button. IPIX images can be viewed and navigated
with the IPIX viewer or with a viewer using JAVA. IPIX prices their IPIX keys to
meet the cost requirements and anticipated use of the IPIX image by the end
user, making it a cost effective alternative to other immersive imaging
technologies.
Because IPIX's technology can be used with commercially available digital
cameras, IPIX images can be captured in almost any environment. IPIX's
technology is compatible with most major operating systems and Internet
browsers. The IPIX image file size is small, 50 to 250 kilobytes, which results
in quick delivery and short download on low bandwidth systems. IPIX's technology
is also taking advantage of the pending availability of broadband networks and
higher resolution digital cameras. IPIX currently has in development its IPIX
Webcam and steerable video technology, V360.
IPIX'S GROWTH STRATEGY
IPIX's objective is to become a world leader in interactive photography and
immersive imaging for the Internet. IPIX believes that it can achieve this
objective by leveraging its leading position in immersive imaging technology.
The key strategies to achieve this objective include:
Build Awareness of the IPIX Brand and Experience
IPIX has begun to create awareness of the IPIX brand name and experience
through a variety of activities. IPIX is focusing its direct sales and
advertising initiatives on its targeted commercial markets. IPIX has entered
into co-marketing relationships with camera manufacturers, such as Kodak, Nikon
and Olympus, and commercial market leaders such as American Express, CNN and
General Electric. It also participates in industry specific trade shows. IPIX is
increasing its presence on the Internet by targeting high-profile, high-traffic
web sites to use its technology. For example, IPIX provided images of the space
shuttle to CNN that were used in its special broadcast of John Glenn's return to
space.
Target Commercial Markets That Can Best Capitalize On IPIX Technology
IPIX believes that applications within targeted commercial markets provide
the most immediate revenue opportunities for IPIX images. These markets are
characterized by the need for high visual content in advertising, product
information and entertainment. IPIX initially has targeted the following
commercial markets: real estate, travel and hospitality, electronic publishing,
corporate and e-commerce and education and entertainment. IPIX actively seeks
customers that are leaders in each of these markets. For example, IPIX has
entered into an agreement with Cendant Corporation and is the preferred provider
of immersive imaging to its real estate subsidiaries, Coldwell Banker, Century
21 and ERA. IPIX organizes its sales force and customizes its product offering
to each commercial market to satisfy the needs of the particular market and
customer. In addition, IPIX
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believes that opportunities exist for its technology in other commercial markets
such as security, law enforcement, child care, government agencies and
architecture.
Develop Approaches to Penetrate Consumer Markets
With the availability of IPIX images on retail products such as CD-ROM
encyclopedias and increased usage of IPIX images on web sites, IPIX believes
that consumers are becoming familiar with immersive imaging and will begin to
require the same immersive imaging technology for their personal use.
By taking advantage of the increasing use and decreasing cost of digital
cameras, IPIX is currently pursuing a number of different product approaches for
the consumer market. The first of these, a personal edition digital camera kit,
is targeted towards the early adopter, as well as the photo enthusiast. IPIX
also seeks to partner with leading camera manufacturers to develop a single use
point and shoot film camera kit that will create an immersive panoramic image
and be targeted to a broader use market. IPIX believes the consumer will utilize
the services of a third party to process and deliver film IPIX images on a
CD-ROM or over the Internet.
Leverage IPIX Technology to Enhance Existing Products and Create New Product
Offerings
IPIX continues research and development efforts to expand the features and
capabilities of its products and services and to develop new product offerings.
In particular, IPIX is pursuing products compatible with the pending
availability of broadband networks and higher resolution digital cameras.
One product in beta test phase is the IPIX Webcam. This technology would
permit the remote capture, creation and transmission of hemispherical or
spherical IPIX images over the Internet. The IPIX image is continuously updated
and can be viewed on a personal computer or other Internet-enabled device. In
addition to its current targeted commercial markets, child care, security and
entertainment industries are possible commercial applications.
Another new product development is IPIX's steerable video technology, V360.
When fully developed, V360 will enable multiple viewers to simultaneously and
independently select their own field of view by navigating within a spherical or
hemispherical full-motion video image transmitted from a stationary camera.
Possible applications for this technology include the sports broadcasting,
tourism and motion picture industries. V360 research is ongoing with working
prototypes developed in conjunction with Discovery, MediaOne and Motorola
currently under evaluation.
Expand Strategic Relationships
IPIX has established strategic relationships with leading camera
manufacturers such as Kodak, Nikon and Olympus as well as technology companies
such as IBM, Intel, AOL and RealNetworks. IPIX believes these relationships will
enable it to achieve rapid adoption of its technology and penetrate markets
quickly. In addition, these relationships will help IPIX to facilitate the
development of compelling content and to expand the range of applications for
IPIX images. IPIX also plans to continue to capitalize on relationships with
software and hardware vendors and distributors possessing complementary
technolo-
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gies. IPIX plans to expand these relationships and seek additional partners with
market and technology leaders.
Expand Internationally
IPIX has increased its international presence through relationships with
strategic partners in select markets. Through these relationships, IPIX sells to
their targeted commercial markets internationally. IPIX has established an
operating subsidiary in the United Kingdom to target market opportunities in
Europe and has entered into distributorship arrangements with strategic partners
in Japan and Australia. Through its UK subsidiary, IPIX has entered into
distribution arrangements with preferred partners in several European countries.
IPIX intends to continue to seek new strategic relationships and organize
additional operating subsidiaries as it expands into new global markets.
PRODUCTS AND SERVICES
IPIX's patented software technology creates IPIX images by combining two
digital 185 degrees photographs taken with a fisheye lens into one 360 degrees
by 360 degrees spherical image. Its software uses two digital 185 degrees
photographs to automatically correct for any minor user error in camera
placement. Its software also corrects the distortion inherent in these
photographs. The resulting image can be viewed in any direction, up-down,
left-right, and horizon to horizon. The user may then view the IPIX image and,
if desired, save the image utilizing an IPIX key for posting to a web site,
transmitting by e-mail or saving to a disk.
IPIX sells IPIX keys, kits and studio work, licenses archived IPIX images
and conducts special research and development projects.
Products
IPIX Keys. An IPIX key is an encryption tool that enables the user to save
and distribute an IPIX image and is its digital equivalent to standard film. One
IPIX key enables the saving and distribution of one IPIX image, just as one film
negative enables the creation of one film photograph. IPIX provides an initial
bundle of IPIX keys in its IPIX kits. IPIX kit owners can purchase additional
keys through its web site or through its toll-free order system. IPIX prices its
keys on the basis of the potential number of viewers, useful life and utility of
the IPIX image. For example, IPIX images used in a CD-ROM encyclopedia are
viewed by a large audience, have a long life and contribute significantly to the
viewing experience and can command higher prices. In addition, IPIX offers
enhancements to its IPIX keys. IPIX keys can be modified so that the IPIX image
may be displayed only in a particular file format or resolution, may be
incorporated into multimedia presentations, has limited creation and viewing
lifetime and may be posted to a specific web site or distributed by e-mail.
IPIX Kits. IPIX kits contain all the necessary items to create an IPIX
image, including a digital camera, fisheye lens, rotator, tripod, software and
an initial amount of IPIX keys. Kit sales are intended primarily to increase the
number of capture devices in the market and to stimulate repeat purchases of
IPIX keys and are not intended to be a significant source of future profits.
IPIX has established strategic relationships with leading digital camera
manufacturers such as Kodak, Nikon and Olympus to increase the number of IPIX
enabled digital
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cameras in the market. IPIX sells its IPIX kits through its direct sales force,
from an on-line store maintained on its web site and through its toll-free
telephone order system. IPIX is considering establishing a new web site,
eCamera.com, where it would sell a full line of IPIX enabled digital cameras to
also enhance IPIX key sales.
In-house Studio. IPIX maintains an in-house studio capable of creating
high-quality, multimedia-rich IPIX images for its customers. IPIX's in-house
studio serves to introduce its technology to customers and stimulate additional
sales. IPIX provides its studio customers with a complete turnkey solution where
it takes the photographs, creates the IPIX images and transmits the images to
the customer or directly to their web site. Prices charged for studio work vary
depending on the number of desired images, type of photograph requested, such as
film or digital, and nature of added enhancements.
IPIX Stockhouse. IPIX maintains a growing archive of select IPIX images
from around the world, such as the Grand Canyon, the Great Wall of China and the
Eiffel Tower, which it licenses to others for a fee. These images are submitted
by company and freelance photographers. Customers who license IPIX images from
IPIX's stockhouse include online publishers, CD-ROM producers, travel companies,
multimedia designers and other content creators. Licensing fees for using our
stock IPIX images are determined based on quality, content, usage and time
frame. IPIX intends to expand this business by partnering with other image
stockhouses to provide additional distribution channels for their archived IPIX
images.
Services
Research and Development Projects. IPIX conducts special research and
development projects acting as a subcontractor for the customer who owns the
final product. However, IPIX maintains ownership of its technology incorporated
into the project, including any improvements and enhancements. For example, IPIX
is developing an in-flight entertainment system for a customer which will permit
each individual passenger on an airplane to view live scenes outside the
aircraft on the passenger's in-seat video monitor. IPIX's participation in this
project has contributed to the development of its technology.
Multimedia Enhancements
IPIX can add the following multimedia capabilities to an IPIX image with
minimal incremental file size:
Multimedia Software. IPIX's multimedia software can link a series of
IPIX images together and include other multimedia content, such as video,
audio and text. The user can combine the finished product with other
digital multimedia features such as Macromedia Director to provide an
attractive interactive product. For example, in November 1998, PBS and
Intel used IPIX's multimedia software to incorporate and link IPIX images
into its digital television broadcast of the Ken Burns documentary on Frank
Lloyd Wright.
IPIX-TV. IPIX's multimedia software can create an IPIX image to
include automated viewing and background audio. By adding autoplay with
either music or narration, the user can provide a video-like viewing
experience of a still image. For example, Swissotel used an IPIX image of
the exterior of a hotel, with automated motion and accompanied by
background street noise, to make the viewer feel as if he were watching a
video of the front of the hotel. Jupiter Communications, an Internet
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marketing research firm, selected IPIX-TV as one of the top five
technologies to watch in 1999.
New Products
IPIX continually makes enhancements and improvements to its technology and
takes advantage of innovations in image compression and cross platform software
development languages. IPIX believes these efforts have enabled it to explore
new applications for its technology. Described below are several products
currently under development:
V360. IPIX's patented technology has the potential to generate
full-motion steerable video. When fully developed, V360 will enable
multiple viewers to simultaneously and independently select their own field
of view within a spherical video image from a fixed camera source. For
example, an IPIX-enabled V360 video feed from a sporting event would allow
viewers to choose their own camera angle, just as if they were actually in
the stadium. V360 was featured at IDC's Demo '99 conference as one of the
forty most innovative technologies of 1999. IPIX is exploring additional
potential commercial applications of V360 such as the security,
teleconference and surveillance industries.
IPIX believes V360 will benefit from the deployment of high-speed
digital networks. Multiple V360 streams could be delivered to the home
using a digital cable network, satellite or broadband. IPIX has developed
working prototypes in conjunction with industry leaders such as MediaOne
and Motorola. Its goal is to become the leader in the field of full-motion
steerable video by aggressively pursuing and developing commercial
applications for V360.
IPIX Webcam. According to InfoTrends, the number of webcams in
service will grow from 1.2 million in 1998 to 12 million by 2002. Existing
webcam technology continuously captures and transmits two-dimensional
digital images over the Internet. IPIX has developed a webcam which will
permit the remote capture, creation and transmission of 180 degrees
navigable hemispherical IPIX images over the Internet. The IPIX image is
continuously updated and viewed on a personal computer or other
Internet-enabled device such as Web-TV. The IPIX Webcam will enable an
unlimited number of viewers to view the IPIX image and independently
control their field of view. IPIX is currently engaged in a beta test with
some of its customers to further refine this technology. Potential
commercial applications include entertainment, child care and security
industries.
IPIX On-Location. IPIX is developing a blue screen application to its
technology in which an IPIX image can be used as a virtual set background.
Blue screens are used to create entire production studios from graphically
rendered images. IPIX believes that its application of this technology,
when fully developed, will provide a cost-effective interactive solution
for these virtual studios.
IPIX Touch Screen. IPIX has incorporated the ability to view an IPIX
image with a touch screen monitor. Viewers may navigate within the IPIX
image by touching the screen in the direction in which they wish to view.
This innovation provides an easy-to-use method of viewing an IPIX image.
Potential opportunities for its touch screen technology include kiosk
manufacturers and airport and tourist information exhibitors who wish to
incorporate IPIX images into their product offerings.
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CUSTOMERS
IPIX has directed their initial sales efforts to industry leaders within
targeted commercial markets. IPIX believes that adoption of its technology by
these leaders will encourage other members of these markets to use IPIX images
to remain competitive. The following is a description of IPIX's targeted
commercial markets and its representative customers within these segments.
<TABLE>
<CAPTION>
TARGETED COMMERCIAL MARKET REPRESENTATIVE CUSTOMERS
- -------------------------- --------------------------------------
<S> <C>
Real estate........................... Century 21, Coldwell Banker, ERA,
Prudential, Rent. Net, Rubloff,
Winkworth, Insignia Financial Group
Travel and hospitality................ Carnival Cruise Lines, Disney Vacation
Club, Hilton Hotels, Holiday Inn,
Hyatt Hotels, Marriott, Starwood,
Swissotel, Travelocity
Electronic publishing................. Associated Press, CNN, Chicago
Tribune, CitySearch, Knight-Ridder,
New York Times, Reuters, The
Washington Post, The Weather Channel
Corporate and e-commerce.............. AutoVantage, Bell South, Cablevision,
General Motors, HGTV, MCI Worldcom,
Microsoft CarPoint, Road Runner, Saab,
Ticketmaster, Toyota
Education and entertainment........... ABC, Discovery Channel, Dreamworks
SKG, Duke University, E! Online, Fox,
IBM Worldbook, MGM, MTV, NBA, NBC,
NFL, National Geographic, PBS,
Paramount Parks, The Walt Disney
Company, Warner Brothers
</TABLE>
Real Estate
Residential and commercial real estate brokers and agents use IPIX images
on their web sites to provide online virtual tours of featured properties. This
capability allows brokers to differentiate themselves and gain new listings. In
addition, IPIX images allow brokers to cost-effectively showcase properties to
the widest possible audience as well as allow prospective buyers to quickly
target properties that match their criteria while expending minimal time and
money. To enhance its exposure to real estate brokers, IPIX has entered into an
agreement with Top Producer, Inc., a leading provider of software customized for
residential real estate brokers, to include IPIX's virtual tour software with
its products. IPIX customers can post IPIX virtual tours to all of the leading
residential web sites, including REALTOR.com, the official web site of the
National Association of Realtors. IPIX is the preferred provider of virtual
tours and immersive imaging to Cendant Corporation's family of real estate
brokers which include Coldwell Banker, ERA and Century 21. IPIX has entered into
an exclusive arrangement with Rent.Net, an on-line apartment locator service, to
provide immersive images of rental apartments. IPIX has strategic relationships
with several real estate portals, including Homes.com and Microsoft Home
Advisor, to further penetrate this market.
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IPIX offers a virtual tour package which includes four IPIX images of a
home taken by an approved photographer for a suggested retail price of $99.95.
Its real estate customers who own their own IPIX kits may create their own
four-room virtual tour for a retail price of $49.95.
Travel and Hospitality
Hotel chains, vacation resorts, cruise lines, theme parks, major tourist
attractions and tourism bureaus use IPIX images to influence travel plans to
targeted destinations, transportation modes and lodging. IPIX images provide a
prospective visitor the opportunity to take virtual tours of rooms, amenities
and attractions before making final travel plans.
The majority of IPIX's travel and hospitality clients utilize the IPIX
studio for a complete turnkey solution. On average, prices for IPIX studio work
range from $2,000 to $4,000 per property.
Electronic Publishing
Broadcasters and publishers incorporate IPIX images on their web sites to
enhance their reporting and coverage of major news events. Also, local city
guides and online classified advertisers are beginning to use IPIX images to
enhance the information on their web sites and enhance online advertising. These
companies typically own their own digital cameras and purchase IPIX keys on a
per-key basis. IPIX is exploring the adoption of a subscription service where a
customer in this industry can purchase a specific or unlimited number of IPIX
keys for one monthly charge.
Corporate and E-Commerce
Companies utilize IPIX images to advertise their product and service
offerings or provide virtual tours of their corporate facilities. For example,
when Ticketmaster launched the My Ticketmaster web site, they used IPIX images
of stadium and concert venues to allow customers to view their seat location
before purchasing a ticket online. IPIX's corporate and e-commerce customers
either purchase kits to create their own IPIX images or utilize IPIX's in-house
studio to create IPIX images for them.
Education and Entertainment
Leaders in the education and entertainment industries use IPIX images to
enhance the appeal and functionality of their products and web sites. In
particular, these customers provide IPIX significant exposure for its brand and
products. For example, IBM features IPIX images in their 1998 IBM Worldbook
electronic encyclopedia. Also, an IPIX virtual tour of the set of the movie,
Episode I: The Phantom Menace, posted on the www.starwars.com web site helped
promote the film's release. IPIX's education and entertainment clients request
studio work and purchase kits and keys to create their own IPIX images. To
increase its penetration into this market, IPIX has engaged Creative Artist
Agency to serve as its representative to promote and market its technology to
the entertainment industry for a term of two years.
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INTERNATIONAL
Through its operating subsidiary in the United Kingdom and its strategic
relationships with distributors in Japan and Australia, IPIX markets their
technology to international customers. For example, in Europe, its preferred
partners distribute IPIX products to customers in several European countries. In
addition, 13% of IPIX's total revenues for 1998 were derived from sales of
products to Sumitomo Corporation, its Japanese distributor. IPIX believes that
its strategy of targeting commercial markets can be applied on a global scale as
usage of the Internet grows internationally. IPIX intends to continue to seek
new strategic relationships and organize additional operating subsidiaries as it
expands into new global markets.
STRATEGIC RELATIONSHIPS
IPIX is establishing strategic relationships with leading companies to
integrate its technology with other hardware, software and Internet
applications, to continue the development of IPIX enabled digital cameras and to
promote and distribute its products and services to existing and emerging
customer bases.
Technology Relationships
IPIX is working with leading technology companies to increase the
multimedia features of IPIX images and to increase the applications available
for viewing IPIX images. IPIX has entered into an agreement with RealNetworks
and has licensed its viewer software for incorporation into their RealPlayer.
Through this agreement, IPIX intends to integrate its technology into Real
Network's streaming audio and video platform, RealPlayer, enabling users to view
IPIX images, along with other multimedia content. IPIX also has entered into an
agreement with IBM to incorporate IPIX's technology in IBM's HotMedia software.
HotMedia is a Java based software which allows web developers to incorporate
multimedia content into e-commerce applications. One development that may arise
out of this relationship is the ability to include IPIX images within Internet
banner ads. IPIX is an Intel MMX and Pentium technology development partner, and
Intel has featured IPIX images in demonstrations of the capabilities of its
multimedia microprocessor technology.
Digital Camera Manufacturers
IPIX has relationships with leading manufacturers of digital cameras such
as Kodak, Nikon and Olympus. These manufacturers have developed several models
of IPIX-compatible digital cameras. Recently, sales of digital cameras have
grown substantially. IDC forecasts that shipments of digital cameras will grow
from 2.7 million units in 1997 to 29.5 million in 2002, although only a small
number of digital cameras currently in circulation are IPIX compatible. IPIX
intends to continue to work with these manufacturers to enhance the IPIX related
features and increase the availability of these cameras. IPIX also intends to
enhance these relationships to include joint product development, manufacture of
fisheye lenses that are easily adaptable to the digital camera, co-marketing
arrangements and distribution of IPIX's products through the manufacturer's
distribution channels.
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Promotion and Distribution Relationships
IPIX has established relationships with companies that provide technology
to its targeted commercial markets to accelerate awareness and adoption of its
technology. These companies market IPIX images with their own technology
offerings to members of commercial markets. For example, IPIX entered into an
agreement with Microsoft HomeAdvisor, a leading real estate portal site, to
promote IPIX virtual tours on its web site. IPIX also established relationships
with companies to distribute its products internationally. IPIX distributes its
products in Europe through its preferred partner program.
SALES AND MARKETING
IPIX's marketing efforts focus on increasing brand awareness and supporting
its product offerings. Using this strategy, IPIX intends to acquire new
customers, increase repeat purchases of IPIX keys and develop new sales
opportunities. IPIX's marketing efforts include print and Internet advertising,
direct mailings, participation in trade shows, co-marketing with strategic
partners and public relations campaigns. IPIX's sales and marketing team focuses
on commercial markets and targets industry leaders. In addition, IPIX continues
to explore other commercial markets for its technology, such as government
agencies, and has sold IPIX products to TVA, the General Services Administration
and the Tennessee Department of Education. As of September 30, 1999, the direct
sales group consisted of 46 employees who operate out of its Oak Ridge office
and its multiple national and international sales offices.
IPIX also has established a telesales group that targets web developers and
other potential users of its technology outside of its targeted commercial
markets. IPIX's telesales team also provides support for the direct sales teams
and fields inquiries from its web site and its toll-free customer service
number. As of September 30, 1999, IPIX had ten employees on its telesales team
which is based in Oak Ridge, Tennessee.
IPIX maintains a customer relations department with eight employees as of
September 30, 1999. IPIX's customer relations personnel answer telephone and
e-mail inquiries regarding IPIX's products and respond to technical questions.
IPIX's service personnel also perform quality assurance checks on each item of
equipment included in an IPIX kit before the kit is shipped and process customer
service inquiries concerning order status, shipping information, returns and
exchanges.
RESEARCH AND PRODUCT DEVELOPMENT
IPIX has made substantial investments in research and product development.
IPIX continues to develop enhancements to its technology and pursue new product
offerings. In particular, IPIX is pursuing products compatible with the pending
availability of broadband networks and higher resolution cameras. One product in
beta test phase is the IPIX Webcam, which it calls the "Eyes of the Internet."
This technology will permit the remote capture, creation and transmission of
180degrees navigable hemispherical IPIX images over the Internet. Another new
product development is its steerable video technology, V360. When fully
developed, V360 will enable multiple viewers to independently select their own
field of view by navigating within a spherical video image transmitted by a
stationary camera. As of September 30, 1999, IPIX employed 17 engineers
dedicated to research and product development.
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COMPETITION
IPIX competes with companies that offer immersive imaging products and
companies that offer traditional two-dimensional photography. IPIX competes with
these companies on the basis of price, ease of use, picture resolution and end
user experience. Its primary competitors in the immersive imaging market are
Apple Computer, Inc., bamboo.com, Be Here Corporation, Black Diamond, Inc.,
Cyclovision, Inc., iMove Corporation and Live Picture Corporation. IPIX does not
believe any of these companies are dominant in this industry. IPIX also competes
against photography development companies in the traditional two-dimensional
film market. Some of its competitors may have greater financial, marketing,
distribution and technical resources than IPIX. IPIX believes its ease of use
and patented technology are positive factors that enhance its competitive
position. IPIX's success will be dependent on its ability to compete with these
competitors on both a quality and cost-effective basis, and there is no
assurance that it will be successful in that competition.
INTELLECTUAL PROPERTY
IPIX relies on a combination of patent, trade secret and trademark laws and
contractual restrictions to establish and protect proprietary rights in its
products. Its patents are intended to protect and support current and future
development of its technology. In the United States, IPIX has seven issued
patents and 13 patent applications pending. IPIX also has 16 international
patent applications pending. In addition, IPIX licenses related patents and
associated international filings from Motorola under the terms of a non-royalty
bearing license agreement. Motorola has a limited right to license IPIX's
patents, and Motorola's consent must be obtained before IPIX can execute any
grant of an exclusive license to IPIX's patents in excess of one year.
IPIX believes that the ownership of patents is presently a significant
factor in its business. However, IPIX's success depends primarily on the
innovative skills, technical competence and marketing abilities of its
personnel. In addition, there can be no assurance that its current and future
patent applications will be granted, or, if granted, that the claims covered by
the patents will not be reduced from those included in its applications. IPIX
has entered into confidentiality and invention assignment agreements with its
employees and entered into non-disclosure agreements with its suppliers,
distributors and appropriate customers to limit access to and disclosure of its
proprietary information. IPIX must also guard against the unauthorized use or
misappropriation of its technology by third parties. IPIX has experienced
wrongful use in the past, and although it has taken steps to stop that use, it
expects to experience more attempts in the future. There can be no assurance
that the statutory and contractual arrangements will provide sufficient
protection to prevent misappropriation of its technology or deter independent
third-party development of competing technologies.
IPIX pursues the protection of its trademarks in the United States and,
based upon anticipated use, internationally. The laws of some foreign countries
might not protect its products or intellectual property rights to the same
extent as the laws of the United States. Effective patent, trade secret and
trademark protection may not be available in every country in which IPIX markets
or licenses its products.
Claims by third parties that IPIX's current or future products infringe
upon their intellectual property rights may have a material adverse effect on
IPIX. Intellectual property litigation is complex and expensive, and the outcome
of this litigation is difficult
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to predict. IPIX has been involved in litigation relating to the protection of
its intellectual property rights. Any future litigation, regardless of outcome,
may result in substantial expense to IPIX and significant diversion of its
management and technical personnel. An adverse determination in any litigation
may subject IPIX to significant liabilities to third parties, require IPIX to
license disputed rights from other parties, if licenses to these rights could be
obtained, or require IPIX to cease using the technology.
LITIGATION
On October 28, 1998, Minds-Eye-View, Inc. and Mr. Ford Oxaal filed a
lawsuit against IPIX in the United States District Court for the Northern
District of New York. Minds-Eye alleged in its lawsuit that IPIX breached a duty
of confidence to them, made misrepresentations and misappropriated trade
secrets. The plaintiffs alleged that IPIX's technology wrongfully incorporated
trade secrets and other know-how gained from them in breach of various duties.
The court removed this action to arbitration upon IPIX's motion, and IPIX
cross-claimed alleging various affirmative claims, including trade secret theft.
Minds-Eye and Mr. Oxaal filed a motion to dismiss the suit, and the court
dismissed the lawsuit on May 19, 1999. Although the lawsuit was dismissed, the
arbitration will proceed in Knoxville, Tennessee in the spring of 2000 to decide
IPIX's affirmative claims against Mr. Oxaal.
On May 20, 1999, Mr. Oxaal filed a lawsuit against IPIX, Kodak, Nikon and
Cendant in the same court alleging that IPIX's technology infringes upon a
patent claim for 360 degrees spherical visual technology held by him. Mr. Oxaal
claims that this alleged infringement is deliberate and willful and is seeking
treble damages against IPIX in an unspecified amount plus interest, an
accounting by IPIX, costs and attorney's fees, in addition to a permanent
injunction prohibiting the alleged infringement of his patent by IPIX. IPIX will
assert defenses to Mr. Oxaal's claims as it believes it did not infringe any
valid claims of his patent. IPIX believes that Mr. Oxaal's claims are without
merit and it intends to vigorously defend against his claims. If Mr. Oxaal were
to prevail in this lawsuit, IPIX's financial condition, results of operations
and cash flows could be materially adversely affected.
IPIX is not currently a party to any other legal proceedings the adverse
outcome of which, individually or in the aggregate, it believes could have a
material adverse effect on its business, financial condition or results of
operations.
EMPLOYEES
As of September 30, 1999, IPIX employed 160 full-time employees. IPIX's
employees are not covered by any collective bargaining agreements. IPIX believes
that its employee relations are good. There is significant competition for
employees with the managerial, technical, marketing, sales and other skills
required to operate IPIX's business. IPIX's success will depend upon its ability
to attract, retain and motivate employees.
FACILITIES
IPIX leases approximately 38,250 square feet of space in Oak Ridge,
Tennessee for its corporate office and operations. The current lease expires
October 8, 2002. IPIX also leases space in Japan, the United Kingdom, New York,
San Jose and Fort Lauderdale for sales offices.
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DESCRIPTION OF BAMBOO.COM CAPITAL STOCK
GENERAL
bamboo.com's amended and restated certificate of incorporation authorizes
the issuance of up to 70,000,000 shares of common stock (to be increased to
150,000,000 shares subject to shareholder approval at the special meeting), par
value $0.001 per share, 7,421,536 shares of Class B common stock, par value
$0.0001 per share and 5,001,100 shares of preferred stock, par value $0.001 per
share, 1,100 shares of which shall be designated Series C redeemable preferred
stock and 5,000,000 shares the rights and preferences of which may be
established from time to time by the board of directors of bamboo.com. This
description is only a summary. As of December 6, 1999, 22,171,542 shares of
common stock were outstanding. As of December 6, 1999, bamboo.com had 213
shareholders of record. To complete the merger bamboo.com will issue 22,712,598
shares of common stock.
COMMON STOCK
Each holder of common stock is entitled to one vote for each share on all
matters to be voted upon by the shareholders, and there are no cumulative voting
rights. Subject to preferences to which holders of preferred stock issued after
the sale of the common stock offered hereby may be entitled, holders of common
stock are entitled to receive ratably such dividends, if any, as may be declared
from time to time by the board of directors out of funds legally available
therefor. In the event of a liquidation, dissolution or winding up of
bamboo.com, holders of common stock would be entitled to share in bamboo.com's
assets remaining after the payment of liabilities and the satisfaction of any
liquidation preference granted the holders of any then outstanding shares of
preferred stock. Holders of common stock have no preemptive or conversion rights
or other subscription rights and there are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are, and the shares of common stock issued by bamboo.com in connection
with the merger, when issued and paid for, will be, fully paid and
nonassessable. The rights, preferences and privileges of the holders of common
stock are subject to and may be adversely affected by the rights of the holders
of shares of any series of preferred stock, which bamboo.com may designate in
the future.
bamboo.com has outstanding a warrant to purchase an aggregate of 280,000
shares of bamboo.com common shares at an aggregate exercise price of $400,000,
which warrant shall expire December 31, 1999. The shares issuable upon the
exercise of this warrant will be "restricted securities" under the Securities
Act of 1933 but are entitled to the registration rights described below.
CLASS B COMMON STOCK
Each holder of Class B common stock is entitled to one vote for each share
on all matters to be voted upon by the shareholders and, except as required by
law, shall have voting rights and powers equal to the voting rights and powers
of their common stock. There are no cumulative voting rights. Holders of Class B
common stock are not entitled to dividends and are not entitled to receive any
assets of the corporation upon the dissolution or liquidation of bamboo.com.
Under the terms of bamboo.com's pairing agreement with its Canadian subsidiary,
bamboo.com Canada, Inc., holders of Class B common stock must also hold an equal
number of shares of Series C preferred stock of
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bamboo.com Canada, Inc., bamboo.com's subsidiary. These holders may elect at any
time and for no cost to convert their bamboo.com Canada Series C preferred stock
into shares of bamboo.com's common stock. Upon such a conversion, bamboo.com is
required to redeem such holders' shares of its Class B common stock for a
redemption price of $0.0001 per share.
PREFERRED STOCK
The board of directors will be authorized, without shareholder approval,
from time to time to issue up to an aggregate of 5,000,000 shares of preferred
stock, $0.001 par value per share, in one or more series, each of such series to
have such rights and preferences, including voting rights, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be determined by the board of directors. The rights of the holders of common
stock will be subject to, and may be adversely affected by, the rights of
holders of any preferred stock that may be issued in the future.
REGISTRATION RIGHTS
Pursuant to the terms of an Investor Rights Agreement, and the holders of
7,760,202 shares of the outstanding common stock (who were former holders of
Series B convertible preferred stock and Series C redeemable preferred stock) or
their permitted transferees are entitled to rights with respect to the
registration of such shares under the Securities Act. The holders of at least
60% of the registrable securities may require bamboo.com, subject to
limitations, to file a registration statement covering at least 30% of the
registrable securities or any lesser amount of shares if the aggregate gross
offering price of at least $10 million. bamboo.com is not required to effect (i)
more than two such registrations pursuant to such demand registration rights;
(ii) a registration within 60 days following the determination by our board of
directors to file a registration statement; (iii) a registration during the
period in which any other registration statement has been filed or has been
declared effective within the prior six months; or (iv) a registration for a
period not to exceed 90 days, if the board of directors of bamboo.com has made a
good faith determination that such registration would be seriously detrimental
to bamboo.com or to its shareholders. Furthermore, pursuant to the terms of the
Investor Rights Agreement, the holders of the registrable securities are
entitled to piggyback registration rights in connection with any registration by
bamboo.com of its securities for its own account or the account of other
security holders. In the event that bamboo.com proposes to register any shares
of common stock under the Securities Act, the holders of such piggyback
registration rights are entitled to receive notice of such registration and are
entitled to include their shares therein.
At any time after bamboo.com becomes eligible to file a registration
statement on Form S-3, holders of $1,000,000 of registrable securities may
require bamboo.com to file registration statements on Form S-3 under the
Securities Act with respect to their shares of common stock. bamboo.com is not
required to effect more than one such registration in any 12 month period.
Each of the foregoing registration rights is subject to conditions and
limitations, including the right of the underwriters in any underwritten
offering to limit the number of shares of registrable securities to be included
in such registration. The registration rights with respect to any holder thereof
terminate upon the earlier of August 26, 2004 or when the shares held by such
holder may be sold under Rule 144 during any 90 day period.
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bamboo.com is required to bear all of the expenses of all such registrations,
except underwriting discounts and commissions. Registration of any of the
registrable securities would result in such shares becoming freely tradable
without restriction under the Securities Act immediately upon effectiveness of
such registration. The Investor Rights Agreement also contains a commitment of
bamboo.com to indemnify the holders of registration rights, subject to
limitations.
Holders of the shares of common stock issuable upon exercise of the warrant
described above are entitled to piggyback registration rights.
The merger agreement allows the bamboo.com board of directors to grant
registration rights to the holders of Series C Convertible Preferred Stock of
bamboo.com's Canadian subsidiary with respect to the shares of bamboo.com common
stock issuable upon conversion.
EFFECT OF SELECTED PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS,
AND THE DELAWARE ANTITAKEOVER STATUTE
Provisions of bamboo.com's restated certificate of incorporation and bylaws
allow bamboo.com to issue preferred stock without any vote or further action by
the shareholders and eliminate the right of shareholders to act by written
consent without a meeting. These provisions may make it more difficult for
shareholders to take corporate actions and could have the effect of delaying or
preventing a change in control of bamboo.com.
bamboo.com is subject to the provisions of Section 203 of the Delaware
General Corporation Law. Subject to exceptions, Section 203 of Delaware law
prohibits a publicly-held Delaware corporation from engaging in a "business
combination" with an "interested shareholder" for a period of three years after
the date of the transaction in which the person became an interested
shareholder, unless the interested shareholder attained such status with the
approval of the board of directors or unless the business combination is
approved in a prescribed manner.
bamboo.com's restated certificate of incorporation provides that the board
of directors will be divided into three classes of directors, with each class
serving a staggered three-year term. The classification system of electing
directors may tend to discourage a third party from making a tender offer or
otherwise attempting to obtain control of us and may maintain the incumbency of
the board of directors, as the classification of the board of directors
generally increases the difficulty of replacing a majority of the directors.
bamboo.com's restated certificate of incorporation eliminates the right of
shareholders to act by written consent without a meeting and bamboo.com's bylaws
eliminate the right of shareholders to call special meetings of shareholders.
The restated certificate of incorporation does not provide for cumulative voting
in the election of directors. These and other provisions may have the effect of
deferring hostile takeovers or delaying changes in control or management of
bamboo.com. The amendment of any of these provisions would require approval by
the board of directors and holders of at least 66 2/3% of the outstanding common
shares.
BOARD OF DIRECTORS VACANCIES
bamboo.com's bylaws authorize the board of directors to fill vacant
directorships or increase the size of the board of directors. This may deter a
shareholder from removing
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incumbent directors and simultaneously gaining control of the board of directors
by filling the vacancies created by such removal with its own nominees.
SHAREHOLDER ACTION; SPECIAL MEETING OF SHAREHOLDERS
bamboo.com's restated certificate of incorporation provides that
shareholders may act only at duly called annual or special meetings of
shareholders, not by written consent. bamboo.com's bylaws further provide that
special meetings of our shareholders may be called only by the president, chief
executive officer or chairman of the board of directors or a majority of the
board of directors.
ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
bamboo.com's restated bylaws provide that shareholders seeking to bring
business before our annual meeting of shareholders, or to nominate candidates
for election as directors at bamboo.com's annual meeting of shareholders, must
provide timely notice thereof in writing. To be timely, a shareholder's notice
must be delivered to, or mailed and received at, bamboo.com's principal
executive offices not less than 120 days prior to the first anniversary of the
date of notice of annual meeting provided with respect to the previous year's
annual meeting of shareholders' provided, that if no annual meeting of
shareholders was held in the previous year or the date of the annual meeting of
shareholders has been changed to be more than 30 calendar days earlier than such
anniversary, notice by the shareholder, to be timely, must be received before
the solicitation is made. The restated bylaws also specify requirements as to
the form and content of a shareholder's notice. These provisions may discourage
shareholders from bringing matters before bamboo.com annual meeting of
shareholders or from making nominations for directors at the bamboo.com annual
meeting of shareholders.
AUTHORIZED BUT UNISSUED SHARES
bamboo.com's authorized but unissued shares of common stock and preferred
stock are available for future issuance without shareholder approval, subject to
limitations imposed by the NASDAQ National Market. These additional shares may
be utilized for a variety of corporate purposes, including future public
offerings to raise additional capital, corporate acquisitions and employee
benefit plans.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling
bamboo.com, bamboo.com has been informed that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act of 1933 and is therefore unenforceable.
AMENDMENT TO BAMBOO.COM'S
RESTATED CERTIFICATE OF INCORPORATION
bamboo.com is asking its shareholders to approve an amendment to
bamboo.com's restated certificate of incorporation to increase the authorized
number of shares of
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bamboo.com common stock from 70 million shares to 150 million shares. A form of
the amendment is attached as Annex F to this joint proxy statement/prospectus.
This amendment is designed to allow for future stock issuances by bamboo.com for
purposes such as raising funds for general operating purposes, acquisition of
assets or employee incentives. If approved, the amendment to the restated
certificate of incorporation will take effect only if the merger is completed.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the merger, 44,884,140 shares of common stock will be
outstanding. These shares will be freely tradable without restriction under the
Securities Act, except for the shares held by "affiliates" of the combined
company (within the meaning of Rule 144 or Rule 145 promulgated under the
Securities Act). The resale of those shares will be subject to the limitations
of Rule 144 or Rule 145, as applicable. In general, under Rule 144 as currently
in effect, persons who may be deemed affiliates of the combined company or
affiliates of bamboo.com or IPIX prior to the merger would be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of 1% of the then outstanding shares of the combined company's common
stock (approximately 448,841 shares upon completion of the merger) or the
average weekly trading volume during the four calendar weeks preceding a sale by
such person. Sales under Rule 144 are also subject to certain provisions
relating to the manner and notice of sale and availability of current public
information about the combined company. In general, under Rule 145, affiliates
of the combined company (which generally is defined to include affiliates of
bamboo.com and IPIX prior to the merger) would also be subject to the above
restrictions on sales of the combined company's common stock.
In addition, a person or persons whose shares are aggregated who has not
been an affiliate of the combined company at any time during the 90 days
immediately preceding a sale, and who has beneficially owned the shares for at
least two years, would be entitled to sell such shares under Rule 144(k) without
regard to the volume limitation and other conditions described above.
In connection with the initial public offerings of bamboo.com and IPIX,
officers, directors and shareholders of the two companies holding 17,571,542
shares of bamboo.com common stock and 11,625,021 shares of IPIX common stock
entered into lock-up agreements with their underwriters. Under the lock-up
agreements, these officers, directors and shareholders agreed not to offer or
sell any shares of common stock for a period of 180 days after the respective
IPOs without the prior written consent of their underwriters. In order to ensure
that former shareholders of each company will be subject to the same lock-up
period upon consummation of the merger, bamboo.com has obtained the consent of
Prudential Securities, as the representative of the several underwriters, to
shorten the lock-up period applicable to its current shareholders such that the
lock-up periods of both companies will expire substantially concurrently.
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MANAGEMENT OF THE COMBINED COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
It is expected that the board of the combined company at the effective time
will consist of nine persons: James M. Phillips, Laban P. Jackson, Jr., John S.
Hendricks and John Trezevant, each of whom was designated by IPIX; Leonard B.
McCurdy, Kevin B. McCurdy, John Moragne and Philip Sanderson, each of whom is a
director of bamboo.com; and a ninth member mutually agreed upon by the chairmen
of IPIX and bamboo.com. The board of the combined company will be divided into
three classes, with the initial term of office of the first, second and third
classes expiring at the first, second and third annual meetings of the
shareholders of the combined company. The first class of directors will consist
of Philip Sanderson, John Trezevent and John S. Hendricks, the second class will
consist of Leonard B. McCurdy, John Moragne and Laban P. Jackson, Jr., and the
third class will consist of Kevin B. McCurdy, James M. Phillips and the mutually
agreed upon independent director.
Each officer is elected by, and serves at the discretion of, the board of
directors. Each of our officers and directors, other than nonemployee directors,
devotes full time to the affairs of the combined company. Nonemployee directors
devote such time to the combined company's affairs as is necessary to discharge
their duties. There are no close family relationships among any of the
directors, officers or key employees of the combined company except that Leonard
B. McCurdy is the father of Kevin B. McCurdy.
The following persons are expected to be named directors and executive
officers of the combined company as of the effective time. Additional persons
may be designated as executive officers of the combined company prior to
consummation of the merger.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
James M. Phillips................. 47 Chairman of the Board and Chief
Executive Officer
Leonard B. McCurdy................ 52 Vice Chairman of the Board
Laban P. Jackson, Jr.............. 55 Vice Chairman of the Board
Jeffrey D. Peters................. 47 President
John J. Kalec..................... 48 Chief Financial Officer
Mark R. Searle.................... 36 Chief Operating Officer
John S. Hendricks................. 47 Director
Kevin B. McCurdy.................. 25 Director
John Moragne...................... 42 Director
Philip Sanderson.................. 31 Director
John Trezevant.................... 48 Director
</TABLE>
JAMES M. PHILLIPS has been the chairman and chief executive officer of IPIX
since March 1997 and has been a member of IPIX's board of directors since 1995.
From June 1995 to March 1997, Mr. Phillips was corporate vice president of
Motorola, Inc.'s multimedia markets division, a division that manufactures,
markets and sells cable modems and other advanced telecommunications products
and systems. From June 1994 to June 1995, Mr. Phillips was vice president and
general manager for Motorola's personal
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communication systems division, a division that designs, manufactures, markets
and distributes PCS subscriber and infrastructure systems and equipment and
other intelligent devices. Mr. Phillips also serves on the Fogelman School of
Business board of advisors at the University of Memphis and on the Chancellor's
advisory council for enhancement for the University of Tennessee, and as a
director of Tennessee Technology, Inc. and the East Tennessee Economic Council.
Mr. Phillips holds a bachelor's degree and a master's degree in business
administration from the University of Memphis.
LEONARD B. MCCURDY has served as chairman and a member of bamboo.com's
board of directors since its inception. Since January 1999, Mr. McCurdy served
as bamboo.com's chief executive officer. Since 1991, Mr. McCurdy has served as
the President of Lanek Limited, a private investment holding company. Lanek
Limited is a shareholder of bamboo.com. From 1988 to 1991, Mr. McCurdy served as
president and chief executive officer of ISM Information Systems Management
Corporation, a company that provided large technology solutions. Mr. McCurdy is
the father of Kevin B. McCurdy.
LABAN P. JACKSON, JR. has been a director of IPIX since 1989. Since January
1989, Mr. Jackson has served as chairman of Clear Creek Properties, a real
estate development company. Mr. Jackson is a director of BankOne Corporation,
TBN Holdings, Inc. and Gulf Stream Home and Garden, Inc. Mr. Jackson is a
graduate of the United States Military Academy.
JEFFREY D. PETERS joined IPIX in August 1998 and serves as its president
and chief operating officer. From February 1996 to August 1998, Mr. Peters was
vice president/general manager of Eastman Kodak Company's digital imaging group.
From September 1991 to February 1996, Mr. Peters was vice president and general
manager of the semiconductor sector of Harris Corporation. Mr. Peters holds a
bachelor's degree from the University of Michigan and a master's degree in
business administration from the Florida Institute of Technology.
JOHN J. KALEC joined IPIX in August 1998 and serves as vice president and
chief financial officer. From August 1996 to August 1998, Mr. Kalec was chief
financial officer of Clayton Homes, Inc., a company specializing in manufactured
housing headquartered in Knoxville, Tennessee. From January 1996 to August 1996,
Mr. Kalec served as senior vice president of Philips Lighting Americas. From
July 1992 to December 1995, he served as managing director, finance and
accounting for Philips Components International B.V., located in Eindhoven, the
Netherlands. Mr. Kalec holds a bachelor's degree in business administration from
Lewis University and a master's degree in accountancy from DePaul University.
Mr. Kalec is a director of Clayton Homes, Inc.
MARK R. SEARLE joined bamboo.com as chief operating officer in January
1999. From October 1997 to November 1998, Mr. Searle served as the chief
operating officer of Cybergold, Inc., an online incentive marketing company.
From December 1994 to April 1997, Mr. Searle served as the vice president of
operations and chief operating officer of Plynetics Express Corporation, a rapid
prototyping company. From August 1994 to December 1994, Mr. Searle served as a
senior consultant for Deloitte & Touche, LLP. Mr. Searle holds a B.A. in English
and creative writing from Princeton University and a master's degree in business
administration from the Harvard Graduate School of Business.
JOHN S. HENDRICKS has been a director of IPIX since January 1997. Since
1982, Mr. Hendricks has been chairman and chief executive officer of Discovery
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<PAGE> 130
Communications, Inc., a television broadcasting company. He is also a member of
the boards of directors of Excalibur Technologies Corporation, the National
Museum of Natural History, Smithsonian Institution, the James Madison Council,
the Library of Congress, the National Cable Television Association and the
Academy of Television Arts and Sciences. Mr. Hendricks is also a member of the
advisory board of the Lowell Observatory, chairman of the board of trustees of
the Walter Kaitz Foundation and Co-chair for the CEO Forum on Education and
Technology. Mr. Hendricks holds a bachelor's degree and an honorary doctorate
from the University of Alabama.
KEVIN B. MCCURDY founded bamboo.com in November 1995 and has served as an
executive vice president and director of bamboo.com since its inception. From
September 1991 to June 1995, Mr. McCurdy attended Babson College where he earned
a bachelor of science in business administration. Mr. McCurdy is the son of
Leonard B. McCurdy.
JOHN MORAGNE has served as director of bamboo.com since March 1999. Since
May 1993, Mr. Moragne has served as managing director of Trident Capital, a
private equity investment firm. Mr. Moragne is currently a director of DAOU
Systems, Inc., MapQuest.com, Inc. and Newgen Results Corp. Mr. Moragne holds a
bachelor of arts from Dartmouth College, a master of sciences degree from the
Stanford Graduate School of Applied Earth Sciences and a master's degree in
business administration from the Stanford Graduate School of Business.
PHILIP SANDERSON has served as director of bamboo.com since March 1999. Mr.
Sanderson is a partner with Walden Media, L.L.C., a private equity investment
firm. Prior to joining Walden Media, L.L.C., Mr. Sanderson was an associate with
Robertson Stephens, an investment banking firm. Prior to joining Robertson
Stephens, Mr. Sanderson worked in the corporate finance group at Goldman Sachs &
Co., an investment banking firm. Mr. Sanderson holds a bachelor of arts from
Hamilton College and a master's degree in business administration from the
Harvard Graduate School of Business.
JOHN TREZEVANT has been a director of IPIX since December of 1999. Since
1994, Mr. Trezevant has been president of Trezevant Realty Corporation and
general partner of Trezevant Properties.
BOARD COMMITTEES
The audit committee of the board of directors will review the internal
accounting procedures of the combined company and consult with and review the
services provided by our independent accountants. Following the merger, the
audit committee will consist of members appointed by the board of directors.
The compensation committee of the board of directors will review and
recommend to the Board the compensation and benefits of all executive officers
of the combined company, will administer the combined company's stock option
plans and employee stock purchase plan and will establish and review general
policies relating to compensation and benefits of employees of the combined
company. Following the merger, the compensation committee will consist of
members appointed by the board of directors. No interlocking relationships exist
between the board of directors or compensation committee and the board of
directors or compensation committee of any other company.
The company's have agreed to form a nominating committee for the election
of directors in the future. The nominating committee will use its best efforts
for each of the
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next two years to nominate the class of directors whose term is expiring for
reelection. The members of the nominating committee will be appointed by the
board of directors of the combined company.
DIRECTOR COMPENSATION
Directors will not receive cash compensation for their service as members
of the board of directors, although they are reimbursed for expenses in
connection with attendance at board and committee meetings. Additional
compensation is not provided for committee participation or special assignments
of the board of directors. From time to time, the directors of bamboo.com and
IPIX have received and may continue to receive grants of options to purchase
common stock.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation, for the fiscal year
ended December 31, 1998, paid to or accrued by executive officers of bamboo.com
and IPIX who are expected to become executive officers (including the chief
executive officer) of the combined company.
Summary Compensation Table
<TABLE>
<CAPTION>
LONG-TERM
1998 ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------ -----------------------
OTHER ANNUAL RESTRICTED SECURITIES
COMPENSATION STOCK UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) $ AWARDS OPTIONS(#)
- --------------------------- --------- -------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
James M. Phillips........ $383,438 $ -- $214,989(1) -- --
Chairman and Chief
Executive Officer
Leonard B. McCurdy....... 10,109(2) -- 137,643 $34,758 560,000(3)
Vice Chairman of the
Board
Jeffrey D. Peters........ 112,692(4) -- 25,000(5) -- --
President
John J. Kalec............ 62,372(6) -- -- -- --
Chief Financial Officer
Mark R. Searle........... 0(7) -- -- -- --
Chief Operating Officer
</TABLE>
- -------------------------
(1) This amount represents a relocation expense of $190,794 and life insurance
premiums of $24,195 IPIX paid on behalf of Mr. Phillips.
(2) Leonard McCurdy received $10,109 for fees for services rendered to
bamboo.com for fiscal year ended December 31, 1998.
(3) These options and stock were granted to Lanek Limited, an entity affiliated
with Leonard McCurdy.
(4) Annualized salary for 1998 was $300,000.
(5) This amount represents a relocation expense for Mr. Peters.
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<PAGE> 132
(6) Annualized salary for 1998 was $175,000.
(7) Mr. Searle joined bamboo.com in January, 1999.
Option Grants in Last Fiscal Year and the Nine Months ended September 30, 1999
The following table sets forth information with respect to stock options
granted to the named officers in the last fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATE
SECURITIES TOTAL OPTIONS OF STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR THE OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -------------------------------------
GRANTED FISCAL YEAR(1) ($/SH) DATE 0%($) 5%($) 10%($)
---------- -------------- ----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Leonard B.
McCurdy(2)(3)...... 560,000 29.94% $0.002 02/12/08 $3,918,880 $6,384,147 $10,166,350
Jeffrey D.
Peters(4).......... 102,027 19.00% 5.94 (5) -- 1,980,131 2,983,596
John J. Kalec(4)..... 42,511 7.90% 5.94 (6) -- 825,050 1,243,158
</TABLE>
- -------------------------
(1) Assumes increases in the fair market value of the common stock of 5% and 10%
per year from the initial public offering price for bamboo.com's common
stock ($7) and IPIX's common stock ($18) over the terms of the options in
compliance with the rules and regulations of the Securities and Exchange
Commission, and does not represent an estimate or projection of the future
value of the common stock. The actual value realized may be greater or less
than the potential realizable values presented in the table.
(2) These options were granted to Lanek Limited, an entity affiliated with
Leonard McCurdy.
(3) Represents shares of bamboo.com common stock.
(4) Represents shares of IPIX common stock.
(5) Mr. Peters' stock options vest in equal amounts over a three year period and
expire in equal amounts on August 17, 2004, 2005 and 2006.
(6) Mr. Kalec's stock options vest in equal amounts over a three year period and
expire in equal amounts on August 24, 2004, 2005 and 2006.
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<PAGE> 133
The following table sets forth option grants to the named officers of the
combined company for the time period of January 1, 1999 to September 30, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------
NUMBER OF
SECURITIES EXERCISE
UNDERLYING PRICES EXPIRATION
NAME OPTIONS GRANTED ($/SH) DATE
---- --------------- -------- ----------
<S> <C> <C> <C>
James M. Phillips(1).......................... 136,036 $7.70 4/9/09
Leonard B. McCurdy(2)......................... 42,000(3) $0.18 1/1/09
336,000(4) $0.18 2/2/09
Jeffrey D. Peters(1).......................... 34,009 $7.70 4/9/09
John J. Kalec(1).............................. 59,516 $7.70 4/9/09
Mark R. Searle(2)............................. 112,000(5) $0.18 2/2/09
56,000(5) $0.27 4/6/09
</TABLE>
- -------------------------
(1) Represents shares of IPIX common stock.
(2) Represents shares of bamboo.com common stock.
(3) These options were fully exercisable on the date of grant.
(4) These options became fully exercisable upon the completion of bamboo.com's
initial public offering.
(5) 25% of the shares subject to these options became exercisable upon the
completion of bamboo.com's initial public offering.
Fiscal Year-End Option Exercises and Values
The following table provides summary information concerning options
exercised and the value of stock option holdings for the fiscal year ended
December 31, 1998 by each of the named officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON FY-END(#) FY-END($)
EXERCISE VALUE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James M. Phillips(1)(2).... -- -- 579,016 193,005 $8,291,509 $2,763,832
Leonard B.
McCurdy(3)(4)(5)......... 560,000 $137,643 -- -- -- --
Jeffrey D. Peters(1)(2).... -- -- -- 102,027 -- 1,230,446
John J. Kalec(1)(2)........ -- -- -- 42,511 -- 512,683
Mark R. Searle(1).......... -- -- -- -- -- --
</TABLE>
- -------------------------
(1) These officers did not exercise any options in 1998.
(2) Represents shares of IPIX common stock.
(3) Represents shares of bamboo.com common stock.
(4) These options were granted to Lanek Limited, an entity affiliated with
Leonard B. McCurdy.
(5) Mr. McCurdy did not hold any options as of December 31, 1998.
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BAMBOO.COM'S STOCK PLANS
Amended and Restated 1998 Employee, Director and Consultant Stock Plan
Proposed Amendment to the 1998 Stock Plan. The 1998 stock plan provides
for the grant to employees of bamboo.com of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code and for the grant to
employees, directors and consultants of nonstatutory stock options and stock
purchase rights. Up to an initial aggregate amount of 8,179,394 shares of
bamboo.com common stock are authorized to be reserved for issuance under the
1998 Plan. Beginning on the first day of bamboo.com's fiscal year 2000, this
initial aggregate amount may be increased annually by the lesser of 1,400,000
shares, 5% of the outstanding shares on that date, or an amount determined by
the board of directors. The board of directors recommends that the shareholders
approve an amendment to the 1998 stock plan that would increase this permitted
annual increase amount from 1,400,000 shares to 2,800,000 shares in order to
provide a sufficient reserve of shares for option grants to the additional
employees, directors and consultants eligible under the 1998 stock plan as a
result of the merger and for additional grants in the future. Benefits to be
received in the future under the 1998 stock plan as a result of the proposed
amendment are not determinable. A copy of the 1998 stock plan is attached as
Annex H to this joint proxy statement/prospectus.
The board of directors of bamboo.com adopted the 1998 stock plan in
December 1998 and the shareholders of bamboo.com approved the 1998 stock plan in
December 1998. In connection with the initial public offering of bamboo.com, the
board of directors of bamboo.com approved the amendment and restatement of the
1998 plan in July 1999 and the shareholders approved the amendment and
restatement in July 1999.
Number of bamboo.com's Shares of Common Stock Available under the 1998
Stock Plan. As of September 30, 1999, a total of 8,179,394 shares of common
stock were reserved for issuance pursuant to the 1998 stock plan, of which
options to acquire 5,675,886 shares were issued and outstanding as of that date.
The 1998 stock plan provides for annual increases in the number of shares
available for issuance under the 1998 plan, as described above under "Proposed
Amendment to the 1998 Stock Plan."
Administration of the 1998 Stock Plan of bamboo.com. The bamboo.com 1998
stock plan administrator, which is the board of directors of bamboo.com or a
committee of the board, administers the 1998 stock plan. In the case of options
intended to qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Internal Revenue Code, the committee consists of two or
more "outside directors" within the meaning of Section 162(m) of the Internal
Revenue Code. The administrator has the power to determine the terms of the
options or stock purchase rights granted, including the exercise price, the
number of shares subject to each option or stock purchase right, the
exercisability of the options and the form of consideration payable upon
exercise and to select participants for the 1998 stock plan.
bamboo.com's Options. Options granted under the stock plan may be
incentive stock options, or ISOs, that are intended to meet all of the
requirements of an incentive stock option as defined in Section 422 of the
Internal Revenue Code or nonqualified stock options, NQSOs, that are not
intended to so qualify. Each option granted under the stock plan will be
designated as either and ISO or a NQSO in an option agreement entered into
between bamboo.com and the optionee. Each option agreement is subject to the
terms and conditions of the stock plan. The administrator determines the
exercise price of NQSOs granted under the bamboo.com's 1998 stock plan, but with
respect to NQSOs intended to
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<PAGE> 135
qualify as "performance-based compensation" within the meaning of Section 162(m)
of the Internal Revenue Code, the exercise price must be equal to at least the
fair market value of the common stock on the date of grant. With respect to any
participant who owns stock possessing more than 10% of the voting power of all
classes of our outstanding capital stock, the exercise price of any ISO granted
must equal at least 110% of the fair market value on the grant date and the term
of any ISO may not exceed five years. The term of all other options granted
under the 1998 stock plan may not exceed ten years. For purposes of the 1998
stock plan, "fair market value" generally means the closing sales price as
quoted on an established stock exchange or a national market system for the last
market trading day prior to the time of determination. As of December 15, 1999,
the closing sales price reported by the NASDAQ National Market was $16.06 per
share.
After termination of an optionee's status as an employee, director or
consultant of bamboo.com, an optionee generally must exercise an option granted
under the 1998 stock plan within the time period set forth in the optionee's
option agreement, or in the absence of a specified time within 3 months or
within 12 months after the optionee's termination by death or disability, but in
no event later than the expiration of the option's ten year term.
bamboo.com Stock Purchase Rights. bamboo.com stock purchase rights granted
under the 1998 stock plan are granted at the fair market value of bamboo.com's
common stock at the time of grant as determined by the administrator of the 1998
stock plan. Unless the administrator determines otherwise, the restricted stock
purchase agreement entered into in connection with the exercise of the stock
purchase right shall grant bamboo.com a repurchase option that is exercisable
upon the voluntary or involuntary termination of the purchaser's service with
bamboo.com for any reason, including death or disability. The purchase price for
share repurchases pursuant to restricted stock purchase agreements shall be the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to bamboo.com. Any repurchase option shall lapse
at the rate that the administrator determines.
Transferability of bamboo.com Options and Stock Purchase Rights. An
optionee generally may not transfer options and stock purchase rights granted
under the 1998 stock plan, and only the optionee may exercise an option or stock
purchase right during his or her lifetime.
Adjustments upon Merger or Asset Sale or Other Corporate Events. The
bamboo.com 1998 stock plan provides that in the event of a merger of bamboo.com
with or into another corporation or a sale of substantially all of our assets,
the successor corporation shall assume or substitute each option or stock
purchase right. If the outstanding options or stock purchase rights are not
assumed or substituted, the bamboo.com administrator shall provide notice to the
optionee that he or she has the right to exercise the option or stock purchase
right as to all of the shares subject to the option or stock purchase right,
including shares which would not otherwise be exercisable, for a period of
fifteen days from the date of the notice. The bamboo.com option or stock
purchase right will terminate upon the expiration of the fifteen-day period. In
addition, options granted under the bamboo.com 1998 stock plan may provide, and
past grants have provided, for additional vesting in the event of a change of
control of bamboo.com. Upon a stock split, combination or similar corporate
event, the 1998 stock plan provides for appropriate adjustments to the number of
shares authorized under the 1998 stock plan and options outstanding thereunder.
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Amendment and Termination of the bamboo.com 1998 Stock Plan. Unless
terminated sooner, the bamboo.com 1998 stock plan will terminate automatically
in 2008. In addition, the administrator has the authority to amend, suspend or
terminate the bamboo.com 1998 plan, provided that no such action may affect any
share of common stock previously issued and sold or any option previously
granted under the bamboo.com 1998 stock plan.
Federal Tax Consequences. The 1998 stock plan is not subject to any
provision of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and is not qualified under Section 401(a) of the Internal Revenue
Code. The federal income tax consequences to bamboo.com and to any person
granted an option under the 1998 stock plan under the applicable provisions of
the Internal Revenue Code and the regulations promulgated thereunder are
substantially as follows:
NQSOs. No income will be recognized by an optionee upon the grant of an
NQSO. On the exercise of an NQSO, the optionee will generally have ordinary
income in an amount equal to the excess of the fair market value of the shares
acquired over the exercise price of the option. The income recognized by an
optionee who is also an employee of bamboo.com will be subject to tax
withholding. Upon a later sale of the shares, the optionee will have capital
gain or loss in an amount equal to the difference between the amount realized on
the sale and tax basis of the shares held.
bamboo.com will be entitled to tax deduction in the same amount as the
ordinary income recognized by the optionee with respect to shares acquired upon
exercise of an NQSO.
ISOs. No income will be recognized by an optionee upon the grant of an
ISO. Also, the optionee will recognize no income at the time of exercise
(although the optionee will have income for alternative minimum income tax
purposes at that time as if the option were an NQSO) and no deduction will be
allowed to bamboo.com federal income tax purposes in connection the grant or
exercise of the option. If the acquired shares are sold or exchanged after the
later of (a) one year from the date of exercise of the options and (b) two years
from the date of grant of the option, the difference between the amount realized
by the optionee on that sale or exchange and the option price will be taxed to
the optionee as a capital gain or loss. If the shares are disposed of before
such holding period requirements are satisfied, then the optionee will have
ordinary income in the year of disposition equal to the difference between the
exercise price and the lower of the fair market value of the stock at the date
of the option exercise or the sale of the stock and the optionee will have
capital gain or loss in an amount equal to the difference between (1) the amount
realized by the optionee upon the disposition of the shares and (2) the option
price paid by the optionee increased by the amount of ordinary income, if so
recognized by the optionee. bamboo.com will be entitled to a deduction in the
same amount as the ordinary income recognized by the optionee if the shareholder
fails to satisfy the ISO holding period requirements.
Stock Purchase Rights. There will be no federal income tax consequences to
either a participant or bamboo.com upon the grant of a stock purchase right. At
the time that shares acquired under the stock purchase right become transferable
or, if earlier, nonforfeitable, a participant generally will recognize taxable
income equal to the difference between the fair market value of the shares
acquired and the purchase price paid under the stock purchase right and, subject
to Section 162(m) of the Internal Revenue Code and a participant including such
compensation in income and bamboo.com satisfying applicable
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reporting requirements, bamboo.com will be entitled to a corresponding
deduction. Under certain circumstances, however, a participant may elect, within
thirty days after the acquisition of shares under a stock purchase right, to
recognize ordinary income as of the date of acquisition and bamboo.com will be
entitled to a corresponding deduction at that time.
The foregoing is only a summary of the effects of federal income taxation
upon the optionee and bamboo.com with regard to the grant and exercise of
options under the plan. Such summary does not purport to be complete and
reference should be made to the applicable provisions of the Internal Revenue
Code.
bamboo.com's 1999 Employee Stock Purchase Plan.
Proposed Amendment to the Purchase Plan. The purchase plan described below
provides employees of bamboo.com the opportunity to purchase, initially, up to
an aggregate of 700,000 shares of bamboo.com common stock. Beginning on the
first day of bamboo.com's fiscal year 2000, this initial aggregate amount may be
increased annually by the lesser of 700,000 shares, 2.5% of the outstanding
shares on that date, or an amount determined by the board of directors. The
board of directors recommends that the shareholders approve an amendment to the
purchase plan that would increase this permitted annual increase amount from
700,000 shares to 1,400,000 shares in order to provide a sufficient reserve of
shares for share purchases by the additional employees who will become eligible
under the purchase plan as a result of the merger. Benefits to be received in
the future under the purchase plan as a result of the proposed amendment are not
determinable.
The bamboo.com board of directors adopted the 1999 employee stock purchase
plan in June 1999, and the shareholders approved the purchase plan in July 1999.
A copy of the purchase plan is attached as Annex G to this joint proxy
statement/prospectus.
Number of Shares of bamboo.com Common Stock Available under the Purchase
Plan. A total of 700,000 shares of bamboo.com common stock has been reserved for
issuance under the purchase plan. In addition, the purchase plan provides for
annual increases in the number of shares available for issuance under the
purchase plan on the first day of each fiscal year of bamboo.com, beginning with
fiscal year 2000, as described in the preceding paragraph.
Administration of the bamboo.com Purchase Plan. The bamboo.com board of
directors, or a committee appointed by the board, administers the purchase plan.
The board or its committee has full and exclusive authority to interpret the
terms of the purchase plan and determine eligibility.
Eligibility to Participate. bamboo.com employees are eligible to
participate if they are customarily employed by bamboo.com or its subsidiary for
at least 20 hours per week over five months in any calendar year. However, an
employee may not be granted an option to purchase stock under the purchase plan
if such an employee:
- immediately after the grant owns stock possessing 5% or more of the total
combined voting power or value of all classes of the capital stock of
bamboo.com, or
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- owns rights to purchase stock under all employee stock purchase plans of
bamboo.com accruing at a rate exceeding $25,000 worth of stock for each
calendar year.
Offering Periods and Contributions. The bamboo.com purchase plan, which is
intended to qualify under Section 423 of the Internal Revenue Code, contains
consecutive, overlapping 24 month offering periods. Each offering period
includes four 6 month purchase periods. The offering periods generally start on
the first trading day on or after May 1 and November 1 of each year, except for
the first such offering period which commenced on the first trading day on or
after the effective date of the initial public offering and ends on the last
trading day on or before April 30, 2001.
The bamboo.com purchase plan permits participants to purchase common stock
through payroll deductions of up to 15% of the participant's "compensation."
Compensation is defined as the participant's base straight time gross earnings
and commissions but excludes payments for overtime, shift premium payments,
incentive compensation, incentive payments, bonuses and other compensation. The
maximum number of shares a participant may purchase during a single offering
period is 10,000 shares.
Purchase of bamboo.com Shares. Amounts deducted and accumulated by the
participant are used to purchase shares of bamboo.com common stock at the end of
each offering period. The price of the stock purchased under the purchase plan
is 85% of the lower of the fair market value of the common stock at the
beginning of the offering period or the end of the applicable purchase period.
In the event the fair market value at the end of a purchase period is less than
the bamboo.com fair market value of the common stock at the beginning of the
offering period, participants will be withdrawn from the current offering period
and will automatically be re-enrolled in a new offering period. For purposes of
the purchase plan, "fair market value" generally means the closing sales price
as quoted on an established stock exchange or a national market system for the
last market trading day prior to the time of determination. As of December 15,
1999, the closing sales price reported by the NASDAQ National Market was $16.06
per share. Participants may end their participation at any time during an
offering period, and they will be paid their payroll deductions to date.
Participation ends automatically upon termination of employment with bamboo.com.
Transferability of Rights. A participant may not transfer rights granted
under the purchase plan other than by will, the laws of descent and distribution
or as may be otherwise provided under the purchase plan.
Adjustments upon Merger or Asset Sale of bamboo.com. The bamboo.com
purchase plan provides that, in the event of a merger of bamboo.com with or into
another corporation or a sale of substantially all of our assets, the successor
corporation may assume or substitute for each outstanding right to purchase
shares of bamboo.com common stock under the purchase plan. If the successor
corporation refuses to assume or substitute for the outstanding options, the
offering period then in progress will be shortened, and a new exercise date will
be set.
Amendment and Termination of the Purchase Plan. The bamboo.com 1999
purchase plan will terminate in 2009. However, the board of directors has the
authority to amend or terminate the purchase plan, except that, subject to the
exceptions described in the purchase plan, no such action may adversely affect
any outstanding rights to purchase stock under the purchase plan.
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<PAGE> 139
New Plan Benefits. Benefits to be received in the future under the
purchase plan are not currently determinable.
Federal Income Tax Consequences. The purchase plan is not subject to any
provision of ERISA, and is not qualified under Section 401(a) of the Internal
Revenue Code. The federal tax consequences to any participant under the purchase
plan and to bamboo.com under the applicable provisions of the Internal Revenue
Code and the regulations promulgated thereunder are substantially as follows:
A participant will not realize taxable income upon the grant of an option
to purchase shares or upon the purchase of shares under the purchase plan.
If a participant disposes of shares acquired under the purchase plan, the
amount of ordinary income, capital gains or capital loss realized will depend on
the holding period of the shares. Under current federal law, the applicable
capital gain rate is determined by the amount of time the shares were held by
the participant.
If the participant disposes of shares acquired under the purchase plan more
than one year after the shares have been transferred and more than two years
after the date of grant, any gain from the sale generally will be long-term
capital gain.
If the shares acquired are disposed of within either of the holding periods
described above (a "Disqualifying Disposition"), the participant will realize
ordinary income equal to the excess of the fair market value of the shares on
the date of purchase pursuant to the purchase plan over the purchase price. This
excess is taxed as ordinary income even if the shares are sold at a loss. In
addition, the participant will have capital gain or loss measured by the
difference between (i) the sale price and (ii) the purchase price plus the
amount of ordinary income recognized.
bamboo.com generally is not entitled to an income tax deduction when any
participant exercises an option to purchase a share under the purchase plan or
upon the subsequent disposition of any such share. If the disposition is a
Disqualifying Disposition, bamboo.com will be entitled to an income tax
deduction in the year of such disposition in an amount equal to the amount of
ordinary income recognized by the participant as a result of such disposition
subject to the participant including such amount in income and bamboo.com
satisfying applicable reporting requirements.
The foregoing is only a summary of the effects of federal income taxation
upon the participant and bamboo.com with regard to the grant and purchase of
shares under the purchase plan. Such summary does not purport to be complete and
reference should be made to the applicable provisions of the Internal Revenue
Code.
IPIX 1997 EQUITY COMPENSATION PLAN
IPIX's 1997 Equity Compensation Plan (as amended) was originally adopted by
the board of directors in November 1997, and was approved by its shareholders in
December 1997. The plan provides for the grant of incentive and nonqualified
options to purchase up to an aggregate of 1,998,559 shares of IPIX common stock
to employees, officers, directors, consultants and independent contractors of
the company or any of its affiliates. The board of directors has adopted a
resolution recommending that the shareholders approve an amendment to the plan
that would increase by 1,000,000 the number of shares that may be issued under
the plan. The board believes that the number of shares remaining available for
issuance will be insufficient to achieve the purpose of the plan over
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<PAGE> 140
the term of such plan unless the additional shares are authorized. A copy of the
plan as amended is attached as Appendix I to this joint proxy
statement/prospectus.
Purpose. The purpose of the plan is to enhance the long-term profitability
and shareholder value of IPIX by offering an opportunity to invest in our
capital stock to those employees, officers, directors, consultants and advisors
who are key to the growth and success of IPIX, to encourage them to continue to
provide services to IPIX and its subsidiary and to encourage them to acquire and
maintain stock ownership in IPIX.
Administration. The plan may be administered by IPIX's board of directors
or by a committee of the board of directors. All members of the committee serve
at the discretion of the board of directors. The committee is authorized to
administer and interpret the plan, subject to its express provisions, and to
make all determinations necessary or advisable for the administration of the
plan.
The plan provides that the board of directors has the authority to
determine from time to time the eligible participants to whom stock options are
to be granted, the number of shares of common stock for which options are
exercisable and the purchase price of the shares, and all other terms and
conditions of the options.
Shares Subject to the Plan. The plan authorizes the granting of options to
purchase up to 2,998,559 shares of IPIX's common stock. The number of shares may
be adjusted. As of October 31, 1999, options to purchase 2,016,778 shares of
IPIX's common stock had been granted under the plan. Considering all options to
purchase IPIX shares, options to purchase 1,518,910 shares are currently
exercisable. If options expire or are terminated for any reason without being
exercised, the shares of IPIX's common stock subject to these options again will
be available for grant.
Types of Options. Options granted under the plan may be incentive stock
options, or ISOs, that are intended to meet all of the requirements of an
incentive stock option as defined in Section 422 of the Internal Revenue Code or
nonqualified stock options, NQSOs, that are not intended so to qualify. Each
option granted under the plan must be evidenced by an agreement duly executed on
behalf of IPIX. Each agreement will comply with and be subject to the terms and
conditions of the plan. Any agreement may contain such other terms, provisions
and conditions not inconsistent with the plan as may be determined by the
committee.
Limitations. During any calendar year, an optionee may not receive options
to purchase IPIX common stock for more than 25% of the total number of shares of
common stock reserved under the plan. Each ISO provides that, if the aggregate
fair market value (as defined below) of the shares on the date of grant with
respect to which the ISOs are exercisable for the first time by the optionee
during any calendar year, under the plan, exceeds $100,000, then the option, as
to the excess, shall be treated as an NQSO. An ISO may not be granted to any
person who is not an employee of IPIX. If and to the extent that an option
designated as an ISO fails to qualify under the Internal Revenue Code, the
option will remain outstanding according to its terms as an NQSO.
Persons who May Participate. All employees of IPIX, including employees
who are officers or members of the IPIX board of directors, and members of the
board of directors who are not employees shall be eligible to participate in the
plan. Consultants and advisors who perform services to IPIX are eligible to
participate in the plan if they render bona fide services and the services are
not in connection with the offer or sale of securities in a capital-raising
transaction. The committee determines the number of shares that will be
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<PAGE> 141
subject to each grant of options to employees, directors, officers, consultants
and advisors, subject to approval of the board of directors with respect to
options granted to non-employee directors and members of the committee.
Terms and Conditions of Options. The price at which shares may be
purchased upon exercise of an option shall be fixed by the committee, in its
sole discretion. The option price of an NQSO may be greater than, equal to or
less than the fair market value of the underlying IPIX shares of common stock on
the date of grant. The option price of any ISO granted under the plan will not
be less than the fair market value of the underlying IPIX shares of common stock
on the date of grant. The committee will also determine the term of each option;
provided that the exercise period may not exceed ten years from the date of
grant. The price of an ISO granted to a person who owns more than 10% of our
stock must be at least equal to 110% of the fair market value of IPIX common
stock on the date of grant, and the ISO's term may not exceed five years. For
purposes of the plan, "fair market value" means the last reported sale price of
the stock on the relevant date as reported by the NASDAQ National Market, or if
there were no trades on that date, the latest preceding date upon which a sale
was reported. As of December 15, 1999, the closing sale price reported by the
NASDAQ National Market was $23.69 per share. An optionee may pay the exercise
price in cash, by delivering shares of IPIX common stock already owned by the
optionee and having a fair market value on the date of exercise equal to the
option price, or by any other method as the committee may approve. The optionee
must pay to IPIX applicable withholding taxes upon exercise of the option as a
condition to receiving the shares. The committee may impose vesting and other
conditions on options as the committee deems appropriate. Options may be
exercised while the optionee is an employee, officer, director, consultant or
advisor or within the following specified periods after termination of the
optionee's employment or services.
If the optionee ceases to be employed or provide service to IPIX for any
reason other than "death," "disability," or "termination for cause," as those
terms are defined in the plan, any option which is otherwise exercisable will
terminate unless exercised within ninety (90) days of the date on which the
optionee ceases to be employed by or provide service to IPIX, but in any event
no later than the date of expiration of the option term.
If the optionee is terminated for cause, any option held by the optionee
will terminate as of the date the optionee ceases to be employed by, or provide
service to, IPIX. If the optionee becomes disabled, any option held by the
optionee which is otherwise exercisable will terminate unless exercised within
one year after the date on which the optionee ceases to be employed by or
provide service to, IPIX, but in any event no later than the date of expiration
of the option term. If the optionee dies, or dies within ninety (90) days after
the date on which the optionee ceases to be employed, or provide service, to
IPIX for a termination of employment or service for any reason other than
"death," "disability," or "termination for cause," any option held by the
optionee which is otherwise exercisable will terminate unless exercised within
one year after the date on which the optionee ceases to be employed by or
provide service to, IPIX, but in no event no later than the date of expiration
of the option term. Any of the optionee's options that are not otherwise
exercisable as of the date on which the optionee ceases to be employed by or
provide service to IPIX shall terminate as of that date.
Amendment and Termination. IPIX's board of directors may terminate or
amend the plan at any time, provided that it has shareholder approval, if
approval is required under the terms of the plan. No termination or amendment of
the plan will adversely effect the rights of any optionee under an option
previously granted unless the optionee
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consents or the grant is contrary to law. The committee may accelerate the
exercisability on any or all outstanding options at any time for any reason. The
plan will terminate on the day immediately preceding the tenth anniversary of
its effective date unless terminated either by the board of directors or unless
extended by the board of directors with approval of the shareholders of IPIX.
Adjustments. In the event of any change in the common stock of IPIX by
reason of a stock dividend, spin-off, recapitalization, stock split, or
combination or exchange of shares, by reason of a merger, consolidation or
reorganization in which IPIX is the surviving corporation, by reason of a
reclassification or change in par value, or by reason of any extraordinary or
unusual event affecting the outstanding common stock of IPIX, options which are
granted that have not been exercised will be appropriately adjusted. An
optionee, at the time of the change will be entitled, upon exercise of the
option, to the same number of shares and class of common stock as if the option
had been exercised prior to the change in common stock.
Nontransferability. The options are exercisable during the lifetime of the
optionee only by the optionee or his or her authorized representative. An
optionee may not transfer the options except by will or by the laws of descent
and distribution or, with respect to NQSOs, if the committee permits.
Change of Control. In the event of a change of control (as defined in the
plan), any outstanding options will become fully exercisable, unless the
committee determines otherwise. If a merger takes place where IPIX is not the
surviving corporation, all outstanding IPIX options will be assumed or replaced
with comparable options. The committee may require that optionees surrender
their outstanding options in the event of a change of control and receive a
payment in cash or common stock equal to the amount by which the fair market
value of the shares subject to the options exceeds the exercise price of the
options.
Federal Tax Consequences. The federal income tax consequences to IPIX and
to any person granted an option under the plan under the applicable provisions
of the Internal Revenue Code 1986 and the regulations thereunder are
substantially as follows:
NQSOs. No income will be recognized by an optionee upon the grant of an
NQSO. On the exercise of an NQSO, the optionee will generally have ordinary
income in an amount equal to the excess of the fair market value of the shares
acquired over the exercise price of the option. The income recognized by an
optionee who is also an employee IPIX will be subject to tax withholding. Upon a
later sale of the shares, the optionee will have capital gain or loss in an
amount equal to the difference between the amount realized on the sale and tax
basis of the shares held.
IPIX will be entitled to tax deduction in the same amount as the ordinary
income recognized by the optionee with respect to shares acquired upon exercise
of an NQSO.
ISOs. No income will be recognized by an optionee upon the grant of an
ISO. Also, the optionee will recognize no income at the time of exercise
(although the optionee will have income for alternative minimum income tax
purposes at that time as if the option were an NQSO) and no deduction will be
allowed to IPIX for federal income tax purposes in connection with the grant or
exercise of the option. If the acquired shares are sold or exchanged after the
later of (a) one year from the date of exercise of the options and two years
from the date of grant of the option, the difference between the amount realized
by the optionee on that sale or exchange and the option, the difference between
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the amount realized by the optionee on that sale or exchange and the option
price will be taxed to the optionee as a capital gain or loss. If the shares are
disposed of before such holding period requirements are satisfied, then the
optionee will have ordinary income in the year of disposition equal to the
difference between the exercise price and the lower of the fair market value of
the stock at the date of the option exercise or the sale of the stock and the
optionee will have capital gain or loss in an amount equal to the difference
between (i) the amount realized by the optionee upon that disposition of the
shares (ii) the option price paid by the optionee increased by the amount of
ordinary income, if any, so recognized by the optionee. IPIX will be entitled to
a deduction in the same amount as the ordinary income recognized by the optionee
if the shareholder fails to satisfy the ISO holding period requirements.
The foregoing is only a summary of the effects of federal income taxation
upon the optionee and IPIX with regard to the grant and exercise of options
under the plan. Such summary does not purport to be complete and reference
should be made to the applicable provisions of the Internal Revenue Code.
BAMBOO.COM'S EMPLOYMENT AGREEMENTS
Leonard B. McCurdy. Mr. McCurdy's employment agreement expires on December
31, 2000 and is renewable automatically for one year periods unless terminated
by us or Mr. McCurdy. Mr. McCurdy receives an annual base salary of $280,000. In
the event that Mr. McCurdy is constructively or actually terminated without
cause, he shall be entitled to severance equal to one-twelfth of his annual base
salary as of the date of termination per month for a period of 12 months and
one-twelfth of his housing allowance. Such payment will be made in a lump sum if
he is terminated within two years of a change in control. In addition, under the
terms of his option agreement under our 1998 stock plan, 25% of the shares
subject to an option which he holds shall vest if he is terminated without
cause. Under the terms of his option agreement under our 1998 stock plan, upon a
change in control, 25% of shares subject to an option which he holds shall vest.
The agreement provides that in the event that any payment or benefit by us to
Mr. McCurdy is determined to be subject to the golden parachute excise tax
rules, Mr. McCurdy shall be entitled to reimbursement by us in an amount
sufficient to pay the excise tax and any applicable federal and state income
taxes on such reimbursement. Upon completion of the merger, Mr. McCurdy will
cease to be a full-time employee and will serve as a director of and advisor to
the combined company.
Mark R. Searle. Mr. Searle's employment agreement is not for a specified
period and constitutes at-will employment. Mr. Searle receives an annual base
salary of $230,000. In the event that Mr. Searle is constructively or actually
terminated without cause, he shall be entitled to severance pay equal to 20% of
his annual base salary, and 25% of his outstanding options will vest under the
terms of his option agreement.
IPIX EMPLOYMENT AGREEMENTS
IPIX has entered into employment agreements with the following named
officers:
James M. Phillips. Mr. Phillips' employment agreement expires on
December 31, 2001 and is renewable automatically for one year periods
unless terminated by IPIX or Mr. Phillips. Mr. Phillips receives an annual
salary of $386,250 and is eligible for a performance based bonus. IPIX may
terminate Mr. Phillips' employment agreement with or without cause;
however, if IPIX terminates the
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agreement without cause, Mr. Phillips is entitled to a severance payment of
$1,000,000.
Jeffrey D. Peters. Mr. Peters' employment agreement continues
indefinitely unless terminated by IPIX or Mr. Peters. Mr. Peters receives
an annual salary of $300,000 and is eligible for a performance based annual
bonus. IPIX may terminate Mr. Peters' employment agreement with or without
cause; however, if IPIX terminates the agreement without cause, Mr. Peters
is entitled to a severance payment equal to one year's salary.
John J. Kalec. Mr. Kalec's employment agreement continues
indefinitely unless terminated by IPIX or Mr. Kalec. Mr. Kalec receives an
annual salary of $175,000 and is eligible for a performance based annual
bonus. IPIX may terminate Mr. Kalec's employment agreement with or without
cause; however, if IPIX terminates the agreement without cause before
August 24, 2000, Mr. Kalec is entitled to a severance payment of $175,000.
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PRINCIPAL SHAREHOLDERS OF BAMBOO.COM
The following table sets forth information with respect to beneficial
ownership of bamboo.com common stock, as of December 6, 1999 and the pro forma
beneficial ownership of the combined company's common stock after completion of
the merger, by:
- each person known by bamboo.com to beneficially own more than 5% of the
common stock;
- each director of bamboo.com;
- certain executive officers of bamboo.com; and
- all directors and executive officers of bamboo.com as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. The address for each listed director and officer is
c/o bamboo.com, Inc., 124 University Avenue, Palo Alto, California 94304. Except
as indicated by footnote, and subject to applicable community property laws, the
persons named in the table have sole voting and investment power with respect to
all shares of common stock shown as beneficially owned by them. The number of
shares of common stock outstanding used in calculating the percentage for each
listed person is based on 22,171,542 shares of common stock outstanding and
1,007,533 shares of common stock underlying options or warrants that are
exercisable within 60 days of December 6, 1999, but excludes shares of common
stock underlying options held by any other persons. Percentage of beneficial
ownership prior to the merger is based on 22,171,542 shares of bamboo.com common
stock outstanding as of December 6, 1999 and 16,590,649 shares of IPIX common
stock outstanding.
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<TABLE>
<CAPTION>
SHARES OF BAMBOO.COM BENEFICIALLY OWNED
------------------------------------------------
PRE-MERGER POST-MERGER
------------------------ ---------------------
PERCENT PERCENT
NUMBER % NUMBER %
----------- ------- ---------- --------
<S> <C> <C> <C> <C>
Funds affiliated with Trident
Capital
John Moragne(1)
2480 Sand Hill Road
Menlo Park, CA 94025.............. 2,410,884(2) 10.87% 2,410,884 5.37%
Funds affiliated with Walden Media
and Information Technology Fund,
L.P.
Philip Sanderson(3)
750 Battery Street, 7th Floor
San Francisco, CA 94025........... 2,049,251(4) 9.24 2,049,251 4.57
Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052............. 1,205,440 5.44 1,205,440 2.69
Funds affiliated with Vantage Point
Venture Partners III, L.P.
101 Bayhill Drive, Suite 100
San Bruno, CA 94025............... 1,137,120(5) 5.13 1,137,120 2.53
Lanek Limited
Leonard B. McCurdy................ 2,366,000(6) 10.49 2,366,000 5.23
Kevin B. McCurdy.................... 1,430,800(7) 6.40 1,430,800 3.17
Howard Field........................ 1,797,245 8.11 1,797,245 4.00
Duncan Fortier...................... 484,400(8) 2.18 484,400 1.08
Randall I. Bresee................... 52,500 0.24 105,000 0.23
Andrew P. Laszlo.................... 665,000(9) 2.97 665,000 1.47
Mark R. Searle...................... 100,333(10) 0.45 140,000 0.31
All directors and executive officers
as a group (13) persons).......... 14,149,867(11) 63.09 14,275,634 31.60
</TABLE>
- -------------------------
* Represents beneficial ownership of less than one percent of the common
stock.
(1) Mr. Moragne, a director of bamboo.com, is a member of Trident Capital
Management-II, L.L.C., the general partner of Information Associates-II,
L.P. Mr. Moragne is also a member of IA-II Affiliates Fund, L.L.C. Mr.
Moragne disclaims beneficial ownership of the shares held by Information
Associates-II, L.P. and IA-II Affiliates Fund, L.L.C., except to the extent
of his pecuniary interest therein.
(2) Represents 2,277,996 shares held by Information Associates-II, L.P. and
132,888 shares held by IA-II Affiliates Fund L.L.C.
(3) Mr. Sanderson, a director of bamboo.com, is a partner of Walden Media,
L.L.C., the General Partner of Walden Media and Information Technology
Fund, L.P. and an affiliate of Walden Japan Partners, L.P., and Walden EDB
Partners, L.P. and disclaims beneficial ownership of the shares held by
Walden Media and Information Technology Fund, L.P., Walden Japan Partners,
L.P., and Walden EDB Partners, L.P. except to the extent of his
proportionate ownership interest therein.
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(4) Represents 1,856,381 shares held by Walden Media and Information Technology
Fund, L.P., 96,435 shares held by Walden Japan Partners, L.P., and 96,435
shares held by Walden EDB Partners, L.P.
(5) Represents 758,078 shares held by VantagePoint Venture Partners III, LP and
379,042 shares held by VantagePoint Communications Partners, LP.
(6) Represents 1,971,200 shares held by Lanek Limited, a five percent
shareholder and affiliate of Leonard McCurdy, chairman of bamboo.com's
board of directors and its chief executive officer, and 378,000 shares of
bamboo.com common stock beneficially owned as a result of options held by
Leonard McCurdy and Lanek Limited exercisable within 60 days of December 6,
1999.
(7) Includes 198,800 shares of bamboo.com common stock beneficially owned as a
result of options exercisable within 60 days of December 6, 1999.
(8) Includes 350,000 shares held by Jascan Investments Corporation, an entity
affiliated with Mr. Fortier and 92,400 shares of bamboo.com common stock
beneficially owned as a result of options exercisable within 60 days of
December 6, 1999.
(9) Includes 238,000 shares of bamboo.com common stock beneficially owned as a
result of options exercisable within 60 days of December 6, 1999.
(10) Includes 100,333 shares of bamboo.com common stock beneficially owned as a
result of options exercisable within 60 days of December 6, 1999.
(11) Includes options to purchase shares of bamboo.com common stock issued to
Mr. Assaraf of which up to 75,600 are exercisable within 60 days of
December 6, 1999. Also includes options to purchase shares of bamboo.com
common stock issued to Mr. Aicklen of which 180,694 are exercisable within
60 days of December 6, 1999 and 21,000 shares of common stock beneficially
held by Mr. Aicklen.
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PRINCIPAL SHAREHOLDERS OF IPIX
The following table sets forth information with respect to beneficial
ownership of IPIX common stock, as of December 6, 1999 and the pro forma
beneficial ownership of the combined company's common stock after completion of
the merger, of:
- each person known by IPIX to beneficially own more than 5% of the common
stock;
- each director of IPIX;
- named executive officers of IPIX; and
- all directors and executive officers of IPIX as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. The address for each listed director and officer is
1009 Commerce Park Drive, Oak Ridge, Tennessee 37830. Except as indicated by
footnote, and subject to applicable community property laws, the persons named
in the table have sole voting and investment power with respect to all shares of
common stock shown as beneficially owned by them. The number of shares of common
stock outstanding used in calculating the percentage for each listed person
includes the shares of IPIX common stock underlying options or warrants that are
exercisable within 60 days of December 6, 1999, but excludes shares of common
stock underlying options held by any other persons. Percentage of beneficial
ownership prior to the merger is based on 16,590,649 shares of IPIX common stock
outstanding as of December 6, 1999.
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<TABLE>
<CAPTION>
SHARES OF IPIX BENEFICIALLY OWNED
-------------------------------------------
PRE-MERGER POST-MERGER
-------------------- --------------------
PERCENT PERCENT
NUMBER % NUMBER %
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Dr. H. Lee Martin........................ 2,257,178(1) 13.6% 3,090,077 6.9%
1020 Commerce Park Drive
Oak Ridge, TN 37830
Motorola, Inc............................ 2,079,462(2) 12.5 2,846,783 6.3
1303 East Algonquin Rd.
Schamburg, IL 60196
MediaOne Interactive Services, Inc....... 1,427,304(3) 8.6 1,953,979 4.4
188 Inverness Drive West
Englewood, CO 80112
GE Capital Equity Investments, Inc....... 1,119,029 6.7 1,531,951 3.4
120 Long Ridge Road
Stamford, CT 06927
Advance Publications, Inc................ 988,479 6.0 1,353,228 3.0
30 Journal Square
Jersey City, NJ 07306
James M. Phillips........................ 772,021(4) 4.4 1,056,897 2.3
Jeffrey D. Peters........................ 76,521(5) * 104,757 *
John J. Kalec............................ 59,516(6) * 81,478 *
John M. Murphy........................... 66,435(7) * 90,950 *
Steven D. Zimmermann..................... 394,736 2.4 540,393 1.2
John S. Hendricks........................ 424,399(8) 2.6 581,003 1.3
Laban P. Jackson, Jr..................... 171,269(9) 1.0 234,467 *
All directors and executive officers as a
group.................................. 2,234,936(10) 12.6 3,059,628 6.6
</TABLE>
- -------------------------
* Less than one percent
(1) Includes 131,309 shares owned by the H. Lee Martin Irrevocable Trust No. 2.
(2) Includes 5,669 shares of IPIX common stock issuable upon the exercise of
stock options.
(3) Includes 5,669 shares of IPIX common stock issuable upon the exercise of
stock options.
(4) Includes 772,021 shares of IPIX common stock issuable upon the exercise of
stock options.
(5) Includes 68,019 shares of IPIX common stock issuable upon the exercise of
stock options.
(6) Includes 42,511 shares of IPIX common stock issuable upon the exercise of
stock options.
(7) Includes 65,185 shares of IPIX common stock issuable upon the exercise of
stock options.
(8) Includes 5,669 shares of IPIX common stock issuable upon the exercise of
stock options. Also includes 81,591 shares of IPIX common stock held by
Hendricks Family Investments, LLC. Also includes 337,139 shares of IPIX
common stock held
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by Discovery Communications, Inc., of which Mr. Hendricks is chairman and
chief executive officer, to which he disclaims all beneficial ownership.
(9) Includes 22,674 shares of IPIX common stock issuable upon the exercise of
stock options.
(10) Includes 1,173,899 shares of IPIX common stock issuable upon the exercise
of stock options and 81,591 and 337,139 shares of IPIX common stock held by
Hendricks Family Investments, LLC and Discovery, respectively.
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BAMBOO.COM RELATED PARTY TRANSACTIONS
Since January 1, 1998, some of bamboo.com directors, executive officers and
affiliates have entered into transactions with bamboo.com as follows:
<TABLE>
<CAPTION>
DATE OF PRICE PER NUMBER OF
NAME PURCHASE TYPE OF SECURITY SECURITY REF. SECURITIES
---- --------- ---------------- --------- ---- ----------
<S> <C> <C> <C> <C> <C>
Jane McCurdy(1).................... 3/31/1998 Common Stock $ 0.25 (9) 2,800
Kristy McCurdy(1).................. 3/31/1998 Common Stock 0.25 (9) 2,800
4/8/1998
Common Stock 0.25 (9) 15,400
Howard Field....................... 2/12/1998 Common Stock 0.25 (9) 140,000
2/12/1998
Option to purchase:
Common Stock 280,000
3/31/1998
Common Stock 0.25 (9) 36,400
3/31/1998
Common Stock 0.25 (9) 168,000
4/8/1998
Common Stock 0.25 (9) 15,400
5/31/1998
Option to purchase:
Common Stock 112,000
6/28/1998
Common Stock units(4) 0.24 (9) 35,000
9/25/1998
Option exercise into:
Common Stock 392,000
12/12/1998
Warrant exercise into:
Common Stock 0.24 (9) 35,000
1/1/1999
Option to purchase:
Common Stock 0.18 51,445
2/2/1999
Option to purchase:
Common Stock 0.18 168,000
9/10/1999
Option exercise into:
Common Stock 0.18 56,000
9/10/1999
Sales of Common Stock 7.00 (56,000)
9/15/1999
Option exercise into:
Common Stock 0.18 163,445
Lanek Limited(2)................... 2/12/1998 Common Stock 0.25 (9) 140,000
2/12/1998
Option to purchase:
Common Stock 560,000
3/31/1998
Common Stock 0.25 (9) 361,200
6/28/1998
Common Stock units(4) 0.24 (9) 70,000
9/25/1998
Option exercise into:
Common Stock 560,000
12/12/1998
Warrant exercise into:
Common Stock 0.24 (9) 70,000
1/1/1999
Option to purchase:
Common Stock 0.18 42,000
Leonard McCurdy.................... 2/2/1999 Option to purchase:
Common Stock 0.18 336,000
Kevin McCurdy...................... 2/12/1998 Common Stock 0.25 (9) 140,000
2/12/1998
Option to purchase:
Common Stock 280,000
5/31/1998
Option to purchase:
Common Stock 140,000
9/25/1998
Option exercise into:
Common Stock 420,000
1/1/1999
Option to purchase:
Common Stock 0.18 42,000
2/2/1999
Option to purchase:
Common Stock 0.18 268,800
</TABLE>
145
<PAGE> 152
<TABLE>
<CAPTION>
DATE OF PRICE PER NUMBER OF
NAME PURCHASE TYPE OF SECURITY SECURITY REF. SECURITIES
---- --------- ---------------- --------- ---- ----------
<S> <C> <C> <C> <C> <C>
9/10/1999
Option exercise into:
Common Stock 0.18 120,000
9/10/1999
Sale of Common Stock 7.00 (112,000)
Lisa Field(3)...................... 3/31/1998 Common Stock 0.25 (9) 5,600
Peter Field(3)..................... 3/31/1998 Common Stock 0.25 (9) 5,600
Carol Smith Slavens(3)............. 3/31/1998 Common Stock 0.25 (9) 8,400
12/8/1998
Series A Preferred Stock 1.43 35,000
Paul Slavens(3).................... 3/31/1998 Common Stock 0.25 (9) 5,600
Duncan Fortier..................... 4/21/1998 Common Stock 0.25 (9) 42,000
1/1/1999
Option to purchase:
Common Stock 0.18 42,000
4/6/1998
Option to purchase:
Common Stock 0.27 50,400
Jascan Investments(5).............. 4/21/1998 Common Stock 0.25 (9) 70,000
6/28/1998
Common Stock units(4) 0.24 (9) 140,000
12/12/1998
Warrant exercise into:
Common Stock 0.24 (9) 140,000
Paula Oprica Aicklen(6)............ Series A Preferred Stock 1.43 21,000
Andrew Aicklen..................... 1/1/1999 Option to purchase:
Common Stock 0.18 98,560
2/2/1999
Option to purchase:
Common Stock 0.18 134,400
Walden Media and 2/18/1999 Convertible subordinated
Information Technology promissory note;
($850,000)
Fund, L.P.(7).................... principal; 10% interest 850,000
per
year; convertible into
Series B Preferred Stock
3/12/1999
Series B Preferred Stock 2.07 1,374,204
5/5/1999
Series B Preferred Stock 2.07 482,177
Walden Japan Partners, L.P.(7)..... 3/12/1999 Series B Preferred Stock 2.07 96,435
Walden EDB Partners, L.P.(7)....... 3/12/1999 Series B Preferred Stock 2.07 96,435
Information Associates-II, Series B Preferred Stock 2.07 2,277,996
L.P.(8).......................... 3/12/1999
IA-II Affiliates Fund, L.L.C.(8)... 3/12/1999 Series B Preferred Stock 2.07 132,888
Intel Corporation.................. 3/12/1999 Series B Preferred Stock 2.07 1,205,440
VantagePoint Venture Partners III,
LP............................... 6/11/1999 Series C Preferred Stock 10,000 667
6/11/1999
Common Stock
Redemption of: 758,078
8/31/1999
Series C Preferred Stock (667)
VantagePoint Communications
Partners, LLP.................... 6/11/1999 Series C Preferred Stock 10,000 333
6/11/1999
Common Stock
8/31/1999
Redemption of:
Series C Preferred Stock (333)
John Assaraf....................... 2/2/1999 Option to purchase:
Common Stock 0.18 221,200
4/6/1999
Option to purchase:
Common Stock 0.27 28,000
10/22/1999
Option exercise into:
Common Stock 0.18 145,600
10/22/1999
Option exercise into:
Common Stock 0.27 28,000
Randall Bresee..................... 4/6/1999 Option to purchase:
Common Stock 0.27 210,000
</TABLE>
146
<PAGE> 153
<TABLE>
<CAPTION>
DATE OF PRICE PER NUMBER OF
NAME PURCHASE TYPE OF SECURITY SECURITY REF. SECURITIES
---- --------- ---------------- --------- ---- ----------
<S> <C> <C> <C> <C> <C>
8/27/1999 Option exercise into:
Common Stock 0.27 52,500
2/2/1999 Option to purchase:
Common Stock 0.18 112,000
4/6/1999 Option to purchase:
Common Stock 0.27 56,000
Andrew Laszlo...................... 1/1/1999 Option to purchase:
Common Stock 0.18 301,000
1/1/1999 Option exercise into:
Common Stock 0.18 301,000
2/2/1999 Option to purchase:
Common Stock 0.18 336,000
4/6/1999 Option to purchase:
Common Stock 0.27 28,000
5/1/1999 Option exercise into:
Common Stock 0.18 56,000
5/1/1999 Option exercise into:
Common Stock 0.27 28,000
6/1/1999 Option exercise into:
Common Stock 0.18 14,000
8/5/1999 Option exercise into:
Common Stock 0.18 28,000
9/10/1999 Sale of Common Stock 7.00 (22,400)
</TABLE>
- -------------------------
(1) A relative of Leonard and Kevin McCurdy.
(2) An entity affiliated with Leonard McCurdy.
(3) A relative of Howard Field.
(4) Each unit consisted of one share of common stock and a warrant to purchase
one share of common stock at an exercise price of Canadian $1.00.
(5) An entity affiliated with Duncan Fortier.
(6) A relative of Andrew Aicklen.
(7) An affiliate of Philip Sanderson.
(8) An affiliate of John Moragne.
(9) Each of these transactions were at C$1.00 which has been translated to US
dollars using the exchange rate in effect at the date of the transaction.
On January 1, 1999 bamboo.com entered into employment agreements, which
contain severance provisions, with Leonard B. McCurdy, Kevin B. McCurdy, Howard
Field and Andrew P. Laszlo.
On February 2, 1999, bamboo.com made a secured loan in the amount of
$53,750 to Mr. Laszlo for the purchase of 301,000 shares of bamboo.com common
stock pursuant to the stock option grant made to Mr. Laszlo on December 30,
1999. The loan accrues interest at 6% per annum and is secured by a full
recourse promissory note, the 301,000 shares of bamboo.com common stock, all
proceeds of such shares and other collateral.
On March 12, 1999, bamboo.com entered into a strategic alliance agreement
with Intel Corporation, a greater than 5% stock holder.
147
<PAGE> 154
On June 1, 1999, bamboo.com made a secured loan in the amount of $20,000 to
Mr. Laszlo for the purchase of an aggregate of 98,000 shares of our common stock
pursuant to stock option grants made to Mr. Laszlo in February 1999 and April
1999. The loan accrues interest at the rate of 6% per annum and is secured by
the 98,000 shares of our common stock, all proceeds of such shares and other
collateral.
On June 11, 1999, bamboo.com issued VantagePoint Venture Partners III, L.P.
and VantagePoint Communication Partners, L.P., together a greater than 5%
shareholder, 758,078 and 379,042 shares of common stock, respectively, and 667
and 333 shares of Series C redeemable preferred stock for an aggregate purchase
price of $6,666,667 and $3,333,333, respectively.
On September 10, 1999, bamboo.com made a secured loan in the amount of
$20,000 to Mr. Kevin McCurdy for the purchase of an aggregate of 112,000 shares
of our common stock pursuant to stock option grants made to Mr. McCurdy in
February 1999. The loan accrues interest at the rate of 6% per annum (and is
secured by the 112,000 shares of our common stock, all proceeds of shares and
other collateral.)
On September 10, 1999, the following executive officers sold shares as part
of the underwriters' exercise of their over-allotment option in bamboo.com's
initial public offering: Mr. Kevin McCurdy -- 112,000 shares; Mr. Howard
Field -- 56,000 shares; Mr. Andrew Laszlo -- 22,400 shares.
On October 22, 1999, bamboo.com made a secured loan in the amount of
$33,500 to Mr. John Assaraf for the purchase of an aggregate of 173,600 shares
of our common stock pursuant to stock option grants made to Mr. Assaraf in
February 1999 and April 1999. The loan accrues interest at the rate of 6% per
annum (and is secured by the 173,600 shares of our common stock, all proceeds of
such shares and other collateral.)
IPIX RELATED PARTY TRANSACTIONS
In December 1996, IPIX issued to each of Motorola, Inc. and Discovery
Communications, Inc., 337,139 shares of common stock for an aggregate purchase
price of $2.0 million each. John S. Hendricks, one of IPIX's directors, is the
chairman and chief executive officer of Discovery. Each of Motorola and
Discovery are entitled to demand and piggyback registration rights with regard
to these shares. In April 1998, Motorola and Discovery exchanged their shares of
IPIX common stock for a like number of shares of IPIX's Series B preferred
stock.
IPIX licenses from Motorola patent and patent applications related to its
technology under a patent license agreement dated January 17, 1997. These
licenses have been granted for the lives of the underlying Motorola patents on a
worldwide, royalty-free, non-exclusive, non-transferrable basis with the right
to sublicense. IPIX may not grant third parties exclusive licenses for its
technology for a term exceeding one year without the prior written consent of
Motorola.
In January 1997, IPIX granted Discovery a world-wide, exclusive license to
utilize its technology in connection with the development of 15
destination-specific CD-ROM titles. The term of the Discovery license will
expire on the expiration date of the last underlying patent.
148
<PAGE> 155
In July 1998, IPIX purchased 170,045 IPIX shares from Dr. H. Lee Martin,
its founder and beneficial owner of greater than 5% of IPIX common shares, for
an aggregate purchase price of $500,000.
In August 1998, IPIX purchased 147,939 IPIX shares of Series B preferred
stock from Motorola for an aggregate purchase price of $878,700.
From April to July 1998, IPIX sold an aggregate of 2,188,698 IPIX shares of
Series C preferred stock to a group of private investors for an aggregate
purchase price of $13.0 million. IPIX also issued warrants to these investors to
purchase an aggregate of 547,175 shares of Series C preferred stock at an
exercise price of $5.94 per share. Purchasers of our Series C preferred stock
included the following related parties:
<TABLE>
<CAPTION>
NUMBER
OF AGGREGATE NUMBER OF
NAME SHARES PURCHASE PRICE WARRANT SHARES
- ---- --------- -------------- --------------
<S> <C> <C> <C>
MediaOne Interactive Services, Inc........ 1,217,674 $7,233,000 304,419
Advance Publications, Inc................. 841,807 5,000,000 210,452
John S. Hendricks......................... 42,090 250,000 10,522
Laban P. Jackson, Jr...................... 17,005 101,000 4,251
</TABLE>
From January to March 1999, IPIX sold an aggregate of 3,504,744 shares of
Series D preferred stock to a group of private investors for an aggregate
purchase price of $27.0 million. Purchasers of IPIX's Series D preferred stock
included the following related parties:
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE
NAME SHARES PURCHASE PRICE
- ---- --------- --------------
<S> <C> <C>
GE Capital Equity Investments, Inc..................... 973,540 $7,500,000
Liberty IP, Inc........................................ 649,027 5,000,000
Motorola, Inc.......................................... 389,416 3,000,000
Laban P. Jackson, Jr................................... 51,922 400,000
John S. Hendricks...................................... 32,451 250,000
</TABLE>
All of IPIX's shares of preferred stock converted into IPIX common stock
upon completion of IPIX's initial public offering. Each of the purchasers of the
Series C preferred stock and the Series D preferred stock are entitled to demand
and piggyback registration rights with regard to their shares of common stock.
In connection with the issuance of the Series D preferred stock to GE
Capital, IPIX entered into a marketing agreement with GE Capital who will
provide IPIX assistance in developing and implementing a marketing program and a
cooperative advertising allowance of $500,000. In addition, IPIX issued a
warrant to GE Capital to purchase 221,059 shares of its Series D preferred stock
at an exercise price of $9.23 per share.
LEGAL MATTERS
Davis Polk & Wardwell, special counsel to bamboo.com, will pass on the
validity of the bamboo.com common shares to be issued to IPIX shareholders in
the merger. It is a
149
<PAGE> 156
condition to the completion of the merger that bamboo.com and IPIX receive
opinions from Davis Polk & Wardwell and Baker, Donelson, Bearman & Caldwell, a
professional corporation, special counsel to IPIX, respectively, to the effect
that, among other things, the merger will be a reorganization for federal income
tax purposes. See "The Merger Agreement -- Conditions to Consummation of the
Merger" and "The Merger -- Material Federal Income Tax Consequences of the
Merger."
EXPERTS
The financial statements of bamboo.com and IPIX as of December 31, 1997 and
December 31, 1998 and for each of the three years in the period ended December
31, 1998 included within this joint proxy statement/prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
FUTURE SHAREHOLDER PROPOSALS
The bamboo.com board of directors has set May 16, 2000 as the date for the
2000 annual meeting of shareholders. The deadline for submission of shareholder
proposals intended to be presented at the 2000 annual meeting of shareholders is
March 11, 2000.
The IPIX board of directors has set May 16, 2000 as the date for the 2000
annual meeting of shareholders. The deadline for submission of shareholder
proposals intended to be presented at the 2000 annual meeting of shareholders is
March 11, 2000.
WHERE YOU CAN FIND MORE INFORMATION
bamboo.com and IPIX file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information that we file at the SEC's public
reference rooms in Washington, D.C., New York, New York and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public from
commercial document retrieval services and at the web site maintained by the SEC
at "http://www.sec.gov."
bamboo.com filed a registration statement on Form S-4 to register with the
SEC the bamboo.com common shares to be issued to IPIX shareholders in the
merger. This joint proxy statement/prospectus is a part of that registration
statement and constitutes a prospectus of bamboo.com in addition to being a
proxy statement of bamboo.com and IPIX for each company's special meeting. As
permitted by SEC rules, this joint proxy statement/prospectus does not contain
all the information that you can find in the registration statement or the
exhibits to that statement.
150
<PAGE> 157
No person is authorized to give any information or to make any
representation with respect to the matters described in this document other than
those contained herein and, if given or made, such information or representation
must not be relied upon as having been authorized by bamboo.com or IPIX. This
document does not constitute an offer to sell, or a solicitation of an offer to
purchase, the securities offered hereby, nor does it constitute the solicitation
of a proxy, in any jurisdiction on which, or to any person to whom, it is
unlawful to make such offer or solicitation. Neither the delivery of this
document nor any sale made hereby, under any circumstances, shall create any
implication that there has been no change in the affairs of bamboo.com or IPIX
since the date hereof, or that the information herein is correct as of any time
subsequent to its date.
bamboo.com owns or has rights to various trademarks, service marks and
trade names used in its business. These include the bamboo.com logo,
BAMBOO.COM(TM), VIEWALWAYS(TM) and BAMBOO(TM).
IPIX owns or has rights to various trademarks, service marks and trade
names used in its business. These include the IPIX(TM) logo, IPIX(TM),GET THE
WHOLE PICTURE(TM), IPIX On Location(TM), IPIX Teleporter(TM), IPIX LOCATION ON
DEMAND-WEBCAM(TM), OMNIVIEW(TM), THE VIRTUAL EYE(R), V360(TM), IPIX: THE EYES OF
THE INTERNET(TM), IPIX WEBCAM: THE EYES OF THE INTERNET(TM), INTERACTV(TM), and
STEP INSIDE THE PICTURE(TM).
151
<PAGE> 158
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
I. HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF
BAMBOO.COM, INC.:
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Shareholders Equity (Deficit).... F-5
Consolidated Statements of Cash Flows....................... F-8
Notes to Consolidated Financial Statements.................. F-9
II. HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF
INTERACTIVE PICTURES CORPORATION:
Report of Independent Accountants........................... F-31
Consolidated Balance Sheets................................. F-32
Consolidated Statements of Operations....................... F-33
Consolidated Statements of Changes in Shareholders'
Equity.................................................... F-34
Consolidated Statements of Cash Flows....................... F-35
Notes to Consolidated Financial Statements.................. F-37
III. PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF THE COMBINED COMPANY (UNAUDITED):
Pro Forma Condensed Consolidated Financial Statements
Introduction.............................................. F-54
Pro Forma Condensed Consolidated Statements of Operations... F-55
Notes to Pro Forma Condensed Consolidated Statements of
Operations................................................ F-60
Pro Forma Condensed Consolidated Balance Sheet.............. F-61
</TABLE>
F-1
<PAGE> 159
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
bamboo.com (formerly Jutvision Corporation)
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of shareholders' equity (deficit)
and of cash flows present fairly, in all material respects, the financial
position of bamboo.com (formerly Jutvision Corporation) and its subsidiary at
December 31, 1997 and 1998 and the results of its operations and its cash flows
for the years ended December 31, 1996, 1997, and 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of bamboo.com's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Jose, California
March 12, 1999, except for Note 13
which is as of July 19, 1999
F-2
<PAGE> 160
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- SEPTEMBER 30,
1997 1998 1999
----- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................. $ 4 $ 430 $27,461
Accounts receivable, net of allowance for doubtful accounts
of zero in 1997, $1 in 1998 and $2 in 1999 (unaudited)... 7 19 126
Prepaid expenses and other current assets.................. -- 79 1,100
----- ------- -------
Total current assets................................ 11 528 28,687
Property, plant and equipment, net......................... 14 212 2,402
Other assets............................................... -- 40 41
----- ------- -------
Total assets........................................ $ 25 $ 780 $31,130
===== ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable........................................... $ 12 $ 133 $ 1,372
Accrued liabilities........................................ 24 122 2,309
Deferred revenue........................................... -- -- 1,857
Notes payable to shareholders.............................. 62 8 --
Current portion of obligations under capital lease......... 106
----- ------- -------
Total current liabilities........................... 98 263 5,644
Obligations under capital lease, net of current portion.... -- -- 455
----- ------- -------
Total liabilities................................... 98 263 6,099
----- ------- -------
Commitments (Notes 7 and 10)
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock: $0.001 par value
Series A Convertible: 500 authorized shares; issued and
outstanding: zero shares in 1997, 231 shares in 1998 and
zero shares in 1999 (unaudited) (Liquidation value: $925
in 1998)................................................. -- -- --
Series B Convertible: 2,325 authorized shares; issued and
outstanding: zero shares in 1997, 1998, and 1999
(unaudited).............................................. -- -- --
COMMON STOCK:
$0.001 par value; 28,000 authorized shares; issued and
outstanding: zero shares in 1997 and 1998, 14,021 shares
in 1999 (unaudited)...................................... -- -- 14
CLASS B COMMON STOCK:
$0.0001 par value; 7,422 authorized shares; issued and
outstanding: 2,845 shares in 1997, 7,422 shares in 1998,
and 7,388 shares in 1999 (unaudited)..................... -- 1 1
Additional paid in capital................................. 161 2,653 70,634
Notes receivable from shareholders......................... -- (54) (148)
Unearned stock-based compensation.......................... -- -- (5,212)
Accumulated other comprehensive income (loss).............. -- (9) 10
Accumulated Deficit........................................ (234) (2,074) (40,268)
----- ------- -------
Total shareholders' equity (deficit)................ (73) 517 25,031
----- ------- -------
Total liabilities and shareholders' equity
(deficit)......................................... $ 25 $ 780 $31,130
===== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 161
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- -------------------
1996 1997 1998 1998 1999
------ ------ ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues..................................... -- $ 46 $ 77 60 1797
Cost of revenues............................. -- 15 67 54 1455
------ ------ ------- -------- --------
Gross profit................................. -- 31 10 6 342
OPERATING EXPENSES:
Sales and marketing.......................... 5 10 300 108 11,048
General and administrative................... 62 122 278 60 4,642
Research and development..................... 24 42 110 64 685
Stock-based compensation..................... -- -- 1,162 906 14,810
------ ------ ------- -------- --------
Total...................................... 91 174 1,850 1,138 31,185
------ ------ ------- -------- --------
Loss from operations......................... (91) (143) (1,840) (1,132) (30,843)
Interest income.............................. -- -- -- -- 278
Interest expense............................. -- -- -- -- (6,629)
------ ------ ------- -------- --------
Net loss................................... (91) (143) (1,840) (1,132) (37,194)
Beneficial conversion feature of Series B
convertible preferred stock................ -- -- -- -- 1,000
------ ------ ------- -------- --------
Net loss attributable to common
shareholders............................ $ (91) $ (143) $(1,840) (1,132) (38,194)
====== ====== ======= ======== ========
Net loss per common share -- basic and
diluted................................. $(0.04) $(0.05) $ (0.31) $ (0.20) $ (3.88)
====== ====== ======= ======== ========
Weighted average common shares -- basic and
diluted.................................... 2,284 2,819 5,953 5,553 9,840
====== ====== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 162
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (DEFICIT)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CLASS B COMMON NOTES
PREFERRED STOCK COMMON STOCK STOCK ADDITIONAL RECEIVABLE
--------------- --------------- --------------- PAID IN FROM
NUMBER AMOUNT NUMBER AMOUNT NUMBER AMOUNT CAPITAL SHAREHOLDERS
------ ------ ------ ------ ------ ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common stock issued to founder in
November 1995....................... -- $ -- -- $ -- 2,240 $ -- $ -- $ --
Common stock issued for cash in
December 1996 at C$0.36 per share
(US$0.26)........................... -- -- -- -- 560 -- 147 --
Net loss.............................. -- -- -- -- -- -- -- --
Other comprehensive loss.............. -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ---- ------
Balance--December 31, 1996............ -- -- -- -- 2,800 -- 147 --
Common stock issued for cash in July
1997 at C$0.42 per share
(US$0.30)........................... -- -- -- -- 45 -- 14 --
Net loss.............................. -- -- -- -- -- -- -- --
Other comprehensive income............ -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ---- ------
Balance -- December 31, 1997.......... -- -- -- -- 2,845 -- 161 --
Common stock issued through March to
September 1998 at fair value of
C$0.36 (US$0.24) to C$1.07
(US$0.71)........................... -- -- -- -- 1,342 -- 432 --
Common stock issued for services
through February to May 1998 at fair
value of C$0.36 (US$0.25) to C$0.50
(US$0.36)........................... -- -- -- -- 1,028 -- 325 --
<CAPTION>
ACCUMULATED
UNEARNED OTHER
STOCK-BASED COMPREHENSIVE ACCUMULATED
COMPENSATION INCOME (LOSS) DEFICIT TOTAL
------------ ------------- ----------- -----
<S> <C> <C> <C> <C>
Common stock issued to founder in
November 1995....................... $ -- $-- $ -- $ --
Common stock issued for cash in
December 1996 at C$0.36 per share
(US$0.26)........................... -- -- -- 147
Net loss.............................. -- -- (91) (91)
Other comprehensive loss.............. -- -- -- (1)
------ --- ---- ----
Balance--December 31, 1996............ -- -- (91) 56
Common stock issued for cash in July
1997 at C$0.42 per share
(US$0.30)........................... -- -- -- 14
Net loss.............................. -- -- (143) (143)
Other comprehensive income............ -- -- --
------ --- ---- ----
Balance -- December 31, 1997.......... -- -- (234) (73)
Common stock issued through March to
September 1998 at fair value of
C$0.36 (US$0.24) to C$1.07
(US$0.71)........................... -- -- -- 432
Common stock issued for services
through February to May 1998 at fair
value of C$0.36 (US$0.25) to C$0.50
(US$0.36)........................... -- -- -- 325
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(Continued)
F-5
<PAGE> 163
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (DEFICIT) -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CLASS B COMMON NOTES
PREFERRED STOCK COMMON STOCK STOCK ADDITIONAL RECEIVABLE UNEARNED
--------------- --------------- --------------- PAID IN FROM STOCK-BASED
NUMBER AMOUNT NUMBER AMOUNT NUMBER AMOUNT CAPITAL SHAREHOLDERS COMPENSATION
------ ------ ------ ------ ------ ------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of options to purchase
common stock for services at fair
value of US$0.27 to US$0.36 per
share in February to May 1998...... -- -- -- -- -- -- 536 -- --
Common stock issued upon exercise
of options at $0.01 per share in
September 1998................... -- -- -- -- 1,871 1 4 -- --
Warrants for common stock issued in
June 1998........................ -- -- -- -- -- -- 23 -- --
Issuance of warrants for common
stock for services............... -- -- -- -- -- -- 168 -- --
Common stock issued upon exercise
of options in December 1998...... -- -- -- -- 336 -- 78 78 --
Settlement of note receivable as
offset to note payable........... -- -- -- -- -- -- -- 24 --
Issuance of Series A convertible
preferred stock in October and
December 1998 at fair value of
$4.00 per share.................. 231 -- -- -- -- -- 926 -- --
Net loss........................... -- -- -- -- -- -- -- -- --
Other comprehensive loss........... -- -- -- -- -- -- -- --
------ ---- ---- ---- ------ ---- ------- ---- ----
Balance -- December 31, 1998....... 231 -- -- -- 7,422 1 2,653 (54) --
Issuance of Series B preferred
stock at $5.807 per share for
cash in March 1999 and May
1999............................. 2,013 2 -- -- -- -- 11,595 --
Dividend relative to beneficial
conversion feature related to
issuance of Series B preferred
stock in May 1999................ -- -- -- -- -- -- 1,000 -- --
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE ACCUMULATED
INCOME (LOSS) DEFICIT TOTAL
------------- ----------- -------
<S> <C> <C> <C>
Issuance of options to purchase
common stock for services at fair
value of US$0.27 to US$0.36 per
share in February to May 1998...... -- -- 536
Common stock issued upon exercise
of options at $0.01 per share in
September 1998................... -- -- 5
Warrants for common stock issued in
June 1998........................ -- -- 23
Issuance of warrants for common
stock for services............... -- -- 168
Common stock issued upon exercise
of options in December 1998...... -- -- --
Settlement of note receivable as
offset to note payable........... -- -- 24
Issuance of Series A convertible
preferred stock in October and
December 1998 at fair value of
$4.00 per share.................. -- -- 926
Net loss........................... -- (1,840) (1,840)
Other comprehensive loss........... (9) -- (9)
--- ------- -------
Balance -- December 31, 1998....... (9) (2,074) 517
Issuance of Series B preferred
stock at $5.807 per share for
cash in March 1999 and May
1999............................. -- 11,597
Dividend relative to beneficial
conversion feature related to
issuance of Series B preferred
stock in May 1999................ -- (1,000) --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
(Continued)
F-6
<PAGE> 164
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (DEFICIT) -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CLASS B COMMON NOTES
PREFERRED STOCK COMMON STOCK STOCK ADDITIONAL RECEIVABLE
--------------- --------------- --------------- PAID IN FROM
NUMBER AMOUNT NUMBER AMOUNT NUMBER AMOUNT CAPITAL SHAREHOLDERS
------ ------ ------ ------ ------ ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Series B preferred stock
at $5.07 per share on conversion of
notes payable and settlement of
interest payable in March 1999....... 312 1 -- -- -- -- 1,809 --
Restricted common stock issued to
service provider in January 1999..... -- -- 120 -- -- -- 819 --
Common stock issued on exercise of
stock options in February, April and
June 1999............................ -- -- 434 1 -- -- 80 (74)
Issuance of common stock with Series C
mandatorily redeemable preferred
stock in June 1999................... -- -- 1,251 1 -- -- 6,602 --
Issuance of common stock on initial
public offering net of related
costs................................ 4,376 4 26,722
Conversion of Series A convertible
preferred stock...................... (231) -- 648 -- --
Conversion of Series B convertible
preferred stock...................... (2,325) (3) 6,509 7 (4)
Conversion of Class B to common
stock................................ 34 -- (34) --
Exercise of common stock options...... 649 1 155 (20)
Remeasurement of restricted stock
issued to service provider........... 450
Amortization of stock based
compensation for service provider....
Common stock options granted for
services in January through September
1999................................. 2,916
Options ruled in exchange for
services.............................
Unearned employee stock based
compensation......................... 15,837
Amortization of employee stock based
compensation.........................
Net loss..............................
Other comprehensive income............
------ --- ------ --- ------ --- ------- ---------
Balance -- September 30, 1999
(unaudited).......................... -- $-- 14,021 $14 7,388 $ 1 $70,634 $ (148)
====== === ====== === ====== === ======= =========
<CAPTION>
ACCUMULATED
UNEARNED OTHER
STOCK-BASED COMPREHENSIVE ACCUMULATED
COMPENSATION INCOME (LOSS) DEFICIT TOTAL
------------ ------------- ----------- --------
<S> <C> <C> <C> <C>
Issuance of Series B preferred stock
at $5.07 per share on conversion of
notes payable and settlement of
interest payable in March 1999....... -- -- -- 1,810
Restricted common stock issued to
service provider in January 1999..... (819) -- -- --
Common stock issued on exercise of
stock options in February, April and
June 1999............................ -- -- -- 7
Issuance of common stock with Series C
mandatorily redeemable preferred
stock in June 1999................... -- -- -- 6,603
Issuance of common stock on initial
public offering net of related
costs................................ 26,726
Conversion of Series A convertible
preferred stock...................... --
Conversion of Series B convertible
preferred stock...................... --
Conversion of Class B to common
stock................................ --
Exercise of common stock options...... 136
Remeasurement of restricted stock
issued to service provider........... (450) --
Amortization of stock based
compensation for service provider.... 605 605
Common stock options granted for
services in January through September
1999................................. 2,916
Options ruled in exchange for
services............................. --
Unearned employee stock based
compensation......................... (15,837) --
Amortization of employee stock based
compensation......................... 11,289 11,289
Net loss.............................. (37,194) (37,194)
Other comprehensive income............ 19 19
--------- --- -------- --------
Balance -- September 30, 1999
(unaudited).......................... $ (5,212) $10 $(40,268) $ 25,031
========= === ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 165
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------ -------------------------
1996 1997 1998 1998 1999
---- ----- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss......................................... $(91) $(143) $(1,841) $(1,132) $(37,194)
Items not affecting cash
Depreciation and amortization................ 12 11 32 5 444
Allowance for doubtful accounts.............. -- -- 1 1 2
Interest on Series C mandatorily redeemable
preferred stock............................ -- -- -- -- 6,629
Issuance of common stock in exchange for
services................................... -- -- 370 370 --
Issuance of Series B convertible preferred
stock in settlement of interest payable.... -- -- -- -- 9
Issuance of warrant for common stock for
services................................... -- -- 168 -- --
Issuance of options for common stock for
services................................... -- -- 536 536 2,916
Stock-based compensation..................... -- -- -- -- 11,894
CHANGES IN ASSETS AND LIABILITIES:
Accounts receivable, net................... -- (7) (14) (3) (137)
Prepaid expenses and other current
assets................................... -- -- (83) (2) (915)
Other assets............................... -- -- (40) -- (143)
Accounts payable........................... 16 7 127 3 1,199
Accrued liabilities........................ -- 8 95 -- 2,254
Deferred revenue........................... -- -- -- -- 1,857
---- ----- ------- ------- --------
Net cash used in operating activities.......... (63) (124) (649) (222) (11,185)
---- ----- ------- ------- --------
INVESTING ACTIVITIES:
Purchase of capital assets....................... (30) (6) (219) (29) (2,172)
---- ----- ------- ------- --------
Net cash used in investing activities.......... (30) (6) (219) (29) (2,172)
---- ----- ------- ------- --------
FINANCING ACTIVITIES:
Notes payable to shareholders.................... 77 (14) (27) (27) (8)
Proceeds from issuance of convertible notes
payable........................................ -- -- -- -- 1,800
Proceeds from issuance of common stock, net of
issuance costs................................. 148 14 387 387 33,333
Proceeds from exercise of common stock options... -- -- 5 5 142
Proceeds from issuance of Series A convertible
preferred stock, net of issuance costs......... -- -- 925 -- --
Proceeds from issuance of Series B convertible
preferred stock, net of issuance costs......... -- -- -- -- 11,597
Proceeds from issuance of Series C mandatorily
redeemable preferred stock..................... -- -- -- -- 4,371
Redemption of Series C mandatorily redeemable
preferred stock................................ -- -- -- -- (11,000)
Proceeds on capital lease obligation............. -- -- -- -- 205
Repayments of capital lease obligation........... -- -- -- -- (66)
Proceeds from issuance of warrants............... -- -- 23 23 --
---- ----- ------- ------- --------
Net cash provided by financing activities...... 225 -- 1,313 388 40,374
---- ----- ------- ------- --------
Effect of exchange rate changes on cash.......... (1) 3 (19) (3) 14
---- ----- ------- ------- --------
Increase (decrease) in cash during the period.... 131 (127) 426 134 27,031
Cash and cash equivalents, beginning of period... -- 131 4 4 430
---- ----- ------- ------- --------
Cash and cash equivalents, end of period......... $131 $ 4 $ 430 $ 138 $ 27,461
==== ===== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE> 166
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
bamboo.com was incorporated on March 26, 1998 as Jutvision Corporation
under the laws of the state of Delaware. bamboo.com has a wholly owned
subsidiary bamboo.com Canada Inc. ("bamboo Canada"), a company incorporated on
December 23, 1998 under the laws of the province of Ontario, Canada as Jutvision
Canada Inc. bamboo.com and its subsidiary generate revenue from virtual tours of
real estate properties on the Internet. Tours are produced by videotaping the
inside and outside of the home or other property, processing the videotape into
a complete virtual tour, and distributing the virtual tour to sites on the
Internet. The virtual tours provide enhanced visual content and are integrated
with multiple listing services by real estate destination web sites.
bamboo.com's markets are the United States and Canada.
The business of bamboo.com was previously operated as Jutvision
Corporation, a company incorporated on November 2, 1995 under the laws of the
Province of Ontario, Canada.
On January 1, 1999, the Board of Directors authorized a corporate
reorganization (see Note 2). Through a series of share exchange agreements,
bamboo Delaware, emerged as the parent company of bamboo Canada and Jutvision
Corporation was merged with bamboo Canada. Prior to the reorganization,
bamboo.com did not have any operations, assets or liabilities.
Under the terms of the reorganization, there was no change in ownership
and, therefore, Jutvision Corporation, has been treated as a predecessor
business and its results presented as the historic results of bamboo.com. The
predecessor business's financial statements presented herein include the results
of operations and cash flows for the periods ended December 31, 1996, 1997,
1998.
NOTE 2. REORGANIZATION
Each Board of Directors approved a reorganization of Jutvision Corporation,
bamboo Canada and bamboo Delaware effective January 1, 1999 through the
following share exchange arrangements:
(a) Exchange of common stockholdings
The common shareholders of Jutvision Corporation agreed to exchange the
outstanding 7,422 common shares on a one-for-one basis for Series B convertible
preferred shares of bamboo Canada. In addition, holders of the outstanding
common stock of Jutvision Corporation also agreed to purchase on a pro-rata
basis 7,422 Class B common shares of bamboo Delaware on a one-for-one basis for
$0.0001 per share.
F-9
<PAGE> 167
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
Under the charters of the respective companies and under a Conversion and
Pairing Agreement, between bamboo Delaware and bamboo Canada, the holders of the
Series B convertible preferred stock of bamboo Canada may exchange their shares
at any time on a one-for-one basis for common stock of bamboo Delaware, and the
shares of the Series B will be redeemed at par value of $0.0001 per share.
Common stock and Class B common stock of bamboo Delaware have identical rights
and privileges with regard to voting. The Series B convertible preferred stock
has voting privileges only where a separate class vote is required by law. The
Series B convertible preferred stock may not be transferred without either a
two-thirds vote of the existing common shareholder of bamboo Canada or approval
of the Board of Directors of bamboo Canada.
The Series B convertible preferred stock of bamboo Canada will
automatically convert into common stock of bamboo Delaware if:
- the net proceeds of an initial public offering of bamboo Delaware common
stock exceeds $15,000; or,
- there is written election by not less than two-thirds majority of the
Series B holders; or
- there is a liquidation, dissolution or winding-up of bamboo Canada.
Due to the terms of the Conversion and Pairing Agreement, the equity
interest of the Series B convertible preferred shareholders of bamboo Canada is
inseparable from and substantively represents an equivalent equity interest in
bamboo Delaware. Accordingly, these shares are presented as equity in the parent
company in the consolidated financial statements. (See also note 14.)
(b) Exchange of preferred stockholdings
In connection with the reorganization, holders of the 231 outstanding
Series A convertible preferred shares of Jutvision Corporation agreed to
exchange their shares on a one-for-one basis for Series A convertible preferred
stock of bamboo Delaware.
On December 23, 1998, 500 shares of the undesignated preferred stock in
bamboo Delaware were designated as Series A convertible preferred stock, having
the same rights and characteristics as the Series A convertible preferred shares
of Jutvision Corporation.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
These consolidated financial statements include the accounts of bamboo.com
and its wholly owned subsidiary. All significant intercompany balances and
transactions have been eliminated.
F-10
<PAGE> 168
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
FOREIGN CURRENCY TRANSLATION
The functional currency of bamboo.com's subsidiary and Jutvision
Corporation is the Canadian dollar. Accordingly, assets and liabilities are
translated at exchange rates in effect at the balance sheet date. Revenue and
expenses are translated at the average rates of exchange during the year.
Translation gains and losses are recorded in accumulated other comprehensive
income (loss).
In Jutvision Corporation's financial statements, monetary assets and
liabilities denominated in foreign currencies were translated into the
functional currency, Canadian dollars, at the exchange rate prevailing at the
balance sheet date. Non-monetary assets and liabilities and transactions were
translated at exchange rates prevailing at the respective transaction dates.
Exchange gains and losses were included in the statement of operations and
comprehensive income (loss).
UNAUDITED INTERIM RESULTS
The accompanying interim financial statements as of September 30, 1999, and
for the nine months ended September 30, 1998 and 1999 are unaudited. The
unaudited interim financial statements have been prepared on the same basis as
the annual financial statements and, in the opinion of management, reflect all
adjustments, which include only normal recurring adjustments, necessary to
present fairly in all material respects bamboo.com's consolidated financial
position, results of operations and its cash flows as of September 30, 1999 and
for the nine months ended September 30, 1998 and 1999. The financial data and
other information disclosed in these notes to financial statements related to
these periods are unaudited. The results for the nine months ended September 30,
1999 are not necessarily indicative of the results to be expected for the year
ending December 31, 1999.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
bamboo.com considers all highly liquid investments with an original or
remaining maturities of three months or less at the date of purchase to be cash
equivalents.
F-11
<PAGE> 169
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
FINANCIAL INSTRUMENTS
The carrying amounts of certain of bamboo.com's financial instruments,
including cash and cash equivalents, accounts receivable, accounts payable, and
notes payable to shareholders approximate fair value due to their short-term
maturities.
CERTAIN RISKS AND CONCENTRATIONS
bamboo.com's financial instruments that are exposed to concentration of
credit risk consist primarily of cash and cash equivalents and accounts
receivable. bamboo.com maintains its accounts for cash and cash equivalents with
one major bank in the United States and one major bank in Canada. Deposits in
these banks may exceed the amount of insurance provided on such deposits.
bamboo.com has not experienced any losses on its deposits of its cash and cash
equivalents.
bamboo.com's revenue is derived entirely from virtual tour services.
bamboo.com performs ongoing credit evaluations of its customers' financial
condition and generally requires no collateral. Four customers accounted for
41%, 28%, 19% and 12% of total accounts receivable as of December 31, 1997. Two
customers accounted for 58% and 13% of total accounts receivable as of December
31, 1998. Revenues from a single customer represented 25%, and 77% of total
revenue for the years ended December 31, 1997 and 1998 respectively. 100% of
revenues were earned from customers located in Canada with accounts receivable
balances denominated in Canadian dollars in the years ended December 31, 1997
and 1998.
bamboo.com does not list real estate on its own web site and is therefore
dependent upon distribution agreements with real estate destination sites. If
any of these agreements were terminated its revenue and results of operations
could be adversely affected.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost and depreciated on a
straight line basis over the estimated lives of the assets ranging between two
and five years. Leasehold improvements are amortized over the term of the lease
or the estimated useful lives, whichever is shorter.
Depreciation and amortization expense for the periods ended December 31,
1996, 1997 and 1998 was $12, $11 and $32, respectively.
ACCOUNTING FOR LONG-LIVED ASSETS
bamboo.com reviews property, plant and other long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying amounts of an asset may not be recoverable. Recoverability is measured
by comparison of its carrying
F-12
<PAGE> 170
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
amount to future net cash flows the assets are expected to generate. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
projected discounted future cash flows arising from the asset.
REVENUE RECOGNITION
bamboo.com generates revenue from services provided to real estate agents
that includes videotaping a home or other property, processing the videotape
into a complete virtual tour and distributing the virtual tour to sites on the
Internet. Revenue from the sale of tours is recognized at the time a virtual
tour is posted to the web site selected by the real estate agent, provided there
are no remaining significant obligations and collection of the resulting
receivable is probable. bamboo.com calculates a return provision based on
historical experience and makes appropriate reserves at the time revenue is
recognized.
STOCK-BASED COMPENSATION
bamboo.com has adopted the disclosure provisions of Financial Accounting
Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-based Compensation." bamboo.com has elected to
continue accounting for stock-based compensation issued to employees using
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," and, accordingly, pro forma disclosures required under SFAS No.
123 have been presented. Stock and other equity instruments issued to
non-employees have been accounted for in accordance with SFAS No. 123 and valued
using the Black-Scholes model.
INCOME TAXES
bamboo.com accounts for its income taxes in accordance with the liability
method. Under this method, deferred tax assets and liabilities are determined
based on differences between the financial reporting and income tax bases of
assets and liabilities and are measured using the enacted tax rates and laws.
Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amounts expected to be realized.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to operations as incurred.
F-13
<PAGE> 171
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
NET LOSS PER COMMON SHARE
Basic net loss per common share is computed by dividing the net loss
available to common shareholders for the period by the weighted average number
of common shares outstanding during the period. Diluted net loss per common
share is computed by dividing the net loss for the period by the weighted
average number of common and common equivalent shares outstanding during the
period. Common equivalent shares, composed of common shares issuable upon the
exercise of stock options and warrants and upon conversion of Series A and
Series B convertible preferred stock, are included in the diluted net loss per
share computation to the extent such shares are dilutive. A reconciliation of
the numerator and denominator used in the calculation of basic and diluted net
loss per common share follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- ------------------
1996 1997 1998 1998 1999
------ ------ ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator
Net loss attributable to common
shareholders.................... $ (91) $ (143) $(1,840) $(1,132) $(38,194)
Denominator
Weighted average common -- shares
basic and diluted............... 2,284 2,819 5,953 5,553 9,940
Weighted average common shares
subject to repurchase........... -- -- -- -- (100)
------ ------ ------- ------- --------
Denominator for basic and diluted
calculation..................... 2,284 2,819 5,953 5,553 9,840
------ ------ ------- ------- --------
Net loss per common share -- basic
and diluted..................... $(0.04) $(0.05) $ (0.31) $ (0.20) $ (3.88)
====== ====== ======= ======= ========
</TABLE>
F-14
<PAGE> 172
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
The following table summarizes common stock equivalents that are not
included in the diluted net income per share calculation of the denominator
above because to do so would be antidilutive for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ -------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Weighted average effect of
common stock equivalents:
Series A convertible
preferred stock........... -- -- 97 -- --
Series B convertible
preferred stock........... -- -- -- -- --
Options to purchase common
stock..................... -- -- -- -- 5,045
Warrants to purchase common
stock..................... -- -- -- -- 228
Common stock subject to
repurchase................ -- -- -- -- 100
-------- -------- -------- -------- --------
-- -- 97 -- 5,373
======== ======== ======== ======== ========
</TABLE>
COMPREHENSIVE LOSS
Effective January 1, 1998, bamboo.com adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting comprehensive income (loss) and its components in financial
statements. Comprehensive income (loss), as defined, includes all changes in
equity during a period from non-owner sources.
The components of comprehensive income (loss) are as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- ------------------
1996 1997 1998 1998 1999
----- ------ -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss............................ $ (91) $ (143) $ (1,841) (1,132) (37,194)
Foreign currency translation
adjustment........................ -- -- (9) 3 19
----- ------ -------- ------- --------
Comprehensive loss.................. $ (91) $ (143) $ (1,850) (1,129) (37,175)
===== ====== ======== ======= ========
</TABLE>
F-15
<PAGE> 173
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the Accounting Standards Executive Committee ("AcSEC")
issued Statement of Position ("SOP") No. 98-1, "Software for Internal Use,"
which provides guidance on accounting for the cost of computer software
developed or obtained for internal use. SOP No. 98-1 is effective for financial
statements for fiscal years beginning after December 15, 1998. The adoption of
SOP No. 98-1 has not had a material impact on bamboo.com's reported results of
operations, financial position or cash flows.
In April 1998, AcSEC issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities." This SOP provides guidance on the financial reporting of start-up
costs and organization costs. It requires the costs of start-up activities and
organization costs to be expensed as incurred. The SOP is effective for
financial statements for fiscal years beginning after December 15, 1998. The
adoption of SOP No. 98-5 has not had a material impact on bamboo.com's reported
results of operations, financial position or cash flows.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, or SFAS 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS 133 establishes new standards of
accounting and reporting for derivative instruments and hedging activities. SFAS
133 requires that all derivatives be recognized at fair value in the statement
of financial position, and that the corresponding gains or losses be reported
either in the statement of operations or as a component of comprehensive income,
depending on the type of hedging relationship that exists. SFAS 133 will be
effective for fiscal years beginning after June 15, 2000. bamboo.com does not
currently hold derivative instruments or engage in hedging activities.
NOTE 4. BALANCE SHEET ACCOUNTS
PROPERTY, PLANT AND EQUIPMENT: (IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998
------ -----
(IN THOUSANDS)
<S> <C> <C>
Service provider equipment.................................. $ -- $197
Computer equipment.......................................... 32 45
Office equipment............................................ 5 12
Leasehold improvements...................................... -- 4
----- ----
37 258
Less: Depreciation and amortization......................... (23) (46)
----- ----
$ 14 $212
===== ====
</TABLE>
F-16
<PAGE> 174
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
ACCRUED LIABILITIES
<TABLE>
<CAPTION>
1997 1998
----- -----
(IN THOUSANDS)
<S> <C> <C>
Accrued Liabilities (in thousands):
Accrued liabilities -- trade................................ $ 4 $ 82
Accrued marketing costs..................................... 20 --
Accrued salaries and benefits............................... -- 40
--- ----
$24 $122
=== ====
</TABLE>
NOTE 5. CONVERTIBLE SUBORDINATED PROMISSORY NOTES PAYABLE
On February 2, 1999, bamboo.com issued convertible subordinated promissory
notes of $1,800, which bore interest at a rate of 10% per annum. On March 12,
1999, the entire principal balance of $1,800 plus accrued interest of $9 was
converted into 311,495 shares of Series B convertible preferred stock of
bamboo.com.
NOTE 6. -- PREFERRED STOCK
Under bamboo.com's Certificate of Incorporation, as amended, bamboo.com's
preferred stock is issuable in series and bamboo.com's Board of Directors,
subject to shareholder approval, is authorized to determine the rights,
preferences and privileges of each series. bamboo.com has authorized 2,825
shares of convertible preferred stock, of which 500 is designated Series A
convertible preferred stock ("Series A") and 2,325 is designated Series B
convertible preferred stock ("Series B").
On March 12, 1999, bamboo.com issued 2,153 shares of Series B preferred
stock, having a par value of $0.001 per share, at $5.807 per share for total
cash proceeds of $10,686 and for conversion of notes payable and settlement of
accrued interest of $1,809.
The terms of Series A and Series B are as follows:
DIVIDENDS
The holders of Series A and Series B are entitled to dividends of $0.32 and
$0.4646, respectively, per share per annum, as and when declared by the Board of
Directors.
VOTING RIGHTS
Each share of Series A and Series B entitles a holder to the number of
votes per share equal to the number of shares of common stock (including
fractions of a share) into which each share of Series A and Series B is
convertible.
F-17
<PAGE> 175
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
LIQUIDATION
Upon any liquidation, dissolution or winding up of bamboo.com, the holders
of the Series A and Series B shall rank in parity with each other and will be
entitled to receive, in equal preference, before any distribution or payment is
made to the holders of common stock, a sum equal to all declared and unpaid
dividends, in addition to an amount per share of $4.00 and $5.807, respectively.
In addition, Series B holders are entitled to participate pro rata based on the
number of shares of common stock into which the Series B convert, along with the
holders of the common stock in any surplus assets remaining after payment of the
liquidation preferences. If such liquidation occurs prior to December 31, 1999,
this amount is limited to $8.7105 per Series B share. In the event such
liquidation occurs after December 31, 1999, this amount is limited to $14.5175
per Series B share.
CONVERSION
Each share of Series A and Series B is convertible into the number of
shares of common stock determined by dividing $4.00 and $5.807, respectively, by
the conversion price at the time in effect for each such share of convertible
preferred stock. The conversion price for Series A and Series B is $1.43 and
$2.07, respectively, per share. Conversion can be requested at any time at the
option of the holder.
The convertible preferred stock would automatically convert into common
stock at the conversion price relevant at that time, if bamboo.com closes a firm
commitment underwritten public offering of shares of common stock in which the
aggregate price received for such shares by bamboo.com (net of underwriting
discounts, commissions and expenses) was at least $10,000 or $4.15 per share, or
upon the written election of not less than two-thirds vote of the then
outstanding Series A and B.
NOTE 7. COMMON STOCK
COMMON STOCK
bamboo.com's Certificate of Incorporation authorizes bamboo.com to issue
28,000 common shares with $0.001 par value. Each common share entitles the
holder to one vote. The holders of the shares of common stock are also entitled
to receive dividends whenever funds are legally available and when declared by
the Board of Directors, subject to the prior rights of holders of all classes of
stock at the time outstanding having priority rights as to dividends.
On September 15, 1998, bamboo.com authorized a 1,000:1 common stock split.
The effect of this stock split has been retroactively reflected throughout the
financial statements.
F-18
<PAGE> 176
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
CLASS B COMMON STOCK
As part of the reorganization on January 1, 1999, (Note 2) bamboo.com
authorized and issued 7,422 Class B common shares with a par value of $0.0001
per share. Each common share entitles the holder to one vote.
COMMON SHARE UNITS
On June 28, 1998, bamboo.com issued 120 common share units for total
proceeds of $76, net of share issuance costs. Each unit consisted of 2.8 common
shares and a warrant to purchase 2.8 common shares. The fair value of the
warrants was established at $23 using the Black-Scholes method with the
following assumptions, no annual dividend, volatility of 100%, risk free
interest rate of 5.35% and term of one year. Based on the fair value of the
underlying instruments within the common share unit, $53 of the total proceeds
was allocated to common shares and the balance of $23 was allocated to the
warrants to purchase common shares. Each warrant entitled the holder to purchase
2.8 common shares at approximately $0.23 per share on or before June 28, 1999.
On December 8, 1998, the warrants were exercised to purchase 336 common shares
for net proceeds of $78.
On December 31, 1998, promissory notes pertaining to this warrant
conversion were outstanding in the amount of $54. The promissory notes are
non-interest bearing until June 28, 1999, after which interest accrues at the
prime rate charged from time to time by the Royal Bank of Canada, compounded
semi-annually, and have no repayment terms.
ISSUED FOR SERVICES RENDERED
At various times throughout the year ended December 31, 1998, 1,028 common
shares were issued to certain individuals, for services rendered. The fair
market value of the stock issued of $326 was charged to results of operations
and comprehensive loss.
STOCK OPTION PLAN
1998 Employee, Director and Consultant Stock Option Plan
During 1998, bamboo.com authorized an Employee, Director and Consultant
Stock Option Plan for a total of 2,380,000 common shares. This plan became
effective on January 1, 1999 once bamboo.com was reorganized. During 1999, an
additional 4,399,394 common shares were authorized under the Plan. Each option
under the incentive plan allows for the purchase of common stock of bamboo.com
and expires not later than five or ten years from the date of grant, depending
on the ownership of the option participants. The vesting terms of the stock
options will be determined on each grant date and are generally two or three
years; however, the amount of options that can be exercised per
F-19
<PAGE> 177
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
participant in any calendar year will be restricted to an aggregate fair market
value of $100,000 of the underlying common stock.
<TABLE>
<CAPTION>
EXERCISE AVERAGE
AVAILABLE FOR OPTIONS PRICE WEIGHTED
GRANT OUTSTANDING PER SHARE EXERCISE PRICE AMOUNT
------------- ----------- ----------- -------------- ------
<S> <C> <C> <C> <C> <C>
Balance, January 1,
1999.................... -- -- $ -- $ -- $ --
Options authorized...... 8,179
Options granted......... (6,861) 6,861 0.18-22.75 1.45 4,745
Options exercised....... -- (1,083) 0.18-0.54 0.22 (236)
Options canceled........ 102 (102) 0.18-7.00 0.95 (97)
Stock purchase rights
granted............... (120) 120 0.18 0.18 22
Stock purchase rights
exercised............. -- (120) 0.18 0.18 (22)
------- ------- ----------- ----- ------
Balances, September 30,
1999.................. 1,300 5,676 $0.18-22.75 $0.78 $4,412
======= ======= =========== ===== ======
</TABLE>
The options outstanding and currently exercisable by exercise price at
September 30, 1999 are as follows (unaudited):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
CONTRACTUAL AVERAGE AVERAGE
NUMBER LIFE EXERCISE NUMBER EXERCISE
EXERCISE PRICE OUTSTANDING (YEARS) PRICE EXERCISABLE PRICE
- -------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.18....................... 3,604 9.12 $ 0.18 2,809 0.18
0.27....................... 1,145 9.52 0.27 462 0.27
0.36....................... 67 9.52 0.36 50 0.27
0.54....................... 421 9.65 0.54 152 0.54
3.57....................... 104 9.73 3.57 33 3.57
7.00....................... 304 9.85 7.00 32 7
22.75....................... 31 9.98 22.75 -- 22.75
----- ---- ------ ----- ------
5,676 9.30 3,538
===== ==== ======
</TABLE>
F-20
<PAGE> 178
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
PRO FORMA STOCK COMPENSATION
bamboo.com has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123") for option grants to employees. Had compensation
cost been determined based on the fair value at the grant date for the awards in
1999 consistent with the provisions of SFAS No. 123, bamboo.com's net loss for
1999 would have been as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, 1999
------------------
<S> <C>
Net loss attributable to common shareholders -- as reported
(unaudited)................................................. $(38,194)
Net loss attributable to common shareholders -- as reported
(unaudited)............................................... (38,347)
Net loss attributable to common shareholders -- as reported
(unaudited)............................................... (3.88)
Net loss attributable to common shareholders -- as reported
(unaudited)............................................... (3.90)
</TABLE>
Such pro forma disclosures may not be representative of future compensation
cost because options vest over several years and additional grants are made each
year.
OPTION AGREEMENTS
On February 12, 1998, bamboo.com issued 1,400 stock options to
non-employees, and on May 31, 1998, bamboo.com issued an additional 471 stock
options to non-employees, in exchange for management services. The stock options
allowed the holder to purchase one common share for $0.01 per share, expired ten
years from the date of grant and vested immediately. As of December 31, 1998,
all of the options had been exercised resulting in cash proceeds of $5.
The fair value of each stock option granted to non-employees was estimated
on the date the non-employee earned the option using the Black-Scholes
option-pricing model with the following assumptions: no annual dividend,
expected volatility of 55%, risk-free interest rate of 5.36%; and expected life
of ten years. The weighted average fair value of stock options earned in 1998
was $0.29. The resulting values have been charged to the statement of operations
and comprehensive loss in the period that services were rendered. The fair value
of the stock options charged to the statement of operations and comprehensive
loss in 1998 was $536.
RESTRICTED STOCK AGREEMENTS
In February 1999, bamboo.com issued from the plan 120,400 shares of its
common stock on exercise of stock purchase rights granted in exchange for
services under restricted purchase agreements. At June 30, 1999, 95 (unaudited)
common shares are subject to repurchase under these agreements at the option of
bamboo.com. The repurchase provision
F-21
<PAGE> 179
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
expires upon involuntary termination of the purchaser's services, an initial
public offering of the common stock of bamboo.com, or merger or reorganization
of bamboo.com.
WARRANTS AND COMMITMENTS
Pursuant to a marketing and distribution agreement entered into on November
11, 1998, bamboo.com agreed to issue a stock purchase warrant once bamboo.com
was reorganized. The warrant allows the holder to purchase 280,000 shares of
common stock at $1.43 per share and expires on December 31, 1999. The warrant
has been recorded at its fair value of $168,401 with the costs charged to the
statement of operations and comprehensive income (loss) in the year ended
December 31, 1998. The fair value of the warrant was estimated using the
Black-Scholes option-pricing model. The following assumptions were used in the
model: no annual dividend, expected volatility of 55%, risk-free interest rate
of 5.35%; and an expected life of 1.2 years.
STOCK-BASED COMPENSATION (UNAUDITED)
In connection with certain stock option grants to employees during the nine
months ended September 30, 1999, bamboo.com recorded unearned stock-based
compensation totalling $15.8 million, which is being amortized over the vesting
periods of the related options which is generally two to three years.
Amortization of this stock-based compensation recognized during the nine months
ended September 30, 1999 totalled approximately $11.3 million. Included within
the amortization for the nine months ended September 30, 1999 is an amount of
$1.8 million arising as a result of the immediate vesting of options to purchase
1,780 shares of common stock of the company upon completion of the initial
public offering. The total unearned stock-based compensation remaining at
September 30, 1999 will be amortized as follows: $1.4 million for the remainder
of 1999; $1.6 million in 2000; $1.2 million in 2001; $280,000 in 2002 and
$20,000 in 2003.
Additionally, bamboo.com recorded unearned stock-based compensation for
restricted common stock granted to a service provider of approximately $819,
which is being amortized over two years. Amortization of the fair value of this
restricted common stock resulted in stock-based compensation of approximately
$308 during the nine months ended September 30, 1999. Quarterly amortization
associated with the restricted common stock is subject to significant increase
or decrease in future quarters based upon future changes in the fair value of
bamboo.com's common stock. bamboo.com's option to repurchase lapses upon
completion of this public offering if this occurs prior to the end of the two
years.
F-22
<PAGE> 180
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
NOTE 8. INCOME TAXES
The principal items accounting for the difference between income taxes
computed at the Canadian statutory rat and the provision for income taxes are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997 1998
----- ----- ----
<S> <C> <C> <C>
Canadian statutory rate............................... 44.5% 44.5% 44.5%
Amounts not deductible for tax purposes............... (0.6)% (0.5)%
Operating losses not benefitted....................... 43.9% 44.0% 44.5%
----- ----- ----
-- -- --
===== ===== ====
</TABLE>
At December 31, 1998, Jutvision Corporation had accumulated income tax
losses of $1,944,259 available in Canada for carry-forward to reduce taxable
income of future years, the benefit of which has not been recorded in these
financial statements. The income tax losses expire as follows:
<TABLE>
<S> <C>
2002........................................................ 83
2003........................................................ 137
2004........................................................ 1,724
-----
1,944
=====
</TABLE>
For Canadian federal and Ontario provincial tax purposes, Jutvision
Corporation's net operating loss carryforwards are subject to certain
limitations on utilization in the event of changes in ownership.
Deferred tax assets are summarized as follows:
<TABLE>
<CAPTION>
1997 1998
----- ----
<S> <C> <C>
Non-capital losses.......................................... $ 98 $865
Share issue costs........................................... -- 2
Property, plant and equipment............................... 5 5
----- ----
103 872
Valuation allowance......................................... (103) (872)
----- ----
-- --
===== ====
</TABLE>
bamboo.com has recorded a full valuation allowance against its deferred tax
assets because it believes it is more likely than not that sufficient taxable
income will not be realized during the carryforward period to utilize the
deferred tax asset. The valuation allowance increased by $770,321 during 1998.
Realization of the future tax benefits related to the deferred tax assets is
dependent upon many factors, including bamboo Canada's ability to generate
taxable income in Canada within the loss carryforward periods.
F-23
<PAGE> 181
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
NOTE 9. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------
1996 1997 1998 1998 1999
----------------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Supplemental disclosures cash flow
information:
Unearned stock based compensation related
to stock options grants................ $ -- $ -- $ -- $ -- $ 11,289
Property Plant and Equipment acquired
under capital leases................... 463
Conversion of notes payable to Series B
convertible preferred stock............ -- -- -- -- 1,800
Issuance of Series B convertible
preferred stock in settlement of
interest............................... -- -- -- -- 9
Exercise of common stock options and
warrants in exchange for note
receivable............................. -- -- 78 -- 74
Stock options issued for prepaid rent
expense................................ -- -- -- -- 10
Interest paid............................ -- -- -- -- 10
Note receivable settled as offset of note
payable................................ -- -- 24 24 --
Common stock issued below fair value..... -- -- 45 45 --
Issuance of common stock for services.... -- -- 326 326 605
Issuance of warrant for common stock for
services............................... -- -- 168 -- --
Issuance of options for common stock for
services............................... -- -- 536 536 2,916
</TABLE>
NOTE 10. COMMITMENTS
bamboo.com is obligated under leases for the rental of facilities, computer
equipment and office equipment. Minimum future rental payments under
bamboo.com's current leases in effect as at December 31, 1998 are as follows (in
thousands):
<TABLE>
<S> <C>
1999........................................................ $ 470
2000........................................................ 391
2001........................................................ 377
2002........................................................ 61
</TABLE>
Total rent expense was $1, $8 and $39 in the years ended 1996, 1997 and
1998, respectively.
F-24
<PAGE> 182
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
MARKETING AND DISTRIBUTION AGREEMENTS
bamboo.com has entered into marketing and distribution agreements with
certain real estate destination web sites to maintain certain promotional and
linkage rights, and technology access in exchange for total minimum payments of
$14,063 payable over three years. A total of $6,906 of the payments are
noncancelable. bamboo.com records the expenses as incurred. Under the terms of
the agreements (as amended), the following minimum non-cancelable and total
future payments are due beginning in April 1999 (in thousands):
<TABLE>
<CAPTION>
NON-
CANCELABLE TOTAL
---------- -------
<S> <C> <C>
Year ended December 31, 1999................................ $2,250 $ 2,382
Year ended December 31, 2000................................ 4,656 4,723
Year ended December 31, 2001................................ -- 5,437
Year ended December 31, 2002................................ -- 1,521
------ -------
$6,906 $14,063
====== =======
</TABLE>
NOTE 11. RELATED PARTY TRANSACTIONS:
bamboo.com purchased capital equipment of $11 in 1996 and $4 in 1997 from a
shareholder.
Notes payable to shareholders are non-interest bearing if repaid in total,
on or before June 30, 1999. If the notes are unpaid after June 30, 1999,
interest will accrue at the prime rate charged by the Royal Bank of Canada,
compounded semi-annually.
NOTE 12. GEOGRAPHIC INFORMATION
bamboo.com has adopted the Financial Accounting Standards Board's
Statements of Financial Accounting Standards No. 131, or SFAS 131, "Disclosures
about Segments of an Enterprise and Related Information," effective for fiscal
years beginning after December 31, 1997. SFAS 131 supersedes Statement of
Financial Accounting Standards No. 14 of SFAS 14, "Financial Reporting for
Segments of a Business Enterprise." SFAS 131 changes current practice under SFAS
14 by establishing a new framework on which to base segment reporting and also
requires interim reporting of segment information.
Management uses one measurement of profitability for its business.
bamboo.com markets its products and related services to customers in the United
States and Canada.
F-25
<PAGE> 183
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
Revenue and long-lived asset information by geographic area are as follows
(in thousands):
<TABLE>
<CAPTION>
LONG LIVED
REVENUES ASSETS
-------- ----------
<S> <C> <C>
1998
Canada................................................... $77 $ 49
United States............................................ -- 163
--- ----
$77 $212
=== ====
1997
Canada................................................... $45 $ 14
United States............................................ -- --
--- ----
$45 $ 14
=== ====
</TABLE>
NOTE 13. SUBSEQUENT EVENTS
DISTRIBUTION AGREEMENTS
On March 16, 1999 and July 15, 1999, bamboo.com entered into two separate
distribution agreements with real estate destination web sites to maintain
certain promotional and linkage rights. At June 30, 1999, the additional minimum
future payments required under these agreements are as follows (in thousands):
<TABLE>
<S> <C>
Year ended December 31, 1999................................ $360
Year ended December 31, 2000................................ 555
----
$915
====
</TABLE>
In addition under the terms of the distribution agreement entered into on
July 15, 1999, bamboo.com is subject to making additional payments totaling
$1,375,000 which are contingent upon the party achieving certain milestones.
LINE OF CREDIT
On April 16, 1999, bamboo.com obtained up to $1.0 million in short term
financing which bears interest at prime (7.75% at June 30, 1999). No advances
have been drawn from this line of credit.
CAPITAL LEASE OBLIGATIONS
On March 24, 1999, bamboo.com entered into a master capital lease agreement
to obtain up to $1,500 in capital lease financing for purchases of video
equipment, office furniture and other equipment including computer hardware and
software made subsequent to January 1, 1999. The available lease line expires on
December 31, 1999. On April 14,
F-26
<PAGE> 184
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
1999 and May 6, 1999, bamboo.com committed $205 and $426, respectively in
property, plant and equipment to capital lease under a sale and leaseback
provision of the master capital lease agreement.
At September 30, 1999, the future minimum payments under these and other
capital lease agreements are as follows (in thousands):
<TABLE>
<S> <C>
1999........................................................ $225
2000........................................................ 264
2001........................................................ 226
----
Minimum lease payments...................................... 715
Less amount representing interest........................... 164
----
Principal amount of minimum lease payments.................. 551
Less current portion........................................ 106
----
$455
====
</TABLE>
NAME CHANGE
On April 23, 1999, Jutvision Canada, Inc. changed its name to bamboo.com
Canada, Inc. and Jutvision Corporation changed its name to bamboo.com.
PRIVATE PLACEMENTS
On May 5, 1999, bamboo.com issued an additional 172 shares of Series B
convertible preferred stock with a par value of $0.001 for $5.807 per share for
total cash proceeds of $1,000. In connection with this issuance, bamboo.com has
recorded a charge of $1 million representing a beneficial conversion feature
limited to the proceeds received.
On June 7, 1999, bamboo Canada amended its articles of incorporation and
the Conversion and Pairing Agreement to reflect the creation of Series C
convertible preferred shares ("Series C shares"). Effective June 11, 1999, the
outstanding Series B convertible preferred shares were converted to Series C
convertible preferred shares. The Series C shares have substantially all of the
same rights and preferences as the Series B convertible preferred shares, except
that the Series C shares do not automatically convert in the event that the
parent company, bamboo.com, completes an initial public offering of its stock.
Under the amended conversion and pairing agreement, the Series C shares are
exchangeable on a one for one basis for common stock of the parent company,
bamboo.com, and the shares of the Series C will be redeemed at par value of
$0.0001 per share.
On June 11, 1999, bamboo.com authorized 1 shares of its Series C
mandatorily redeemable preferred stock, and entered into an agreement to sell
shares of its Series C
F-27
<PAGE> 185
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
mandatorily redeemable preferred stock and 1,251 shares of its common stock for
total gross proceeds of $11,000
DIVIDENDS
The holders of Series C mandatorily redeemable preferred stock are entitled
to receive cumulative dividends out of any assets legally available and prior
and in preference to any other securities, of $0.5 per share accruing annually
from June 30, 2000.
VOTING RIGHTS
The Series C mandatorily redeemable preferred shareholders are entitled to
elect one director to the Board of Directors, which currently consists of six
directors in total.
REDEMPTION
The shares of the Series C mandatorily redeemable preferred stock may be
redeemed at any time at the option of bamboo.com by payment of an amount of $10
per share plus any accrued and unpaid dividends. At the option of the holders,
bamboo.com is required to redeem the stock in a single installment after the
occurrence of a redemption event. A redemption event being defined as the
earliest to occur of (a) the sale of bamboo.com's common stock in an
underwritten public offering with aggregate proceeds in excess of $10,000; (b) a
change in control; or (c) June 8, 2004.
LIQUIDATION
The holders of the Series C mandatorily redeemable preferred stock shall be
entitled to receive prior and in preference to any other distribution, dividend
or redemption payments of any assets of bamboo.com their payment of the
redemption price.
The $11,000 of proceeds from issuance has been allocated to the Series C
mandatorily redeemable preferred stock and the common stock based on their
relative fair values. Accordingly, $4,400 has been allocated to the Series C
redeemable preferred stock and $6,600 has been allocated to the common stock at
June 11, 1999.
The relative fair values are $8,000 for the Series C mandatorily redeemable
preferred stock and $12,100 for the common stock. The corresponding discount of
$6,600 recognized on the Series C mandatorily redeemable preferred stock will be
amortized using the effective interest rate to the statement of operations as an
interest charge over the five-year period to June 8, 2004. In the six month
period ended June 30, 1999 bamboo.com recognized approximately $81 of the
discount as an interest charge.
Under the terms of the Series C mandatorily redeemable preferred stock
agreement, redemption upon completion of the Initial Public Offering, ("IPO") by
bamboo.com and
F-28
<PAGE> 186
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
an additional interest charge of $6,500 was recorded to accrete the preferred
stock to its redemption value of $11,000.
EMPLOYEE STOCK PURCHASE PLAN
In addition, on June 9, 1999, the Board of Directors approved the 1999
Employee Stock Purchase Plan subject to shareholder approval and effectiveness
of bamboo.com's IPO Registration Statement with the Securities and Exchange
Commission. On July 19, 1999, bamboo.com's shareholders approved the adoption of
the 1999 Employee Stock Purchase Plan under which 700 shares have been reserved
for issuance.
INITIAL PUBLIC OFFERING
On June 9, 1999, bamboo.com approved the issuance and sale in an
underwritten public offering of bamboo.com's common stock.
STOCK SPLIT
On July 19, 1999, bamboo.com approved a 2.8 for 1 forward split of its
common stock, which will be effected prior to the closing of the public
offering. All common stock data and common stock option plan information has
been restated to reflect the forward split.
In addition, the conversion prices of bamboo.com's Series A and Series B
convertible preferred stock have also been adjusted to reflect the effect of the
forward split.
NOTE 14. INITIAL PUBLIC OFFERING (UNAUDITED)
On August 25, 1999 the Company completed the initial public offering of
4,000 shares of its common stock at a price of $7 per share. Proceeds of the
offering, net of underwriting discount and other direct costs of the offering,
were approximately $24,278.
On September 7, 1999 under the terms of the underwriting agreement covering
the Initial Public Offering the underwriters exercised a portion of the over
allotment option for 376 shares of the common stock of the Company. Proceeds
received, net of underwriting discount, from exercise of the over allotment
option were approximately $2,448.
Upon completion of the Company's public offering and in accordance with the
respective preferred stock purchase agreements 648 and 6,509 shares of the
Company's Series A and Series B convertible preferred stock converted into 231
and 2,325 shares of common stock of the Company respectively.
In accordance with the terms of the original option grants upon completion
of the Initial Public Offering options to purchase 1,780 shares of the Company's
common stock
F-29
<PAGE> 187
BAMBOO.COM
(FORMERLY JUTVISION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
INFORMATION AS OF SEPTEMBER 30, 1999 AND/OR FOR THE PERIODS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED
became fully vested. As a result additional compensation expense of $1,800 has
been recorded in the quarter ended September 30, 1999.
On August 31, 1999 the Company used $11,000 of the proceeds of the Initial
Public Offering to redeem all outstanding shares of the Company's Series C
mandatorily redeemable ("Series C") preferred stock. As a result of this
redemption the Company recorded a charge to interest expense of approximately
$6,629 representing the difference between the carrying value of the Series C
preferred stock and its redemption value.
NOTE 15. PLAN OF MERGER (UNAUDITED)
The Company and Interactive Pictures Corporation ("IPIX") have entered into
an Agreement and Plan of Merger, dated as of October 25, 1999 ("the merger
agreement"). Pursuant to the merger agreement, IPIX will become a wholly-owned
subsidiary of the Company. In exchange for IPIX common stock, the Company will
issue 1.369 shares of its common stock for every share of IPIX common stock
outstanding immediately prior to the Effective Time (as defined in the merger
agreement) of the merger.
All outstanding options to purchase IPIX common stock will be assumed by
the Company and will become options to purchase shares of the Company's common
stock. The transaction is intended to be accounted for as a pooling of interests
and qualify as a tax-free reorganization. The merger has been approved by the
boards of directors of the Company and IPIX, but is still subject to approval by
the shareholders of IPIX and other conditions to closing.
The merger agreement obligates the Company or IPIX to pay to the other
party a termination fee of $16 million if the merger is not consummated as a
result of certain specified events.
In connection with the merger agreement, the Company and IPIX entered into
two stock option agreements. IPIX granted the Company an option to purchase
19.9% of IPIX's common shares at a price of $22.25 per share, and the Company
granted IPIX an option to purchase 19.9% of the Company's common shares at a
price of $16.25 per share. The stock options become exercisable in the event
that the issuer of the option becomes the subject of a publicly announced third
party takeover proposal. Neither the Company nor IPIX may realize more than a
total of $20 million from the payment of both the $16 million termination fee
and the exercise of the stock option and subsequent sale of the option shares.
Both options terminate either upon consummation of the merger, 30 days after
termination of the merger agreement (other than as a result of a proposal by a
third party to acquire 30% or more of the equity or assets, or to undertake a
merger involving 30% of the net assets, net revenue or net income of the issuer)
or 180 days after the termination of the merger agreement.
F-30
<PAGE> 188
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Interactive Pictures Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, changes in shareholders' equity,
and of cash flows present fairly, in all material respects, the financial
position of Interactive Pictures Corporation and its subsidiary (the "Company")
at December 31, 1997 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Knoxville, Tennessee
January 29, 1999, except as to Notes 5 and 6
for which the date is April 12, 1999 and as to Note 13
for which the date is July 2, 1999
F-31
<PAGE> 189
INTERACTIVE PICTURES CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1997 1998 1999
---------- ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................... $ 1,826 $ 1,064 $ 2,817
Securities available-for-sale............................... 1,000 -- 65,396
Accounts receivable, less allowance for doubtful accounts of
$190 at December 31, 1997, $170 at December 31, 1998 and
$110 at September 30, 1999 (unaudited).................... 538 842 2,075
Inventory, less reserve for obsolescence of $100 at December
31, 1998 and $140 at September 30, 1999 (unaudited)....... 232 328 1,144
Costs and estimated earnings in excess of billings on
uncompleted contracts..................................... 65 -- --
Prepaid expenses and other current assets................... 231 305 2,992
---------- ------------ --------
Total current assets............................... 3,892 2,539 74,424
---------- ------------ --------
PROPERTY AND EQUIPMENT:
Furniture and equipment..................................... 772 1,667 2,602
Leasehold improvements...................................... 35 53 141
---------- ------------ --------
807 1,720 2,743
Less accumulated depreciation and amortization.............. (144) (367) (624)
---------- ------------ --------
Property and equipment, net............................. 663 1,353 2,119
---------- ------------ --------
Other assets................................................ 19 97 151
---------- ------------ --------
Total assets....................................... $ 4,574 $ 3,989 $ 76,694
========== ============ ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Convertible debenture....................................... $ 3,000 $ 1,000 --
Current portion of promissory note.......................... 8 8 8
Accounts payable............................................ 325 401 506
Accrued expenses............................................ 567 1,598 2,059
Accrued placement fees and related expenses................. -- 50 --
Deferred revenue............................................ 63 118 223
---------- ------------ --------
Total current liabilities.......................... 3,963 3,175 2,796
---------- ------------ --------
Long-term portion of promissory note........................ 29 21 15
Commitments and contingencies (Note 11)
SHAREHOLDERS' EQUITY:
Convertible preferred stock:
Series A $0.001 par value; 1,644,817 shares authorized,
issued and outstanding at December 31, 1998 ($6,576
aggregate liquidation value at December 31, 1998)....... -- 2 --
Series B $0.001 par value; 674,279 shares authorized at
December 31, 1998; 526,340 shares issued and outstanding
at December 31, 1998 ($3,126 aggregate liquidation value
at December 31, 1998)................................... -- 1 --
Series C $0.001 par value; 4,482,705 shares authorized at
December 31, 1998; 2,357,058 shares issued and
outstanding at December 31, 1998 ($14,000 aggregate
liquidation value at December 31, 1998)................. -- 2 --
Series D $0.001 par value; 3,725,803 authorized; no shares
issued or outstanding................................... -- -- --
Common stock, $0.001 par value, 17,004,500 shares authorized
at December 31, 1997 and 1998 and 100,000,000 shares
authorized at September 30, 1999; 6,286,565 and 4,101,805
shares issued and outstanding at December 31, 1997 and
1998, respectively; 16,562,713 shares issued and
outstanding at September 30, 1999 (unaudited)............. 6 4 17
Additional paid-in capital.................................. 9,982 24,808 114,464
Deferred stock compensation................................. -- -- (847)
Accumulated deficit......................................... (9,406) (24,024) (39,751)
---------- ------------ --------
Total shareholders' equity......................... 582 793 73,883
---------- ------------ --------
Total liabilities and shareholders' equity......... $ 4,574 $ 3,989 $ 76,694
========== ============ ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-32
<PAGE> 190
INTERACTIVE PICTURES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
---------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Products.................. $ 1,337 $ 2,128 $ 2,712 $ 1,832 $ 5,406
Services.................. 208 318 329 156 --
----------- ----------- ------------ ----------- -----------
1,545 2,446 3,041 1,988 5,406
----------- ----------- ------------ ----------- -----------
COST OF REVENUES:
Products.................. 543 446 1,207 548 2,690
Services.................. 108 316 241 85 --
----------- ----------- ------------ ----------- -----------
651 762 1,448 633 2,690
----------- ----------- ------------ ----------- -----------
Gross profit.............. 894 1,684 1,593 1,355 2,716
----------- ----------- ------------ ----------- -----------
OPERATING EXPENSES:
Sales and marketing....... 908 2,829 8,387 5,625 12,429
Research and
development............. 389 1,171 2,668 1,928 2,653
General and
administrative.......... 921 2,598 3,864 2,290 4,069
Amortization of product
development and patent
costs................... 71 858 -- -- --
Non-cash compensation
expense................. -- -- -- -- 169
----------- ----------- ------------ ----------- -----------
Total operating
expenses..... 2,289 7,456 14,919 9,843 19,320
----------- ----------- ------------ ----------- -----------
Interest income........... 111 181 276 248 889
Interest expense.......... -- (42) (202) (177) (12)
Other income (expense),
net..................... 90 55 27 23 --
----------- ----------- ------------ ----------- -----------
Net loss........ $ (1,194) $ (5,578) $ (13,225) $ (8,394) $ (15,727)
=========== =========== ============ =========== ===========
Basic and diluted loss per
common share (Note 2)... $ (0.21) $ (0.89) $ (2.84) $ (1.71) $ (2.28)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-33
<PAGE> 191
INTERACTIVE PICTURES CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
---------------------------------------------------------------------
PREFERRED PREFERRED PREFERRED PREFERRED ADDITIONAL
COMMON STOCK STOCK STOCK STOCK PAID-IN
STOCK SERIES A SERIES B SERIES C SERIES D CAPITAL
------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1996...................... $ 5 $ -- $ -- $ -- $ -- $ 6,007
Proceeds from issuance of 674,279 common
shares, net of related costs................ 1 -- -- -- -- 3,974
Issuance of 27,207 common shares upon exercise
of options.................................. -- -- -- -- -- 1
Change in net unrealized gain on securities
available-for-sale.......................... -- -- -- -- -- --
Net loss...................................... -- -- -- -- -- --
------- ------ ----- ------ ------ -----------
Balances, December 31, 1996.................... 6 -- -- -- -- 9,982
Net loss...................................... -- -- -- -- -- --
------- ------ ----- ------ ------ -----------
Balances, December 31, 1997.................... 6 -- -- -- -- 9,982
Issuance of 74,820 common shares upon exercise
of options.................................. -- -- -- -- -- 3
Conversion of 2,319,095 shares of common stock
into Series A and B preferred stock......... (2) 2 1 -- -- 15
Proceeds from issuance of 2,188,698 shares of
Series C preferred stock and warrants, net
of related costs............................ -- -- -- 2 -- 12,527
Conversion of $1,000 debenture into 168,361
shares of Series C preferred stock.......... -- -- -- -- -- 1,000
Proceeds from issuance of 229,561 shares of
common stock and warrants, net of related
costs....................................... -- -- -- -- -- 1,281
Exchange of common for preferred shares and
related repurchase and retirement of 170,045
shares of Series C preferred stock.......... -- -- -- -- -- --
Repurchase and retirement of 147,939 shares of
Series B preferred stock.................... -- -- -- -- -- --
Net loss....................................... -- -- -- -- -- --
------- ------ ----- ------ ------ -----------
Balances, December 31, 1998.................... 4 2 1 2 -- 24,808
Proceeds from issuance of 3,115,328 shares of
Series D preferred stock and warrants, net
of related costs (unaudited)................ -- -- -- -- 3 22,081
Issuance of 157,838 common shares upon
exercise of options (unaudited)............. -- -- -- -- -- 165
Conversion of $1,000 debenture and interest
into 174,535 shares of Series C preferred
stock (unaudited)........................... -- -- -- -- -- 1,036
Net loss (unaudited).......................... -- -- -- -- -- --
Conversion of preferred stock to 7,818,077
shares of common stock (unaudited).......... 8 (2) (1) (2) (3) --
Issuance of options to purchase 795,130 shares
of common stock (unaudited)................. -- -- -- -- -- 1,034
Forfeiture of options to purchase 13,688
shares of common stock (unaudited).......... -- -- -- -- -- (18)
Proceeds from issuance of 3,850,000 shares of
common stock upon initial public offering,
net of related costs (unaudited)............ 4 -- -- -- -- 63,555
Conversion of redeemable common stock to
10,191 shares of common stock............... -- -- -- -- -- 80
Issuance of 55,556 shares of common stock for
advertising fees............................ -- -- -- -- -- 1,000
Issuance of 569,247 shares of common stock
upon exercise of warrants (unaudited)....... 1 -- -- -- -- 723
Amortization of deferred stock compensation
(unaudited)................................. -- -- -- -- -- --
------- ------ ----- ------ ------ -----------
Balances, September 30, 1999 (unaudited)....... $ 17 $ -- $ -- $ -- $ -- $ 114,464
======= ====== ===== ====== ====== ===========
<CAPTION>
---------------------------------------------
NET UNREALIZED
GAIN (LOSS)
ON DEFERRED
AVAILABLE-FOR- STOCK ACCUMULATED
SALE SECURITIES COMPENSATION DEFICIT
--------------- ------------ ------------
<S> <C> <C> <C>
Balances, January 1, 1996...................... $ 27 -- $ (2,634)
Proceeds from issuance of 674,279 common
shares, net of related costs................ -- -- --
Issuance of 27,207 common shares upon exercise
of options.................................. -- -- --
Change in net unrealized gain on securities
available-for-sale.......................... (27) -- --
Net loss...................................... -- -- (1,194)
-------- -------- ------------
Balances, December 31, 1996.................... -- -- (3,828)
Net loss...................................... -- -- (5,578)
-------- -------- ------------
Balances, December 31, 1997.................... -- -- (9,406)
Issuance of 74,820 common shares upon exercise
of options.................................. -- -- --
Conversion of 2,319,095 shares of common stock
into Series A and B preferred stock......... -- -- (15)
Proceeds from issuance of 2,188,698 shares of
Series C preferred stock and warrants, net
of related costs............................ -- -- --
Conversion of $1,000 debenture into 168,361
shares of Series C preferred stock.......... -- -- --
Proceeds from issuance of 229,561 shares of
common stock and warrants, net of related
costs....................................... -- -- --
Exchange of common for preferred shares and
related repurchase and retirement of 170,045
shares of Series C preferred stock.......... -- -- (500)
Repurchase and retirement of 147,939 shares of
Series B preferred stock.................... -- -- (878)
Net loss....................................... -- -- (13,225)
-------- -------- ------------
Balances, December 31, 1998.................... -- -- (24,024)
Proceeds from issuance of 3,115,328 shares of
Series D preferred stock and warrants, net
of related costs (unaudited)................ -- -- --
Issuance of 157,838 common shares upon
exercise of options (unaudited)............. -- -- --
Conversion of $1,000 debenture and interest
into 174,535 shares of Series C preferred
stock (unaudited)........................... -- -- --
Net loss (unaudited).......................... -- -- (15,727)
Conversion of preferred stock to 7,818,077
shares of common stock (unaudited).......... -- -- --
Issuance of options to purchase 795,130 shares
of common stock (unaudited)................. -- (1,034) --
Forfeiture of options to purchase 13,688
shares of common stock (unaudited).......... -- 18 --
Proceeds from issuance of 3,850,000 shares of
common stock upon initial public offering,
net of related costs (unaudited)............ -- -- --
Conversion of redeemable common stock to
10,191 shares of common stock............... -- -- --
Issuance of 55,556 shares of common stock for
advertising fees............................ -- -- --
Issuance of 569,247 shares of common stock
upon exercise of warrants (unaudited)....... -- -- --
Amortization of deferred stock compensation
(unaudited)................................. -- 169 --
-------- -------- ------------
Balances, September 30, 1999 (unaudited)....... $ -- $ (847) $ (39,751)
======== ======== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-34
<PAGE> 192
INTERACTIVE PICTURES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $(1,194) $(5,578) $(13,225) $(8,394) $(15,727)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation.............................................. 108 132 224 156 256
Provision for doubtful accounts receivable................ -- 190 (20) (20) 73
Loss (gain) on disposal of fixed assets................... -- 88 -- -- (6)
Amortization of product development and patent costs...... 71 858 -- -- --
Accretion of securities available-for-sale discounts...... (50) (51) (167) (153) (424)
Provision for inventory obsolescence...................... 44 (44) 100 -- 40
Non-cash compensation expense............................. -- -- -- -- 169
Non-cash expense related to issuance of warrants.......... -- -- -- -- 26
Changes in operating assets and liabilities:
Accounts receivable..................................... (148) (445) (284) (144) (1,305)
Inventory............................................... (60) (120) (196) (278) (855)
Prepaid expenses........................................ (55) 7 (172) (209) (1,529)
Other assets............................................ (16) (162) 21 85 (213)
Accounts payable........................................ 169 (85) 75 72 105
Accrued expenses........................................ (43) 520 1,081 281 (534)
Costs and estimated earnings in excess of billings on
uncompleted contracts................................. 3 (35) 64 -- --
Deferred revenue........................................ (18) (100) 55 (37) 105
------- ------- -------- ------- -------
Net cash used in operating activities................. (1,189) (4,825) (12,444) (8,641) (19,819)
------- ------- -------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of furniture and equipment........................ (130) (504) (913) (626) (1,058)
Purchases of securities available-for-sale.................. (3,174) (3,933) (7,831) (7,831) (78,964)
Maturities of securities available-for-sale................. 5,141 3,485 8,999 5,000 13,992
Proceeds from disposal of equipment......................... -- -- -- -- 42
Patent and product development costs........................ (678) -- -- -- --
------- ------- -------- ------- -------
Net cash provided by (used in) investing activities... 1,159 (952) 253 (3,457) (65,988)
------- ------- -------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock.................. 3,976 -- 1,285 -- 64,420
Net proceeds from issuance of preferred stock............... -- -- 12,529 13,899 26,876
Repurchase of preferred and common stock.................... -- -- (1,378) (1,326) (3,730)
Issuance (repayment) of convertible debenture............... -- 3,000 (1,000) -- --
Repayments of promissory note............................... -- (3) (8) (6) (6)
------- ------- -------- ------- -------
Net cash provided by financing activities............. 3,976 2,997 11,428 12,567 87,560
------- ------- -------- ------- -------
Net increase (decrease) in cash and cash equivalents........ 3,946 (2,780) (762) 469 1,753
Cash and cash equivalents, beginning of period.............. 660 4,606 1,826 1,826 1,064
------- ------- -------- ------- -------
Cash and cash equivalents, end of period.................... $ 4,606 $ 1,826 $ 1,064 $ 2,295 $ 2,817
======= ======= ======== ======= =======
</TABLE>
F-35
<PAGE> 193
INTERACTIVE PICTURES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
No income taxes were paid in any period presented. Interest payments were
insignificant in all periods presented.
Noncash investing and financing activities:
The Company acquired furniture and equipment of $40 in 1997 through the issuance
of a promissory note.
During 1998, a $1,000 convertible debenture was converted into 168,361 shares of
Series C preferred stock. In addition, 2,319,095 shares of common stock were
exchanged for 1,644,817 shares of Series A preferred stock and 674,279 shares of
Series B preferred stock.
During March 1999, a $1,000 convertible debenture and accrued interest was
converted into 174,535 shares of Series C preferred stock.
Also during March 1999, the Company issued 105,142 shares of redeemable common
stock for a portion of the placement fee in connection with the issuance of
Series D preferred stock.
During August 1999, the Company issued $1,000 of common stock (55,556 shares) to
Creative Artists Agency as an advertising alliance fee.
The accompanying notes are an integral part of these consolidated financial
statements.
F-36
<PAGE> 194
INTERACTIVE PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. GENERAL
Interactive Pictures Corporation ("IPIX" or the "Company") is engaged in
the design and sale of electronic digital imaging products related to IPIX
images. The Company's patented technology allows viewers to Step Inside the
Picture with IPIX images and changes the way people create and view images,
immersing them in a 360 degrees X 360 degrees spherical environment. IPIX images
provide a complete field of view in a window, which can be navigated by moving a
cursor inside the image.
Using the Company's technology, clients can create virtual tours and
multimedia content to enhance marketing and accelerate electronic commerce over
the Internet. The Company's customers are primarily in the real estate,
publishing and corporate and e-commerce industries. Customers in the real estate
and the corporate and e-commerce markets represented an aggregate of 63%, 57%
and 62% of total revenues for 1996, 1997 and 1998.
The Company performs research and development to enhance its own products,
as well as for other entities with whom the Company has entered into contracts.
The Company also performs content development services for itself and others
with whom the Company has entered into contracts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL STATEMENTS. Information in the accompanying financial
statements and notes to the financial statements for the interim period as of
September 30, 1999, and for the nine-month periods ended September 30, 1998 and
1999, is unaudited. The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting principles and
Regulation S-X. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine-month period ended September 30,
1999, are not necessarily indicative of the results that may be expected for the
year ending December 31, 1999.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements of the
Company include the accounts of Interactive Pictures Corporation and its
wholly-owned subsidiary, Interactive Pictures UK Limited, a United Kingdom
company formed in 1998. All significant intercompany balances and transactions
have been eliminated. The subsidiary's functional currency is the British Pound.
The cumulative translation adjustment account as of December 31, 1998 and
September 30, 1999 (unaudited), was insignificant.
CASH AND CASH EQUIVALENTS. The Company considers all highly liquid debt
instruments with a maturity of three months or less when purchased to be cash
equivalents.
SECURITIES AVAILABLE-FOR-SALE. Securities available-for-sale represent
those securities intended to be held for an indefinite period of time.
Securities available-for-sale are recorded at fair value based on prices
obtained from commercial pricing services.
F-37
<PAGE> 195
INTERACTIVE PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Unrealized gains and losses are excluded from earnings and reported in
other comprehensive income in shareholders' equity. Interest income includes
interest, amortization of purchase premiums and discounts, and realized gains
and losses on sales of securities. The cost of securities sold is based on the
specific identification method. The securities portfolio at December 31, 1997
and September 30, 1999 (unaudited) consisted entirely of U.S. government
obligations with maturities of less than one year. Amortized costs approximated
fair values and unrealized gains and losses were insignificant.
CONCENTRATIONS OF CREDIT RISK. Financial instruments that potentially
subject the Company to a concentration of credit risk consist of cash and cash
equivalents, and accounts receivable. Cash and cash equivalents are deposited
with high credit quality financial institutions. The Company's accounts
receivable are derived from revenue earned from clients located in the U.S. and
abroad. The Company performs ongoing credit evaluations of its clients'
financial condition and generally requires no collateral from its clients. To
date, the Company has not experienced any material losses.
The following table summarizes the revenue from product customers in excess
of 10% of total revenues:
<TABLE>
<CAPTION>
1996 1998
---- ----
<S> <C> <C>
Customer A.................................................. 0% 13%
Customer B.................................................. 12 0
Customer C.................................................. 16 0
</TABLE>
At December 31, 1998, Customer A accounted for 16% of accounts receivable.
One additional customer also represented 16% of accounts receivable at December
31, 1998. Four customers represented 10%, 10%, 11%, and 28%, respectively, of
accounts receivable at December 31, 1997. Three customers represented 21%, 15%
and 11%, respectively, of accounts receivable at September 30, 1998 (unaudited).
No customer represented in excess of 10% of the Company's revenues in 1997, or
in the nine-month period ended September 30, 1999 (unaudited). Customer A
represented 19% of the Company's revenue for the nine-month period ended
September 30, 1998 (unaudited).
INVENTORY. Inventory, which consists primarily of digital cameras and
related hardware, is stated at the lower of cost or market, with cost determined
using standard costs (which approximate first-in, first-out costs). The Company
records a provision for obsolete inventory whenever such an impairment has been
identified.
PROPERTY AND EQUIPMENT. Property and equipment consist primarily of
computer equipment and office furnishings, which are stated at cost. Routine
maintenance and repair costs are expensed as incurred. The costs of major
additions, replacements, and improvements are capitalized. Gains and losses from
disposals are included in operations upon disposal. To date, disposals of
property and equipment have been insignificant. Fixed assets are depreciated
primarily using the straight-line method over estimated useful lives, which
range from three to ten years. Leasehold improvements are amortized over the
term of the lease, or estimated useful life whichever is shorter.
F-38
<PAGE> 196
INTERACTIVE PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
PATENTS AND PRODUCT DEVELOPMENT COSTS. External legal costs incurred to
maintain the Company's intellectual property position are capitalized and
amortized over the estimated useful life of the related patents.
The Company also capitalizes eligible software costs incurred after
technological feasibility of the product has been established by a working
model. Capitalized software costs are amortized over the estimated useful life
of the product on a straight-line basis.
During 1997, the Company became aware of certain competitors using
alternative technologies and determined that it was necessary to revise the
estimated economic lives of both capitalized product development costs and
patent costs from five years and seven years, respectively, to one year and
three years, respectively. The effect of the change was to increase amortization
expense by approximately $650. Qualifying costs in 1997 and 1998, were
insignificant and, therefore, the Company did not capitalize such costs.
LONG-LIVED ASSETS. The carrying value of intangible assets, property and
equipment, and other long-lived assets is reviewed on a regular basis for the
existence of facts, both internally and externally, that may suggest impairment.
The Company recognizes impairment losses whenever events or circumstances result
in the carrying amount of the assets exceeding the sum of the expected future
cash flows associated with such assets. The measurement of the impairment losses
to be recognized is based on the difference between the fair values and the
carrying amounts of the assets. To date no such impairment has been indicated.
INCOME TAXES. The Company uses the asset and liability method of
accounting for income taxes, which requires the recognition of deferred tax
liabilities and assets for expected future tax consequences of temporary
differences between the carrying amounts and the tax basis of assets and
liabilities. A valuation allowance against deferred tax assets is recorded if,
based upon available evidence, it is more likely than not that some or all of
the deferred tax assets will not be realized. Tax credits are accounted for as a
reduction of tax expense in the year in which the credits reduce taxes payable.
The Company does not recognize deferred income taxes for temporary
differences associated with its investment in the foreign subsidiary because the
differences are essentially permanent in duration.
Interactive Pictures UK Limited is not included in the tax filing of its
parent, Interactive Pictures Corporation. As a result, Interactive Pictures UK
Limited files a separate return with the United Kingdom jurisdiction governing
the subsidiary.
REVENUE RECOGNITION. Product revenue is recognized upon shipment or
delivery to distributors and end users provided there are no uncertainties
surrounding product acceptance, there are no significant vendor obligations, the
fees are fixed and determinable, and collection is considered probable. The
Company provides an allowance for returns upon recognizing revenue as deemed
necessary based on historical experience. Returns were insignificant for all
years presented. Payments received in advance are initially recorded as deferred
revenue and recognized ratably as obligations are fulfilled.
F-39
<PAGE> 197
INTERACTIVE PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The Company derives service revenues from research and development
activities performed under fixed-price contracts with certain U.S. government
agencies and other third parties. Such revenues are recognized using the
percentage-of-completion method of accounting (based on the ratio of costs
incurred to total estimated costs, or as certain targets in the development
process are met, as appropriate under the contract). Provisions for estimated
losses on uncompleted contracts are made on a contract-by-contract basis and are
recognized in the period in which such losses become probable and can be
reasonably estimated. To date, such losses have been insignificant. Unbilled
fees and services on contracts are comprised of costs plus estimated earnings on
certain contracts in excess of contractual billings on such contracts. Advanced
billings and billings in excess of costs plus estimated earnings are classified
as deferred revenue.
RESEARCH AND DEVELOPMENT COSTS. Research and development expenditures are
expensed as incurred. Costs incurred under contracts to perform research and
development for others, excluding contracts with government agencies, are
accounted for under Statement of Financial Accounting Standards (SFAS) No. 68,
Research and Development Arrangements (Note 12).
ADVERTISING EXPENSES. All advertising expenditures are expensed as
incurred. Advertising expenses for 1996, 1997 and 1998, were $0, $392 and
$1,087, respectively. The Company recognizes expenditures under cooperative
advertising arrangements net of reimbursements received from participants.
ACCOUNTING FOR STOCK-BASED COMPENSATION. The Company has elected to
continue following Accounting Principles Board Opinion No. 25 ("APB 25"),
Accounting for Stock Issued to Employees, and related Interpretations in
accounting for stock options granted to employees rather than the alternative
fair value accounting provided for under SFAS No. 123, Accounting for
Stock-Based Compensation ("Statement 123").
FOREIGN CURRENCY TRANSACTIONS. Substantially all historical sales have
been denominated in U.S. dollars. All transaction gains and losses are included
in operations. Such amounts have been insignificant to date.
ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Examples of
items affected by certain significant estimates made by management are long-
lived assets, including patents and product development costs, certain accruals,
receivables and inventory.
SEGMENT REPORTING. In 1998, the Company adopted Statement of Financial
Accounting Standards 131 ("SFAS 131"), Disclosure About Segments of an
Enterprise and Related Information. SFAS 131 requires use of \the "management"
approach which designates the internal organization that is used by management
for making operating decisions and assessing performance as the source of the
Company's reportable segments. SFAS 131 also requires disclosures about products
and services, geographic areas, and
F-40
<PAGE> 198
INTERACTIVE PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
major customers. The adoption of SFAS 131 did not affect results of operations
or financial position.
NET LOSS PER SHARE. The Company computes net loss per share in accordance
with SFAS No. 128, Earnings Per Share, and SEC Staff Accounting Bulletin No. 98
("SAB 98"). Under the provisions of SFAS No. 128 and SAB 98, basic and diluted
net loss per share is computed by dividing the net loss available to common
shareholders for the period by the weighted average number of shares of common
stock outstanding during the period. The calculation of diluted net loss per
share excludes potential common shares if the effect is antidilutive. Potential
common shares are composed of incremental shares of common stock issuable upon
the exercise of potentially dilutive stock options and warrants and upon
conversion of the Company's preferred stock and convertible debenture.
The following table sets forth the computation of basic and dilutive net
loss per share for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------ -----------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NUMERATOR:
Net loss................... $ (1,194) $ (5,578) $ (13,225) $ (8,394) $ (15,727)
DENOMINATOR:
Weighted average shares.... 5,636,662 6,286,565 4,660,789 4,899,493 6,912,724
NET LOSS PER SHARE:
Basic and diluted.......... $ (0.21) $ (0.89) $ (2.84) $ (1.71) $ (2.28)
</TABLE>
The following table sets forth common stock equivalents that are not
included in the diluted net income per share calculation above because to do so
would be antidilutive for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- -----------------------
1996 1997 1998 1998 1999
-------- -------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Weighted average effect of
common stock equivalents
Preferred Stocks:
Series A.................... -- -- 1,197,061 1,059,993 1,297,578
Series B.................... -- -- 434,837 414,325 526,340
Series C.................... -- -- 1,511,024 1,261,295 2,357,058
Series D.................... -- -- -- -- 2,860,044
Employee stock options........ 203,018 697,241 661,210 666,990 1,583,823
Convertible debenture......... -- 86,987 441,481 409,680 51,132
-------- -------- ---------- ---------- ----------
203,018 784,228 4,245,613 3,812,283 8,675,975
======== ======== ========== ========== ==========
</TABLE>
F-41
<PAGE> 199
INTERACTIVE PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
RECLASSIFICATIONS. Certain reclassifications have been made to certain
previously reported 1996 and 1997 amounts to conform with the 1998 presentation.
RECENT ACCOUNTING PRONOUNCEMENTS. In June 1998, the FASB issued SFAS No.
133, Accounting for Derivatives and Hedging Activities. SFAS 133 establishes
accounting and reporting standards of derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
SFAS 133 is effective for fiscal years beginning after June 15, 2000. The
adoption of SFAS 133 is not expected to have a material impact on the Company's
reported results of operations, financial position or cash flows.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, Accounting for the Cost of Computer Software
Developed or Obtained for Internal Use. SOP 98-1 is effective for financial
statements for the years beginning after December 15, 1998. SOP 98-1 provides
guidance over accounting for computer software developed or obtained for
internal use including the requirement to capitalize specified costs and
amortization of such costs. The adoption of SOP 98-1 has not had a material
effect on the Company's reported results of operations, financial position, or
cash flows.
In March 1998, AICPA issued Statement of Position 98-4, Deferral of the
Effective Date of a Provision of SOP 97-2. SOP 98-4 defers for one year the
application of certain provisions of Statement of Position 97-2, Software
Revenue Recognition. Different informal and nonauthoritative interpretations of
certain provisions of SOP 97-2 have arisen and, as a result, the AICPA issued
SOP 98-9 in December 1998, which is effective for periods beginning after March
15, 1999. SOP 98-9 extends the effective date of SOP 98-4 and provides
additional interpretive guidance. The adoption of SOP 97-2, SOP 98-4 and SOP
98-9 have not had and are not expected to have a material impact on the
Company's reported results of operations, financial position or cash flows.
In April 1998, the AICPA issued SOP 98-5, Reporting on the Costs of
Start-Up Activities, which is effective for fiscal years beginning after
December 15, 1998, provides guidance on the financial reporting of start-up
costs and organization costs. It requires costs of start-up activities and
organization costs to be expensed as incurred. The adoption of this standard has
not had a material impact on the Company's reported results of operations,
financial position or cash flows.
F-42
<PAGE> 200
INTERACTIVE PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
3. ACCRUED LIABILITIES
Accrued liabilities consist of the following as of December 31:
<TABLE>
<CAPTION>
1997 1998
-------- ----------
<S> <C> <C>
Accrued legal fees........................................ $ 210 $ 451
Accrued vacation.......................................... 55 137
Accrued relocation expenses............................... -- 461
Other liabilities......................................... 302 599
-------- ----------
$ 567 $ 1,648
======== ==========
</TABLE>
4. INCOME TAXES
The components of the Company's net deferred tax asset (liability) as of
December 31, 1997 and 1998, is as follows:
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
DEFERRED TAX ASSETS (LIABILITIES):
Financial reserves.................................... $ 72 $ 103
Accrued expenses and deferred revenue................. 91 255
----------- -----------
163 358
Valuation allowance................................... (163) (358)
----------- -----------
Net current deferred tax asset
(liability).............................. $ -- $ --
=========== ===========
LONG-TERM:
Net operating loss carryforwards...................... $ 3,121 $ 7,911
Research and development credits...................... 45 45
Intangible assets..................................... 259 239
----------- -----------
3,425 8,195
Valuation allowance................................... (3,425) (8,195)
----------- -----------
Net long-term deferred tax asset
(liability).............................. $ -- $ --
=========== ===========
</TABLE>
At December 31, 1998, the Company has available net operating loss
carryforwards of approximately $21,000,000, which it may use to offset future
federal taxable income. The net operating loss carryforwards, if not utilized,
will begin to expire in 2009. The Company has available research and development
credits of approximately $45 that will expire in 2010.
Income tax benefits have not been recorded since the Company has fully
reserved the tax benefit of temporary differences, operating losses and tax
credit carryforwards based on management's evaluation of the positive and
negative evidence impacting the realizability of the assets, consisting
principally of net operating loss carryforwards. Management has considered the
Company's history of losses and concluded that as of December 31, 1997 and 1998,
the deferred tax assets should be fully reserved.
F-43
<PAGE> 201
INTERACTIVE PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The Company's 1996, 1997 and 1998 income tax provision differs from that
obtained by using the statutory rate of 34% due to the following:
<TABLE>
<CAPTION>
1996 1997 1998
----- ------- -------
<S> <C> <C> <C>
Computed "expected" tax benefit....................... $(406) $(1,897) $(4,496)
State income taxes, net of federal income tax
benefit............................................. (48) (223) (524)
Change in valuation allowance......................... 451 2,105 4,965
Permanent differences................................. 3 15 55
----- ------- -------
$ -- $ -- $ --
===== ======= =======
</TABLE>
5. DEBT
On October 29, 1997, the Company issued a $3,000, 8% convertible debenture
due September 30, 1998 (the Debenture). The debenture was convertible into
505,084 shares of Series C preferred stock. Effective October 23, 1998, $1,000
of the Debenture was assigned by the investor to a group of private investors
who converted such portion of the Debenture into 168,361 shares of Series C
preferred stock. The Company paid off $1,000 of the Debenture in October 1998,
and converted the remaining $1,000 into 174,535 shares of Series C preferred
stock in March 1999.
The Company entered into a $40 non-interest bearing promissory note payable
during August 1997; due in monthly installments of $1, including principal and
imputed interest, through August 2002. The note is collateralized by certain
furniture and equipment of the Company.
6. SHAREHOLDERS' EQUITY
As of December 31, 1997, the Company's outstanding capital stock consisted
solely of common stock. The investment agreements among the Company and certain
corporate investors provide certain rights and obligations to the parties,
including but not limited to board representation, the issuance of equity
securities, and public registration and antidilution rights.
During April 1998, the Company authorized and issued to new corporate
investors 2,188,698 shares of Series C preferred stock, as well as warrants to
purchase an additional 609,460 shares of Series C preferred stock, for net
proceeds of $12,529. The warrants expire five years from the issuance or upon
consummation of a "qualified public offering," as defined in the warrant
agreements. The warrant exercise price for 547,175 shares is $5.94 and $7.12 for
the remaining shares under these warrants.
In connection with the Series C transaction, the Company exchanged, on a
one-for-one basis, an aggregate of 2,319,095 shares of common stock for
1,644,817 shares of Series A preferred stock and 674,279 shares of Series B
preferred stock.
During August 1998, the Company issued warrants to purchase 22,956 shares
of common stock. These warrants have an exercise price of $7.12 per share and
expire three
F-44
<PAGE> 202
INTERACTIVE PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
years from the issuance or upon consummation of a "qualified public offering,"
as defined in the warrant agreement.
On March 19 and April 12, 1999, the Company amended its Charter to (i)
increase the number of common shares authorized to 34,009,000 shares; (ii)
change the authorized number of shares of Series B and C preferred stock to
526,340 and 3,151,715, respectively; and (iii) change the par value of its
common stock to $0.001. All amounts included in the accompanying financial
statements have been restated to retroactively reflect the change in par value.
Subsequent to the year ended December 31, 1998, the Company issued an
aggregate of 3,504,744 shares of Series D preferred stock for gross proceeds of
$27,000.
In connection with the Series D issuance, warrants to purchase 221,059
shares of Series D preferred stock were issued. The warrants have an exercise
price of $9.23 and expire three years from issuance or upon consummation of a
"qualified public offering," as defined in the warrant agreement.
In April 1999, the Company issued 6,802 warrants to purchase common stock
at $9.23 per share. These warrants expire three years from issuance or upon
consummation of a "qualified public offering," as defined in the warrant
agreement.
The Company's amended Charter provides the following rights and preferences
to the holders of Series A, B, C and D preferred stock:
VOTING
Each share of all series of preferred stock has voting rights equal to an
equivalent number of shares of common stock into which it is convertible
and votes together as one class with the common stock.
The consent of the holders of greater than 70% of the outstanding shares of
Series A, B and C preferred stock will be necessary to effect certain
changes to the Company's Charter that would adversely affect the powers,
preferences and other rights of the preferred stock.
The consent of the holders of greater than a majority of the outstanding
shares of Series D preferred stock will be necessary to effect certain
changes to the Company's Charter.
The holders of Series A and B preferred stock shall each be entitled to
elect one director at each annual meeting of the stockholders. The holders
of Series C and D preferred stock shall be entitled to elect two directors
at each meeting.
LIQUIDATION
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, holders of Series A, B and C preferred stock are
entitled to receive an
F-45
<PAGE> 203
INTERACTIVE PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
amount of $3.9989, $5.9396 and $5.9396 per share, respectively, prior to
and in preference to any distribution to the holders of common stock.
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, holders of Series D preferred stock are entitled
to receive an amount of $7.7038 per share prior to and in preference to any
distribution to the holders of common stock and all other classes of
preferred stock.
CONVERSION
Each share of all series of outstanding preferred stock is convertible, at
the option of the holder, according to a conversion ratio which is subject
to adjustment for dilution. In the event that the per share offering price
of proceeds from a "qualified public offering," as defined in the Company's
charter, exceed certain thresholds, each share of all series of outstanding
preferred stock automatically converts on a one-for-one basis to common
stock.
DIVIDENDS
Holders of preferred stock are entitled to receive noncumulative dividends
when and if declared by the Board of Directors. No dividends have been
declared through December 31, 1998.
The Company provided put options to certain of its underwriters upon their
purchase for cash of 389,416 shares of Series D convertible preferred stock and
105,142 shares of common stock. The option holders can exercise the options at
the close of an initial public offering only if the National Association of
Securities Dealers, Inc. (NASD) concludes upon the close of the initial public
offering that the underlying stock issuances result in compensation to the
underwriters in excess of its allowed limits. Upon exercise of the options by
the holders, the Company must pay cash to the holders of the original purchase
price of each share. There is no provision for unpaid dividends. The Company
presented these shares as mandatorily redeemable stock in the balance sheet. The
Company concluded that the redemption value of these securities was the same as
the amount at which the securities were initially recorded.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair values of financial instruments have been estimated using data which
the Company considered the best available. The following estimation
methodologies were used:
CASH AND CASH EQUIVALENTS. Cash and cash equivalents are reflected at
carrying value, which is considered fair value due to the short-term nature
of these instruments.
ACCOUNTS RECEIVABLE. Accounts receivable consists primarily of trade
receivables. The Company has estimated their fair value to be the carrying
value.
F-46
<PAGE> 204
INTERACTIVE PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
SECURITIES AVAILABLE-FOR-SALE. The estimated fair value of securities
available-for-sale is based on the quoted market prices for those or
similar investments. Amortized costs approximate fair value.
CONVERTIBLE DEBENTURE AND PROMISSORY NOTE. Fair values are based on quoted
market prices for the same or similar issues, or the carrying value is used
where a market price is unavailable. The carrying value is assumed to be
the fair value for these liabilities as no market price for a comparable
instrument was available.
8. EMPLOYEE STOCK AND BENEFIT PLANS
STOCK OPTION PLAN
The Company has authorized the 1997 Equity Compensation Plan (the Plan),
under which 1,998,559 shares of common stock are authorized and reserved for
issuance to selected employees, officers, directors, consultants and advisors.
The Company has reserved a sufficient number of shares of common stock for
issuance pursuant to the authorized options. As of December 31, 1998, 547,970
options had been granted under this Plan. In addition, the Company has granted
certain options to purchase shares of the Company's common stock to employees
not under the Plan; these options were primarily granted prior to the
authorization of the 1997 plan. The exercise price of all options granted is the
fair value of the Company's common stock at the date of grant as estimated by
common stock and convertible preferred stock transactions with third parties at
or near grant dates. The options generally vest over one to three-year periods
and expire five years after the respective vesting dates.
F-47
<PAGE> 205
INTERACTIVE PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
A summary of the Company's stock option activity is as follows:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE STOCK AVERAGE
OF EXERCISE GRANT DATE OPTIONS EXERCISE
SHARES PRICES FAIR VALUE EXERCISABLE PRICE
------ ----------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Under option at January 1,
1996...................... 519,467
Options granted in 1996..... 140,117 $3.68 $0.97
Options exercised in 1996... (27,207) 0.03
Options cancelled in 1996... (40,811) 3.68
---------
Under option at December 31,
1996...................... 591,566 446,088 $0.56
Options granted in 1997..... 891,733 4.06 0.97
Options cancelled in 1997... (107,468) 3.68
---------
Under option at December 31,
1997...................... 1,375,831 677,103 1.62
Options granted in 1998..... 536,067 6.00 1.21
Options exercised in 1998... (74,820) 0.03
Options cancelled in 1998... (11,337) 6.47
---------
Under option at December 31,
1998...................... 1,825,741 835,192 2.47
=========
</TABLE>
The following table summarizes information about stock options at December
31, 1998:
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
OPTIONS OUTSTANDING ------------------------------
------------------------------------------------- NUMBER
NUMBER WEIGHTED-AVERAGE EXERCISABLE
RANGE OF OUTSTANDING REMAINING WEIGHTED-AVERAGE AT WEIGHTED-AVERAGE
EXERCISE PRICE AT 12/31/98 CONTRACTUAL LIFE EXERCISE PRICE 12/31/98 EXERCISE PRICE
- -------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$0.03 308,611 0.7 years $0.03 308,611 $0.03
$3.68 872,688 2.7 years $3.68 486,677 $3.68
$5.94 - $6.47 644,442 8.9 years $6.06 39,904 $6.41
</TABLE>
ACCOUNTING FOR STOCK-BASED COMPENSATION
Under APB 25, because the exercise price of the Company's stock options
equals the deemed fair value of the underlying stock on the date of the grant,
no compensation cost has been recognized in the accompanying financial
statements. Pro forma information regarding net loss is required by Statement
123, and has been determined as if the Company had accounted for its stock
options under the fair value method of Statement 123. The Company has determined
that the difference between historical results and such pro forma information
would have been to increase the net loss by $133, $311 and $301 in 1996, 1997
and 1998, respectively, and to increase the net loss per share to $(0.24),
$(0.94), and $(2.91) in 1996, 1997 and 1998, respectively.
F-48
<PAGE> 206
INTERACTIVE PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The minimum fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants: expected lives of five years, risk
free interest rate of 6.21% in 1996, 5.71% in 1997, 4.59% in 1998, and expected
dividends and volatility of zero in 1996, 1997 and 1998. Because the
determination of fair value of all options granted after such time as the
Company becomes a public entity would include an expected volatility factor in
addition to the factors described in this paragraph, these results may not be
representative of future periods.
401(K) PLAN
The Company has a 401(k) profit sharing plan which is available to all
full-time employees after six months of service and those part-time employees
who have completed one thousand hours of employment during twelve consecutive
months. The Company will match sixty-five cents per dollar up to 6.15% of the
employee's annual salary. The Company made contributions of $33, $44 and $116 in
1996, 1997 and 1998, respectively.
9. COMPREHENSIVE INCOME
On January 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income, which establishes new requirements for reporting and
displaying comprehensive income (loss) and its components. The adoption of SFAS
No. 130 has no impact on the Company's net loss or total stockholders' equity.
This new accounting standard requires net unrealized gains or losses on the
Company's available-for-sale securities to be reported as accumulated other
comprehensive income (loss).
The following reclassification adjustments are required to avoid
double-counting net realized gains on sales of securities that were previously
included in comprehensive income prior to the sales of the securities:
<TABLE>
<CAPTION>
1996
--------------
<S> <C>
Net gains on sales of securities included in interest
income.................................................... $ 27
Other comprehensive income reclassification adjustment...... (27)
----
Net unrealized gain (loss) reported in other comprehensive
income................................................. $ --
====
</TABLE>
10. SEGMENT INFORMATION
The Company has two reportable segments: 1) IPIX products, and 2) research
and development services for others. The accounting policies of the segments are
the same as those of the Company. The Company evaluates the performance of its
segments and allocates resources to them based solely on evaluation of gross
profit. There are no inter-segment revenues. The Company does not make
allocations of corporate costs to the individual segments and does not identify
separate assets of the segments in making decisions regarding performance or
allocation of resources to them. Management believes the Company's future growth
will occur in the IPIX products segment.
F-49
<PAGE> 207
INTERACTIVE PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Information about reported segments is as follows:
<TABLE>
<CAPTION>
RESEARCH AND
DEVELOPMENT
IPIX SERVICES
PRODUCTS FOR OTHERS TOTAL
---------- ------------ ----------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31:
1996
Revenues.................................... $ 1,337 $ 208 $ 1,545
Gross profit................................ 794 100 894
1997
Revenues.................................... $ 2,128 $ 318 $ 2,446
Gross profit................................ 1,682 2 1,684
1998
Revenues.................................... $ 2,712 $ 329 $ 3,041
Gross profit................................ 1,505 88 1,593
NINE MONTHS ENDED SEPTEMBER 30:
1998 (UNAUDITED)
Revenues.................................... $ 1,832 $ 156 $ 1,988
Gross profit................................ 1,284 71 1,355
1999 (UNAUDITED)
Revenues.................................... $ 5,406 $ -- $ 5,406
Gross profit................................ 2,716 -- 2,716
</TABLE>
Revenue and long-lived asset information by geographic area is as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------------ ---------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
United States............ $ 1,148 $ 1,834 $ 2,404 $ 1,403 $ 4,293
Japan.................... 138 273 352 352 23
Singapore................ 259 143 13 13 2
United Kingdom........... -- 22 41 35 944
Other foreign
countries.............. -- 174 231 185 144
---------- ---------- ---------- -------- ----------
$ 1,545 $ 2,446 $ 3,041 $ 1,988 $ 5,406
========== ========== ========== ======== ==========
LONG-LIVED ASSETS:
Foreign.................. $ -- $ 15 $ 47
United States............ 663 1,338 2,072
---------- ---------- ----------
$ 663 $ 1,353 2,119
========== ========== ==========
</TABLE>
F-50
<PAGE> 208
INTERACTIVE PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Foreign revenues include all sales made to customers outside the United
States, including those generated by the UK subsidiary.
11. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases certain office space under noncancelable operating
leases. Future minimum lease payments with remaining terms in excess of one year
are as follows:
<TABLE>
<CAPTION>
<S> <C>
1999........................................................ $ 537
2000........................................................ 419
2001........................................................ 376
2002........................................................ 329
2003........................................................ 56
------
$1,717
======
</TABLE>
Rental expense for operating leases was $46, $152 and $430 for 1996, 1997
and 1998, respectively.
The Company is subject to claims in the ordinary course of business.
Management believes the ultimate resolution of these matters will have no
material impact on the financial condition, results of operations or cash flows
of the Company.
12. RESEARCH AND DEVELOPMENT ARRANGEMENTS
The Company performs certain research and development activities under
various third party contracts under which the Company receives payments upon
achieving certain targets in the development process. One of these contracts
provided for receipt of royalties under a license agreement. The remaining
contract for which information is disclosed below included no such arrangements.
Both of these contracts expired prior to December 31, 1998.
Total revenue earned and costs incurred under third party research and
development contracts, excluding contracts with government agencies, at December
31, is as follows:
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Revenue earned.............................................. $80 $105 $63
Cost incurred............................................... 45 208 --
</TABLE>
13. SUBSEQUENT EVENTS
On July 2, 1999, the Board of Directors approved a 0.34009-for-1 reverse
stock split. All references to number of shares, per share amounts, stock option
data, and warrant exercise prices have been restated for all periods presented.
Unaudited
In April and May of 1999, the Company issued options to employees and
directors to purchase 795,130 shares of common stock at $7.70 per share. The
Company recorded deferred stock compensation totalling approximately $1,034
during these time periods which represents the difference between the deemed
fair market value of the Company's common stock for accounting purposes and the
exercise price of the options at the date of
F-51
<PAGE> 209
INTERACTIVE PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
grant. The deferred stock compensation will be presented as a reduction of
shareholders' equity and will be amortized over the three year vesting period of
the options.
In October 1998, a lawsuit was filed against the Company. This lawsuit
alleged that the Company breached a duty of confidence, made misrepresentations
and misappropriated trade secrets. The court removed this action to arbitration
upon the Company's motion and the Company cross-claimed alleging various
affirmative claims. The court dismissed the lawsuit in May 1999 upon motion of
the plaintiffs. However, arbitration is expected to take place in the spring of
2000. In May 1999, one of the original plaintiffs filed a second lawsuit against
the Company alleging patent infringement. Management believes that the claims
are without merit and intends to vigorously defend against such claims. Since
the plaintiffs have not specified in their lawsuit the amount of damages they
seek, an estimate of the ultimate liability of the Company cannot be made. If
the Company does not effectively defend against the claims, the Company's
financial condition, results of operations and cash flows could be materially
adversely affected.
By letter dated June 7, 1999, the NASD informed the Company that it would
consider a portion of the redeemable convertible preferred stock and redeemable
common stock to be underwriting compensation received in connection with the
proposed initial public offering in excess of the amounts allowable under the
NASD's Conduct Rules (Note 6). In order to comply with the NASD's Conduct Rules,
the Company repurchased 484,367 shares of common stock, including shares
representing the redeemable convertible preferred stock and the redeemable
common stock following the consummation of the initial public offering for
$3,730.
Before the effectiveness of the registration statement covering the shares
of common stock being sold in the Company's initial public offering, the Company
provided written materials to persons it identified as eligible participants in
its directed share program. The Company has been advised that these materials
may constitute a prospectus that does not meet the requirements of the
Securities Act of 1933. If the distribution of these materials did constitute a
violation of the Securities Act of 1933, the recipients of these materials who
purchased common stock in this offering would have the right, for a period of
one year from the date of their purchase of common stock, to obtain recovery of
the consideration paid in connection with their purchase of common stock or, if
they had already sold the stock, sue the Company for damages resulting from
their purchase of common stock. These damages could total up to approximately
$2,800 plus interest, based on the initial public offering price of $18.00 per
share, if these investors seek recovery or damages after an entire loss of their
investment.
In August 1999, the Company raised net proceeds of approximately $63,200 in
its initial public offering.
The Company and bamboo.com, Inc. ("bamboo") have entered into an Agreement
and Plan of Merger, dated as of October 25, 1999 ("the merger agreement").
Pursuant to the merger agreement, IPIX will become a wholly-owned subsidiary of
bamboo.com and bamboo will issue 1.369 shares of its common stock for every
share of IPIX common stock outstanding immediately prior to the Effective Time
(as defined in the merger agreement) of the merger.
F-52
<PAGE> 210
INTERACTIVE PICTURES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
All outstanding options to purchase the Company's common stock will be
assumed by bamboo and will become options to purchase shares of bamboo common
stock. The transaction is intended to be accounted for as a pooling of interests
and qualify as a tax-free reorganization. The merger has been approved by the
boards of directors of the Company and bamboo, but is still subject to approval
by the shareholders of IPIX and other conditions to closing.
The merger agreement obligates the Company or bamboo to pay to the other
party a termination fee of $16 million if the merger is not consummated as a
result of certain specified events.
In connection with the merger agreement, the Company and bamboo entered
into two stock option agreements. IPIX granted bamboo an option to purchase
19.9% of IPIX's common shares at a price of $22.25 per share, and bamboo granted
IPIX an option to purchase 19.9% of bamboo's common shares at a price of $16.25
per share. The stock options become exercisable in the event that the issuer of
the option becomes the subject of a publicly announced third party takeover
proposal. Neither the Company nor bamboo may realize more than a total of $20
million from the payment of both the $16 million termination fee and the
exercise of the stock option and subsequent sale of the option shares. Both
options terminate either upon consummation of the merger, 30 days after
termination of the merger agreement (other than as a result of a proposal by a
third party to acquire 30% or more of the equity or assets, or to undertake a
merger involving 30% of the net assets, net revenue or net income of the issuer)
or 180 days after the termination of the merger agreement.
F-53
<PAGE> 211
THE COMBINED COMPANY
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
INTRODUCTION
On October 25, 1999, bamboo.com and IPIX entered into an agreement and plan
of merger. Under the agreement, bamboo.com would issue 1.369 common shares for
every common share of IPIX. The merger is subject to, among other things,
completion of due diligence and the approval by shareholders of bamboo.com and
IPIX. The transaction, which is intended to be accounted for as a pooling of
interests, is expected to be consummated in the first quarter of 2000.
The following unaudited pro forma condensed consolidated statements of
operations for the fiscal years ended December 31, 1996, 1997 and 1998 and for
the nine month periods ended September 30, 1998 and 1999 give effect to the
merger with IPIX as if it had been consummated at the beginning of each period.
The following unaudited pro forma condensed consolidated balance sheet as
of September 30, 1999 gives effect to the merger by bamboo.com with IPIX as if
the transaction had occurred as of September 30, 1999.
The pro forma condensed consolidated financial statements have been
prepared by management of bamboo.com and may not be indicative of the financial
position or results that actually would have occurred if the transaction had
been in effect on the dates indicated or which may be obtained in the future.
F-54
<PAGE> 212
THE COMBINED COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED DECEMBER 31, 1996 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PROFORMA PROFORMA
BAMBOO.COM IPIX ADJUSTMENTS TOTAL
---------- ------- ----------- --------
<S> <C> <C> <C> <C>
REVENUES:
Products............................... $ -- $ 1,337 $ -- $ 1,337
Services............................... -- 208 -- 208
------ ------- ------- -------
-- 1,545 -- 1,545
------ ------- ------- -------
COST OF REVENUES:
Products............................... -- 543 -- 543
Services............................... -- 108 -- 108
------ ------- ------- -------
-- 651 -- 651
------ ------- ------- -------
Gross profit........................... -- 894 -- 894
------ ------- ------- -------
OPERATING EXPENSES:
Sales and marketing.................... 4 908 -- 912
Research and development............... 24 389 -- 413
General and administrative............. 62 921 -- 983
Merger expenses(2)..................... -- -- -- --
Amortization of patent costs........... -- 71 -- 71
------ ------- ------- -------
Total operating expenses............. 90 2,289 -- 2,379
------ ------- ------- -------
Interest income........................ -- 111 -- 111
Interest expense....................... -- -- -- --
Other income (expense), net............ -- 90 -- 90
------ ------- ------- -------
Net loss............................. $ (90) $(1,194) $ -- $(1,284)
====== ======= ======= =======
Basic and diluted loss per common
share(1)............................. $(0.04) $ (0.15) $ (0.13)
Weighted average shares -- basic and
diluted(1)........................... 2,284 7,717 10,001
</TABLE>
F-55
<PAGE> 213
THE COMBINED COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED DECEMBER 31, 1997 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PROFORMA PROFORMA
BAMBOO.COM IPIX ADJUSTMENTS TOTAL
---------- ------- ----------- --------
<S> <C> <C> <C> <C>
REVENUES:
Products............................... $ 45 $ 2,128 $ -- $ 2,173
Services............................... -- 318 -- 318
------ ------- ------- -------
45 2,446 -- 2,491
------ ------- ------- -------
COST OF REVENUES:
Products............................... 15 446 -- 461
Services............................... -- 316 -- 316
------ ------- ------- -------
15 762 -- 777
------ ------- ------- -------
Gross profit........................... 30 1,684 -- 1,714
------ ------- ------- -------
OPERATING EXPENSES:
Sales and marketing.................... 10 2,829 -- 2,839
Research and development............... 41 1,171 -- 1,212
General and administrative............. 122 2,598 -- 2,720
Merger expenses(2)..................... -- -- -- --
Amortization of patent costs........... -- 858 -- 858
------ ------- ------- -------
Total operating expenses............. 173 7,456 -- 7,629
------ ------- ------- -------
Interest income........................ -- 181 -- 181
Interest expense....................... -- (42) -- (42)
Other income (expense), net............ -- 55 -- 55
------ ------- ------- -------
Net loss............................. $ (143) $(5,578) $ -- $(5,721)
====== ======= ======= =======
Basic and diluted loss per common
share(1)............................. $(0.05) $ (0.65) $ (0.50)
Weighted average shares -- basic and
diluted(1)........................... 2,819 8,607 11,426
</TABLE>
F-56
<PAGE> 214
THE COMBINED COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED DECEMBER 31, 1998 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PROFORMA PROFORMA
BAMBOO.COM IPIX ADJUSTMENTS TOTAL
---------- -------- ----------- --------
<S> <C> <C> <C> <C>
REVENUES:
Products............................. $ 77 $ 2,712 $ -- $ 2,789
Services............................. -- 329 -- 329
------- -------- ------- --------
77 3,041 -- 3,118
------- -------- ------- --------
COST OF REVENUES:
Products............................. 67 1,207 -- 1,274
Services............................. -- 241 -- 241
------- -------- ------- --------
67 1,448 -- 1,515
------- -------- ------- --------
Gross profit......................... 10 1,593 -- 1,603
------- -------- ------- --------
OPERATING EXPENSES:
Sales and marketing.................. 300 8,387 -- 8,687
Research and development............. 278 2,668 -- 2,946
General and administrative........... 110 3,864 -- 3,974
Merger expenses(2)................... -- -- -- --
Non-cash compensation expense........ 1,162 -- -- 1,162
------- -------- ------- --------
Total operating expenses............. 1,850 14,919 -- 16,769
------- -------- ------- --------
Interest income...................... -- 276 -- 276
Interest expense..................... -- (202) -- (202)
Other income (expense), net.......... -- 27 -- 27
------- -------- ------- --------
Net loss........................... $(1,840) $(13,225) $ -- $(15,065)
======= ======== ======= ========
Basic and diluted loss per common
share(1)........................... $ (0.31) $ (2.07) $ (1.22)
Weighted average shares -- basic and
diluted(1)......................... 5,953 6,381 12,334
</TABLE>
F-57
<PAGE> 215
THE COMBINED COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PROFORMA PROFORMA
BAMBOO.COM IPIX ADJUSTMENTS TOTAL
---------- ------- ----------- --------
<S> <C> <C> <C> <C>
REVENUES:
Products............................... $ 60 $ 1,832 $ -- $ 1,892
Services............................... -- 156 -- 156
------- ------- ------- -------
60 1,988 -- 2,048
------- ------- ------- -------
COST OF REVENUES:
Products............................... 54 548 -- 602
Services............................... -- 85 -- 85
------- ------- ------- -------
54 633 -- 687
------- ------- ------- -------
Gross profit........................... 6 1,355 -- 1,361
------- ------- ------- -------
OPERATING EXPENSES:
Sales and marketing.................... 108 5,625 -- 5,733
Research and development............... 64 1,928 -- 1,992
General and administrative............. 60 2,290 -- 2,350
Merger expenses(2)..................... -- -- -- --
Non-cash compensation expense.......... 906 -- -- 906
------- ------- ------- -------
Total operating expenses............. 1,138 9,843 -- 10,981
------- ------- ------- -------
Interest income........................ -- 248 -- 248
Interest expense....................... -- (177) -- (177)
Other income (expense), net............ -- 23 -- 23
------- ------- ------- -------
Net loss............................. $(1,132) $(8,394) $ -- $(9,526)
======= ======= ======= =======
Basic and diluted loss per common
share(1)............................. $ (0.20) $ (1.25) $ (0.78)
Weighted average shares -- basic and
diluted(1)........................... 5,553 6,707 12,260
</TABLE>
F-58
<PAGE> 216
THE COMBINED COMPANY
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PROFORMA PROFORMA
BAMBOO.COM IPIX ADJUSTMENTS TOTAL
---------- -------- ----------- --------
<S> <C> <C> <C> <C>
REVENUES:
Products............................. $ 1,797 $ 5,406 $ -- $ 7,203
Services............................. -- -- --
-------- -------- ------- --------
1,797 5,406 -- 7,203
-------- -------- ------- --------
COST OF REVENUES:
Products............................. 1,455 2,690 -- 4,145
Services............................. -- -- -- --
-------- -------- ------- --------
1,455 2,690 -- 4,145
-------- -------- ------- --------
Gross profit......................... 342 2,716 -- 3,058
-------- -------- ------- --------
OPERATING EXPENSES:
Sales and marketing.................. 11,048 12,429 -- 23,477
Research and development............. 685 2,653 -- 3,338
General and administrative........... 4,642 4,069 -- 8,711
Merger expenses(2)................... -- -- -- --
Non-cash compensation expense(3)..... 14,810 169 292 15,271
-------- -------- ------- --------
Total operating expenses........... 31,185 19,320 292 50,797
-------- -------- ------- --------
Interest income...................... -- 889 -- 889
Interest expense..................... (6,629) (12) -- (6,641)
Other income (expense), net.......... 278 -- -- 278
-------- -------- ------- --------
Net loss........................... (37,194) (15,727) (292) (53,213)
-------- -------- ------- --------
Beneficial conversion feature of
series B convertible preferred
stock.............................. (1,000) -- -- (1,000)
-------- -------- ------- --------
Net loss attributable to common
shareholders....................... $(38,194) $(15,727) $ (292) $(54,213)
======== ======== ======= ========
Basic and diluted loss per common
share(1)........................... $ (3.88) $ (1.66) $ (2.81)
Weighted average shares -- basic and
diluted(1)......................... 9,840 9,464 19,304
</TABLE>
F-59
<PAGE> 217
THE COMBINED COMPANY
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
(1) Pro forma net loss per share amounts are based on the average number of
common shares of the combined companies outstanding during each period.
Shares of IPIX have been adjusted to the equivalent shares of bamboo.com for
each period using an exchange ratio of 1.369.
(2) The pro forma condensed consolidated statements of operations do not reflect
certain estimated non-recurring charges aggregating approximately
$10,100,000 with respect to legal, accounting and other expenses associated
with the merger or approximately $2,056,000 related to the accelerated
vesting of a portion of the bamboo.com options outstanding upon consummation
of the merger.
(3) Based on review of accounting policies of both companies, adjustment was
made to accelerate amortization of deferred compensation expense to conform
to the policy determined most appropriate.
F-60
<PAGE> 218
THE COMBINED COMPANY
PRO-FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
AS OF SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PROFORMA PROFORMA
BAMBOO.COM IPIX ADJUSTMENTS TOTAL
---------- -------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................. $27,461 $ 2,817 $ -- $ 30,278
Short-term investments............... -- 65,396 -- 65,396
Accounts receivable, net............. 126 2,075 -- 2,201
Inventory, net....................... -- 1,144 -- 1,144
Prepaid and other current assets..... 1,100 2,992 -- 4,092
------- -------- -------- --------
Total current assets............ 28,687 74,424 -- 103,111
------- -------- -------- --------
Fixed assets, net.................... 2,402 2,119 -- 4,521
Other assets......................... 41 151 -- 192
------- -------- -------- --------
Total assets....................... $31,130 $ 76,694 $ -- $107,824
======= ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable..................... $ 1,372 $ 506 $ -- $ 1,878
Accrued expenses..................... 2,415 2,067 -- 4,482
Deferred revenue..................... 1,857 223 -- 2,080
------- -------- -------- --------
Total current liabilities.......... 5,644 2,796 -- 8,440
------- -------- -------- --------
Promissory note, less current
portion............................ -- 15 -- 15
Capital lease obligations, less
current portion.................... 455 -- -- 455
SHAREHOLDERS' EQUITY:
Common stock......................... 14 17 -- 31
Class B common stock................. 1 -- -- 1
Additional paid-in capital........... 70,634 114,464 -- 185,098
Notes receivable from stockholders... (148) -- -- (148)
Accumulated other comprehensive
income............................. 10 -- -- 10
Deferred stock compensation(1)....... (5,212) (847) 292 (5,767)
Accumulated deficit(1)............... (40,268) (39,751) (292) (80,311)
------- -------- -------- --------
Total shareholders' equity......... 25,031 73,883 -- 98,914
------- -------- -------- --------
Total liabilities and shareholders'
equity.......................... $31,130 $ 76,694 $ -- $107,824
======= ======== ======== ========
</TABLE>
- ---------------
(1) Based on review of accounting policies of both companies, adjustment was
made to accelerate amortization of deferred compensation expense to conform
to the policy determined most appropriate.
F-61
<PAGE> 219
ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 25, 1999
BETWEEN
INTERACTIVE PICTURES CORPORATION
AND
BAMBOO.COM, INC.
<PAGE> 220
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
ARTICLE 1
THE MERGER
Section 1.01. The Merger............................................. A-1
Section 1.02. Effective Time......................................... A-1
Section 1.03. Closing of the Merger.................................. A-2
Section 1.04. Effects of the Merger.................................. A-2
Section Formation of Merger Sub; Certificate of Incorporation
1.05....... and Bylaws of Surviving Corporation.................... A-2
Section 1.06. Board of Directors and Officers of bamboo.............. A-2
Section 1.07. Conversion of Shares................................... A-4
Section 1.08. Exchange of Certificates............................... A-4
Section 1.09. Stock Options.......................................... A-6
Section 1.10. Taking of Necessary Action; Further Action............. A-7
Section 1.11. Alternative Transaction Structure...................... A-7
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF BAMBOO
Section 2.01. Organization and Qualification......................... A-7
Section 2.02. Capitalization of bamboo............................... A-8
Section 2.03. Authority Relative to this Agreement; Recommendation... A-9
Section 2.04. SEC Reports; Financial Statements...................... A-9
Section 2.05. Information Supplied................................... A-10
Section 2.06. Consents and Approvals; No Violations.................. A-10
Section 2.07. No Default............................................. A-11
Section 2.08. No Undisclosed Liabilities; Absence of Changes......... A-11
Section 2.09. Litigation............................................. A-12
Section 2.10. Compliance with Applicable Law......................... A-12
Section 2.11. Employee Benefit Plans; Labor Matters.................. A-12
Section 2.12. Environmental Laws and Regulations..................... A-14
Section 2.13. Tax Matters............................................ A-14
Section 2.14. Title to Property...................................... A-15
Section 2.15. Intellectual Property.................................. A-15
Section 2.16. Insurance.............................................. A-17
Section 2.17. Material Contracts..................................... A-17
Section 2.18. Vote Required.......................................... A-17
Section 2.19. Tax and Accounting Treatment........................... A-17
Section 2.20. Affiliates............................................. A-17
Section 2.21. Certain Business Practices............................. A-17
Section 2.22. Insider Interests...................................... A-18
Section 2.23. Brokers................................................ A-18
Section 2.24. No Existing Discussions................................ A-18
Section 2.25. Takeover Statutes and Charter Provisions............... A-18
Section 2.26. Year 2000 Compliance Matters........................... A-18
</TABLE>
A-i
<PAGE> 221
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF IPIX
Section 3.01. Organization and Qualification......................... A-18
Section 3.02. Capitalization of IPIX................................. A-19
Section 3.03. Authority Relative to this Agreement; Recommendation... A-20
Section 3.04. SEC Reports; Financial Statements...................... A-20
Section 3.05. Information Supplied................................... A-21
Section 3.06. Consents and Approvals; No Violations.................. A-21
Section 3.07. No Default............................................. A-22
Section 3.08. No Undisclosed Liabilities; Absence of Changes......... A-22
Section 3.09. Litigation............................................. A-22
Section 3.10. Compliance with Applicable Law......................... A-22
Section 3.11. Employee Benefit Plans; Labor Matters.................. A-23
Section 3.12. Environmental Laws and Regulations..................... A-24
Section 3.13. Tax Matters............................................ A-25
Section 3.14. Title to Property...................................... A-25
Section 3.15. Intellectual Property.................................. A-25
Section 3.16. Insurance.............................................. A-27
Section 3.17. Material Contracts..................................... A-27
Section 3.18. Vote Required.......................................... A-27
Section 3.19. Tax and Accounting Treatment........................... A-27
Section 3.20. Affiliates............................................. A-27
Section 3.21. Certain Business Practices............................. A-27
Section 3.22. Insider Interests...................................... A-28
Section 3.23. Brokers................................................ A-28
Section 3.24. No Existing Discussions................................ A-28
Section 3.25. Takeover Statutes and Charter Provisions............... A-28
Section 3.26. Year 2000 Compliance Matters........................... A-28
ARTICLE 4
COVENANTS
Section 4.01. Conduct of Business of bamboo.......................... A-28
Section 4.02. Conduct of Business of IPIX............................ A-30
Section 4.03. Preparation of S-4 and the Proxy Statement............. A-32
Section 4.04. No Solicitation by bamboo.............................. A-33
Section 4.05. No Solicitation by IPIX................................ A-34
Section 4.06. Meetings of Shareholders............................... A-35
Section 4.07. Nasdaq Listing......................................... A-35
Section 4.08. Access to Information.................................. A-36
Section 4.09. Additional Agreements; Reasonable Efforts.............. A-36
Section 4.10. Employee Benefit Plans................................. A-36
Section 4.11. Public Announcements................................... A-36
Section 4.12. Indemnification........................................ A-37
Section 4.13. Notification of Certain Matters........................ A-38
Section 4.14. Affiliates............................................. A-38
Section 4.15. Tax and Accounting Treatment........................... A-38
Section 4.16. Noncompetition Agreements.............................. A-39
</TABLE>
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<TABLE>
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<S> <C> <C>
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 5.01. Conditions to Each Party's Obligations to Effect the
Merger................................................. A-39
Section 5.02. Conditions to the Obligations of bamboo................ A-39
Section 5.03. Conditions to the Obligations of IPIX.................. A-40
ARTICLE 6
TERMINATION; AMENDMENT; WAIVER
Section 6.01. Termination............................................ A-41
Section 6.02. Effect of Termination.................................. A-42
Section 6.03. Fees and Expenses...................................... A-42
Section 6.04. Amendment.............................................. A-43
Section 6.05. Extension; Waiver...................................... A-43
ARTICLE 7
MISCELLANEOUS
Section 7.01. Nonsurvival of Representations and Warranties.......... A-43
Section 7.02. Entire Agreement; Assignment........................... A-43
Section 7.03. Validity............................................... A-43
Section 7.04. Notices................................................ A-43
Section 7.05. Governing Law.......................................... A-44
Section 7.06. Descriptive Headings................................... A-44
Section 7.07. Parties in Interest.................................... A-44
Section 7.08. Certain Definitions.................................... A-44
Section 7.09. Personal Liability..................................... A-45
Section 7.10. Specific Performance................................... A-45
Section 7.11. Counterparts........................................... A-45
APPENDIX A
EXHIBITS:
IPIX Affiliate Letter................................................. Exhibit 1
bamboo Affiliate Letter............................................... Exhibit 2
Stock Option Agreements............................................... Exhibit 3
SCHEDULES:
bamboo Disclosure Schedule
IPIX Disclosure Schedule
</TABLE>
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of October
25, 1999, is between Interactive Pictures Corporation, a Tennessee corporation
("IPIX"), and bamboo.com, Inc., a Delaware corporation ("bamboo").
WHEREAS, the Boards of Directors of IPIX and bamboo each have, in light of
and subject to the terms and conditions set forth herein, (i) determined that
the Merger (as defined below) is fair to their respective shareholders and in
the best interests of such shareholders and (ii) approved the Merger in
accordance with this Agreement;
WHEREAS, concurrently with the execution and delivery of this Agreement, as
a condition and inducement to IPIX's and bamboo's willingness to enter into this
Agreement, IPIX and bamboo have each entered into a Stock Option Agreement dated
as of the date hereof (collectively, the "Stock Option Agreements"), pursuant to
which IPIX has granted to bamboo an option to purchase certain IPIX Shares (as
defined below) and pursuant to which bamboo has granted to IPIX an option to
purchase certain bamboo Shares (as defined below).
WHEREAS, it is intended that the Merger be treated (i) for Federal income
tax purposes as a tax-free reorganization under Section 368(a)(2)(E) of the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) as a "pooling
of interests" for accounting purposes.
WHEREAS, IPIX and bamboo desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, IPIX and bamboo hereby agree as follows:
ARTICLE 1
THE MERGER
Section 1.01. THE MERGER. As promptly as reasonably practicable after the
date hereof, bamboo shall take all necessary actions to form a wholly-owned
subsidiary ("Merger Sub") pursuant to and in accordance with the Tennessee
Business Corporation Act (the "TBCA"). At the Effective Time (as defined below)
and upon the terms and subject to the conditions of this Agreement and in
accordance with the TBCA, Merger Sub shall be merged with and into IPIX (the
"Merger") with IPIX continuing as the surviving corporation (the "Surviving
Corporation"), wholly owned by bamboo, and the separate corporate existence of
Merger Sub shall cease. The Merger is intended to qualify as a tax-free
reorganization under Section 368(a)(2)(E) of the Code.
Section 1.02. EFFECTIVE TIME. Subject to the terms and conditions set
forth in this Agreement, Articles of Merger (the "Articles of Merger") shall be
duly executed and acknowledged by each of IPIX, bamboo and Merger Sub, as
applicable and thereafter the Articles of Merger reflecting the Merger shall be
delivered to the Secretary of State of the State of Tennessee for filing
pursuant to the TBCA on the Closing Date. The Merger shall become effective at
such time as a properly executed and certified copy of the Articles of Merger
are duly filed by the Secretary of State of the State of Tennessee in accordance
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with the TBCA or such later time as the parties may agree upon and set forth in
the Articles of Merger and the Merger Certificate (the time at which the Merger
becomes effective shall be referred to herein as the "Effective Time").
Section 1.03. CLOSING OF THE MERGER. The closing of the Merger (the
"Closing") will take place at a time and on a date to be specified by the
parties, which shall be no earlier than January 1, 2000 and no later than the
second business day on or after January 1, 2000 on which the latest to occur of
the conditions set forth in Article 5 have been satisfied (the "Closing Date"),
at the offices of Davis Polk & Wardwell in California, unless another time, date
or place is agreed to in writing by the parties hereto.
Section 1.04. EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in the TBCA. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of Merger Sub shall vest in the Surviving Corporation, and
all debts, liabilities and duties of Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
Section 1.05. FORMATION OF MERGER SUB; CERTIFICATE OF INCORPORATION AND
BYLAWS OF SURVIVING CORPORATION. (a) Prior to the Effective Time, IPIX and
bamboo agree to take such action as is necessary to amend this Agreement to add
Merger Sub as a party. Bamboo agrees to take such action as is necessary to
cause Merger Sub to perform the various covenants and agreements contained
herein which are contemplated herein to be performed by Merger Sub. Any
covenants or agreements of Merger Sub contained herein shall be binding on such
entity as of the time such entity becomes a party to this Agreement.
(b) The Charter of Merger Sub as in effect immediately prior to the
Effective Time shall be the Charter of the Surviving Corporation.
(c) The Bylaws of Merger Sub immediately prior to the Effective Time shall
be the Bylaws of the Surviving Corporation.
(d) At the Effective Time, bamboo shall take all necessary actions to
change its name to such name as shall be recommended by three independent
nationally-recognized naming/management consulting organizations selected as
follows: Each of bamboo and IPIX shall select one of such organizations with the
third organization selected by the two previously selected organizations. If the
three naming/management organizations are unable to agree in the selection of a
name, the name selected by the third, jointly selected organization shall be the
name of the Surviving Corporation. This change of name shall be achieved by the
merger of bamboo with a wholly-owned subsidiary to be established by bamboo for
the purpose of effecting the name change in accordance with Section 253(b) of
the Delaware General Corporation Law (the "DGCL").
Section 1.06. BOARD OF DIRECTORS AND OFFICERS OF BAMBOO. (a) At or prior
to the Effective Time, each of IPIX and bamboo agrees to take such action as is
necessary to cause the number of directors comprising the full Board of
Directors of bamboo to be nine persons, including (i) four of the current
members of bamboo's Board of Directors (or, if less than four of the current
members of bamboo's Board of Directors are available or willing to serve as a
director of bamboo after the Effective Time, such replacement directors as may
be nominated by the remaining members of bamboo's Board of Directors in
accordance with the Bylaws of bamboo) (such four members being referred to as
the "bamboo Designees"), (ii) four of IPIX's current directors nominated by IPIX
(or, if less than four of the current members of IPIX's Board of Directors are
available or willing to
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serve as a director of bamboo after the Effective Time, such replacement
directors as may be nominated by the remaining directors of IPIX (the "IPIX
Designees") and (iii) one additional independent director mutually selected by
the Chairman of IPIX and bamboo (the "Joint Designee"). The Joint Designee shall
be deemed to be an independent director of bamboo if such person is neither a
director, officer or employee of bamboo or IPIX or owns, directly or indirectly,
more than 3% of the outstanding common stock of bamboo after the Effective Time.
(b) Notwithstanding the foregoing, if immediately prior to the Effective
Time bamboo's Board of Directors includes five members, then, at or prior to the
Effective Time, the size of bamboo's Board of Directors shall be increased from
nine directors to eleven directors, and each of bamboo and IPIX shall have the
right to nominate one additional director in addition to the four directors
provided for in subparagraphs (i) and (ii) of Section 1.06(a). At the Effective
Time, bamboo's Board of Directors shall establish a nominating committee (the
"Nominating Committee"), which shall include four members, of whom two shall be
former directors of IPIX (which two members shall be designated by Mr. Phillips
as Chairman of bamboo after the Effective Time) and two shall be directors who
were members of the Board of directors of bamboo (which two members shall be
designated by Mr. McCurdy as Vice Chairman of bamboo after the Effective Time)
prior to the Effective Time. The Nominating Committee shall use its best efforts
to make nominations so as to preserve the proportion of directors of each of
bamboo and IPIX for a period of two years from the Effective Time as described
in this Section 1.06.
(c) Prior to the Effective Time, IPIX shall take all necessary action to
assure that the four IPIX Designees (or, if Section 1.06(b) is applicable, the
five IPIX Designees) and the Joint Designee shall be appointed to the Board of
Directors of IPIX, and shall be directors of IPIX at the Effective Time.
(d) The four IPIX Designees (or if Section 1.06(b) is applicable, the five
IPIX Designees), shall be appointed to the three classes of the bamboo Board of
Directors as follows:
(i) two IPIX Designees shall be appointed to the class of directors to
be elected in 2000;
(ii) one IPIX Designee (or if Section 1.06(b) is applicable, two IPIX
Designees) shall be appointed to the class of directors to be elected in
2001; and
(iii) one IPIX Designee and the Joint Designee shall be appointed to
the class of directors to be elected in 2002.
(e) From and after the Effective Time, until successors are duly elected or
appointed and qualified in accordance with applicable law, (i) the directors of
the Surviving Corporation shall be the same as those of bamboo, and (ii) the
directors of subsidiaries of bamboo and IPIX shall be such persons who were
serving in such capacities immediately prior to the Effective Time.
(f) From and after the Effective Time, and until successors are duly
elected or appointed and qualified in accordance with applicable law, the
Chairman and Chief Executive Officer of IPIX shall be the Chairman and Chief
Executive Officer of bamboo, the Chairman of bamboo and Mr. Laban Jackson, Jr.
shall be the Vice Chairmen of bamboo, the President and Chief Operating Officer
of IPIX shall be the President of bamboo, the Chief Operating Officer of bamboo
shall continue as the Chief Operating
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Officer of bamboo (and shall report to the Chief Executive Officer of bamboo)
and the Chief Financial Officer of IPIX shall be the Chief Financial Officer of
bamboo. The above shall also hold such offices in the Surviving Corporation.
Other management positions of bamboo shall be determined by IPIX's Chairman and
Chief Executive Officer, who will consult with the Chairman and Chief Executive
Officer of bamboo to ensure that the most qualified individuals from both
organizations are selected.
(g) From and after the Effective Time, the existing officers of the
subsidiaries of bamboo and IPIX shall continue to serve in such capacities at
the pleasure of their respective boards of directors.
Section 1.07. CONVERSION OF SHARES. (a) At the Effective Time, each share
of common stock, par value $.001 per share of IPIX (individually an "IPIX Share"
and collectively, the "IPIX Shares") issued and outstanding immediately prior to
the Effective Time shall (except as provided in Section 1.07(b)), by virtue of
the IPIX Merger and without any action on the part of IPIX, bamboo, Merger Sub
or the holder thereof, be converted into and shall become 1.369 fully paid and
nonassessable shares of common stock, par value $.001 per share, of bamboo
(individually a "bamboo Share" and collectively, the "bamboo Shares").
(b) At the Effective Time, each IPIX Share held in the treasury of IPIX and
each IPIX Share held by bamboo or any Subsidiary of bamboo immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of IPIX, bamboo or Merger Sub be canceled, retired and cease to exist and
no payment shall be made with respect thereto.
(c) At the Effective Time, each share of common stock, $.001 par value per
share, of Merger Sub issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of IPIX
or Merger Sub, be converted into and shall become one fully paid and
nonassessable share of common stock of the Surviving Corporation and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation.
(d) The outstanding shares of capital stock of bamboo and each of its
subsidiaries shall remain outstanding after the Effective Time and shall be
unaffected by the Merger.
Section 1.08. EXCHANGE OF CERTIFICATES. (a) Prior to the Effective Time,
bamboo shall enter into an agreement with, and shall deposit with such agent or
agents as may be satisfactory to IPIX and bamboo (the "Exchange Agent"), for the
benefit of the holders of IPIX Shares, for exchange through the Exchange Agent
in accordance with this Article 1: (i) certificates representing the appropriate
number of bamboo Shares to be issued to holders of IPIX Shares and (ii) cash to
be paid in lieu of fractional bamboo Shares (such bamboo Shares and such cash is
hereinafter referred to as the "Exchange Fund") issuable pursuant to Section
1.07 in exchange for outstanding IPIX Shares.
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding IPIX Shares (the "Certificates") whose shares were converted into
the right to receive bamboo Shares pursuant to Section 1.07: (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as IPIX and bamboo may reasonably specify) and (ii) instructions for
use in effecting the surrender of
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the Certificates in exchange for certificates representing bamboo Shares. Upon
surrender of a Certificate to the Exchange Agent, together with such letter of
transmittal, duly executed, and any other required documents, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole bamboo Shares and, if applicable, a check
representing the cash consideration to which such holder may be entitled on
account of a fractional bamboo Share, which such holder has the right to receive
pursuant to the provisions of this Article 1, and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of IPIX
Shares which is not registered in the transfer records of IPIX, a certificate
representing the proper number of bamboo Shares may be issued to a transferee if
the Certificate representing such IPIX Shares is presented to the Exchange
Agent, accompanied by all documents required by the Exchange Agent or bamboo to
evidence and effect such transfer and by evidence that any applicable stock
transfer or other taxes have been paid. Until surrendered as contemplated by
this Section 1.08, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
certificate representing bamboo Shares and cash in lieu of any fractional bamboo
Shares as contemplated by this Section 1.08.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to bamboo Shares with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the bamboo Shares represented thereby and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 1.08(f)
until the holder of record of such Certificate shall surrender such Certificate.
Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole bamboo Shares issued in exchange therefor, without interest,
(i) at the time of such surrender, the amount of any cash payable in lieu of a
fractional bamboo Share to which such holder is entitled pursuant to Section
1.08(f) and the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole bamboo
Shares, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole bamboo Shares.
(d) If any Certificate for IPIX Shares shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange therefor, upon the making
of an affidavit of that fact by the holder thereof, such bamboo Shares and cash
in lieu of fractional bamboo Shares, if any, as may be required pursuant to this
Agreement; provided, however, that bamboo or the Exchange Agent, may, in its
respective discretion, require the delivery of a suitable bond, opinion or
indemnity.
(e) All bamboo Shares issued upon the surrender for exchange of IPIX Shares
in accordance with the terms hereof (including any cash paid pursuant to Section
1.08(c) or 1.08(f)) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such IPIX Shares. There shall be no further
registration of transfers on the stock transfer books of IPIX of the IPIX Shares
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to bamboo for any reason, they shall
be canceled and exchanged as provided in this Article 1.
(f) No fractional bamboo Shares shall be issued in the Merger, but in lieu
thereof each holder of IPIX Shares otherwise entitled to a fractional bamboo
Share shall, upon surrender of its, his or her Certificate or Certificates, be
entitled to receive an amount of
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cash rounded to the nearest cent (without interest) determined by multiplying
the fair market value of a bamboo Share (as determined by the bamboo Board of
Directors at the Effective Time) by the fractional share interest to which such
holder would otherwise have been entitled. The parties acknowledge that payment
of the cash consideration in lieu of issuing fractional shares was not
separately bargained for consideration but merely represents a mechanical
rounding off for purposes of simplifying the corporate and accounting
complexities which would otherwise be caused by the issuance of fractional
shares.
(g) Any portion of the Exchange Fund which remains undistributed to the
shareholders of IPIX for six months after the Effective Time shall be delivered
to bamboo, upon demand, and any shareholders of IPIX who have not theretofore
complied with this Article 1 shall thereafter look only to bamboo for payment of
their claim for bamboo Shares, any cash in lieu of fractional bamboo Shares and
any applicable dividends or distributions with respect to bamboo Shares, as the
case may be.
(h) Neither IPIX nor bamboo nor Merger Sub shall be liable to any holder of
IPIX Shares, as the case may be, for such shares (or dividends or distributions
with respect thereto) or cash from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
Section 1.09. STOCK OPTIONS. (a) At the Effective Time, each outstanding
option to purchase IPIX Shares (an "IPIX Stock Option" or collectively, "IPIX
Stock Options") issued pursuant to the 1997 Equity Compensation Plan, whether
vested or unvested, and all other outstanding options to purchase IPIX Shares
that are listed in Section 1.09 of the Disclosure Schedule shall be assumed by
bamboo (all of such plans or agreements pursuant to which any IPIX Stock Option
has been issued or may be issued are referred to collectively as the "IPIX Stock
Option Plans"). Each IPIX Stock Option shall be deemed to constitute an option
to acquire, on the same terms and conditions as were applicable under such IPIX
Stock Option, the same number of bamboo Shares (rounded up to the nearest whole
share) as the holder of such IPIX Stock Option would have been entitled to
receive pursuant to the Merger had such holder exercised such option in full
immediately prior to the Effective Time, at a price per share (rounded down to
the nearest whole cent) equal to (y) the aggregate exercise price for the IPIX
Shares otherwise purchasable pursuant to such IPIX Stock Option divided by (z)
the number of full bamboo Shares deemed purchasable pursuant to such IPIX Stock
Option; provided, however, that in the case of any option to which section 421
of the Code applies by reason of its qualification under section 422 of the Code
("incentive stock options" or "ISOs"), the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise of
such option shall be determined in order to comply with section 424(a) of the
Code.
(b) As soon as practicable after the Effective Time, bamboo shall deliver
to the holders of IPIX Stock Options appropriate notices setting forth such
holders' rights pursuant to the IPIX Stock Option Plans and the agreements
evidencing the grants of such IPIX Options shall continue in effect on the same
terms and conditions (subject to the adjustments required by this Section 1.09
after giving effect to the Merger). Bamboo shall comply with the terms of the
IPIX Plans and ensure, to the extent required by, and subject to the provisions
of, such Plans, that IPIX Stock Options which qualified as incentive stock
options immediately prior to the Effective Time continue to qualify as incentive
stock options of bamboo after the Effective Time.
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(c) Bamboo shall take all corporate action necessary to reserve for
issuance a sufficient number of bamboo Shares for delivery upon exercise of all
IPIX Stock Options assumed in accordance with this Section 1.09. As soon as
practicable after the Effective Time, bamboo shall file a registration statement
on Form S-8 (or any successor or other appropriate forms) with respect to the
bamboo Shares subject to any IPIX Stock Options held by persons who are or were
directors, officers or employees of IPIX or its subsidiaries (and with respect
to which IPIX currently has an effective registration statement on Form S-8) and
shall use its reasonable best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding. With respect to those individuals who subsequent to
the Merger will be subject to the reporting requirements under Section 16(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), where
applicable, bamboo shall administer the IPIX Stock Option Plans assumed pursuant
to this Section 1.09 in a manner that complies with Rule 16b-3 promulgated under
the Exchange Act, as it may be amended from time to time, to the extent the
applicable IPIX Stock Option Plan complied with such rule immediately prior to
the Merger.
Section 1.10. TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time
after the Effective Time, IPIX, bamboo or Merger Sub reasonably determines that
any deeds, assignments or instruments or confirmations of transfer are necessary
or desirable to carry out the purposes of this Agreement and to vest the
Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of IPIX, the officers and
directors of IPIX, bamboo and Merger Sub are fully authorized in the name of
their respective corporations or otherwise to take, and will take, all such
lawful and necessary or desirable action.
Section 1.11. ALTERNATIVE TRANSACTION STRUCTURE. Notwithstanding anything
to the contrary set forth in this Agreement, bamboo shall have the right, at any
time on or prior to December 31, 1999, to notify IPIX in writing that it desires
to amend the transaction structure so that instead of the Merger contemplated by
this Article 1, the parties shall complete the transactions set forth in
Appendix A. If bamboo so notifies IPIX, (a) Article 1 of this Agreement shall be
replaced in its entirety with Article 1 set forth in Appendix A and (b) the
remaining provisions of the Agreement shall be modified as set forth in Appendix
A. In that event, the parties shall proceed to complete the transactions
contemplated by this Agreement as so modified (and subject to the terms and
conditions set forth in this Agreement).
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF BAMBOO
Except as set forth on the Disclosure Schedule delivered by bamboo to IPIX
(the "bamboo Disclosure Schedule") and as disclosed in bamboo's SEC Reports (as
defined in Section 2.04 below) prior to the date hereof, bamboo hereby
represents and warrants to IPIX as follows:
Section 2.01. ORGANIZATION AND QUALIFICATION. (a) Each of bamboo and its
subsidiaries is duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has all
requisite power and authority to own, lease and operate its properties and to
carry on its businesses as now
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being conducted, except where the failure to be so organized, existing and in
good standing or to have such power and authority would not have a Material
Adverse Effect (as defined below) on bamboo. When used in connection with
bamboo, the term "Material Adverse Effect" means any change or effect (i) that
is or is reasonably likely to be materially adverse to the business, results of
operations or condition (financial or otherwise) of bamboo and its subsidiaries,
taken as a whole, other than any change or effect arising out of general
economic conditions or conditions affecting companies generally in the
industries in which bamboo participates, or (ii) that materially impairs the
ability of bamboo to perform its obligations hereunder or to consummate the
transactions contemplated hereby.
(b) Bamboo has heretofore delivered to IPIX accurate and complete copies of
the Certificate of Incorporation and Bylaws (or similar governing documents), as
currently in effect, of bamboo. Each of bamboo and its subsidiaries is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
in such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not have a Material Adverse Effect on bamboo. Section 2.1
of the bamboo Disclosure Schedule sets forth a list of the bamboo subsidiaries.
Section 2.02. CAPITALIZATION OF BAMBOO. (a) As of September 30, 1999, the
authorized capital stock of bamboo consists of: (i) 70,000,000 shares of Common
Stock, $0.001 par value per share, of which 14,020,655 shares were issued and
outstanding; (ii) 7,421,536 shares of Class B Common Stock, $0.0001 per value
per share, of which 7,387,938 shares were issued and outstanding; and (iii)
5,000,000 shares of Preferred Stock, par value $0.001 per share, of which, none
were issued and outstanding. All of the outstanding bamboo Shares have been duly
authorized and validly issued, and are fully paid, nonassessable and free of
preemptive rights. As of September 30, 1999, (1) 5,675,886 bamboo Shares were
reserved for issuance and issuable upon or otherwise deliverable in connection
with the exercise of outstanding bamboo Stock Options, (2) 7,387,938 bamboo
Shares were reserved for issuance or issuance upon conversion of the Series C
Convertible Preferred issued by bamboo Canada, Inc. and (3) 280,000 bamboo
Shares were reserved for issuance and issuable upon or otherwise deliverable in
connection with the execution of an outstanding warrant. As of September 30,
1999, 700,000 bamboo Shares were reserved for issuance pursuant to the 1999
Employee Stock Purchase Plan.
(b) Bamboo is the record and beneficial owner of all of the issued and
outstanding shares of common stock of its subsidiaries.
(c) Between September 30, 1999 and the date hereof, no shares of bamboo's
capital stock have been issued other than pursuant to bamboo Stock Options
already in existence on such date, and, between September 30, 1999 and the date
hereof, no bamboo Stock Options have been granted. Except as set forth in
Section 2.02(a) above or provided in Section 2.02 of the bamboo Disclosure
Schedule, as of the date hereof, there are no outstanding (i) shares of capital
stock or other voting securities of bamboo, (ii) securities of bamboo
convertible into or exchangeable for shares of capital stock or voting
securities of bamboo, (iii) options or other rights to acquire from bamboo or
its subsidiaries, or obligations of bamboo or its subsidiaries to issue, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of bamboo, or (iv) equity equivalents,
interests in the ownership or earnings of bamboo or its subsidiaries or other
similar rights (collectively, "bamboo Securities"). As of the date hereof there
are no outstanding obligations of bamboo or any of its subsidiaries to
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repurchase, redeem or otherwise acquire any bamboo Securities or shareholder
agreements, voting trusts or other agreements or understandings to which bamboo
is a party or by which it is bound relating to the voting or registration of any
shares of capital stock of bamboo.
(d) Except as set forth in Section 2.02(a) above, there are no securities
of bamboo convertible into or exchangeable for, no options or other rights to
acquire from bamboo, and no other contract, understanding, arrangement or
obligation (whether or not contingent) providing for the issuance or sale,
directly or indirectly, of, any capital stock or other ownership interests in,
or any other securities of, any subsidiary of bamboo.
(e) The bamboo Shares constitute the only class of equity securities of
bamboo registered or required to be registered under the Exchange Act.
(f) Bamboo does not own directly or indirectly more than fifty percent
(50%) of the outstanding voting securities or interests (including membership
interests) of any entity other than the bamboo subsidiaries reflected in Section
2.01 of the bamboo Disclosure Schedule.
Section 2.03. AUTHORITY RELATIVE TO THIS AGREEMENT; RECOMMENDATION. (a)
Bamboo has all necessary corporate power and authority to execute and deliver
this Agreement and the Stock Option Agreements and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Stock Option Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by the Board of Directors of bamboo (the "bamboo Board"), and no
other corporate proceedings on the part of bamboo are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby, except as
specified in Section 2.18. This Agreement has been duly and validly executed and
delivered by bamboo and constitutes a valid and binding agreement of bamboo.
(b) The bamboo Board, at a meeting duly called and held, has unanimously
(i) determined that this Agreement and the Stock Option Agreements and the
transactions contemplated hereby and thereby are fair to and in the best
interests of bamboo's shareholders, (ii) approved this Agreement, the Stock
Option Agreements and the transactions contemplated hereby and thereby and
(iii), subject to Section 4.04(b) and Rule 4310(c) of the Nasdaq Stock Market
Rules, resolved to recommend that the shareholders of bamboo approve the
issuance of bamboo Shares pursuant to this Agreement and the Stock Option
Agreements. Robertson Stephens (the "bamboo Financial Adviser") has delivered to
the bamboo Board its written opinion, dated as of the date of this Agreement, to
the effect that, as of such date, the exchange ratio contemplated by the Merger
is fair to the holders of bamboo Shares from a financial point of view.
Section 2.04. SEC REPORTS; FINANCIAL STATEMENTS. (a) Bamboo has filed all
required forms, reports and documents with the Securities and Exchange
Commission (the "SEC"), each of which has complied in all material respects with
all applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act (and the rules and regulations
promulgated thereunder, respectively), each as in effect on the dates such
forms, reports and documents were filed. Bamboo has heretofore delivered or
promptly will deliver prior to the Effective Date to IPIX, in the form filed
with the SEC (including any amendments thereto but excluding any exhibits), (i)
all definitive proxy statements relating to bamboo's meetings of shareholders
(whether
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annual or special) held since August 25, 1999 and (ii) all other reports or
registration statements filed by bamboo with the SEC (all of the foregoing,
collectively, the "bamboo SEC Reports"). None of such bamboo SEC Reports,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, contained, when filed, any untrue statement
of a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of bamboo included in the
bamboo SEC Reports were prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis (except as may be
indicated in the notes thereto), and fairly present the consolidated financial
position of bamboo and its consolidated subsidiaries as of the dates thereof and
their consolidated results of operations and changes in financial position for
the periods then ended, subject in the case of interim financial statements to
the absence of footnotes and to normal year-end audit adjustments. All material
agreements, contracts and other documents required to be filed as exhibits to
any of the bamboo SEC Reports have been so filed. These representations shall be
deemed to be made with respect to the bamboo SEC Reports filed subsequent to the
date hereof at the time of their filing.
(b) Bamboo has heretofore made available or promptly will make available to
IPIX a complete and correct copy of any amendments or modifications, which are
required to be filed with the SEC but have not yet been filed with the SEC, to
agreements, documents or other instruments which previously had been filed by
bamboo with the SEC pursuant to the Exchange Act.
Section 2.05. INFORMATION SUPPLIED. None of the information supplied or
to be supplied by bamboo for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by bamboo in
connection with the issuance of bamboo Shares in the Merger (the "S-4") will, at
the time the S-4 is filed with the SEC and at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and (ii) the proxy statement
relating to the meeting of bamboo's shareholders and the meeting of IPIX's
shareholders to be held in connection with the Merger (the "Proxy Statement")
will, at the date mailed to shareholders of bamboo and IPIX and at the times of
the meeting or meetings of shareholders of bamboo and IPIX to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement, insofar as it relates to the
meeting of bamboo's shareholders to vote on the Merger, will comply as to form
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder, and the S-4 will comply as to form in all material
respects with the provisions of the Securities Act and the rules and regulations
thereunder.
Section 2.06. CONSENTS AND APPROVALS; NO VIOLATIONS. (a) Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Act, the Exchange
Act, state securities or blue sky laws, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the rules of the National
Association of Securities Dealers, Inc. ("NASD"), the filing and recordation of
the Articles of Merger as required by the TBCA, no filing with or notice to, and
no permit, authorization, consent or approval of, any court or
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tribunal or administrative, governmental or regulatory body, agency or
authority, whether domestic or foreign, (a "Governmental Entity") is necessary
for the execution and delivery by bamboo of this Agreement or the consummation
by bamboo of the transactions contemplated hereby, except where the failure to
obtain such permits, authorizations, consents or approvals or to make such
filings or give such notice would not have a Material Adverse Effect on bamboo.
(b) Neither the execution, delivery and performance of this Agreement or
the Stock Option Agreements by bamboo nor the consummation by bamboo of the
transactions contemplated hereby or thereby will (i) conflict with or result in
any breach of any provision of the respective Certificate of Incorporation or
Bylaws (or similar governing documents) of bamboo or any of bamboo's
subsidiaries, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration or Lien (as
defined below)) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which bamboo or any of bamboo's subsidiaries is a
party or by which any of them or any of their respective properties or assets
may be bound, or (iii) violate any order, writ, injunction, decree, law,
statute, rule or regulation applicable to bamboo or any of bamboo's subsidiaries
or any of their respective properties or assets, except in the case of (ii) or
(iii) for violations, breaches or defaults listed on Section 2.06 of the bamboo
Disclosure Schedule or which would not have a Material Adverse Effect on bamboo.
For purposes of this Agreement, "Lien" means, with respect to any asset
(including, without limitation, any security) any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
Section 2.07. NO DEFAULT. None of bamboo or any of its subsidiaries is in
breach, default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a breach, default or violation) of any
term, condition or provision of (i) its Certificate of Incorporation or Bylaws
(or similar governing documents), (ii) any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
bamboo or any of its subsidiaries is now a party or by which any of them or any
of their respective properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to bamboo, its
subsidiaries or any of their respective properties or assets, except in the case
of (ii) or (iii) for violations, breaches or defaults that would not have a
Material Adverse Effect on bamboo.
Section 2.08. NO UNDISCLOSED LIABILITIES; ABSENCE OF CHANGES. As of June
30, 1999, none of bamboo or its subsidiaries had any liabilities or obligations
of any nature, whether or not accrued, contingent or otherwise, that would be
required by generally accepted accounting principles to be reflected on a
consolidated balance sheet of bamboo and its consolidated subsidiaries
(including the notes thereto) or which would have a Material Adverse Effect on
bamboo. Since June 30, 1999, none of bamboo or its subsidiaries has incurred any
liabilities of any nature, whether or not accrued, contingent or otherwise,
which have had, and there have been no events, changes or effects with respect
to bamboo or its subsidiaries having, a Material Adverse Effect on bamboo. Since
June 30, 1999, there has not been (i) any change by bamboo in its accounting
methods, principles or practices (other than as required after the date hereof
by concurrent changes in generally accepted accounting principles), (ii) any
revaluation by bamboo of any of its assets having a Material Adverse Effect on
bamboo, including, without limitation, any write-down of the value of any assets
other than in the ordinary course of business or
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(iii) any other action or event that would have required the consent of any
other party hereto pursuant to Section 4.01 of this Agreement had such action or
event occurred after the date of this Agreement.
Section 2.09. LITIGATION. As of the date hereof there is no suit, claim,
action, proceeding or investigation pending or, to the knowledge of bamboo,
threatened against bamboo or any of its subsidiaries or any of their respective
properties or assets before any Governmental Entity which, individually or in
the aggregate, would have a Material Adverse Effect on bamboo or would prevent
or delay the consummation of the transactions contemplated by this Agreement.
Except as publicly disclosed by bamboo in the bamboo SEC Reports filed prior to
the date hereof, as of the date hereof none of bamboo or its subsidiaries is
subject to any outstanding order, writ, injunction or decree which, insofar as
can be reasonably foreseen in the future, would have a Material Adverse Effect
on bamboo or would prevent or delay the consummation of the transactions
contemplated hereby.
Section 2.10. COMPLIANCE WITH APPLICABLE LAW. Bamboo and its subsidiaries
hold all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the "bamboo Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which would not have a
Material Adverse Effect on bamboo. Bamboo and its subsidiaries are in compliance
with the terms of the bamboo Permits, except where the failure so to comply
would not have a Material Adverse Effect on bamboo. The businesses of bamboo and
its subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity and except for violations or possible
violations which do not, and, insofar as reasonably can be foreseen, in the
future would not have a Material Adverse Effect on bamboo. As of the date hereof
no investigation or review by any Governmental Entity with respect to bamboo or
its subsidiaries is pending or, to the knowledge of bamboo, threatened, nor, to
the knowledge of bamboo, has any Governmental Entity indicated an intention to
conduct the same, other than, in each case, those which bamboo reasonably
believes will not have a Material Adverse Effect on bamboo.
Section 2.11. EMPLOYEE BENEFIT PLANS; LABOR MATTERS. (a) Section 2.11 of
the bamboo Disclosure Schedule lists each employment, bonus, deferred
compensation, pension, stock option, stock appreciation right, profit-sharing or
retirement plan, arrangement or practice, each medical, vacation, retiree
medical, severance pay plan, and each other agreement or fringe benefit plan,
arrangement or practice, of bamboo, whether formal or informal, which affects
one or more of its employees, including all "employee benefit plans" as defined
by Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (collectively, the "bamboo Plans").
(b) Copies of each such bamboo Plan requested by IPIX have heretofore been
delivered to IPIX. For each bamboo Plan which is an "employee benefit plan"
under Section 3(3) of ERISA, bamboo has made available to IPIX correct and
complete copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service, the most
recent Form 5500 Annual Report (including all applicable schedules), and all
related trust agreements, insurance contracts and funding agreements which
implement each such bamboo Plan.
(c) Bamboo does not have any commitment, whether formal or informal, (i) to
create any additional such bamboo Plan; (ii) to modify or change any such bamboo
Plan; or (iii) to maintain for any period of time any such bamboo Plan.
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(d) There are no bamboo Plans which are subject to Title IV of ERISA or the
minimum funding standards of Section 412 of the Code. Neither bamboo nor any
bamboo Plan nor any trustee, administrator, fiduciary or sponsor of any bamboo
Plan has engaged in any prohibited transactions as defined in Section 406 of
ERISA or Section 4975 of the Code for which there is no statutory or
administrative exemption; all filings, reports and descriptions as to such
bamboo Plans (including Form 5500 Annual Reports, Summary Plan Descriptions,
PBCG-1's and Summary Annual Reports) required to have been made or distributed
to participants, the Internal Revenue Service, the United States Department of
Labor and other governmental agencies have been made in a timely manner or will
be made on or prior to the Closing Date; there is no material litigation,
disputed claim, governmental proceeding or investigation pending or threatened
with respect to any of such bamboo Plans, the related trusts, or any fiduciary,
trustee, administrator or sponsor of such bamboo Plans; such bamboo Plans have
been established, maintained and administered in all material respects in
accordance with their governing documents and applicable provisions of ERISA and
the Code and Treasury Regulations promulgated thereunder; there has been no
"Reportable Event" as defined in Section 4043 of ERISA with respect to any
bamboo Plan that has not been waived by the Pension Benefit Guaranty
Corporation; and each bamboo Plan which is intended to be a qualified plan under
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service.
(e) The consummation of the transactions on the part of bamboo contemplated
by this Agreement will not (i) entitle any employee or former employee of bamboo
to severance pay, unemployment compensation or any other payment, and (ii)
accelerate the time of payment or vesting of any stock option, stock
appreciation right, deferred compensation or other employee benefits under any
bamboo Plan (including vacation and sick pay).
(f) None of the bamboo Plans which are "welfare benefit plans," within the
meaning of Section 3(1) of ERISA, provide for continuing benefits or coverage
after termination or retirement from employment, except for COBRA rights under a
"group health plan" as defined in Code Section 4980B(g) and ERISA Section 607.
(g) Neither bamboo nor any other entity required to be aggregated with
bamboo under Code Section 414(b), (c), (m) or (n) ("ERISA Affiliate") has ever
participated in or withdrawn from a multi-employer plan as defined in Section
4001(a)(3) of Title IV of ERISA, and neither bamboo nor any ERISA Affiliate has
incurred and does not presently owe any liability as a result of any partial or
complete withdrawal by any employer from such a multi-employer plan as described
under Sections 4201, 4203, or 4205 of ERISA.
(h) There are no collective bargaining agreements in effect between bamboo
and labor unions or organizations representing any of bamboo's employees. During
the past three years, there has been no request for collective bargaining or for
an employee election from any employee, union or the National Labor Relations
Board. In addition, (i) bamboo is in compliance with all federal, state and
local laws, rules and regulations relating to employees' employment and/or
employment relationships, including, without limitation, wage related laws,
anti-discrimination laws, employee safety laws and COBRA (defined herein to mean
the requirements of Code Section 4980B, Proposed Treasury Regulation Section
1.162-26 and Part 6 of Subtitle B of Title I of ERISA), and is not engaged in
any unfair labor practice; (ii) there is no unfair labor practice complaint
against bamboo pending or, to the knowledge of bamboo, threatened before the
National Labor Relations Board or the United States Department of Labor or
similar agency of a foreign
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government; (iii) there is no labor strike, dispute, slowdown or stoppage in
progress or, to the knowledge of bamboo, threatened against or involving bamboo;
(iv) no question concerning representation has been raised or, to the knowledge
of bamboo, is threatened respecting the employees of bamboo; (v) no grievance or
arbitration proceeding is pending and no claim therefor has been made; (vi) to
the knowledge of bamboo, no private agreement restricts bamboo from relocating,
closing or terminating any of its operations or facilities; and (vii) bamboo has
not in the past three years experienced any labor strike, dispute, slowdown,
stoppage or other labor difficulty.
Section 2.12. ENVIRONMENTAL LAWS AND REGULATIONS. (a) (i) Each of bamboo
and its subsidiaries is in compliance with all applicable federal, state, local
and foreign laws and regulations relating to pollution or protection of human
health or the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata) (collectively,
"Environmental Laws"), except for non-compliances that would not have a Material
Adverse Effect on bamboo, which compliance includes, but is not limited to, the
possession by each of bamboo and its subsidiaries of all material permits and
other governmental authorizations required under applicable Environmental Laws,
and compliance with the terms and conditions thereof; and (ii) none of bamboo or
any of its subsidiaries has received written notice of, or, to the knowledge of
bamboo or any of its subsidiaries, is the subject of, any action, cause of
action, claim, investigation, demand or notice by any person or entity alleging
liability under or non-compliance with any Environmental Law (an "Environmental
Claim") that would have a Material Adverse Effect on bamboo.
(b) Neither bamboo nor any of its subsidiaries presently owns nor has it in
the past owned any real property on which any above ground or underground
storage tanks are located, or on which any such tanks were located during the
ownership by bamboo or any of its subsidiaries of such real property except as
would not have a Material Adverse Effect on bamboo.
(c) Except as would not have a Material Adverse Effect on bamboo, bamboo
and its subsidiaries have not at any time generated, used, treated or otherwise
handled any materials listed in Section 101(14) of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. sec.sec. 9601 et seq. ("CERCLA"), nor any other substance, material or
waste defined as toxic or hazardous under any Environmental Law, including, but
not limited to asbestos ("Hazardous Materials").
Section 2.13. TAX MATTERS. (a)(i) Bamboo and each of its subsidiaries has
filed or has had filed on its behalf in a timely manner (within any applicable
extension periods) with the appropriate Governmental Entity all income and other
material Tax Returns (as defined herein) with respect to Taxes (as defined
herein) of bamboo and each of its subsidiaries, and all Tax Returns were in all
material respects true, complete and correct; (ii) all material Taxes with
respect to bamboo and each of its subsidiaries have been paid in full or have
been provided for in accordance with GAAP on bamboo's most recent balance sheet
which is part of the bamboo SEC Documents; (iii) there are no outstanding
agreements or waivers extending the statutory period of limitations applicable
to any federal, state, local or foreign income or other material Tax Returns
required to be filed by or with respect to bamboo or its subsidiaries; (iv) to
the knowledge of bamboo none of the Tax Returns of or with respect to bamboo or
any of its subsidiaries is currently being audited or examined by any
Governmental Entity; (v) no deficiency for any income or other material Taxes
has been assessed with respect to bamboo or any of its subsidiaries
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which has not been abated or paid in full; (vi) no claim has ever been made by
an authority in a jurisdiction where any of bamboo or its subsidiaries does not
file Tax Returns that it is or may be subject to taxation by such jurisdiction;
(vii) neither bamboo nor any of its subsidiaries has been a member of an
affiliated, consolidated, combined or unitary group other than one of which
bamboo was the common parent, or made any election or participated in any
arrangement whereby any Tax liability or any Tax asset of bamboo or any of its
subsidiaries was determined or taken into account for Tax purposes with
reference to or in conjunction with any Tax liability or any Tax asset of any
other person; (viii) neither bamboo nor any of its subsidiaries is party to any
Tax sharing agreement or to any other express or implied agreement or
arrangement, as a result of which liability of bamboo or any of its subsidiaries
to a Governmental Authority is determined or taken into account with reference
to the activities of any other person, and neither bamboo nor any of its
subsidiaries is currently under any obligation to pay any amounts as a result of
having been a party to such an agreement or arrangement, regardless of whether
such Tax is imposed on bamboo or any of its subsidiaries; and (ix) each of
bamboo and its subsidiaries has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, shareholder or other third party.
(b) For purposes of this Agreement, (i) "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, sales, use, ad valorem, goods and services, capital,
transfer, franchise, profits, license, withholding, payroll, employment,
employer health, excise, estimated, severance, stamp, occupation, property or
other taxes, customs duties, fees, assessments or charges of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority and (ii) "Tax Return" shall
mean any report, return, documents, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction with respect to
Taxes.
Section 2.14. TITLE TO PROPERTY. Bamboo and each of its subsidiaries have
good and defensible title to all of its properties and assets, free and clear of
all liens, charges and encumbrances except liens for taxes not yet due and
payable and such liens or other imperfections of title, if any, as do not
materially detract from the value of or interfere with the present use of the
property affected thereby or which, individually or in the aggregate, would not
have a Material Adverse Effect on bamboo; and, to bamboo's knowledge, all leases
pursuant to which bamboo or any of its subsidiaries lease from others real or
personal property are in good standing, valid and effective in accordance with
their respective terms, and there is not, to the knowledge of bamboo, under any
of such leases, any existing material default or event of default (or event
which with notice or lapse of time, or both, would constitute a material default
and in respect of which bamboo or such subsidiary has not taken adequate steps
to prevent such a default from occurring) except where the lack of such good
standing, validity and effectiveness, or the existence of such default or event
of default would not have a Material Adverse Effect on bamboo.
Section 2.15. INTELLECTUAL PROPERTY. (a) All of bamboo's and its
subsidiaries' interests in all of bamboo's and its subsidiaries' rights, title
and interest in and to all existing United States and foreign patents,
trademarks, trade names, service marks, copyrights, trade secrets, know how,
methods or processes and other intellectual properties and proprietary
information and any applications therefor (the "Intellectual Property Rights")
that are material to its business as currently conducted (the "bamboo Owned
Intellectual Property Rights") are free and clear of all Liens (except for Liens
that would
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not result in a bamboo Material Adverse Effect) and as of the date hereof, the
title thereto of bamboo or any subsidiary, as the case may be, is not being
questioned in any litigation or administrative proceeding before any court or
government agency.
(b) As of the date hereof, there is no action, suit, investigation or
proceeding (or, to the knowledge of bamboo, any basis therefor) pending against,
or, to the knowledge of bamboo, threatened against or affecting, bamboo, any of
its subsidiaries, any present or former officer, director or employee of bamboo
or any of its subsidiaries (i) based upon, or challenging or seeking to deny or
restrict, the use by bamboo or any of its subsidiaries of any of the bamboo
Owned Intellectual Property Rights or the Intellectual Property Rights owned by
a third party and licensed or sublicensed by either bamboo or any of its
subsidiaries (the "bamboo Licensed Intellectual Property Rights"), (ii) alleging
that the use of the bamboo Owned Intellectual Property Rights or the bamboo
Licensed Intellectual Property Rights or any services provided, processes used,
or products manufactured or sold by bamboo or any of its subsidiaries do or may
conflict with, misappropriate or infringe upon any Intellectual Property Right
or other proprietary right of any third person or (iii) alleging that the rights
of bamboo or any of its subsidiaries in or to the bamboo Owned Intellectual
Property Rights or the bamboo Licensed Intellectual Property Rights conflict
with, misappropriate, or infringe upon any Intellectual Property Right or other
proprietary right of any third party that, in the case of any of clauses (i),
(ii) or (iii) would have a Material Adverse Effect on bamboo.
(c) The conduct of the business of bamboo and its subsidiaries as now
conducted does not, to bamboo's knowledge, infringe any valid patents,
trademarks, trade names, service marks or copyrights or make any unauthorized
use of any trade secret, know how, methods or processes and any other
intellectual properties or proprietary information of others that would have a
Material Adverse Effect on bamboo. The consummation of the transactions
completed hereby will not result in the loss or impairment of any bamboo Owned
Intellectual Property Rights or bamboo Licensed Intellectual Property Rights
that would have a Material Adverse Effect on bamboo.
(d) To the knowledge of bamboo, no third person is engaging in any activity
or using any Intellectual Property Right that materially infringes upon the
bamboo Intellectual Property Rights or the Licensed Intellectual Property Rights
or upon the rights of either bamboo or any of its subsidiaries therein that
would have a Material Adverse Effect on bamboo.
(e) Each of bamboo and its subsidiaries has taken steps it believes
appropriate to protect and maintain its trade secrets, know how, methods or
processes as such, except in cases where bamboo has elected to rely on patent or
copyright protection in lieu of trade secret protection. To the knowledge of
bamboo, there has been no misappropriation of any material trade secrets or
other material confidential Intellectual Property Rights of either bamboo or any
of its subsidiaries by any third person that would have a Material Adverse
Effect on bamboo.
(f) Except as previously disclosed to IPIX, no current material licenses
for the use of any bamboo Owned Intellectual Property Rights have been granted
by bamboo or any of its subsidiaries, as the case may be, to any third parties.
Section 2.15 of the Disclosure Schedule is a list of all material bamboo
Licensed Intellectual Property Rights.
(g) Except as previously disclosed to IPIX, none of bamboo or any of its
subsidiaries has given an indemnity in connection with any Intellectual Property
Right to any person.
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Section 2.16. INSURANCE. Bamboo and its subsidiaries maintain general
liability and other business insurance that bamboo believes to be reasonably
prudent for its business.
Section 2.17. MATERIAL CONTRACTS. (a) Pursuant to this Section 2.17(a)
and Section 2.11(e), bamboo has delivered or otherwise will make available to
IPIX or its representatives true, correct and complete copies of all written
contracts and agreements (and all amendments, modifications and supplements
thereto and all side letters to which bamboo is a party affecting the
obligations of any party thereunder) to which bamboo or any of its subsidiaries
is a party or by which any of their properties or assets are bound that are,
material to the business, properties or assets of bamboo and its subsidiaries
taken as a whole, including, all: (i) Material Contracts as set forth in Item
601(b)(10) of Regulation S-K of the SEC; and (ii) any other written agreements,
contacts and commitments to which bamboo is a party, together with all
amendments thereto (collectively, together with any such contracts entered into
in accordance with Section 4.01 hereof, the "bamboo Contracts"). Except as
disclosed pursuant to Section 2.11(a) and Section 2.11(e) of this Agreement,
neither bamboo nor any of its subsidiaries is a party to or bound by any
severance, golden parachute or other agreement with any employee or consultant
pursuant to which such person would be entitled to receive any additional
compensation or an accelerated payment of compensation as a result of the
consummation of the transactions contemplated hereby.
(b) To the knowledge of bamboo, (i) each of the bamboo Contracts is valid
and enforceable in accordance with its terms, (ii) there is no default under any
bamboo Contract so listed either by bamboo or by any other party thereto, and
(iii) no event has occurred that with the lapse of time or the giving of notice
or both would constitute a default thereunder by bamboo or, any other party, in
any such case in which such default or event could reasonably be expected to
have a Material Adverse Effect on bamboo.
(c) No party to any such bamboo Contract has given notice to bamboo of or
made a claim against bamboo with respect to any breach or default thereunder, in
any such case in which such breach or default would have a Material Adverse
Effect on bamboo.
Section 2.18. VOTE REQUIRED. Pursuant to the provisions of Nasdaq Stock
Market Rule 4310(c), the affirmative vote of the holders of at least a majority
of the total votes cast on the proposal in person or by proxy is necessary to
approve the issuance of bamboo shares in connection with the Merger.
Section 2.19. TAX AND ACCOUNTING TREATMENT. Neither bamboo nor, to the
knowledge of bamboo, any of its affiliates has taken or agreed to take any
action that would prevent the Merger from (i) qualifying as a tax-free
reorganization under Section 368(a)(2)(E) of the Code, or (ii) being accounted
for as a pooling of interests in accordance with Accounting Principles Board
Opinion No. 16, the interpretive releases issued pursuant thereto, and the
pronouncements of the SEC.
Section 2.20. AFFILIATES. Except for the directors and executive officers
of bamboo, there are no persons who, to the knowledge of bamboo, may be deemed
to be affiliates of bamboo under Rule 1-02(b) of Regulation S-X of the SEC (the
"bamboo Affiliates").
Section 2.21. CERTAIN BUSINESS PRACTICES. None of bamboo, any of its
subsidiaries or any directors, officers, agents or employees of bamboo or any of
its subsidiaries has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or
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campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended (the "FCPA"), or (iii) made any other unlawful payment, in each
case except as would not have a Material Adverse Effect on bamboo.
Section 2.22. INSIDER INTERESTS. No officer, director or other affiliate
of bamboo has any interest involving an aggregate value or payments of $60,000
or more in any material property, real or personal, tangible or intangible,
including without limitation, any computer software or bamboo Intellectual
Property Rights, used in or pertaining to the business of bamboo or any
subsidiary, except for the ordinary rights of a shareholder or employee stock
option holder.
Section 2.23. BROKERS. No broker, finder or investment banker (other than
the bamboo Financial Adviser, a true and correct copy of whose engagement
agreement has been provided to IPIX) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of bamboo.
Section 2.24. NO EXISTING DISCUSSIONS. As of the date hereof, bamboo is
not engaged, directly or indirectly, in any discussions or negotiations with any
other party with respect to any bamboo Takeover Proposal (as defined in Section
4.04).
Section 2.25. TAKEOVER STATUTES AND CHARTER PROVISIONS. The Board of
Directors of bamboo has taken the necessary action to render Section 203 of the
DGCL and any other potentially applicable anti-takeover or similar statute or
regulation inapplicable to this Agreement and the Stock Option Agreement and the
transactions contemplated hereby and thereby.
Section 2.26. YEAR 2000 COMPLIANCE MATTERS. Except for matters which,
individually and in the aggregate, would not have a Material Adverse Effect on
bamboo, all proprietary and third-party licensed computer systems including
computer hardware and software owned, leased or licensed by bamboo and computer
software incorporated in products produced by bamboo and its subsidiaries (a)
will, prior to December 31, 1999, accurately and without interruption recognize
the advent of the year 2000 without any adverse change in operations associated
with such recognition, (b) can accurately and without interruption recognize and
manipulate date information relating to dates prior to, on and after January 1,
2000 and (c) can accurately and without interruption interact with other year
2000 compliant computer systems and computer software in a way that does not
compromise their ability to correctly recognize the advent of the year 2000 or
to accurately and without interruption recognize and manipulate date information
relating to dates prior to, on or after January 1, 2000. The costs of the
adaptations to such computer systems, hardware and software being made by bamboo
and its subsidiaries in order to achieve year 2000 compliance are not expected
to have a Material Adverse Effect on bamboo.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF IPIX
Except as set forth on the Disclosure Schedule delivered by IPIX to bamboo
(the "IPIX Disclosure Schedule") and as disclosed in IPIX's SEC Reports (as
defined in Section 3.04), IPIX hereby represents and warrants to bamboo as
follows:
Section 3.01. ORGANIZATION AND QUALIFICATION. (a) Each of IPIX and its
subsidiaries is duly incorporated, validly existing and in good standing under
the laws of the
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jurisdiction of its incorporation or organization and has all requisite power
and authority to own, lease and operate its properties and to carry on its
businesses as now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority would not have
a Material Adverse Effect (as defined below) on IPIX. When used in connection
with IPIX, the term "Material Adverse Effect" means any change or effect (i)
that is or is reasonably likely to be materially adverse to the business,
results of operations or condition (financial or otherwise) of IPIX and its
subsidiaries, taken as a whole, other than any change or effect arising out of
general economic conditions or in conditions affecting companies generally in
the industries in which IPIX participates, or (ii) that materially impairs the
ability of IPIX to perform its obligations hereunder or to consummate the
transactions contemplated hereby.
(b) IPIX has heretofore delivered to bamboo accurate and complete copies of
the Charter and Bylaws (or similar governing documents), as currently in effect,
of IPIX. Each of IPIX and its subsidiaries is duly qualified or licensed and in
good standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except in such jurisdictions where
the failure to be so duly qualified or licensed and in good standing would not
have a Material Adverse Effect on IPIX. Section 3.02 of the IPIX Disclosure
Schedule sets forth a list of the IPIX subsidiaries.
Section 3.02. CAPITALIZATION OF IPIX. (a) As of October 14, 1999, the
authorized capital stock of IPIX consists of (i) 100,000,000 IPIX Common Shares,
$0.001 par value, of which 16,562,713 IPIX Shares were issued and outstanding,
and (ii) 10,000,000 shares of preferred stock, $.001 par value, of which no
shares were issued and outstanding. All of the outstanding IPIX Shares have been
duly authorized and validly issued, and are fully paid, nonassessable and free
of preemptive rights. As of the date of this Agreement, 3,139,345 IPIX Shares
were reserved for issuance and issuable upon or otherwise deliverable in
connection with the exercise of outstanding IPIX Stock Options.
(b) IPIX is the record and beneficial owner of all of the issued and
outstanding shares of common stock of its subsidiaries.
(c) Between September 30, 1999 and the date hereof, no shares of IPIX's
capital stock have been issued other than pursuant to IPIX Stock Options already
in existence on such date. Between October 25, 1999 and the date hereof, no IPIX
Stock Options have been granted. Except as set forth in Section 3.02(a) above,
as of the date hereof, there are no outstanding (i) shares of capital stock or
other voting securities of IPIX, (ii) securities of IPIX convertible into or
exchangeable for shares of capital stock or voting securities of IPIX, (iii)
options or other rights to acquire from IPIX or its subsidiaries, or obligations
of IPIX or its subsidiaries to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of IPIX, or (iv) equity equivalents, interests in the ownership or
earnings of IPIX or its subsidiaries or other similar rights (collectively,
"IPIX Securities"). As of the date hereof there are no outstanding obligations
of IPIX or any of its subsidiaries to repurchase, redeem or otherwise acquire
any IPIX Securities or except as set forth on Section 3.02(c)(i) of the IPIX
Disclosure Schedule, shareholder agreements, voting trusts or other agreements
or understandings to which IPIX is a party or by which it is bound relating to
the voting or registration of any shares of capital stock of IPIX.
(d) There are no securities of IPIX convertible into or exchangeable for,
no options or other rights to acquire from IPIX, and no other contract,
understanding, arrangement or
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obligation (whether or not contingent) providing for the issuance or sale,
directly or indirectly, of any capital stock or other ownership interests in, or
any other securities of, any subsidiary of IPIX.
(e) The IPIX Common Shares constitute the only class of equity securities
of IPIX registered or required to be registered under the Exchange Act.
(f) IPIX does not own directly or indirectly more than fifty percent (50%)
of the outstanding voting securities or interests (including membership
interests) of any entity other than the IPIX subsidiaries reflected in Section
3.02 of the IPIX Disclosure Schedule.
Section 3.03. AUTHORITY RELATIVE TO THIS AGREEMENT; RECOMMENDATION. (a)
IPIX has all necessary corporate power and authority to execute and deliver this
Agreement and the Stock Option Agreement and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Stock Option Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by the
Board of Directors of IPIX (the "IPIX Board"), and no other corporate
proceedings on the part of IPIX are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby, except as specified in Section
3.18. This Agreement has been duly and validly executed and delivered by IPIX
and constitutes a valid and binding agreement of IPIX.
(b) J.P. Morgan & Co., Inc. (the "IPIX Financial Adviser") has delivered to
the IPIX Board its written opinion, dated as of the date of this Agreement, to
the effect that, as of such date, the exchange ratio contemplated by the Merger
is fair to the holders of IPIX Shares from a financial point of view.
Section 3.04. SEC REPORTS; FINANCIAL STATEMENTS. (a) IPIX has filed all
required forms, reports and documents with the SEC, each of which has complied
in all material respects with all applicable requirements of the Securities Act
and the Exchange Act (and the rules and regulations promulgated thereunder,
respectively), each as in effect on the dates such forms, reports and documents
were filed. IPIX has heretofore delivered or promptly will deliver prior to the
Effective Date to bamboo, in the form filed with the SEC (including any
amendments thereto but excluding any exhibits), (i) its quarterly report on Form
10-Q for the quarter ended June 30, 1999, (ii) all definitive proxy statements
relating to IPIX's meetings of shareholders (whether annual or special) held
since August 5, 1999 and (iii) all other reports or registration statements
filed by IPIX with the SEC (all of the foregoing, collectively, the "IPIX SEC
Reports"). None of such IPIX SEC Reports, including, without limitation, any
financial statements or schedules included or incorporated by reference therein,
contained, when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of IPIX included in the IPIX SEC Reports were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as may be indicated in the notes thereto), and fairly present the
consolidated financial position of IPIX and its consolidated subsidiaries as of
the dates thereof and their consolidated results of operations and changes in
financial position for the periods then ended, subject in the case of interim
financial statements to the absence of footnotes and to normal year-end audit
adjustments. All material agreements, contracts and other documents required to
be filed as exhibits to any of the IPIX SEC Reports have been so filed. These
representations
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shall be deemed to be made with respect to the IPIX SEC Reports filed subsequent
to the date hereof at the time of their filing.
(b) IPIX has heretofore made available or promptly will make available to
bamboo a complete and correct copy of any amendments or modifications, which are
required to be filed with the SEC but have not yet been filed with the SEC, to
agreements, documents or other instruments which previously had been filed by
IPIX with the SEC pursuant to the Exchange Act.
Section 3.05. INFORMATION SUPPLIED. None of the information supplied or
to be supplied by IPIX for inclusion or incorporation by reference in (i) the
S-4 will, at the time the S-4 is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and (ii) the Proxy
Statement will, at the date mailed to shareholders of IPIX and bamboo and at the
times of the meeting or meetings of shareholders of IPIX and bamboo to be held
in connection with the Merger, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement, insofar as it relates to the
meeting of IPIX's shareholders to vote on the Merger, will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder, and the S-4 will comply as to form in all material
respects with the provisions of the Securities Act and the rules and regulations
thereunder.
Section 3.06. CONSENTS AND APPROVALS; NO VIOLATIONS. (a) Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Act, the Exchange
Act, state securities or blue sky laws, the HSR Act, the rules of the NASD, and
the filing and recordation of the Articles of Merger as required by the TBCA, no
filing with or notice to, and no permit, authorization, consent or approval of,
any Governmental Entity is necessary for the execution and delivery by IPIX of
this Agreement or the consummation by IPIX of the transactions contemplated
hereby, except where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings or give such notice would not have
a Material Adverse Effect on IPIX.
(b) Neither the execution, delivery and performance of this Agreement or
the Stock Option Agreements by IPIX nor the consummation by IPIX of the
transactions contemplated hereby or thereby will (i) conflict with or result in
any breach of any provision of the respective Charter or Bylaws (or similar
governing documents) of IPIX or any of IPIX's subsidiaries, (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which IPIX or any of IPIX's
subsidiaries is a party or by which any of them or any of their respective
properties or assets may be bound or (iii) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to IPIX or any of IPIX's
subsidiaries or any of their respective properties or assets, except in the case
of (ii) or (iii) for violations, breaches or defaults listed on Schedule 3.6 to
the IPIX Disclosure Schedule or which would not have a Material Adverse Effect
on IPIX.
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Section 3.07. NO DEFAULT. None of IPIX or any of its subsidiaries is in
breach, default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a breach, default or violation) of any
term, condition or provision of (i) its Charter or Bylaws (or similar governing
documents), (ii) any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which IPIX or any of its
subsidiaries is now a party or by which any of them or any of their respective
properties or assets may be bound or (iii) any order, writ, injunction, decree,
law, statute, rule or regulation applicable to IPIX, its subsidiaries or any of
their respective properties or assets, except in the case of (ii) or (iii) for
violations, breaches or defaults that would not have a Material Adverse Effect
on IPIX.
Section 3.08. NO UNDISCLOSED LIABILITIES; ABSENCE OF CHANGES. As of June
30, 1999, none of IPIX or its subsidiaries had any liabilities or obligations of
any nature, whether or not accrued, contingent or otherwise, that would be
required by generally accepted accounting principles to be reflected on a
consolidated balance sheet of IPIX and its consolidated subsidiaries (including
the notes thereto) or which would have a Material Adverse Effect on IPIX. Since
June 30, 1999, none of IPIX or its subsidiaries has incurred any liabilities of
any nature, whether or not accrued, contingent or otherwise, which have had, and
there have been no events, changes or effects with respect to IPIX or its
subsidiaries having, a Material Adverse Effect on IPIX. Since June 30, 1999,
there has not been (i) any change by IPIX in its accounting methods, principles
or practices (other than as required after the date hereof by concurrent changes
in generally accepted accounting principles), (ii) any revaluation by IPIX of
any of its assets having a Material Adverse Effect on IPIX, including, without
limitation, any write-down of the value of any assets other than in the ordinary
course of business or (iii) any other action or event that would have required
the consent of any other party hereto pursuant to Section 4.02 of this Agreement
had such action or event occurred after the date of this Agreement.
Section 3.09. LITIGATION. As of the date hereof, there is no suit, claim,
action, proceeding or investigation pending or, to the knowledge of IPIX,
threatened against IPIX or any of its subsidiaries or any of their respective
properties or assets before any Governmental Entity which, individually or in
the aggregate, would have a Material Adverse Effect on IPIX or would prevent or
delay the consummation of the transactions contemplated by this Agreement. As of
the date hereof, none of IPIX or its subsidiaries is subject to any outstanding
order, writ, injunction or decree which, insofar as can be reasonably foreseen
in the future, would have a Material Adverse Effect on IPIX or would prevent or
delay the consummation of the transactions contemplated hereby.
Section 3.10. COMPLIANCE WITH APPLICABLE LAW. IPIX and its subsidiaries
hold all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the "IPIX Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which would not have a
Material Adverse Effect on IPIX. IPIX and its subsidiaries are in compliance
with the terms of the IPIX Permits, except where the failure so to comply would
not have a Material Adverse Effect on IPIX. The businesses of IPIX and its
subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity and except for violations or possible
violations which do not, and, insofar as reasonably can be foreseen, in the
future would not have a Material Adverse Effect on IPIX. As of the date hereof,
no investigation or review by any Governmental Entity with respect to IPIX or
its subsidiaries is pending or, to the knowledge of IPIX, threatened, nor, to
the knowledge of IPIX, has any Governmental
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Entity indicated an intention to conduct the same, other than, in each case,
those which IPIX reasonably believes will not have a Material Adverse Effect on
IPIX.
Section 3.11. EMPLOYEE BENEFIT PLANS; LABOR MATTERS. (a) Section 3.11 of
the IPIX Disclosure Schedule lists each employment, bonus, deferred
compensation, pension, stock option, stock appreciation right, profit-sharing or
retirement plan, arrangement or practice, each medical, vacation, retiree
medical, severance pay plan, and each other agreement or fringe benefit plan,
arrangement or practice, of IPIX, whether formal or informal, which affects one
or more of its employees, including all "employee benefit plans" as defined by
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (collectively, the "IPIX Plans").
(b) Copies of each such IPIX Plan requested by bamboo have heretofore been
delivered to bamboo. For each IPIX Plan which is an "employee benefit plan"
under Section 3(3) of ERISA, IPIX has made available to bamboo correct and
complete copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service, the most
recent Form 5500 Annual Report (including all applicable schedules), and all
related trust agreements, insurance contracts and funding agreements which
implement each such IPIX Plan.
(c) IPIX does not have any commitment, whether formal or informal, (i) to
create any additional such IPIX Plan; (ii) to modify or change any such IPIX
Plan; or (iii) to maintain for any period of time any such IPIX Plan.
(d) There are no IPIX Plans which are subject to Title IV of ERISA or the
minimum funding standards of Section 412 of the Code. Neither IPIX nor any IPIX
Plan nor any trustee, administrator, fiduciary or sponsor of any IPIX Plan has
engaged in any prohibited transactions as defined in Section 406 of ERISA or
Section 4975 of the Code for which there is no statutory or administrative
exemption; all filings, reports and descriptions as to such IPIX Plans
(including Form 5500 Annual Reports, Summary Plan Descriptions, PBCG-1's and
Summary Annual Reports) required to have been made or distributed to
participants, the Internal Revenue Service, the United States Department of
Labor and other governmental agencies have been made in a timely manner or will
be made on or prior to the Closing Date; there is no material litigation,
disputed claim, governmental proceeding or investigation pending or threatened
with respect to any of such IPIX Plans, the related trusts, or any fiduciary,
trustee, administrator or sponsor of such IPIX Plans; such IPIX Plans have been
established, maintained and administered in all material respects in accordance
with their governing documents and applicable provisions of ERISA and the Code
and Treasury Regulations promulgated thereunder; there has been no "Reportable
Event" as defined in Section 4043 of ERISA with respect to any IPIX Plan that
has not been waived by the Pension Benefit Guaranty Corporation; and each IPIX
Plan and each IPIX Plan which is intended to be a qualified plan under Section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service.
(e) The consummation of the transactions on the part of IPIX contemplated
by this Agreement will not (i) entitle any employee or former employee of IPIX
to severance pay, unemployment compensation or any other payment, and (ii)
accelerate the time of payment or vesting of any stock option, stock
appreciation right, deferred compensation or other employee benefits under any
IPIX Plan (including vacation and sick pay).
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(f) None of the IPIX Plans which are "welfare benefit plans," within the
meaning of Section 3(1) of ERISA, provide for continuing benefits or coverage
after termination or retirement from employment, except for COBRA rights under a
"group health plan" as defined in Code Section 4980B(g) and ERISA Section 607.
(g) Neither IPIX nor any other entity required to be aggregated with IPIX
under Code Section 414(b), (c), (m) or (n) ("ERISA Affiliate") has ever
participated in or withdrawn from a multi-employer plan as defined in Section
4001(a)(3) of Title IV of ERISA, and neither IPIX nor any ERISA Affiliate has
incurred and does not presently owe any liability as a result of any partial or
complete withdrawal by any employer from such a multi-employer plan as described
under Sections 4201, 4203, or 4205 of ERISA.
(h) There are no collective bargaining agreements in effect between IPIX
and labor unions or organizations representing any of IPIX's employees. During
the past three years, there has been no request for collective bargaining or for
an employee election from any employee, union or the National Labor Relations
Board. In addition, (i) IPIX is in compliance with all federal, state and local
laws, rules and regulations relating to employees' employment and/or employment
relationships, including, without limitation, wage related laws,
anti-discrimination laws, employee safety laws and COBRA (defined herein to mean
the requirements of Code Section 4980B, Proposed Treasury Regulation Section
1.162-26 and Part 6 of Subtitle B of Title I of ERISA), and is not engaged in
any unfair labor practice; (ii) there is no unfair labor practice complaint
against IPIX pending or, to the knowledge of IPIX, threatened before the
National Labor Relations Board or the United States Department of Labor; (iii)
there is no labor strike, dispute, slowdown or stoppage in progress or, to the
knowledge of IPIX, threatened against or involving IPIX; (iv) no question
concerning representation has been raised or, to the knowledge of IPIX, is
threatened respecting the employees of IPIX; (v) no grievance or arbitration
proceeding is pending and no claim therefor has been made; (vi) to the knowledge
of IPIX, no private agreement restricts IPIX from relocating, closing or
terminating any of its operations or facilities; and (vii) IPIX has not in the
past three years experienced any labor strike, dispute, slowdown, stoppage or
other labor difficulty.
Section 3.12. ENVIRONMENTAL LAWS AND REGULATIONS. (a) (i) Each of IPIX
and its subsidiaries is in compliance with all applicable Environmental Laws,
except for non-compliances that would not have a Material Adverse Effect on
IPIX, which compliance includes, but is not limited to, the possession by each
of IPIX and its subsidiaries of all material permits and other governmental
authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof; and (ii) none of IPIX or any of its
subsidiaries has received written notice of, or, to the knowledge of IPIX or any
of its subsidiaries, is the subject of, any Environmental Claim that would have
a Material Adverse Effect on IPIX.
(b) Neither IPIX nor any of its subsidiaries presently owns nor has it in
the past owned any real property on which any above ground or underground
storage tanks are located, or on which any such tanks were located during the
ownership by IPIX or any of its subsidiaries of such real property except as
would not have a Material Adverse Effect on IPIX.
(c) Except as would not have a Material Adverse Effect on IPIX, IPIX and
its subsidiaries have not at any time generated, used, treated or otherwise
handled any Hazardous Materials.
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Section 3.13. TAX MATTERS. (i) IPIX and each of its subsidiaries has
filed or has had filed on its behalf in a timely manner (within any applicable
extension periods) with the appropriate Governmental Entity all income and other
material Tax Returns with respect to Taxes of IPIX and each of its subsidiaries,
and all Tax Returns were in all material respects true, complete and correct;
(ii) all material Taxes with respect to IPIX and each of its subsidiaries have
been paid in full or have been provided for in accordance with GAAP on IPIX's
most recent balance sheet which is part of the IPIX SEC Documents; (iii) there
are no outstanding agreements or waivers extending the statutory period of
limitations applicable to any federal, state, local or foreign income or other
material Tax Returns required to be filed by or with respect to IPIX or its
subsidiaries; (iv) to the knowledge of IPIX none of the Tax Returns of or with
respect to IPIX or any of its subsidiaries is currently being audited or
examined by any Governmental Entity; (v) no deficiency for any income or other
material Taxes has been assessed with respect to IPIX or any of its subsidiaries
which has not been abated or paid in full; (vi) no claim has ever been made by
an authority in a jurisdiction where any of IPIX or its subsidiaries does not
file Tax Returns that it is or may be subject to taxation by such jurisdiction;
(vii) neither IPIX nor any of its subsidiaries has been a member of an
affiliated, consolidated, combined or unitary group other than one of which IPIX
was the common parent, or made any election or participated in any arrangement
whereby any Tax liability or any Tax asset of IPIX or any of its subsidiaries
was determined or taken into account for Tax purposes with reference to or in
conjunction with any Tax liability or any Tax asset of any other person; (viii)
neither IPIX nor any of its subsidiaries is party to any Tax sharing agreement
or to any other express or implied agreement or arrangement, as a result of
which liability of IPIX or any of its subsidiaries to a Governmental Authority
is determined or taken into account with reference to the activities of any
other person, and neither IPIX nor any of its subsidiaries is currently under
any obligation to pay any amounts as a result of having been a party to such an
agreement or arrangement, regardless of whether such Tax is imposed on IPIX or
any of its subsidiaries; and (ix) each of IPIX and its subsidiaries has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, shareholder, or
other third party.
Section 3.14. TITLE TO PROPERTY. IPIX and each of its subsidiaries have
good and defensible title to all of its properties and assets, free and clear of
all liens, charges and encumbrances except liens for taxes not yet due and
payable and such liens or other imperfections of title, if any, as do not
materially detract from the value of or interfere with the present use of the
property affected thereby or which, individually or in the aggregate, would not
have a Material Adverse Effect on IPIX; and, to IPIX's knowledge, all leases
pursuant to which IPIX or any of its subsidiaries lease from others real or
personal property are in good standing, valid and effective in accordance with
their respective terms, and there is not, to the knowledge of IPIX, under any of
such leases, any existing material default or event of default (or event which
with notice or lapse of time, or both, would constitute a material default and
in respect of which IPIX or such subsidiary has not taken adequate steps to
prevent such a default from occurring) except where the lack of such good
standing, validity and effectiveness, or the existence of such default or event
of default would not have a Material Adverse Effect on IPIX.
Section 3.15. INTELLECTUAL PROPERTY. (a) All of IPIX's and its
subsidiaries' interests in all of IPIX's and its subsidiaries' rights, title and
interest in and to all existing United States and foreign patents, trademarks,
trade names, service marks, copyrights, trade secrets, know how, methods or
processes and other intellectual properties and proprietary
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information and any applications therefor that are material to its business as
currently conducted (the "IPIX Owned Intellectual Property Rights") are free and
clear of all Liens (except for Liens that would not result in an IPIX Material
Adverse Effect) and as of the date hereof, the title thereto of IPIX or any
subsidiary, as the case may be, is not being questioned in any litigation or
administrative proceeding before any court or government agency.
(b) As of the date hereof, there is no action, suit, investigation or
proceeding (or, to the knowledge of IPIX, any basis therefor) pending against,
or, to the knowledge of IPIX, threatened against or affecting, IPIX, any of its
subsidiaries, any present or former officer, director or employee of IPIX or any
of its subsidiaries (i) based upon, or challenging or seeking to deny or
restrict, the use by IPIX or any of its subsidiaries of any of the IPIX Owned
Intellectual Property Rights or the Intellectual Property Rights owned by a
third party and licensed or sublicensed by either IPIX or any of its
subsidiaries (the "IPIX Licensed Intellectual Property Rights"), (ii) alleging
that the use of the IPIX Owned Intellectual Property Rights or the IPIX Licensed
Intellectual Property Rights or any services provided, processes used, or
products manufactured or sold by IPIX or any of its subsidiaries do or may
conflict with, misappropriate or infringe upon any Intellectual Property Right
or other proprietary right of any third person or (iii) alleging that the rights
of IPIX or any of its subsidiaries in or to the IPIX Owned Intellectual Property
Rights or the IPIX Licensed Intellectual Property Rights conflict with,
misappropriate, or infringe upon any Intellectual Property Right or other
proprietary right of any third party that, in the case of any of clauses (i),
(ii) or (iii) would have a Material Adverse Effect on IPIX.
(c) The conduct of the business of IPIX and its subsidiaries as now
conducted does not, to IPIX's knowledge, infringe any valid patents, trademarks,
trade names, service marks or copyrights or make any unauthorized use of any
trade secret, know how, methods or processes and any other intellectual
properties or proprietary information of others that would have a Material
Adverse Effect on IPIX. The consummation of the transactions completed hereby
will not result in the loss or impairment of any IPIX Owned Intellectual
Property Rights or IPIX Licensed Intellectual Property Rights that would have a
Material Adverse Effect on IPIX.
(d) To the knowledge of IPIX, no third person is engaging in any activity
or using any Intellectual Property Right that materially infringes upon the IPIX
Intellectual Property Rights or the Licensed Intellectual Property Rights or
upon the rights of either IPIX or any of its subsidiaries therein that would
have a Material Adverse Effect on IPIX.
(e) Each of IPIX and its subsidiaries has taken steps it believes
appropriate to protect and maintain its trade secrets, know how, methods or
processes as such, except in cases where IPIX has elected to rely on patent or
copyright protection in lieu of trade secret protection. To the knowledge of
IPIX, there has been no misappropriation of any material trade secrets or other
material confidential Intellectual Property Rights of either IPIX or any of its
subsidiaries by any third person that would have a Material Adverse Effect on
IPIX.
(f) No current licenses for the use of any IPIX Owned Intellectual Property
Rights have been granted by IPIX or any of its subsidiaries, as the case may be,
to any third parties. Section 3.15 of the Disclosure Schedule is a list of
material IPIX Licensed Intellectual Property Rights.
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(g) Except as previously disclosed to bamboo, none of IPIX or any of its
subsidiaries has given an indemnity in connection with any Intellectual Property
Right to any person.
Section 3.16. INSURANCE. IPIX and its subsidiaries maintain general
liability and other business insurance that IPIX believes to be reasonably
prudent for its business.
Section 3.17. MATERIAL CONTRACTS. (a) Pursuant to this Section 3.17(a)
and Section 3.11(e), IPIX has delivered or otherwise will make available to
bamboo or its representatives true, correct and complete copies of all written
contracts and agreements (and all amendments, modifications and supplements
thereto and all side letters to which IPIX is a party affecting the obligations
of any party thereunder) to which IPIX or any of its subsidiaries is a party or
by which any of their properties or assets are bound that are, material to the
business, properties or assets of IPIX and its subsidiaries taken as a whole,
including, all: (i) Material Contracts as set forth in Item 601(b)(10) of
Regulation S-K of the SEC; (ii) written and oral agreements, contacts and
commitments to which IPIX is a party, together with all amendments thereto,
(collectively, together with any such contracts entered into in accordance with
Section 4.02 hereof, the "IPIX Contracts"). Except as disclosed pursuant to
Section 3.11(e) of this Agreement, neither IPIX nor any of its subsidiaries is a
party to or bound by any severance, golden parachute or other agreement with any
employee or consultant pursuant to which such person would be entitled to
receive any additional compensation or an accelerated payment of compensation as
a result of the consummation of the transactions contemplated hereby.
(b) To the knowledge of IPIX, (i) each of the IPIX Contracts is valid and
enforceable in accordance with its terms, and there is no default under any IPIX
Contract so listed either by IPIX, (ii) by any other party thereto, and no event
has occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder by IPIX and (iii) any other party, in any such
case in which such default or event could reasonably be expected to have a
Material Adverse Effect on IPIX.
(c) No party to any such IPIX Contract has given notice to IPIX of or made
a claim against IPIX with respect to any breach or default thereunder, in any
such case in which such breach or default have a Material Adverse Effect on
IPIX.
Section 3.18. VOTE REQUIRED. The affirmative vote of the holders of at
least a majority of the outstanding IPIX Common Shares is necessary to approve
and adopt this Agreement and the Merger.
Section 3.19. TAX AND ACCOUNTING TREATMENT. Neither IPIX nor, to the
knowledge of IPIX, any of its affiliates has taken or agreed to take any action
that would prevent the Merger from (i) qualifying as a tax-free reorganization
under Section 368(a)(2)(E) of the Code, or (ii) being accounted for as a pooling
of interests in accordance with Accounting Principles Board Opinion No. 16, the
interpretive releases issued pursuant thereto, and the pronouncements of the
SEC.
Section 3.20. AFFILIATES. Except for the directors and executive officers
of IPIX, there are no persons who, to the knowledge of IPIX, may be deemed to be
affiliates of IPIX under Rule 1-02(b) of Regulation S-X of the SEC (the "IPIX
Affiliates").
Section 3.21. CERTAIN BUSINESS PRACTICES. None of IPIX, any of its
subsidiaries or any directors, officers, agents or employees of IPIX or any of
its subsidiaries has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic
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government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the FCPA, or (iii) made any other
unlawful payment, in each case except as would not have a Material Adverse
Effect on IPIX.
Section 3.22. INSIDER INTERESTS. No officer, director or other affiliate
of IPIX has any interest involving an aggregate value or payments of $60,000 in
any material property, real or personal, tangible or intangible, including
without limitation, any computer software or IPIX Intellectual Property Rights,
used in or pertaining to the business of IPIX or any subsidiary, except for the
ordinary rights of a shareholder or employee stock option holder.
Section 3.23. BROKERS. No broker, finder or investment banker (other than
the IPIX Financial Adviser, a true and correct copy of whose engagement
agreement has been provided to bamboo) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of IPIX.
Section 3.24. NO EXISTING DISCUSSIONS. As of the date hereof, IPIX is not
engaged, directly or indirectly, in any discussions or negotiations with any
other party with respect to any IPIX Takeover Proposal (as defined in Section
4.05).
Section 3.25. TAKEOVER STATUTES AND CHARTER PROVISIONS. The Board of
Directors of IPIX has taken the necessary action to render the TBCA and any
other potentially applicable anti-takeover or similar statute or regulation
inapplicable to this Agreement and the Stock Option Agreement and the
transactions contemplated hereby and thereby.
Section 3.26. YEAR 2000 COMPLIANCE MATTERS. Except for matters which,
individually and in the aggregate, would not have a Material Adverse Effect on
IPIX, all proprietary and third-party licensed computer systems including
computer hardware and software owned, leased or licensed by IPIX and computer
software incorporated in products produced by IPIX and its subsidiaries (a)
will, prior to December 31, 1999, accurately and without interruption recognize
the advent of the year 2000 without any adverse change in operations associated
with such recognition, (b) can accurately and without interruption recognize and
manipulate date information relating to dates prior to, on and after January 1,
2000 and (c) can accurately and without interruption interact with other year
2000 compliant computer systems and computer software in a way that does not
compromise their ability to correctly recognize the advent of the year 2000 or
to accurately and without interruption recognize and manipulate date information
relating to dates prior to, on or after January 1, 2000. The costs of the
adaptations to such computer systems, hardware and software being made by IPIX
and its subsidiaries in order to achieve year 2000 compliance are not expected
to have a Material Adverse Effect on IPIX.
ARTICLE 4
COVENANTS
Section 4.01. CONDUCT OF BUSINESS OF BAMBOO. Except as contemplated by
this Agreement or as described in Section 4.01 of the bamboo Disclosure
Schedule, during the period from the date hereof to the Effective Time, bamboo
will conduct its operations in the ordinary course of business consistent with
past practice and, to the extent consistent therewith, with no less diligence
and effort than would be applied in the absence of this Agreement, seek to
preserve intact its current business organization, keep available the service of
its current officers and employees and preserve its relationships with
customers,
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suppliers and others having business dealings with it to the end that goodwill
and ongoing businesses shall be unimpaired at the Effective Time. Without
limiting the generality of the foregoing, except as otherwise expressly provided
in this Agreement or as described in Section 4.01 of the bamboo Disclosure
Schedule, prior to the Effective Time, bamboo will not, and will not permit any
of its subsidiaries to, without the prior written consent of IPIX:
(a) amend its Certificate of Incorporation or Bylaws (or other similar
governing instrument) except as required in order to comply with its
obligations under this Agreement;
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities (except bank
loans) or equity equivalents (including, without limitation, any stock
options or stock appreciation rights), except for (i) the issuance and sale
by bamboo of bamboo Shares pursuant to (A) options to purchase bamboo
Shares (a "bamboo Stock Option" or collectively, "bamboo Stock Options")
previously issued pursuant to the Amended and Restated 1998 Employee,
Director and Consultant Stock Plan or issuance of bamboo Shares pursuant to
the Amended and Restated 1999 Employee Stock Purchase Plan or any other
plans or agreements pursuant to which any bamboo Stock Option has been
issued or may be issued (referred to collectively as the "bamboo Plans")
and (B) outstanding warrants or conversion rights; and (ii) the granting of
stock options by bamboo to new employees and consultants in the ordinary
course of business and consistent with past practices of bamboo, provided
that the aggregate number of bamboo Shares issuable pursuant to such
options shall not exceed 75,000 per month;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, make any other actual, constructive or deemed distribution
in respect of its capital stock or otherwise make any payments to
shareholders in their capacity as such, or redeem or otherwise acquire any
of its securities (except for a redemption of the Class B Common Stock if
and when required under the Certificate of Incorporation of bamboo);
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of bamboo or any of its subsidiaries (other than the
Merger);
(e) (i) incur or assume any long-term or short-term debt other than in
the ordinary course or issue any debt securities; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person; (iii)
make any loans, advances or capital contributions to, or investments in,
any other person other than in the ordinary course; (iv) pledge or
otherwise encumber shares of capital stock of bamboo or its subsidiaries;
or (v) mortgage or pledge any of its material assets, tangible or
intangible, or create or suffer to exist any material Lien thereupon (other
than tax Liens for taxes not yet due or Liens in the ordinary course of
business consistent with past practice);
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(f) except as may be required by law, and except in the ordinary
course consistent with past practice, and except as contemplated in Section
4.01(b), above, enter into, adopt or amend or terminate any bonus, profit
sharing, compensation, severance, termination, stock option, stock
appreciation right, restricted stock, performance unit, stock equivalent,
stock purchase agreement, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreement, trust, plan,
fund or other arrangement for the benefit or welfare of any director,
officer or employee in any manner, or increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the
date hereof (including, without limitation, the granting of stock
appreciation rights or performance units);
(g) acquire, sell, lease or dispose of any material assets in any
single transaction or series of related transactions (other than in the
ordinary course of business);
(h) except as may be required as a result of a change in law or in
GAAP, change any of the accounting principles or practices used by it;
(i) revalue in any material respect any of its assets, including,
without limitation, writing down the value of inventory or writing-off
notes or accounts receivable other than as required under GAAP in the
ordinary course of business;
(j) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership, or other business organization or
division thereof or any equity interest therein which, individually, is in
excess of $250,000; (ii) enter into any contract or agreement, other than
in the ordinary course of business consistent with past practice, which
would be material to bamboo; (iii) authorize any new capital expenditure or
expenditures which, individually, is in excess of $100,000 or, in the
aggregate, are in excess of $500,000; provided, however that none of the
foregoing shall limit any capital expenditure required pursuant to existing
contracts;
(k) make any tax election or settle or compromise any income tax
liability material to bamboo and its subsidiaries taken as a whole;
(l) settle or compromise any pending or threatened suit, action or
claim which (i) relates to the transactions contemplated hereby or (ii) the
settlement or compromise of which would have a Material Adverse Effect on
bamboo;
(m) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.01(a) through 4.01(l) or any action which would
make any of the representations or warranties of bamboo contained in this
Agreement untrue or incorrect.
Notwithstanding anything to the contrary contained in this Agreement, the
parties agree that bamboo (by vote of a majority of its Board of Directors)
shall have the right to grant registration rights to the current holders of the
Series C Convertible Preferred Stock of bamboo.com Canada, Inc. with respect to
shares of Common Stock of bamboo issuable upon conversion of such Series C
Convertible Preferred Stock.
Section 4.02. CONDUCT OF BUSINESS OF IPIX. Except as contemplated by this
Agreement or as described in Section 4.2 of the IPIX Disclosure Schedule, during
the period from the date hereof to the Effective Time, IPIX will conduct its
operations in the ordinary course of business consistent with past practice and,
to the extent consistent therewith, with no less diligence and effort than would
be applied in the absence of this
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Agreement, seek to preserve intact its current business organization, keep
available the service of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Without limiting the generality of the foregoing, except as
otherwise expressly provided in this Agreement or as described in Section 4.2 of
the IPIX Disclosure Schedule, prior to the Effective Time, IPIX will not, and
will not permit any of its subsidiaries to, without the prior written consent of
bamboo:
(a) amend its Charter or Bylaws (or other similar governing
instrument);
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities (except bank
loans) or equity equivalents (including, without limitation, any stock
options or stock appreciation rights), except for (i) the issuance and sale
by IPIX of IPIX Shares pursuant to options previously granted under the
IPIX Stock Option Plans and (iii) the granting of stock options by IPIX to
new employees or consultants in the ordinary course of business and
consistent with past practices of IPIX, provided that the aggregate number
of IPIX Shares issuable pursuant to such options shall not exceed 75,000
per month;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, make any other actual, constructive or deemed distribution
in respect of its capital stock or otherwise make any payments to
shareholders in their capacity as such, or redeem or otherwise acquire any
of its securities;
(d) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of IPIX or any of its subsidiaries (other than the Merger);
(e) (i) incur or assume any long-term or short-term debt other than in
the ordinary course or issue any debt securities; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person; (iii)
make any loans, advances or capital contributions to, or investments in,
any other person other than in the ordinary course; (iv) pledge or
otherwise encumber shares of capital stock of IPIX or its subsidiaries; or
(v) mortgage or pledge any of its material assets, tangible or intangible,
or create or suffer to exist any material Lien thereupon (other than tax
Liens for taxes not yet due or Liens in the ordinary course of business
consistent with past practice);
(f) except as may be required by law, and except in the ordinary
course consistent with past practice, and except as contemplated in Section
4.02(b), above enter into, adopt or amend or terminate any bonus, profit
sharing, compensation, severance, termination, stock option, stock
appreciation right, restricted stock, performance unit, stock equivalent,
stock purchase agreement, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreement, trust, plan,
fund or other arrangement for the benefit or welfare of any director,
officer or employee in any manner, or increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any
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plan and arrangement as in effect as of the date hereof (including, without
limitation, the granting of stock appreciation rights or performance
units);
(g) acquire, sell, lease or dispose of any material assets in any
single transaction or series of related transactions (other than in the
ordinary course of business);
(h) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(i) revalue in any material respect any of its assets, including,
without limitation, writing down the value of inventory or writing-off
notes or accounts receivable other than as required by GAAP in the ordinary
course of business;
(j) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership, or other business organization or
division thereof or any equity interest therein which individually, is in
excess of $250,000; (ii) enter into any contract or agreement, other than
in the ordinary course of business consistent with past practice, which
would be material to IPIX; (iii) authorize any new capital expenditure or
expenditures which, individually, is in excess of $100,000 or, in the
aggregate, in excess of $500,000; provided, however that none of the
foregoing shall limit any capital expenditure required pursuant to existing
contracts;
(k) make any tax election or settle or compromise any income tax
liability material to IPIX and its subsidiaries taken as a whole;
(l) settle or compromise any pending or threatened suit, action or
claim which (i) relates to the transactions contemplated hereby or (ii) the
settlement or compromise of which could have a Material Adverse Effect on
IPIX;
(m) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.02(a) through 4.02(l) or any action which would
make any of the representations or warranties of IPIX contained in this
Agreement untrue or incorrect.
Section 4.03. PREPARATION OF S-4 AND THE PROXY STATEMENT. IPIX and bamboo
shall promptly prepare and file with the SEC the Proxy Statement, and the
parties shall prepare and file with the SEC the S-4, in which the Proxy
Statement will be included as a prospectus. Each of the parties shall use its
reasonable best efforts to have the S-4 declared effective under the Securities
Act as promptly as practicable after such filing. The parties shall also use
their reasonable best efforts to take any action (other than qualifying to do
business in any jurisdiction in which it is now not so qualified) required to be
taken under any applicable state securities laws in connection with the issuance
of bamboo Shares in the Merger and upon the exercise of IPIX Stock Options and
bamboo Stock Options. Each party shall furnish all information concerning such
party and the shareholders and holders of stock options of such party as may be
reasonably requested in connection with any such action. IPIX and bamboo agree
that the information supplied or to be supplied by it for inclusion or
incorporation by reference in the Proxy Statement and each amendment or
supplement thereto at the time of mailing thereof and at the time of the
respective meetings of shareholders of IPIX and bamboo, or, in the case of the
Form S-4 and each amendment or supplement thereto, at the time it is filed or
becomes effective, will not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of circumstances under which they were made,
not misleading.
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Section 4.04. NO SOLICITATION BY BAMBOO. (a) Bamboo shall not, nor shall
it permit any of its subsidiaries to, nor shall it authorize or permit any of
its directors, officers or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
its subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action designed to facilitate, any inquiries or the making of any proposal
which constitutes a bamboo Takeover Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding any bamboo Takeover
Proposal; provided, however, that if, at any time, the Board of Directors of
bamboo determines in good faith, based on the advice of outside counsel, that it
is necessary for the bamboo Board to do so in order to comply with its fiduciary
duties to bamboo's shareholders under applicable law, bamboo may, in response to
a bamboo Superior Proposal (as defined in Section 4.04(b)) and subject to
providing prior written notice of its decision to take such action to IPIX (the
"bamboo Notice") and in compliance with Section 4.04(c), following delivery of
the bamboo Notice (x) furnish information with respect to bamboo and its
subsidiaries to any person making a bamboo Superior Proposal pursuant to a
customary confidentiality agreement (as determined by bamboo based on the advice
of its outside counsel) and (y) participate in discussions or negotiations
regarding such bamboo Superior Proposal. For purposes of this Agreement, "bamboo
Takeover Proposal" means any inquiry, proposal or offer from any person relating
to any bamboo Takeover Event, and "bamboo Takeover Event" means any (w) direct
or indirect acquisition or purchase of a business that constitutes 30% or more
of the net revenues, net income or the assets of bamboo and its subsidiaries,
taken as a whole, (x) direct or indirect acquisition or purchase of 30% or more
of any class of equity securities of bamboo or any of its subsidiaries whose
business constitutes 30% or more of the net revenues, net income or assets of
bamboo and its subsidiaries, taken as a whole, (y) tender offer or exchange
offer that if consummated would result in any person beneficially owning 30% or
more of any class of equity securities of bamboo or any of its subsidiaries
whose business constitutes 30% or more of the net revenues, net income or assets
of bamboo and its subsidiaries, taken as a whole, or (z) merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving bamboo or any of its subsidiaries whose business
constitutes 30% or more of the net revenues, net income or assets of bamboo and
its subsidiaries, taken as a whole, other than the transactions contemplated by
this Agreement.
(b) Except as expressly permitted by this Section 4.04, neither the Board
of Directors of bamboo nor any committee thereof shall (i) withdraw or modify,
or propose publicly to withdraw or modify, in a manner adverse to IPIX, the
approval or recommendation by such Board of Directors or such committee of the
Merger or this Agreement or (ii) approve or recommend, or propose publicly to
approve or recommend, any bamboo Takeover Proposal; provided that the Board of
Directors of bamboo may take such action if it determines in good faith, based
on the advice of outside counsel, that in light of a bamboo Superior Proposal it
is necessary to do so in order to act in a manner consistent with its fiduciary
duties to bamboo's shareholders under applicable law. For purposes of this
Agreement, a "bamboo Superior Proposal" means any bamboo Takeover Proposal which
the Board of Directors of bamboo determines in its good faith judgment to be
more favorable to bamboo's shareholders than the Merger and for which financing,
to the extent required, is then committed or which, in the good faith judgment
of the Board of Directors of bamboo, is reasonably capable of being obtained by
such third party.
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(c) In addition to the obligations of bamboo set forth in paragraphs (a)
and (b) of this Section 4.04, bamboo shall immediately advise IPIX orally and in
writing of any request for information or of any bamboo Takeover Proposal.
Bamboo will keep IPIX reasonably informed of the status of any such request or
bamboo Takeover Proposal.
(d) Nothing contained in this Section 4.04 shall prohibit bamboo from
taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
bamboo's shareholders if, in the good faith judgment of the Board of Directors
of bamboo, based on the advice of outside counsel, failure so to disclose would
be inconsistent with its obligations under applicable law; provided, however,
that, except in connection with a bamboo Superior Proposal, neither bamboo nor
its Board of Directors nor any committee thereof shall withdraw or modify, or
propose publicly to withdraw or modify, its position with respect to this
Agreement or the Merger or approve or recommend, or propose publicly to approve
or recommend, a bamboo Takeover Proposal.
Section 4.05. NO SOLICITATION BY IPIX. (a) IPIX shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any of its
directors, officers or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action designed to facilitate, any inquiries or the making of any proposal
which constitutes any IPIX Takeover Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding any IPIX Takeover
Proposal; provided, however, that if, at any time, the Board of Directors of
IPIX determines in good faith, based on the advice of outside counsel, that it
is necessary for the IPIX Board of Directors to do so in order to comply with
its fiduciary duties to IPIX's shareholders under applicable law, IPIX may, in
response to an IPIX Superior Proposal (as defined in Section 4.05(b)) and
subject to providing prior written notice of its decision to take such action to
bamboo (the "IPIX Notice") and compliance with Section 4.05(c), following
delivery of the IPIX Notice (x) furnish information with respect to IPIX and its
subsidiaries to any person making an IPIX Superior Proposal pursuant to a
customary confidentiality agreement (as determined by IPIX based on the advice
of its outside counsel) and (y) participate in discussions or negotiations
regarding such IPIX Superior Proposal. For purposes of this Agreement, "IPIX
Takeover Proposal" means any inquiry, proposal or offer from any person relating
to any IPIX Takeover Event, and "IPIX Takeover Event" means any (w) direct or
indirect acquisition or purchase of a business that constitutes 30% or more of
the net revenues, net income or the assets of IPIX and its subsidiaries, taken
as a whole, (x) direct or indirect acquisition or purchase of 30% or more of any
class of equity securities of IPIX or any of its subsidiaries whose business
constitutes 30% or more of the net revenues, net income or assets of IPIX and
its subsidiaries, taken as a whole, (y) tender offer or exchange offer that if
consummated would result in any person beneficially owning 30% or more of any
class of equity securities of IPIX or any of its subsidiaries whose business
constitutes 30% or more of the net revenues, net income or assets of IPIX and
its subsidiaries, taken as a whole, or (z) merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving IPIX or any of its subsidiaries whose business constitutes 30% or more
of the net revenues, net income or assets of IPIX and its subsidiaries, taken as
a whole, other than the transactions contemplated by this Agreement.
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(b) Except as expressly permitted by this Section 4.05, neither the Board
of Directors of IPIX nor any committee thereof shall (i) withdraw or modify, or
propose publicly to withdraw or modify, in a manner adverse to bamboo, the
approval or recommendation by such Board of Directors or such committee of the
Merger or this Agreement or (ii) approve or recommend, or propose publicly to
approve or recommend, any IPIX Takeover Proposal; provided that the Board of
Directors of IPIX may take such action if it determines in good faith, based on
the advice of outside counsel, that in light of an IPIX Superior Proposal it is
necessary to do so in order to act in a manner consistent with its fiduciary
duties to IPIX's shareholders under applicable law. For purposes of this
Agreement, an "IPIX Superior Proposal" means any IPIX Takeover Proposal which
the Board of Directors of IPIX determines in its good faith judgment to be more
favorable to IPIX's shareholders than the Merger and for which financing, to the
extent required, is then committed or which, in the good faith judgment of the
Board of Directors of IPIX, is reasonably capable of being obtained by such
third party.
(c) In addition to the obligations of IPIX set forth in paragraphs (a) and
(b) of this Section 4.05, IPIX shall immediately advise bamboo orally and in
writing of any request for information or of any IPIX Takeover Proposal. IPIX
will keep bamboo reasonably informed of the status of any such request or IPIX
Takeover Proposal.
(d) Nothing contained in this Section 4.05, shall prohibit IPIX from taking
and disclosing to its shareholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from making any disclosure to IPIX's
shareholders if, in the good faith judgment of the Board of Directors of IPIX,
based on the advice of outside counsel, failure so to disclose would be
inconsistent with its obligations under applicable law; provided, however, that,
except in connection with an IPIX Superior Proposal, neither IPIX nor its Board
of Directors nor any committee thereof shall withdraw or modify, or propose
publicly to withdraw or modify, its position with respect to this Agreement or
the Merger or approve or recommend, or propose publicly to approve or recommend,
an IPIX Takeover Proposal.
Section 4.06. MEETINGS OF SHAREHOLDERS. Each of IPIX and bamboo shall
take all action necessary, in accordance with the TBCA and DGCL, respectively,
its respective Charter/Certificate of Incorporation and Bylaws, to duly call,
give notice of, convene and hold a meeting of its shareholders as promptly as
practicable, to consider and vote upon the adoption and approval of this
Agreement and the transactions contemplated hereby. Subject to the provisions of
Sections 4.04 and 4.05, IPIX and bamboo will, through their respective Boards of
Directors, recommend to their respective shareholders approval of such matters;
provided further, however, that neither IPIX nor bamboo, respectively, if such
party shall have received an IPIX Superior Proposal or bamboo Superior Proposal,
shall, in any event, be permitted to terminate this Agreement as a result of the
occurrence of the events described in clauses (i) and (ii) of this sentence.
IPIX and bamboo shall coordinate and cooperate with respect to the timing of
such meetings and shall use their reasonable best efforts to hold such meetings
on the same day and as soon as practicable after the date hereof.
Section 4.07. NASDAQ LISTING. The parties shall use their reasonable best
efforts to cause the bamboo Shares to be issued in the Merger and the bamboo
Shares to be reserved for issuance upon exercise of IPIX Stock Options or bamboo
Stock Options to be approved for listing on the Nasdaq National Market
("Nasdaq"), subject to official notice of issuance, prior to the Effective Time.
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Section 4.08. ACCESS TO INFORMATION. (a) Between the date hereof and the
Effective Time, bamboo will give IPIX and its authorized representatives, and
IPIX will give bamboo and its authorized representatives, reasonable access to
all employees, offices and other facilities and to all books and records of
itself and its subsidiaries, will permit the other party to make such
inspections as such party may reasonably require and will cause its officers and
those of its subsidiaries to furnish the other party with such financial and
operating data and other information with respect to the business and properties
of itself and its subsidiaries as the other party may from time to time
reasonably request.
(b) Each of the parties hereto will hold and will cause its consultants and
advisers to hold in confidence all confidential documents and information
furnished to it in connection with the transactions contemplated by this
Agreement pursuant to the terms of that certain Confidentiality Agreement
entered into between IPIX and bamboo dated October 8, 1999.
Section 4.09. ADDITIONAL AGREEMENTS; REASONABLE EFFORTS. Subject to the
terms and conditions herein provided, each of the parties hereto agrees to use
its reasonable best efforts to take, or cause to be taken, all action, and to
do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation, (i)
cooperating in the preparation and filing of the Proxy Statement and the S-4,
any filings that may be required under the HSR Act, and any amendments to any
thereof; (ii) obtaining consents of all third parties and Governmental Entities
necessary, proper or advisable for the consummation of the transactions
contemplated by this Agreement; (iii) obtaining consents of all client companies
that are parties to contracts with IPIX and/or bamboo; (iv) contesting any legal
proceeding relating to the Merger; and (v) the execution of any additional
instruments necessary to consummate the transactions contemplated hereby.
Subject to the terms and conditions of this Agreement, IPIX, Merger Sub and
bamboo agree to use their reasonable best efforts to cause the Effective Time to
occur as soon as practicable after the shareholder votes with respect to the
Merger. In case at any time after the Effective Time any further action is
necessary to carry out the purposes of this Agreement, the proper officers and
directors of each party hereto shall take all such necessary action.
Section 4.10. EMPLOYEE BENEFIT PLANS. (a) It is the parties' present
intent to provide after the Effective Time to employees of IPIX and bamboo and
their subsidiaries employee benefit plans which, in the aggregate, are not less
favorable than those currently provided by IPIX and bamboo, respectively.
Notwithstanding the foregoing, nothing contained herein shall be construed as
requiring the parties to continue any specific employee benefit plans.
(b) The parties agree to work together prior to the Effective Time to
develop and design such plans, programs and arrangements and to prepare for the
implementation of such plans, programs and arrangements described in this
Section 4.10 following the Effective Time.
(c) The parties agree to discuss in good faith prior to taking any action
that would result in a "Change of Control" for purposes of the IPIX stock
options.
Section 4.11. PUBLIC ANNOUNCEMENTS. IPIX and bamboo will consult with one
another before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement,
including, without limitation, the Merger, and shall not issue any such press
release or make any such public statement
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prior to such consultation, except as may be required by applicable law or by
obligations pursuant to any listing agreement with the Nasdaq as determined by
IPIX or bamboo.
Section 4.12. INDEMNIFICATION. (a) To the extent, if any, not provided by
an existing right under one of the parties' directors and officers liability
insurance policies, from and after the Effective Time, bamboo shall, to the
fullest extent permitted by applicable law, indemnify, defend and hold harmless
each person who is now, or has been at any time prior to the date hereof, or who
becomes prior to the Effective Time, a director, officer or employee of the
parties hereto (each an "Indemnified Party" and, collectively, the "Indemnified
Parties") against all losses, expenses (including reasonable attorneys' fees and
expenses), claims, damages or liabilities or, subject to the proviso of the next
succeeding sentence, amounts paid in settlement, arising out of actions or
omissions occurring at or prior to the Effective Time and whether asserted or
claimed prior to, at or after the Effective Time that are in whole or in part
(i) based on, or arising out of the fact that such person is or was a director,
officer or employee of such party or a subsidiary of such party or (ii) based
on, arising out of or pertaining to the transactions contemplated by this
Agreement. In the event of any such loss, expense, claim, damage or liability
(whether or not arising before the Effective Time), (i) bamboo shall pay the
reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to bamboo, promptly after
statements therefor are received and otherwise advance to such Indemnified Party
upon request reimbursement of documented expenses reasonably incurred, in either
case to the extent not prohibited by the DGCL or its Certificate or Bylaws, (ii)
bamboo will cooperate in the defense of any such matter and (iii) any
determination required to be made with respect to whether an Indemnified Party's
conduct complies with the standards set forth under the DGCL and bamboo's
Certificate or Bylaws shall be made by independent counsel mutually acceptable
to bamboo and the Indemnified Party; provided, however, that bamboo shall not be
liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld). The Indemnified Parties as a group may
retain only one law firm with respect to each related matter except to the
extent there is, in the opinion of counsel to an Indemnified Party, under
applicable standards of professional conduct, a conflict on any significant
issue between positions of any two or more Indemnified Parties. Following the
Effective Time, bamboo shall cause IPIX to honor all indemnification agreements
with Indemnified Parties (including IPIX's by-laws) in effect as of the date of
this Agreement in accordance with the terms thereof. IPIX has disclosed to
bamboo all such indemnification agreements prior to the date of this Agreement.
(b) For a period of six years after the Effective Time, bamboo shall cause
to be maintained in effect the policies of directors' and officers' liability
insurance maintained by IPIX and bamboo for the benefit of those persons who are
covered by such policies at the Effective Time (or bamboo may substitute
therefor policies of at least the same coverage with respect to matters
occurring prior to the Effective Time) unless such coverage is not available at
commercially reasonable rates in which case bamboo shall purchase such coverage
as (i) may be obtained at commercially reasonable rates and (ii) is no less
broad than coverage purchased for persons who are then serving as directors
and/or officers of bamboo.
(c) If bamboo or any of its successors or assigns (i) consolidates with or
merges into any other person and shall not be the continuing or surviving
corporation or entity or such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person, then and in either
such case, proper provision shall be made so that the
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successors and assigns of bamboo shall assume the obligations set forth in this
Section 4.12.
(d) To the fullest extent permitted by law, from and after the Effective
Time, all rights to indemnification now existing in favor of the employees,
agents, directors or officers of IPIX and bamboo and their subsidiaries with
respect to their activities as such prior to the Effective Time, as provided in
IPIX's and bamboo's Charter/Certificate of Incorporation or Bylaws, in effect on
the date thereof or otherwise in effect on the date hereof, shall survive the
Merger and shall continue in full force and effect for a period of not less than
six years from the Effective Time.
(e) The provisions of this Section 4.12 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
his or her representatives.
Section 4.13. NOTIFICATION OF CERTAIN MATTERS. The parties hereto shall
give prompt notice to the other parties, of (i) the occurrence or nonoccurrence
of any event the occurrence or nonoccurrence of which would be likely to cause
any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time, (ii) any
material failure of such party to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder, (iii) any notice
of, or other communication relating to, a default or event which, with notice or
lapse of time or both, would become a default, received by such party or any of
its subsidiaries subsequent to the date of this Agreement and prior to the
Effective Time, under any contract or agreement material to the financial
condition, properties, businesses or results of operations of such party and its
subsidiaries taken as a whole to which such party or any of its subsidiaries is
a party or is subject, (iv) any notice or other communication from any third
party alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement, (v) any
amendments made (other than such amendments effected in the ordinary course of
business that will not materially adversely affect the contractual arrangement
in question) to any bamboo Contract or IPIX Contract prior to the Effective
Time, or (vi) any material adverse change in their respective financial
condition, properties, businesses or results of operations, taken as a whole,
other than changes resulting from general economic conditions; provided,
however, that the delivery of any notice pursuant to this Section 4.13 shall not
cure such breach or non-compliance or limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
Section 4.14. AFFILIATES. (a) IPIX and bamboo shall use all reasonable
efforts to obtain from any IPIX Affiliate or bamboo Affiliate who has not
previously executed such letter agreement and from any person who may be deemed
to have become an IPIX Affiliate or bamboo Affiliate after the date of this
Agreement and on or prior to the Effective Time, a letter agreement
substantially in the form of Exhibit 1 hereto in the case of IPIX and Exhibit 2
hereto in the case of bamboo, in each case as soon as practicable.
(b) Bamboo shall not be required to maintain the effectiveness of the S-4
for the purpose of resale of bamboo Shares by shareholders of IPIX or bamboo who
may be affiliates of IPIX or bamboo pursuant to Rule 145 under the Securities
Act.
Section 4.15. TAX AND ACCOUNTING TREATMENT. From and after the date
hereof and until the Effective Time, neither IPIX nor bamboo shall take any
action, or fail to take any action, that it knows would jeopardize qualification
of the Merger as a tax-free reorganization under Section 368(a)(2)(E) of the
Code or enter into any contract,
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agreement, commitment or arrangement with respect to the foregoing. In addition,
during that period, each of the parties will notify the other party (and will
offer to enter into discussions with the other party) before taking any action,
or failing to take any action, that it believes would jeopardize the treatment
of the Merger as a "pooling of interests" for accounting purposes.
Section 4.16. NONCOMPETITION AGREEMENTS. On or prior to the Effective
Time, bamboo shall use its reasonable best efforts to enter into noncompetition
agreements with certain of its executive officers, as reasonably identified by
IPIX, which agreements shall provide for a term of at least one year and shall
contain such other terms and conditions as may be customary for such businesses.
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 5.01. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE
MERGER. The respective obligations of each party hereto to effect the Merger
are subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) this Agreement shall have been approved and adopted by the
requisite vote of the shareholders of IPIX and bamboo;
(b) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
Governmental Authority which prohibits, restrains, enjoins or restricts the
consummation of the Merger;
(c) any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired, and any other governmental or regulatory
notices or approvals required with respect to the transactions contemplated
hereby shall have been either filed or received; and
(d) the S-4 shall have become effective under the Securities Act and
shall not be the subject of any stop order or proceedings seeking a stop
order, and all state securities laws or "blue sky" permits and
authorizations necessary to issue bamboo Shares in exchange for IPIX Shares
in the Merger shall have been obtained.
Section 5.02. CONDITIONS TO THE OBLIGATIONS OF BAMBOO. The obligation of
bamboo to effect the Merger is subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) the representations of IPIX contained in this Agreement or in any
other document delivered pursuant hereto shall be true and correct (except
to the extent that the breach thereof would not have a Material Adverse
Effect on IPIX) at and as of the Effective Time with the same effect as if
made at and as of the Effective Time (except to the extent such
representations specifically related to an earlier date, in which case such
representations shall be true and correct as of such earlier date), and at
the Closing IPIX shall have delivered to bamboo a certificate to that
effect;
(b) each of the covenants and obligations of IPIX to be performed at
or before the Effective Time pursuant to the terms of this Agreement shall
have been duly performed in all material respects at or before the
Effective Time, except for any failure to perform which, individually or in
the aggregate, would not have a Material
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Adverse Effect on IPIX, and at the Closing IPIX shall have delivered to
bamboo a certificate to that effect;
(c) Bamboo shall have received the opinion of Davis Polk & Wardwell,
counsel to bamboo, dated the Closing Date and addressed to bamboo, to the
effect that (i) the Merger will be treated for Federal income tax purposes
as a tax-free reorganization under Section 368(a)(2)(E) of the Code; (ii)
each of Merger Sub and IPIX will be a party to the reorganization within
the meaning of Section 368(b) of the Code and (iii) no gain or loss for
Federal income tax purposes will be recognized by Merger Sub, bamboo or any
shareholder of bamboo as a result of the Merger, and such opinion shall not
have been withdrawn or modified in any material respect. Such opinion may
be conditioned upon the receipt of representations of bamboo, IPIX and
Merger Sub, all in form and substance reasonably satisfactory to such
counsel and other reasonable assumptions set forth therein; and
(d) there shall have been no events, changes or effects with respect
to IPIX or its subsidiaries that have had a Material Adverse Effect on
IPIX.
Section 5.03. CONDITIONS TO THE OBLIGATIONS OF IPIX. The obligation of
IPIX to effect the Merger is subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) the representations of bamboo contained in this Agreement or in
any other document delivered pursuant hereto shall be true and correct
(except to the extent that the breach thereof would not have a Material
Adverse Effect on bamboo) at and as of the Effective Time with the same
effect as if made at and as of the Effective Time (except to the extent
such representations specifically related to an earlier date, in which case
such representations shall be true and correct as of such earlier date),
and at the Closing bamboo shall have delivered to IPIX a certificate to
that effect;
(b) each of the covenants and obligations of bamboo to be performed at
or before the Effective Time pursuant to the terms of this Agreement shall
have been duly performed in all material respects at or before the
Effective Time, except for any failure to perform which, individually or in
the aggregate, would not have a Material Adverse Effect, and at the Closing
bamboo shall have delivered to IPIX a certificate to that effect;
(c) the bamboo Shares issuable to the IPIX shareholders pursuant to
this Agreement and such other shares to be reserved for issuance in
connection with the Merger shall have been authorized for listing on Nasdaq
upon official notice of issuance;
(d) IPIX shall have received the opinion of Baker, Donelson, Bearman &
Caldwell, counsel to IPIX, dated the Closing Date and addressed to IPIX, to
the effect that (i) the Merger will be treated for Federal income tax
purposes as a tax-free reorganization under Section 368(a)(2)(E) of the
Code; (ii) each of Merger Sub and IPIX will be a party to the
reorganization within the meaning of Section 368(b) of the Code; and (iii)
no gain or loss for Federal income tax purposes will be recognized by
Merger Sub, IPIX or a shareholder of IPIX as a result of the Merger (other
than with respect to cash received by a shareholder of IPIX in lieu of a
fractional bamboo Share), and such opinion shall not have been withdrawn or
modified in any material respect. Such opinion may be conditioned upon the
receipt of representations of bamboo, IPIX and Merger Sub, all in form and
substance
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reasonably satisfactory to such counsel and other reasonable assumptions
set forth therein; and
(e) there shall have been no events, changes or effects with respect to
bamboo or its subsidiaries that have had a Material Adverse Effect on bamboo.
ARTICLE 6
TERMINATION; AMENDMENT; WAIVER
Section 6.01. TERMINATION. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after approval and adoption of this Agreement by IPIX's or bamboo's
shareholders:
(a) by mutual written consent of IPIX and bamboo;
(b) by IPIX or bamboo if (i) any court of competent jurisdiction in
the United States or other United States Governmental Entity shall have
issued a final order, decree or ruling or taken any other final action
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action is or shall have become non-appealable or
(ii) the Merger has not been consummated by June 30, 2000; provided,
however, that no party may terminate this Agreement pursuant to this clause
(ii) if such party's failure to fulfill any of its obligations under this
Agreement shall have been the reason that the Effective Time shall not have
occurred on or before said date;
(c) by bamboo if (i) there shall have been a breach of any
representation or warranty on the part of IPIX set forth in this Agreement,
or if any representation or warranty of IPIX shall have become untrue, in
either case such that the conditions set forth in Section 5.02(a) would be
incapable of being satisfied by June 30, 2000 (or as otherwise extended),
(ii) there shall have been a breach by IPIX of any of its covenants or
agreements hereunder having a Material Adverse Effect on IPIX or materially
adversely affecting (or materially delaying) the consummation of the
Merger, and IPIX has not cured such breach within twenty (20) business days
after notice by bamboo thereof, provided that bamboo has not breached any
of its obligations hereunder, (iii) the IPIX Board shall have recommended
to IPIX's shareholders an IPIX Superior Proposal, (iv) the IPIX Board shall
have withdrawn, modified or changed its approval or recommendation of this
Agreement or the Merger or shall have failed to call, give notice of,
convene or hold a shareholders' meeting to vote upon the Merger, or shall
have adopted any resolution to effect any of the foregoing, (v) IPIX shall
have convened a meeting of its shareholders to vote upon the Merger and
shall have failed to obtain the requisite vote of its shareholders; (vi)
bamboo shall have convened a meeting of its shareholders to vote upon the
Merger and shall have failed to obtain the requisite vote of its
shareholders; or (vii) a tender or exchange offer for outstanding shares of
capital stock of IPIX then representing 30% or more of the combined power
to vote generally for the election of IPIX directors is commenced, and the
Board of Directors of IPIX does not recommend that shareholders not tender
their shares into such tender or exchange offer.
(d) by IPIX if (i) there shall have been a breach of any
representation or warranty on the part of bamboo set forth in this
Agreement, or if any representation
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or warranty of bamboo shall have become untrue, in either case such that
the conditions set forth in Section 5.03(a) would be incapable of being
satisfied by June 30, 2000 (or as otherwise extended), (ii) there shall
have been a breach by bamboo of any of its covenants or agreements
hereunder having a Material Adverse Effect on bamboo or materially
adversely affecting (or materially delaying) the consummation of the
Merger, and bamboo has not cured such breach within twenty (20) business
days after notice by IPIX thereof, provided that IPIX has not breached any
of its obligations hereunder, (iii) the bamboo Board shall have recommended
to bamboo's shareholders a bamboo Superior Proposal, (iv) the bamboo Board
shall have withdrawn, modified or changed its approval or recommendation of
this Agreement or the Merger or shall have failed to call, give notice of,
convene or hold a shareholders' meeting to vote upon the Merger, or shall
have adopted any resolution to effect any of the foregoing, (v) IPIX shall
have convened a meeting of its shareholders to vote upon the Merger and
shall have failed to obtain the requisite vote of its Shareholders, (vi)
bamboo shall have convened a meeting of its shareholders to vote upon the
Merger and shall have failed to obtain the requisite vote of its
shareholders, or (vii) a tender offer or exchange offer for outstanding
shares of capital stock of bamboo then representing 30% or more of the
combined power to vote generally for the election of bamboo directors is
commenced, and the Board of Directors of bamboo does not recommend that
shareholders not tender their shares into such tender or exchange offer.
Section 6.02. EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 6.01, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or shareholders, other
than the provisions of this Section 6.02 and Sections 4.08(b) and 6.03 hereof.
Nothing contained in this Section 6.02 shall relieve any party from liability
for any breach of this Agreement.
Section 6.03. FEES AND EXPENSES. Each party shall bear its own expenses
in connection with this Agreement and the transactions contemplated hereby
except that:
(a) Bamboo shall pay to IPIX by wire transfer $16,000,000 (the "bamboo
Termination Fee"), upon demand, if (i) this Agreement is terminated
pursuant to Section 6.01(c)(vi) or any subsection of Section 6.01(d) (other
than Section 6.01(d)(v)), (ii) prior to the time this Agreement is
terminated or the time of the bamboo Special Meeting, a bamboo Takeover
Proposal shall have been publicly announced or shall have become publicly
known and (iii) during the term of this Agreement or within 225 days after
the termination of this Agreement a bamboo Takeover Event shall occur. Such
payment shall be made in immediately available funds.
(b) IPIX shall pay to bamboo by wire transfer $16,000,000 (the "IPIX
Termination Fee"), upon demand, if (i) this Agreement is terminated
pursuant to Section 6.01(d)(v) or any subsection of Section 6.01(c) (other
than Section 6.01(c)(vi)), (ii) prior to the time this Agreement is
terminated or the time of the IPIX Special Meeting, an IPIX Takeover
Proposal shall have been publicly announced or shall have become publicly
known and (iii) during the term of this Agreement or within 225 days after
the termination of this Agreement an IPIX Takeover Event shall occur. Such
payment shall be made in immediately available funds.
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Section 6.04. AMENDMENT. This Agreement may be amended by action taken by
IPIX and bamboo at any time before or after approval of the Merger by the
shareholders of IPIX and bamboo (if required by applicable law) but, after any
such approval, no amendment shall be made which requires the approval of such
shareholders under applicable law without such approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of the parties
hereto.
Section 6.05. EXTENSION; WAIVER. At any time prior to the Effective Time,
each party hereto may (i) extend the time for the performance of any of the
obligations or other acts of any other party, (ii) waive any inaccuracies in the
representations and warranties of any other party contained herein or in any
document, certificate or writing delivered pursuant hereto or (iii) waive
compliance by any other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE 7
MISCELLANEOUS
Section 7.01. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement. This Section 7.01 shall not
limit any covenant or agreement of the parties hereto which by its terms
requires performance after the Effective Time.
Section 7.02. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (a)
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) shall not be assigned by operation of law or
otherwise.
Section 7.03. VALIDITY. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
Section 7.04. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by facsimile
or by registered or certified mail (postage prepaid, return receipt requested),
to each other party as follows:
If to IPIX: James M. Phillips
Interactive Pictures Corporation
12009 Commerce Park Drive
Oak Ridge, Tennessee 37830
Fax: (423) 482-6755
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with a copy to: Baker, Donelson, Bearman & Caldwell, P.C.
165 Madison Avenue
Memphis, Tennessee 38103
Attn: Matthew S. Heiter
Fax: (901) 577-0737
if to bamboo: Andrew P. Laszlo
bamboo.com, Inc.
124 University Avenue
Palo Alto, California 94301
Fax: (650) 325-9286
with a copy to: Davis Polk & Wardwell
1875 Charleston Road
Mountain View, California 94043
Attn: David W. Ferguson
Fax: (650) 316-3866
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 7.05. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law thereof.
Section 7.06. DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 7.07. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Section 4.12 nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
Section 7.08. CERTAIN DEFINITIONS. For the purposes of this Agreement,
the term:
(a) "affiliate" means (except as otherwise provided in Sections 2.20,
3.20 and 4.13) a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control
with, the first mentioned person;
(b) "business day" means any day other than a day on which Nasdaq is
closed;
(c) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof;
(d) "knowledge" or "known" means, with respect to any matter in
question, if an executive officer of IPIX or bamboo or their respective
subsidiaries, as the case may be, has actual knowledge of such matter;
(e) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity; and
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(f) "subsidiary" or "subsidiaries" of IPIX, bamboo or any other
person, means any corporation, partnership, limited liability company,
association, trust, unincorporated association or other legal entity of
which IPIX, bamboo or any such other person, as the case may be (either
alone or through or together with any other subsidiary), owns, directly or
indirectly, 50% or more of the capital stock, the holders of which are
generally entitled to vote for the election of the board of directors or
other governing body of such corporation or other legal entity.
Section 7.09. PERSONAL LIABILITY. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect shareholder of IPIX, bamboo or Merger Sub or any officer,
director, employee, agent, representative or investor of any party hereto.
Section 7.10. SPECIFIC PERFORMANCE. The parties hereby acknowledge and
agree that the failure of either party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder.
Section 7.11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
bamboo.com, Inc.
By: /s/ LEONARD B. MCCURDY
-----------------------------------
Name: Leonard B. McCurdy
Title: Chairman and Chief
Executive Officer
INTERACTIVE PICTURES CORPORATION
By: /s/ JAMES M. PHILLIPS
-----------------------------------
Name: James M. Phillips
Title: Chairman and Chief
Executive Officer
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APPENDIX A
A. If, pursuant to Section 1.11 of the Agreement, bamboo notifies IPIX that it
elects to use the alternative transaction structure (the "Alternative
Transaction Structure") referred to in Section 1.11, Article I of the Agreement
shall be replaced in its entirety with the following Article I.
ARTICLE 1
THE MERGER
Section 1.01. THE MERGER. At the Effective Time (as defined below) and
upon the terms and subject to the conditions of this Agreement and in accordance
with the Tennessee Business Corporation Act (the "TBCA") and the General
Corporation Law of the State of Delaware (the "DGCL"), two wholly owned
subsidiaries, Merger Sub A, a Tennessee corporation and a wholly owned
subsidiary of Newco (as defined below) ("Merger Sub A"), and Merger Sub B, a
Delaware corporation and a wholly owned subsidiary of Newco ("Merger Sub B"),
shall be merged with and into IPIX (the "IPIX Merger") and bamboo (the "bamboo
Merger", collectively the IPIX Merger and the bamboo Merger shall be referred to
herein as the "Merger"), respectively, with each of IPIX and bamboo continuing
as the surviving corporations (each, a "Surviving Corporation"), wholly owned by
Newco, and the separate corporate existence of each of Merger Sub A and Merger
Sub B shall cease. Newco shall continue as the parent corporation and shall
continue to be governed by the laws of the State of Delaware. The Merger is
intended to qualify as transfers subject to Section 351(a) of the Code.
Section 1.02. EFFECTIVE TIME. Subject to the terms and conditions set
forth in this Agreement, Articles of Merger (the "Articles of Merger") and
Certificates of Merger (each, a "Merger Certificate") shall be duly executed and
acknowledged by each of IPIX, bamboo, Newco, Merger Sub A and Merger Sub B, as
applicable and thereafter the Articles of Merger reflecting the IPIX Merger
shall be delivered to the Secretary of State of the State of Tennessee for
filing pursuant to the TBCA on the Closing Date and the Merger Certificates
reflecting the bamboo Merger shall be delivered to the Secretary of State of the
State of Delaware for filing pursuant to the DGCL on the Closing Date (as
defined in Section 1.03). The Merger shall become effective at such time as a
properly executed and certified copy of the Articles of Merger are duly filed by
the Secretary of State of the State of Tennessee in accordance with the TBCA and
the Merger Certificate is duly filed by the Secretary of State of the State of
Delaware in accordance with the DGCL or such later time as the parties may agree
upon and set forth in the Articles of Merger and the Merger Certificate (the
time at which the Merger becomes effective shall be referred to herein as the
"Effective Time").
Section 1.03. CLOSING OF THE MERGER. The closing of the Merger (the
"Closing") will take place at a time and on a date to be specified by the
parties, which shall be no earlier than January 1, 2000 and no later than the
second business day on or after January 1, 2000 on which the latest to occur of
the conditions set forth in Article 5 have been satisfied (the "Closing Date"),
at the offices of Davis Polk & Wardwell in California, unless another time, date
or place is agreed to in writing by the parties hereto.
Section 1.04. EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in the TBCA and the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of
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each of Merger Sub A and Merger Sub B shall vest in the respective Surviving
Corporations, and all debts, liabilities and duties of each of Merger Sub A and
Merger Sub B shall become the debts, liabilities and duties of the respective
Surviving Corporations.
Section 1.05. FORMATION OF NEWCO AND MERGER SUBS; CERTIFICATE OF
INCORPORATION AND BYLAWS OF SURVIVING CORPORATION. (a) Prior to the Effective
Time, IPIX and bamboo agree to take such action as is necessary to (i) form a
new corporation under the laws of the State of Delaware ("Newco") that will be
owned equally by IPIX and bamboo; (ii) form two new corporations that are wholly
owned subsidiaries of Newco to be Merger Sub A and Merger Sub B; and (iii) amend
this Agreement to add each of Newco, Merger Sub A and Merger Sub B as a party.
IPIX and bamboo agree to take such action as is necessary to cause Newco, Merger
Sub A and Merger Sub B to perform the various covenants and agreements contained
herein which are contemplated herein to be performed by Newco, Merger Sub A and
Merger Sub B. Any covenants or agreements of Newco, Merger Sub A and Merger Sub
B contained herein shall be binding on such entity as of the time such entity
becomes a party to this Agreement.
(b) The Certificate of Incorporation of bamboo shall be the Certificate of
Incorporation of Newco as of the Effective Time.
(c) The Bylaws of bamboo shall be the Bylaws of Newco after the Effective
Time.
(d) The Charter of Merger Sub A and the Certificate of Incorporation of
Merger Sub B as in effect immediately prior to the Effective Time shall be the
Charter and Certificate of Incorporation of the Surviving Corporations,
respectively.
(e) The Bylaws of Merger Sub A and Merger Sub B immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporations, respectively.
Section 1.06. BOARD OF DIRECTORS AND OFFICERS OF NEWCO, MERGER SUB A AND
MERGER SUB B. (a) At or prior to the Effective Time, each of IPIX and bamboo
agrees to take such action as is necessary (i) to cause the number of directors
comprising the full Board of Directors of Newco to be nine persons, including
four of the current members of bamboo's Board of Directors (or, if less than
four of the current members of bamboo's Board of Directors is available or
willing to serve as a director of Belgium after the Effective Time, such
replacement directors as may be nominated by the remaining members of bamboo's
Board of Directors in accordance with the Bylaws of bamboo) (such four members
being referred to as the "bamboo Designees"), (ii) four of IPIX's current
directors nominated by IPIX (or, if less than four of the current members of
IPIX's Board of Directors are available or willing to serve as a director of
bamboo after the Effective Time, such replacement directors as may be nominated
by the remaining directors of IPIX (the "IPIX Designees") and (iii) one
additional independent director mutually selected by the Chairmen of IPIX and
bamboo (the "Joint Designee"). The Joint Designee shall be deemed to be an
independent director of Newco if such person is neither a director, officer or
employee of bamboo or IPIX or owns, directly or indirectly, more than 3% of the
outstanding common stock of Newco after the Effective Time.
(b) At the Effective Time, Newco's Board of Directors shall establish a
nominating committee (the "Nominating Committee"), which shall include four
members, of whom two shall be former directors of IPIX (which two members shall
be designated by Mr. Phillips as Chairman of bamboo after the Effective Time)
and two shall be directors who were members of the Board of directors of bamboo
(which two members shall be
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designated by Mr. McCurdy as Vice Chairman of bamboo after the Effective Time)
prior to the Effective Time. The Nominating Committee shall use its best efforts
to make nominations so as to preserve the proportion of directors of each of
bamboo and IPIX for a period of two years from the Effective Time as described
in this Section 1.06.
(c) Prior to the Effective Time, IPIX shall take all necessary action to
assure that the four IPIX Designees and the Joint Designee shall be appointed to
the Board of Directors of IPIX, and shall be directors of IPIX at the Effective
Time.
(d) The four IPIX Designees, the four bamboo Designees and the Joint
Designee shall be appointed to the three classes of the bamboo Board of
Directors as follows:
(i) two IPIX Designees and two bamboo Designees shall be appointed to
the class of directors to be elected in 2000;
(ii) one IPIX Designee and one bamboo Designee shall be appointed to
the class of directors to be elected in 2001; and
(iii) one IPIX Designee, one bamboo Designee and the Joint Designee
shall be appointed to the class of directors to be elected in 2002.
(e) From and after the Effective Time, until successors are duly elected or
appointed and qualified in accordance with applicable law, (i) the directors of
IPIX and bamboo shall be the same as those of Newco, and (ii) the directors of
subsidiaries of bamboo and IPIX shall be such persons who were serving in such
capacities immediately prior to the Effective Time.
(f) From and after the Effective Time, and until successors are duly
elected or appointed and qualified in accordance with applicable law, the
Chairman and Chief Executive Officer of IPIX shall be Chairman and Chief
Executive Officer of Newco, the Chairman of bamboo and Mr. Laban Jackson, Jr.
shall be Vice Chairman of Newco, the President and Chief Operating Officer of
IPIX shall be President of Newco, the Chief Operating Office of Belgium shall be
the Chief Operating Officer of Newco and shall report to the Chief Executive
Officer of bamboo and the Chief Financial Officer of IPIX shall be Chief
Financial Officer of Newco. The above shall also hold such offices in Merger Sub
A and Merger Sub B. The officers of Merger Sub A and Merger Sub B shall be the
officers of the Surviving Corporations. Other management positions of IPIX-
bamboo shall be determined by IPIX's Chairman and Chief Executive Officer, who
will consult with the Chairman and Chief Executive Officer of bamboo to ensure
that the most qualified individuals from both organizations are selected.
(g) From and after the Effective Time, the existing officers of the
subsidiaries of the surviving corporations shall continue to serve in such
capacities at the pleasure of their respective boards of directors.
(h) The name of the Surviving Corporation shall be such name as shall be
recommended by three independent nationally-recognized naming/management
consulting organizations selected as follows: Each of bamboo and IPIX shall
select one of such organizations with the third organization selected by the two
previously selected organizations. If the three naming/management organizations
are unable to agree in the selection of a name, the name selected by the third,
jointly selected organization shall be the name of the Surviving Corporation.
This change of name shall be achieved by the merger of bamboo with a
wholly-owned subsidiary to be established by bamboo for the
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purpose of effecting the name change in accordance with Section 253(b) of the
Delaware General Corporation Law (the "DGCL").
Section 1.07. CONVERSION OF SHARES. (a) At the Effective Time, each share
of common stock, par value $.001 per share of IPIX (individually an "IPIX Share"
and collectively, the "IPIX Shares") issued and outstanding immediately prior to
the Effective Time shall, by virtue of the IPIX Merger and without any action on
the part of IPIX, bamboo, Newco or the holder thereof, be converted into and
shall become 1.3690 fully paid and nonassessable shares of common stock, par
value $.001 per share, of Newco (individually a "Newco Share" and collectively,
the "Newco Shares").
(b) At the Effective Time, each share of common stock, par value $.001 per
share, of bamboo (individually a "bamboo Share" and collectively, the "bamboo
Shares") issued and outstanding immediately prior to the Effective Time (other
than bamboo Shares held in bamboo's treasury) shall, by virtue of the bamboo
Merger and without any action on the part of IPIX, Newco, bamboo or the holder
thereof, be converted into and shall become 1.0 fully paid and nonassessable
Newco Shares. At the Effective Time, each share of Class B common stock, per
value $0.0001 per share, of bamboo (individually a "Class B Share" and
collectively, the "Class B Shares") issued and outstanding immediately prior to
the Effective Time (other than Class B Shares held in bamboo treasury) shall, by
virtue of the bamboo Merger and without any action on the part of IPIX, Newco,
bamboo or the holder thereof, be converted into and shall become 1.0 fully paid
and nonassessable shares of Class B Common Stock of Newco (the "Newco Class B
Shares"). All references to the bamboo Shares shall include the Class B Shares
in this Agreement, and all references to the Newco Shares shall include the
Newco Class B Shares. IPIX Shares and bamboo Shares are sometimes referred to
collectively herein as "Shares."
(c) At the Effective Time, each outstanding share of the common stock of
any subsidiaries of IPIX and bamboo shall remain outstanding.
(d) At the Effective Time, each bamboo Share held in the treasury of bamboo
or any subsidiary of bamboo and each IPIX Share held in the treasury of IPIX or
any subsidiary of IPIX immediately prior to the Effective Time shall, by virtue
of the Merger and without any action on the part of Newco, IPIX or bamboo be
canceled, retired and cease to exist and no payment shall be made with respect
thereto.
(e) At the Effective Time, (i) each share of common stock, $.001 par value
per share, of Merger Sub A issued and outstanding immediately prior to the
Effective Time shall, by virtue of the IPIX Merger and without any action on the
part of Newco, IPIX or Merger Sub A, be converted into and shall become 1.0
fully paid and nonassessable IPIX Share and (ii) each share of common stock, par
value $.001 per share, of Merger Sub B issued and outstanding immediately prior
to the Effective Time shall, by virtue of the bamboo Merger and without any
action on the part of Newco, bamboo or Merger Sub B, be converted into and shall
become one fully paid and nonassessable bamboo Share.
Section 1.08. EXCHANGE OF CERTIFICATES. (a) Prior to the Effective Time,
Newco shall enter into an agreement with, and shall deposit with such agent or
agents as may be satisfactory to IPIX and bamboo (the "Exchange Agent"), for the
benefit of the holders of IPIX Shares and bamboo Shares, for exchange through
the Exchange Agent in accordance with this Article 1: (i) certificates
representing the appropriate number of Newco Shares to be issued to holders of
IPIX Shares and to holders of bamboo Shares and (ii) cash to be paid in lieu of
fractional Newco Shares (such Newco Shares and such
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cash is hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 1.07 in exchange for outstanding IPIX Shares and bamboo Shares.
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding IPIX Shares or bamboo Shares (the "Certificates") whose shares were
converted into the right to receive Newco Shares pursuant to Section 1.07: (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as IPIX and bamboo may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for certificates
representing Newco Shares. Upon surrender of a Certificate to the Exchange
Agent, together with such letter of transmittal, duly executed, and any other
required documents, the holder of such Certificate shall be entitled to receive
in exchange therefor a certificate representing that number of whole Newco
Shares and, if applicable, a check representing the cash consideration to which
such holder may be entitled on account of a fractional Newco Share, which such
holder has the right to receive pursuant to the provisions of this Article 1,
and the Certificate so surrendered shall forthwith be canceled. In the event of
a transfer of ownership of IPIX Shares or bamboo Shares which is not registered
in the transfer records of either IPIX or bamboo, a certificate representing the
proper number of Newco Shares may be issued to a transferee if the Certificate
representing such IPIX Shares or bamboo Shares is presented to the Exchange
Agent, accompanied by all documents required by the Exchange Agent or Newco to
evidence and effect such transfer and by evidence that any applicable stock
transfer or other taxes have been paid. Until surrendered as contemplated by
this Section 1.08, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
certificate representing Newco Shares and cash in lieu of any fractional Newco
Shares as contemplated by this Section 1.08.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to Newco Shares with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the Newco Shares represented thereby and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section 1.08(f)
until the holder of record of such Certificate shall surrender such Certificate.
Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole Newco Shares issued in exchange therefor, without interest,
(i) at the time of such surrender, the amount of any cash payable in lieu of a
fractional Newco Share to which such holder is entitled pursuant to Section
1.08(f) and the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole Newco
Shares, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole Newco Shares.
(d) In the event that any Certificate for IPIX Shares or bamboo Shares
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange therefor, upon the making of an affidavit of that fact by the holder
thereof such Newco Shares and cash in lieu of fractional Newco Shares, if any,
as may be required pursuant to this Agreement;
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provided, however, that Newco or the Exchange Agent, may, in its respective
discretion, require the delivery of a suitable bond, opinion or indemnity.
(e) All Newco Shares issued upon the surrender for exchange of IPIX Shares
or bamboo Shares in accordance with the terms hereof (including any cash paid
pursuant to Section 1.08(c) or 1.08(f)) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such IPIX Shares or bamboo Shares.
There shall be no further registration of transfers on the stock transfer books
of either of IPIX or bamboo of the IPIX Shares or bamboo Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to Newco for any reason, they shall be canceled
and exchanged as provided in this Article 1.
(f) No fractional Newco Shares shall be issued in the Merger, but in lieu
thereof each holder of IPIX Shares or bamboo Shares otherwise entitled to a
fractional Newco Share shall, upon surrender of its, his or her Certificate or
Certificates, be entitled to receive an amount of cash rounded to the nearest
cent (without interest) determined by multiplying the fair market value of a
Newco Share as determined by the Newco Board of Directors at the Effective Time
by the fractional share interest to which such holder would otherwise have been
entitled. The parties acknowledge that payment of the cash consideration in lieu
of issuing fractional shares was not separately bargained for consideration but
merely represents a mechanical rounding off for purposes of simplifying the
corporate and accounting complexities which would otherwise be caused by the
issuance of fractional shares.
(g) Any portion of the Exchange Fund which remains undistributed to the
shareholders of either IPIX or bamboo for six months after the Effective Time
shall be delivered to Newco, upon demand, and any shareholders of either IPIX or
bamboo who have not theretofore complied with this Article 1 shall thereafter
look only to Newco for payment of their claim for Newco Shares, any cash in lieu
of fractional Newco Shares and any applicable dividends or distributions with
respect to Newco Shares, as the case may be.
(h) Neither Newco, IPIX nor bamboo shall be liable to any holder of IPIX
Shares, bamboo Shares or Newco Shares, as the case may be, for such shares (or
dividends or distributions with respect thereto) or cash from the Exchange Fund
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
Section 1.09. STOCK OPTIONS. (a) At the Effective Time, each outstanding
option to purchase IPIX Shares (an "IPIX Stock Option" or collectively, "IPIX
Stock Options") issued pursuant to the 1997 Equity Compensation Plan and all
other contractual grants for options to purchase IPIX Shares, whether vested or
unvested and all other outstanding options to purchase IPIX Shares that are
listed in Section 1.09 of the Disclosure Schedule, shall be assumed by Newco
(all of such plans or agreements pursuant to which any IPIX Stock Option has
been issued or may be issued are referred to collectively as the "IPIX Stock
Option Plans"). Each IPIX Stock Option shall be deemed to constitute an option
to acquire, on the same terms and conditions as were applicable under such IPIX
Stock Option, the same number of Newco Shares (rounded up to the nearest whole
share) as the holder of such IPIX Stock Option would have been entitled to
receive pursuant to the Merger had such holder exercised such option in full
immediately prior to the Effective Time, at a price per share (rounded up to the
nearest whole cent) equal to (y) the aggregate exercise price for the IPIX
Shares otherwise purchasable pursuant to such IPIX Stock Option divided by (z)
the number of Newco Shares deemed purchasable pursuant
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to such IPIX Stock Option; provided, however, that in the case of any option to
which section 421 of the Code applies by reason of its qualification under
section 422 of the Code ("incentive stock options" or "ISOs"), the option price,
the number of shares purchasable pursuant to such option and the terms and
conditions of exercise of such option shall be determined in order to comply
with section 424(a) of the Code.
(b) At the Effective Time, each outstanding option to purchase bamboo
Shares (a "bamboo Stock Option" or collectively, "bamboo Stock Options") issued
pursuant to the 1998 Employee, Director and Consultant Stock Plan or Amended and
Restated 1999 Employee Stock Purchase Plan, whether vested or unvested, shall be
assumed by Newco (all of such plans or agreements pursuant to which any bamboo
Stock Option has been issued or may be issued are referred to collectively as
the "bamboo Plans"). Each bamboo Stock Option shall be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such bamboo Stock Option, the same number of Newco Shares (rounded up to the
nearest whole share) as the holder of such bamboo Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised such option
in full immediately prior to the Effective Time, at a price per share (rounded
down to the nearest whole cent) equal to (y) the aggregate exercise price for
the bamboo Shares otherwise purchasable pursuant to such bamboo Stock Option
divided by (z) the number of full Newco Shares deemed purchasable pursuant to
such bamboo Stock Option; provided, however, that in the case of any ISO, the
option price, the number of shares purchasable pursuant to such option and the
terms and conditions of exercise of such option shall be determined in order to
comply with section 424(a) of the Code.
(c) As soon as practicable after the Effective Time, Newco shall deliver to
the holders of IPIX Stock Options and bamboo Stock Options appropriate notices
setting forth such holders' rights pursuant to the respective IPIX Plans and
bamboo Plans and the agreements evidencing the grants of such IPIX Options and
bamboo Options shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 1.09 after giving effect to
the Merger). Newco shall comply with the terms of the IPIX Plans and bamboo
Plans and ensure, to the extent required by, and subject to the provisions of,
such Plans, that IPIX Stock Options and bamboo Stock Options which qualified as
incentive stock options immediately prior to the Effective Time continue to
qualify as incentive stock options of Newco after the Effective Time.
(d) Newco shall take all corporate action necessary to reserve for issuance
a sufficient number of Newco Shares for delivery upon exercise of IPIX Stock
Options and bamboo Stock Options assumed in accordance with this Section 1.09.
As soon as practicable after the Effective Time, Newco shall file a registration
statement on Form S-8 (or any successor or other appropriate forms) with respect
to the Newco Shares subject to any IPIX Stock Options and bamboo Stock Options
held by persons who are or were directors, officers or employees of IPIX or
bamboo or their subsidiaries and shall use its best efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding. With respect to those
individuals who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), where applicable, Newco shall administer IPIX
Plans and bamboo Plans assumed pursuant to this Section 1.09 in a manner that
complies with Rule 16b-3 promulgated under the Exchange Act, as it may be
amended from time to time, to the extent the applicable IPIX Plan and bamboo
Plan complied with such rule immediately prior to the Merger.
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Section 1.10. TAKING OF NECESSARY ACTION; FURTHER ACTION. (a) If, at any
time after the Effective Time, Newco, IPIX or bamboo reasonably determines that
any deeds, assignments, or instruments or confirmations of transfer are
necessary or desirable to carry out the purposes of this Agreement and to vest
Newco with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of IPIX or bamboo, the officers and directors
of Newco, IPIX and bamboo are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
or desirable action.
(b) In addition, each of the remaining provisions of the Agreement shall be
correspondingly modified to the extent necessary in order to fully reflect and
implement the Alternative Transaction Structure. In particular, and without
limitation, the representations, warranties, covenants, closing conditions and
the form of the letters contained in Exhibits 1 and 2 to the Agreement shall be
appropriately modified to refer to Newco, Merger Sub A, Merger Sub B, the IPIX
Merger and the bamboo Merger and to appropriate reflect the changes in
shareholder votes, listing requirements, SEC and registration requirements and
similar matters that are necessary in light of the Alternative Transaction
Structure. The intention of the parties is to make such modifications, and only
such modifications, as are necessary to achieve the same rights and obligations
of the parties under the Alternative Transaction Structure as applied under the
original structure.
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ANNEX B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), dated as of October 25,
1999, is by and between bamboo.com, Inc., a Delaware corporation ("Grantee"),
and Interactive Pictures Corporation, a Tennessee corporation ("Issuer").
RECITALS
A. Grantee and Issuer have entered into an Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement"), which has been executed in
connection with this Agreement (each capitalized term used herein without
definition shall have the meaning specified in the Merger Agreement).
B. As a condition to Grantee's entering into the Merger Agreement and in
consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
ARTICLE 1
THE STOCK OPTION
Section 1.1. GRANT OF OPTION. Issuer hereby grants to Grantee an
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 2,790,110 shares of fully paid and nonassessable common stock of the Issuer,
$0.001 par value per share ("Common Stock"), which is equal to 19.9% of the
number of shares of Common Stock issued and outstanding on the date hereof, at a
purchase price equal to the Option Price, as adjusted in accordance with the
provisions of Section 1.5 of this Agreement. The Option Price shall mean $22.25
per share.
Section 1.2. EXERCISE OF THE OPTION.
(a) EXERCISE. Grantee may exercise the Option, in whole or in part, and
from time to time, if, but only if, a Triggering Event (as hereinafter defined)
shall have occurred prior to the occurrence of an Option Termination Event (as
hereinafter defined).
(b) OPTION TERMINATION EVENTS. The term "Option Termination Event" shall
mean any of the following events: (i) immediately prior to the Effective Time of
the Merger; (ii) 30 days after the termination of the Merger Agreement (other
than upon or during the continuance of a Triggering Event); or (iii) 180 days
following any termination of the Merger Agreement upon or during the continuance
of a Triggering Event (or if, at the expiration of such 180-day period the
Option cannot be exercised by reason of any applicable judgment, decree, order,
law or regulation, then 10 business days after such impediment to exercise shall
have been removed or shall have become final and not subject to appeal).
Notwithstanding the foregoing, the Option may not be exercised if the
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Grantee is in material breach of its representation or warranties, or in
material breach of any of its covenants or agreements contained in this
Agreement or the Merger Agreement.
(c) TRIGGERING EVENTS. A "Triggering Event" shall be deemed to occur if a
IPIX Takeover Proposal shall have been publicly announced or shall have become
publicly known prior to the time the Merger Agreement is terminated or the time
of the IPIX Special Meeting.
(d) NOTICE OF TRIGGERING EVENT. Issuer shall notify Grantee promptly in
writing of the occurrence of any Triggering Event, it being understood that the
giving of such notice by Issuer shall not be a condition to the right of Grantee
to exercise the Option or for a Triggering Event to have occurred.
(e) CONDITIONS TO CLOSING. Grantee may purchase shares pursuant to the
Option only if all of the following conditions are satisfied: (i) no injunction
shall have been enacted, issued, promulgated or enforced by any governmental
authority which prohibits, restrains or restricts the purchase of shares
pursuant to the Option and (ii) any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT")
shall have expired or been terminated at or prior to such time.
(f) NOTICE OF EXERCISE, CLOSING. If Grantee is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the "Exercise
Notice"), (the date of the Exercise Notice being herein referred to as the
"Notice Date") specifying (i) the total number of shares it will purchase
pursuant to such exercise and (ii) a place and date not earlier than one
business day nor later than ten business days from the Notice Date for the
closing of such purchase (the "Closing Date"); provided, that if the closing of
the purchase and sale pursuant to the Option (the "Closing") cannot be
consummated because the conditions to closing set forth above have not been
satisfied, the period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which such conditions to closing have been
satisfied. Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto. Notwithstanding this subsection (f), in no event shall
any Closing Date be more than 18 months after the related Notice Date, and if
the Closing Date shall not have occurred within 18 months after the related
Notice Date due to the failure to obtain any such required approval, the
exercise of the Option effected on the Notice Date shall be deemed to have
expired.
(g) PURCHASE PRICE. At the Closing referred to in subsection (f) above,
Grantee shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
shall not preclude Grantee from exercising the Option.
(h) ISSUANCE OF COMMON STOCK. At the Closing, simultaneously with the
delivery of immediately available funds as provided in subsection (g) of this
Section 1.2, Issuer shall deliver to Grantee a certificate or certificates
representing the number of shares of Common Stock purchased by the Grantee and,
if the Option is exercised in part only, a new Option evidencing the rights of
Grantee thereof to purchase the balance of the shares purchasable hereunder, and
Grantee shall deliver to Issuer a copy of this Agreement and a letter agreeing
that Grantee will not offer to sell or otherwise dispose of such shares in
violation of applicable law or the provisions of this Agreement.
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(i) LEGEND. Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESALE RESTRICTIONS ARISING UNDER THE SECURITIES ACTION OF 1993,
AS AMENDED."
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such reference if Grantee shall
have delivered to Issuer a copy of a letter from the staff of the SEC, or an
opinion of counsel in form and substance reasonably satisfactory to Issuer, to
the effect that such legend is not required for purposes of the Securities Act.
(j) RECORD GRANTEE; EXPENSES. Upon the giving by Grantee to Issuer of the
written notice of exercise of the Option provided for under subsection (f) of
this Section 1.2 and the tender of the applicable purchase price in immediately
available funds, Grantee shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
Grantee or the Issuer shall have failed or refused to designate the bank account
described in subsection (g) of this Section 1.2. Issuer shall pay all expenses
and any and all United States federal, state and local taxes and other charges
that may be payable in connection with the preparation, issuance and delivery of
stock certificates under this Section 1.2 in the name of Grantee or its
assignee, transferee or designee.
Section 1.3. RESERVATION OF SHARES. Issuer agrees: (i) that it shall at
all times maintain, free from preemptive rights, sufficient authorized but
unissued or treasury shares of Common Stock (and other securities issuable
pursuant to Section 1.5 so that the Option may be exercised without additional
authorization of Common Stock (or such other securities) after giving effect to
all other options, warrants, convertible securities and other rights to purchase
Common Stock (or such other securities); (ii) that it will not, by charter
amendment or through reorganization, consolidation, merger, dissolution or sale
of assets or by other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be observed
or performed hereunder by Issuer; (iii) promptly to take all action as may from
time to time be required (including without limitation complying with all
pre-merger notification, reporting and waiting periods under the HSR Act) in
order to permit Grantee to exercise the Option and Issuer duly and effectively
to issue shares of Common Stock pursuant hereto; and (iv) promptly to take all
action provided herein to protect the rights of Grantee against dilution.
Section 1.4. DIVISION OF OPTION; LOST OPTIONS. This Agreement (and the
Option granted hereby) are exchangeable, without expense, at the option of
Grantee, upon presentation and surrender of this Agreement at the principal
office of Issuer, for other agreements providing for Options of different
denominations entitling the holder thereof to purchase, on the same terms and
subject to the same conditions as are set forth herein, in the aggregate the
same number of shares of Common Stock purchasable hereunder. The terms
"Agreement" and "Option" as used herein include any Stock Option Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like
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tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
Section 1.5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) In the event of any change in Common Stock by reason of stock
dividends, splits, mergers, recapitalization, combinations, subdivisions,
conversions, exchanges of shares, extraordinary or liquidating dividends or
other similar transactions or changes in the corporate or capital structures of
Issuer, the type and number of shares of Common Stock purchasable upon exercise
hereof and the Option Price shall be appropriately and equitably adjusted so the
Grantee shall receive upon exercise of the Option and payment of the aggregate
Option Price hereunder the number and class of shares or other securities or
property that Grantee would have received in respect of Common Stock if the
Option had been exercised in full immediately prior to such event, or the record
date therefor, as applicable. Issuer shall take such steps in connection with
such consolidation, merger, liquidation or other such action as may be necessary
to assure that the provisions hereof shall thereafter apply as nearly as
possible to any securities or property thereafter deliverable upon exercise of
the Option.
(b) If prior to an Option Termination Event, Issuer shall enter into an
agreement to consolidate with or merge into any person other than Grantee or one
of its subsidiaries and shall not be the continuing or surviving corporation of
such consolidation or merger, then, and in each such case, the agreement
governing such transaction shall make proper provision so that the continuing or
surviving corporation of a consolidation or merger with Issuer (if other than
Issuer), or, at the election of Grantee, any person that controls the continuing
or surviving person shall agree to be bound by and to assume in writing all the
obligations and responsibilities of Issuer under the Option.
Section 1.6. REGISTRATION RIGHTS. (a) If Grantee requests Issuer in
writing to register under the Securities Act any of the securities purchased by
Grantee hereunder, Issuer shall promptly prepare, file and keep current a shelf
registration statement under the Securities Act covering any securities issued
pursuant to this Option and shall use its reasonable best efforts to cause such
registration statement to become effective and remain current in order to permit
the sale or other disposition of any securities issued upon total or partial
exercise of this Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee. Issuer will use its reasonable best efforts to
cause such registration statement first to become effective and then to remain
effective for such period not in excess of 120 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Grantee for a
period of 18 months following such first request shall have the right to demand
a second such registration if reasonably necessary to effect such sales or
dispositions. The foregoing notwithstanding, if, at the time of any request by
Grantee for registration of Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering of shares of Common
Stock, and in the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters, of such
offering the inclusion of Grantee's Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by Issuer, the number
of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; and provided, however, that after any such
required reduction the number of Option Shares to be included in such offering
for the account of Grantee shall constitute at least 25% of the total number of
shares to be sold by Grantee
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and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practicable and no reduction shall thereafter occur (and
such registration shall not be charged against Grantee).
(b) Grantee shall provide all information reasonably requested by Issuer
for inclusion in any registration statement to be filed hereunder.
(c) Issuer shall pay all fees and expenses in connection with any
registration pursuant to this Section other than underwriting discounts and
commissions to brokers or dealers and shall indemnify Grantee, its officers,
directors, agents, other controlling persons and any underwriters retained by
Grantee in connection with such sale of such Option Shares in the customary way,
and agree to customary contribution provisions with such persons, with respect
to claims, damages, losses and liabilities (and any expenses relating thereto)
arising (or to which Grantee, its officers, directors, agents, other controlling
persons or underwriters may be subject) in connection with any such offer or
sale under the federal securities laws or otherwise, except for information
furnished in writing by Grantee or its underwriters to Issuer. Grantee and its
underwriters, respectively, shall indemnify Issuer to the same extent with
respect to information furnished in writing to Issuer by Grantee and such
underwriters.
Section 1.7. THIRD PARTY OFFER. At any time or from time to time after
(i) the making, other than by Grantee or its affiliates, of a tender or exchange
offer for then outstanding shares of Common Stock at a price per share in excess
of the Option Price or (ii) the announcement by any person other than Grantee or
its affiliates of an agreement including an agreement in principle, to
consummate with Issuer a merger, consolidation or other business combination or
sale of assets of Issuer, in each case resulting in payment to holders of Common
Stock of an amount per share in excess of the Option Price (a "THIRD PARTY
OFFER"), Grantee may, at its election, upon two days' notice to Issuer,
surrender all or a part of the Option to Issuer, in which event Issuer shall pay
to Grantee, on the day of each such surrender and in consideration thereof,
against tender by Issuer of an instrument evidencing such surrender, an amount
in cash per Share the rights to which are surrendered equal to the excess of (i)
the price per share of Common Stock to be paid in such Third Party Offer over
(ii) the Option Price. If all or a portion of the price per share of Common
Stock to be paid in such Third Party Offer consists of non-cash consideration,
the price per share of Common Stock referred to in clause (i) above shall be the
cash consideration per share of Common Stock, if any, plus the fair market value
of the non-cash consideration per share of Common Stock as set forth in such
Third Party Offer or, if not so set forth, as determined by nationally
recognized investment bankers selected by Grantee, which determination shall be
conclusive and binding for all purposes of this Agreement. In the event of a
sale of assets of Issuer, the price per share of Common Stock referred to in
clause (i) shall be the last per-share price of Common Stock on the fourth
trading day following the announcement of such sale. Upon exercise of its right
to surrender the Option or any portion thereof and the receipt by Grantee of
cash pursuant to this Section, any and all rights of Grantee to purchase shares
of Common Stock with respect to the portion of the Option surrendered pursuant
to this Section shall be terminated.
Section 1.8. EXTENSION OF TIME FOR REGULATORY APPROVALS. The 18 month
period for exercise of certain rights under Sections 1.2 and 1.6 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights, and for the
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expiration of all statutory waiting periods; and (ii) to the extent necessary to
avoid liability under Section 16(b) of the Exchange Act by reason of such
exercise.
Section 1.9. PROFIT LIMITATION. (a) Notwithstanding any other provision
of this Agreement or the Merger Agreement, in no event shall Grantee's Total
Profit (as defined below) exceed $20,000,000 (the "Maximum Amount") and, if it
otherwise would exceed such Maximum Amount, Grantee at its sole election may (i)
pay cash to Issuer, (ii) deliver to Issuer for cancellation Option Shares
previously purchased by Grantee, or (iii) any combination thereof, so that
Grantee's actually realized Total Profit (as defined below) shall not exceed the
Maximum Amount after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Option may
not be exercised for a number of Option Shares as would, as of the Notice Date,
result in a Notional Total Profit (as defined below) of more than the Maximum
Amount and, if exercise of the Option otherwise would result in the Notional
Total Profit exceeding such amount, Grantee, at its discretion, may (in addition
to any of the actions specified in Section 1.9 above) increase the Option Price
so that the Notional Total Profit shall not exceed the Maximum Amount.
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the cash amount actually received by
Grantee pursuant to Section 6.03(a) of the Merger Agreement less any repayment
by Parent to the Company pursuant to Section 1.9(a)(i) hereof and (ii) (x) the
net cash amounts or the fair market value of any property received by Grantee
pursuant to the sale of Option Shares (or of any other securities into or for
which such Option Shares are converted or exchanged), less (y) Grantee's
purchase price for such Option Shares (or other securities).
(d) As used herein, the term "Notional Total Profit" with respect to any
number of Option Shares as to which Grantee may propose to exercise the Option
shall mean the Total Profit determined as of the Notice Date, assuming that the
Option was exercised on such date for such number of Option Shares and assuming
that such Option Shares, together with all other Option Shares previously
acquired upon exercise of the Option and held by Grantee and its affiliates as
of such date, were sold for cash at the closing price on NASDAQ for the Option
Shares as of the close of business on the preceding trading day (less customary
brokerage commissions).
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ISSUER
Section 2.1. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby
represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Issuer and no other corporate
proceedings on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This Agreement has been
duly and validly executed and delivered by Issuer. This
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Agreement is the valid and binding obligation of Issuer, enforceable
against Issuer in accordance with its terms.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common
Stock at any time and from time to time issuable hereunder, and all such
shares, upon issuance pursuant hereto, will be duly authorized, validly
issued, fully paid, nonassessable, and will be delivered free and clear of
all claims, liens, encumbrances and security interests, and not subject to
any preemptive rights.
(c) The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with or
result in any violation pursuant to any provisions of the Certificate of
Incorporation or Bylaws of Issuer or any Issuer subsidiary, subject to obtaining
any approvals or consents contemplated hereby, or result in any violation of any
loan or credit agreement, note, mortgage, indenture, lease, plan, or other
agreement, obligation, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Issuer or any Issuer subsidiary or their respective properties or assets,
which violation would have, individually or in the aggregate, a Material Adverse
Effect on the Issuer.
ARTICLE 3
MISCELLANEOUS PROVISIONS
Section 3.1. ASSIGNMENT OF OPTION BY GRANTEE. This Agreement shall be
binding upon each party hereto and such party's successors and assigns. Neither
of the parties hereto may assign any of its rights or obligations under this
Option Agreement or the Option created hereunder to any other person, without
the express written consent of the other party.
Section 3.2. SURVIVAL. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this Option
Agreement and the consummation of the transactions contemplated hereby, except
as otherwise provided herein.
Section 3.3. APPLICATION FOR REGULATORY APPROVAL. Each of Grantee and
Issuer will use its best efforts to make all filings with, and to obtain
consents of, all third parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement, including
without limitation making application to list the shares of Common Stock
issuable hereunder on the Nasdaq National Market System upon official notice of
issuance.
Section 3.4. SPECIFIC PERFORMANCE; TIME OF THE ESSENCE. The parties
hereto acknowledge that damages would be an inadequate remedy for a breach of
this Agreement by either party hereto and that the obligations of the parties
hereto shall be enforceable by either party hereto through injunctive or other
equitable relief. The parties agree that time shall be of the essence in the
performance of obligations hereunder.
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Section 3.5. SEVERABILITY OF PROVISIONS. If any term, provision,
covenant, or restriction contained in this Agreement is held by a court or a
federal or state regulatory agency of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions contained in this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
Section 3.6. NOTICES. All notices, claims, demands and other
communications hereunder shall be deemed to have been duly given or made when
delivered in person, by registered or certified mail (postage prepaid, return
receipt requested), by overnight courier, or by facsimile at the respective
addresses of the parties set forth in the Merger Agreement.
Section 3.7. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 3.8. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 3.9. EXPENSES. Except as otherwise expressly provided herein or
in the Merger Agreement, each of the parties hereto shall bear and pay all costs
and expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
Section 3.10. ENTIRE AGREEMENT. Except as otherwise expressly provided
herein or in the Merger Agreement, this Agreement contains the entire agreement
between the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, except as assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided herein. Any provision of this Agreement may be
waived only in writing at any time by the party that is entitled to the benefits
of such provision. This Agreement may not be modified, amended, altered, or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
Section 3.11. FURTHER ASSURANCES. In the event of any exercise of the
Option by Grantee, Issuer and Grantee shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
Nothing contained in this Agreement shall be deemed to authorize Issuer or
Grantee to breach any provision of the Merger Agreement.
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IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be
signed by their respective officers hereunto duly authorized, all as of the date
first written above.
bamboo.com, Inc.
By: /s/ LEONARD B. MCCURDY
-----------------------------------
Name: Leonard B. McCurdy
Title: Chairman and Chief
Executive Officer
INTERACTIVE PICTURES CORPORATION
By: /s/ JAMES M. PHILLIPS
-----------------------------------
Name: James M. Phillips
Title: Chairman and Chief
Executive Officer
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ANNEX C
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement"), dated as of October 25,
1999, is by and between Interactive Pictures Corporation, a Tennessee
corporation ("Grantee"), and bamboo.com, Inc., a Delaware corporation
("Issuer").
RECITALS
A. Grantee and Issuer have entered into an Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement"), which has been executed in
connection with this Agreement (each capitalized term used herein without
definition shall have the meaning specified in the Merger Agreement).
B. As a condition to Grantee's entering into the Merger Agreement and in
consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties hereto
agree as follows:
ARTICLE 1
THE STOCK OPTION
Section 1.1. GRANT OF OPTION. Issuer hereby grants to Grantee an
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 3,295,979 shares of fully paid and nonassessable common stock of the Issuer,
$0.001 par value per share ("Common Stock"), which is equal to 19.9% of the
number of shares of Common Stock issued and outstanding on the date hereof, at a
purchase price equal to the Option Price, as adjusted in accordance with the
provisions of Section 1.5 of this Agreement. The Option Price shall mean $16.25
per share.
Section 1.2. EXERCISE OF THE OPTION.
(a) EXERCISE. Grantee may exercise the Option, in whole or in part, and
from time to time, if, but only if, a Triggering Event (as hereinafter defined)
shall have occurred prior to the occurrence of an Option Termination Event (as
hereinafter defined).
(b) OPTION TERMINATION EVENTS. The term "Option Termination Event" shall
mean any of the following events: (i) immediately prior to the Effective Time of
the Merger; (ii) 30 days after the termination of the Merger Agreement (other
than upon or during the continuance of a Triggering Event); or (iii) 180 days
following any termination of the Merger Agreement upon or during the continuance
of a Triggering Event (or if, at the expiration of such 180-day period the
Option cannot be exercised by reason of any applicable judgment, decree, order,
law or regulation, then 10 business days after such impediment to exercise shall
have been removed or shall have become final and not subject to appeal).
Notwithstanding the foregoing, the Option may not be exercised if the
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Grantee is in material breach of its representation or warranties, or in
material breach of any of its covenants or agreements contained in this
Agreement or the Merger Agreement.
(c) TRIGGERING EVENTS. A "Triggering Event" shall be deemed to occur if a
bamboo Takeover Proposal shall have been publicly announced or shall have become
publicly known prior to the time the Merger Agreement is terminated or the time
of the bamboo Special Meeting.
(d) NOTICE OF TRIGGERING EVENT. Issuer shall notify Grantee promptly in
writing of the occurrence of any Triggering Event, it being understood that the
giving of such notice by Issuer shall not be a condition to the right of Grantee
to exercise the Option or for a Triggering Event to have occurred.
(e) CONDITIONS TO CLOSING. Grantee may purchase shares pursuant to the
Option only if all of the following conditions are satisfied: (i) no injunction
shall have been enacted, issued, promulgated or enforced by any governmental
authority which prohibits, restrains or restricts the purchase of shares
pursuant to the Option and (ii) any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
shall have expired or been terminated at or prior to such time.
(f) NOTICE OF EXERCISE, CLOSING. If Grantee is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the "Exercise
Notice"), (the date of the Exercise Notice being herein referred to as the
"Notice Date") specifying (i) the total number of shares it will purchase
pursuant to such exercise and (ii) a place and date not earlier than one
business day nor later than ten business days from the Notice Date for the
closing of such purchase (the "Closing Date"); provided, that if the closing of
the purchase and sale pursuant to the Option (the "Closing") cannot be
consummated because the conditions to closing set forth above have not been
satisfied, the period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which such conditions to closing have been
satisfied. Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto. Notwithstanding this subsection (f), in no event shall
any Closing Date be more than 18 months after the related Notice Date, and if
the Closing Date shall not have occurred within 18 months after the related
Notice Date due to the failure to obtain any such required approval, the
exercise of the Option effected on the Notice Date shall be deemed to have
expired.
(g) PURCHASE PRICE. At the Closing referred to in subsection (f) above,
Grantee shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
shall not preclude Grantee from exercising the Option.
(h) ISSUANCE OF COMMON STOCK. At the Closing, simultaneously with the
delivery of immediately available funds as provided in subsection (g) of this
Section 1.2, Issuer shall deliver to Grantee a certificate or certificates
representing the number of shares of Common Stock purchased by the Grantee and,
if the Option is exercised in part only, a new Option evidencing the rights of
Grantee thereof to purchase the balance of the shares purchasable hereunder, and
Grantee shall deliver to Issuer a copy of this Agreement and a letter agreeing
that Grantee will not offer to sell or otherwise dispose of such shares in
violation of applicable law or the provisions of this Agreement.
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(i) LEGEND. Certificates for Common Stock delivered at a closing hereunder
may be endorsed with a restrictive legend that shall read substantially as
follows:
"THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESALE RESTRICTIONS ARISING UNDER THE SECURITIES ACTION OF 1993,
AS AMENDED."
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such reference if Grantee shall
have delivered to Issuer a copy of a letter from the staff of the SEC, or an
opinion of counsel in form and substance reasonably satisfactory to Issuer, to
the effect that such legend is not required for purposes of the Securities Act.
(j) RECORD GRANTEE; EXPENSES. Upon the giving by Grantee to Issuer of the
written notice of exercise of the Option provided for under subsection (f) of
this Section 1.2 and the tender of the applicable purchase price in immediately
available funds, Grantee shall be deemed to be the holder of record of the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually delivered to
Grantee or the Issuer shall have failed or refused to designate the bank account
described in subSection (g) of this Section 1.2. Issuer shall pay all expenses
and any and all United States federal, state and local taxes and other charges
that may be payable in connection with the preparation, issuance and delivery of
stock certificates under this Section 1.2 in the name of Grantee or its
assignee, transferee or designee.
Section 1.3. RESERVATION OF SHARES. Issuer agrees: (i) that it shall at
all times maintain, free from preemptive rights, sufficient authorized but
unissued or treasury shares of Common Stock (and other securities issuable
pursuant to Section 1.5 so that the Option may be exercised without additional
authorization of Common Stock (or such other securities) after giving effect to
all other options, warrants, convertible securities and other rights to purchase
Common Stock (or such other securities); (ii) that it will not, by charter
amendment or through reorganization, consolidation, merger, dissolution or sale
of assets or by other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be observed
or performed hereunder by Issuer; (iii) promptly to take all action as may from
time to time be required (including without limitation complying with all
pre-merger notification, reporting and waiting periods under the HSR Act) in
order to permit Grantee to exercise the Option and Issuer duly and effectively
to issue shares of Common Stock pursuant hereto; and (iv) promptly to take all
action provided herein to protect the rights of Grantee against dilution.
Section 1.4. DIVISION OF OPTION; LOST OPTIONS. This Agreement (and the
Option granted hereby) are exchangeable, without expense, at the option of
Grantee, upon presentation and surrender of this Agreement at the principal
office of Issuer, for other agreements providing for Options of different
denominations entitling the holder thereof to purchase, on the same terms and
subject to the same conditions as are set forth herein, in the aggregate the
same number of shares of Common Stock purchasable hereunder. The terms
"Agreement" and "Option" as used herein include any Stock Option Agreements and
related Options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like
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tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
Section 1.5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) In the event of any change in Common Stock by reason of stock
dividends, splits, mergers, recapitalization, combinations, subdivisions,
conversions, exchanges of shares, extraordinary or liquidating dividends or
other similar transactions or changes in the corporate or capital structures of
Issuer, the type and number of shares of Common Stock purchasable upon exercise
hereof and the Option Price shall be appropriately and equitably adjusted so the
Grantee shall receive upon exercise of the Option and payment of the aggregate
Option Price hereunder the number and class of shares or other securities or
property that Grantee would have received in respect of Common Stock if the
Option had been exercised in full immediately prior to such event, or the record
date therefor, as applicable. Issuer shall take such steps in connection with
such consolidation, merger, liquidation or other such action as may be necessary
to assure that the provisions hereof shall thereafter apply as nearly as
possible to any securities or property thereafter deliverable upon exercise of
the Option.
(b) If prior to an Option Termination Event, Issuer shall enter into an
agreement to consolidate with or merge into any person other than Grantee or one
of its subsidiaries and shall not be the continuing or surviving corporation of
such consolidation or merger, then, and in each such case, the agreement
governing such transaction shall make proper provision so that the continuing or
surviving corporation of a consolidation or merger with Issuer (if other than
Issuer), or, at the election of Grantee, any person that controls the continuing
or surviving person shall agree to be bound by and to assume in writing all the
obligations and responsibilities of Issuer under the Option.
Section 1.6. REGISTRATION RIGHTS. (a) If Grantee requests Issuer in
writing to register under the Securities Act any of the securities purchased by
Grantee hereunder, Issuer shall promptly prepare, file and keep current a shelf
registration statement under the Securities Act covering any securities issued
pursuant to this Option and shall use its reasonable best efforts to cause such
registration statement to become effective and remain current in order to permit
the sale or other disposition of any securities issued upon total or partial
exercise of this Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee. Issuer will use its reasonable best efforts to
cause such registration statement first to become effective and then to remain
effective for such period not in excess of 120 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Grantee for a
period of 18 months following such first request shall have the right to demand
a second such registration if reasonably necessary to effect such sales or
dispositions. The foregoing notwithstanding, if, at the time of any request by
Grantee for registration of Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering of shares of Common
Stock, and in the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters, of such
offering the inclusion of Grantee's Option Shares would interfere with the
successful marketing of the shares of Common Stock offered by Issuer, the number
of Option Shares otherwise to be covered in the registration statement
contemplated hereby may be reduced; and provided, however, that after any such
required reduction the number of Option Shares to be included in such offering
for the account of Grantee shall constitute at least 25% of the total number of
shares to be sold by Grantee
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and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practicable and no reduction shall thereafter occur (and
such registration shall not be charged against Grantee).
(b) Grantee shall provide all information reasonably requested by Issuer
for inclusion in any registration statement to be filed hereunder.
(c) Issuer shall pay all fees and expenses in connection with any
registration pursuant to this Section other than underwriting discounts and
commissions to brokers or dealers and shall indemnify Grantee, its officers,
directors, agents, other controlling persons and any underwriters retained by
Grantee in connection with such sale of such Option Shares in the customary way,
and agree to customary contribution provisions with such persons, with respect
to claims, damages, losses and liabilities (and any expenses relating thereto)
arising (or to which Grantee, its officers, directors, agents, other controlling
persons or underwriters may be subject) in connection with any such offer or
sale under the federal securities laws or otherwise, except for information
furnished in writing by Grantee or its underwriters to Issuer. Grantee and its
underwriters, respectively, shall indemnify Issuer to the same extent with
respect to information furnished in writing to Issuer by Grantee and such
underwriters.
Section 1.7. THIRD PARTY OFFER. At any time or from time to time after
(i) the making, other than by Grantee or its affiliates, of a tender or exchange
offer for then outstanding shares of Common Stock at a price per share in excess
of the Option Price or (ii) the announcement by any person other than Grantee or
its affiliates of an agreement including an agreement in principle, to
consummate with Issuer a merger, consolidation or other business combination or
sale of assets of Issuer, in each case resulting in payment to holders of Common
Stock of an amount per share in excess of the Option Price (a "Third Party
Offer"), Grantee may, at its election, upon two days' notice to Issuer,
surrender all or a part of the Option to Issuer, in which event Issuer shall pay
to Grantee, on the day of each such surrender and in consideration thereof,
against tender by Issuer of an instrument evidencing such surrender, an amount
in cash per Share the rights to which are surrendered equal to the excess of (i)
the price per share of Common Stock to be paid in such Third Party Offer over
(ii) the Option Price. If all or a portion of the price per share of Common
Stock to be paid in such Third Party Offer consists of non-cash consideration,
the price per share of Common Stock referred to in clause (i) above shall be the
cash consideration per share of Common Stock, if any, plus the fair market value
of the non-cash consideration per share of Common Stock as set forth in such
Third Party Offer or, if not so set forth, as determined by nationally
recognized investment bankers selected by Grantee, which determination shall be
conclusive and binding for all purposes of this Agreement. In the event of a
sale of assets of Issuer, the price per share of Common Stock referred to in
clause (i) shall be the last per-share price of Common Stock on the fourth
trading day following the announcement of such sale. Upon exercise of its right
to surrender the Option or any portion thereof and the receipt by Grantee of
cash pursuant to this Section, any and all rights of Grantee to purchase shares
of Common Stock with respect to the portion of the Option surrendered pursuant
to this Section shall be terminated.
Section 1.8. EXTENSION OF TIME FOR REGULATORY APPROVALS. The 18 month
period for exercise of certain rights under Sections 1.2 and 1.6 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights, and for the
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expiration of all statutory waiting periods; and (ii) to the extent necessary to
avoid liability under Section 16(b) of the Exchange Act by reason of such
exercise.
Section 1.9. PROFIT LIMITATION. (a) Notwithstanding any other provision
of this Agreement or the Merger Agreement, in no event shall Grantee's Total
Profit (as defined below) exceed $20,000,000 (the "Maximum Amount") and, if it
otherwise would exceed such Maximum Amount, Grantee at its sole election may (i)
pay cash to Issuer, (ii) deliver to Issuer for cancellation Option Shares
previously purchased by Grantee, or (iii) any combination thereof, so that
Grantee's actually realized Total Profit (as defined below) shall not exceed the
Maximum Amount after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Option may
not be exercised for a number of Option Shares as would, as of the Notice Date,
result in a Notional Total Profit (as defined below) of more than the Maximum
Amount and, if exercise of the Option otherwise would result in the Notional
Total Profit exceeding such amount, Grantee, at its discretion, may (in addition
to any of the actions specified in Section 1.9 above) increase the Option Price
so that the Notional Total Profit shall not exceed the Maximum Amount.
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the cash amount actually received by
Grantee pursuant to Section 6.03(a) of the Merger Agreement less any repayment
by Parent to the Company pursuant to Section 1.9(a)(i) hereof and (ii) (x) the
net cash amounts or the fair market value of any property received by Grantee
pursuant to the sale of Option Shares (or of any other securities into or for
which such Option Shares are converted or exchanged), less (y) Grantee's
purchase price for such Option Shares (or other securities).
(d) As used herein, the term "Notional Total Profit" with respect to any
number of Option Shares as to which Grantee may propose to exercise the Option
shall mean the Total Profit determined as of the Notice Date, assuming that the
Option was exercised on such date for such number of Option Shares and assuming
that such Option Shares, together with all other Option Shares previously
acquired upon exercise of the Option and held by Grantee and its affiliates as
of such date, were sold for cash at the closing price on NASDAQ for the Option
Shares as of the close of business on the preceding trading day (less customary
brokerage commissions).
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ISSUER
Section 2.1. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby
represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Issuer and no other corporate
proceedings on the part of Issuer are necessary to authorize this Agreement
or to consummate the transactions so contemplated. This Agreement has been
duly and validly executed and delivered by Issuer. This
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Agreement is the valid and binding obligation of Issuer, enforceable
against Issuer in accordance with its terms.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof
through the termination of this Agreement in accordance with its terms will
have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common
Stock at any time and from time to time issuable hereunder, and all such
shares, upon issuance pursuant hereto, will be duly authorized, validly
issued, fully paid, nonassessable, and will be delivered free and clear of
all claims, liens, encumbrances and security interests, and not subject to
any preemptive rights.
(c) The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict
with or result in any violation pursuant to any provisions of the
Certificate of Incorporation or Bylaws of Issuer or any Issuer subsidiary,
subject to obtaining any approvals or consents contemplated hereby, or
result in any violation of any loan or credit agreement, note, mortgage,
indenture, lease, plan, or other agreement, obligation, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Issuer or any Issuer subsidiary
or their respective properties or assets, which violation would have,
individually or in the aggregate, a Material Adverse Effect on the Issuer.
ARTICLE 3
MISCELLANEOUS PROVISIONS
Section 3.1. ASSIGNMENT OF OPTION BY GRANTEE. This Agreement shall be
binding upon each party hereto and such party's successors and assigns. Neither
of the parties hereto may assign any of its rights or obligations under this
Option Agreement or the Option created hereunder to any other person, without
the express written consent of the other party.
Section 3.2. SURVIVAL. All representations, warranties and covenants
contained herein shall survive the execution and delivery of this Option
Agreement and the consummation of the transactions contemplated hereby, except
as otherwise provided herein.
Section 3.3. APPLICATION FOR REGULATORY APPROVAL. Each of Grantee and
Issuer will use its best efforts to make all filings with, and to obtain
consents of, all third parties and governmental authorities necessary to the
consummation of the transactions contemplated by this Agreement, including
without limitation making application to list the shares of Common Stock
issuable hereunder on the Nasdaq National Market System upon official notice of
issuance.
Section 3.4. SPECIFIC PERFORMANCE; TIME OF THE ESSENCE. The parties
hereto acknowledge that damages would be an inadequate remedy for a breach of
this Agreement by either party hereto and that the obligations of the parties
hereto shall be enforceable by either party hereto through injunctive or other
equitable relief. The parties agree that time shall be of the essence in the
performance of obligations hereunder.
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Section 3.5. SEVERABILITY OF PROVISIONS. If any term, provision,
covenant, or restriction contained in this Agreement is held by a court or a
federal or state regulatory agency of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions contained in this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
Section 3.6. NOTICES. All notices, claims, demands and other
communications hereunder shall be deemed to have been duly given or made when
delivered in person, by registered or certified mail (postage prepaid, return
receipt requested), by overnight courier, or by facsimile at the respective
addresses of the parties set forth in the Merger Agreement.
Section 3.7. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 3.8. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 3.9. EXPENSES. Except as otherwise expressly provided herein or
in the Merger Agreement, each of the parties hereto shall bear and pay all costs
and expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
Section 3.10. ENTIRE AGREEMENT. Except as otherwise expressly provided
herein or in the Merger Agreement, this Agreement contains the entire agreement
between the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, except as assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided herein. Any provision of this Agreement may be
waived only in writing at any time by the party that is entitled to the benefits
of such provision. This Agreement may not be modified, amended, altered, or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
Section 3.11. FURTHER ASSURANCES. In the event of any exercise of the
Option by Grantee, Issuer and Grantee shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.
Nothing contained in this Agreement shall be deemed to authorize Issuer or
Grantee to breach any provision of the Merger Agreement.
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IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be
signed by their respective officers hereunto duly authorized, all as of the date
first written above.
bamboo.com, Inc.
By: /s/ LEONARD B. MCCURDY
-----------------------------------
Name: Leonard B. McCurdy
Title: Chairman and Chief
Executive Officer
INTERACTIVE PICTURES CORPORATION
By: /s/ JAMES M. PHILLIPS
-----------------------------------
Name: James M. Phillips
Title: Chairman and Chief
Executive Officer
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ANNEX D
October 25, 1999
Board of Directors
bamboo.com, Inc.
124 University Ave
Palo Alto, CA 94301
Members of the Board:
We understand that Interactive Pictures Corporation ("IPIX"), and
bamboo.com, Inc. ("bamboo.com") have entered into an Agreement and Plan of
Merger dated the date hereof (the "Agreement") which will provide, among other
things, for the merger (the "Merger") of a newly formed, wholly owned subsidiary
of bamboo.com ("Merger Sub") with and into IPIX. Upon consummation of the
Merger, IPIX will become a wholly owned subsidiary of bamboo.com. Under the
terms set forth in the Agreement, at the effective time of the Merger (the
"Effective Time"), each share of common stock of IPIX, par value $0.001 per
share ("IPIX Common Stock"), issued and outstanding immediately prior to the
Effective Time, other than certain shares to be canceled pursuant to the
Agreement, will be converted into the right to receive 1.3690 shares (the
"Exchange Ratio") of the common stock of bamboo.com, par value $0.001 per share
("bamboo.com Common Stock"). The terms and conditions of the Merger are set out
more fully in the Agreement.
You have asked us whether, in our opinion, the Exchange Ratio is fair from
a financial point of view and as of the date hereof to bamboo.com.
For purposes of this opinion we have, among other things:
(i) reviewed certain publicly available financial statements and other
business and financial information of IPIX and bamboo.com, respectively;
(ii) reviewed certain internal financial statements, forecasts and
other financial and operating data concerning IPIX and bamboo.com prepared
by the managements of IPIX and bamboo.com, respectively;
(iii) reviewed with IPIX and bamboo.com certain publicly available
estimates of research analysts relating to IPIX and bamboo.com;
(iv) held discussions with the respective managements of IPIX and
bamboo.com concerning the businesses, past and current operations,
financial condition and future prospects of both IPIX and bamboo.com,
independently and combined, including discussions with the managements of
IPIX and bamboo.com concerning synergies that are expected to result from
the Merger as well as their views regarding the strategic rationale for the
Merger;
(v) reviewed the financial terms and conditions set forth in the
Agreement;
(vi) reviewed the stock price and trading history of IPIX Common Stock
and bamboo.com Common Stock;
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Board of Directors
bamboo.com, Inc.
October 25, 1999
Page 2
(vii) compared the financial terms of the Merger with the financial
terms, to the extent publicly available, of other transactions that we
deemed relevant;
(viii) performed a pro forma merger analysis of the combined entity;
(ix) prepared an analysis of the relative contributions of IPIX and
bamboo.com to the combined company;
(x) prepared an analysis of the financial performance of IPIX and
bamboo.com and the prices and trading activity of IPIX Common Stock and
bamboo.com Common Stock with that of certain other publicly traded
companies comparable with IPIX and bamboo.com, respectively;
(xi) participated in discussions and negotiations among
representatives of IPIX and bamboo.com and their financial and legal
advisors; and
(xii) made such other studies and inquiries, and reviewed such other
data, as we deemed relevant.
In our review and analysis, and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to us (including information furnished to us orally or
otherwise discussed with us by the managements of IPIX and bamboo.com) or
publicly available and have neither attempted to verify, nor assumed
responsibility for verifying, any of such information. We have relied upon the
assurances of the managements of IPIX and bamboo.com that they are not aware of
any facts that would make such information inaccurate or misleading.
Furthermore, we did not obtain or make, or assume any responsibility for
obtaining or making, any independent evaluation or appraisal of the properties,
assets or liabilities (contingent or otherwise) of IPIX or bamboo.com, nor were
we furnished with any such evaluation or appraisal. With respect to the
financial forecasts and projections (and the assumptions and bases therefor) for
each of IPIX and bamboo.com that we have reviewed, upon the advice of the
managements of IPIX and bamboo.com, we have assumed that such forecasts and
projections have been reasonably prepared in good faith on the basis of
reasonable assumptions and reflect the best currently available estimates and
judgments as to the future financial condition and performance of IPIX and
bamboo.com, respectively, and we have further assumed that such projections and
forecasts will be realized in the amounts and in the time periods currently
estimated. In this regard, we note that each of bamboo.com and IPIX face
exposure to the Year 2000 problem. We have not undertaken any independent
analysis to evaluate the reliability or accuracy of the assumptions made with
respect to the potential effect that the Year 2000 problem might have on IPIX's
and bamboo.com's respective forecasts. We have assumed that the Merger will be
consummated upon the terms set forth in the Agreement without material
alteration thereof, including, among other things, that the Merger will be
treated as a tax-free reorganization
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Board of Directors
bamboo.com, Inc.
October 25, 1999
Page 3
pursuant to the Internal Revenue Code of 1986, as amended. In addition, we have
assumed that the historical financial statements of each of IPIX and bamboo.com
reviewed by us have been prepared and fairly presented in accordance with U.S.
generally accepted accounting principles consistently applied. We have relied as
to all legal matters relevant to rendering our opinion on the advice of counsel.
This opinion is necessarily based upon market, economic and other
conditions as in effect on, and information made available to us as of, the date
hereof. It should be understood that subsequent developments may affect the
conclusion expressed in this opinion and that we disclaim any undertaking or
obligation to advise any person of any change in any matter affecting this
opinion which may come or be brought to our attention after the date of this
opinion. Our opinion is limited to the fairness, from a financial point of view
and as of the date hereof, to bamboo.com of the Exchange Ratio. We do not
express any opinion as to (i) the value of any employee agreement or other
arrangement entered into in connection with the Merger, (ii) any tax or other
consequences that might result from the Merger or (iii) what the value of
bamboo.com Common Stock will be when issued to IPIX's stockholders pursuant to
the Merger or the price at which shares of bamboo.com Common Stock may be traded
in the future. Our opinion does not address the relative merits of the Merger
and the other business strategies that bamboo.com's Board of Directors has
considered or may be considering, nor does it address the decision of
bamboo.com's Board of Directors to proceed with the Merger.
We are acting as financial advisor to bamboo.com in connection with the
Merger and will receive (i) a fee contingent upon the delivery of this opinion
and (ii) an additional fee contingent upon the consummation of the Merger. In
addition, bamboo.com has agreed to indemnify us for certain liabilities that may
arise out of our engagement. In the ordinary course of business, we may trade in
bamboo.com's securities and IPIX's securities for our own account and the
account of our customers and, accordingly, may at any time hold a long or short
position in bamboo.com's securities or IPIX's securities.
Our opinion expressed herein is provided for the information of the Board
of Directors of bamboo.com in connection with its evaluation of the Merger. Our
opinion is not intended to be and does not constitute a recommendation to any
stockholder of bamboo.com or IPIX as to how such stockholder should vote, or
take any other action, with respect to the Merger. This opinion may not be
summarized, described or referred to or furnished to any party except with our
express prior written consent.
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Board of Directors
bamboo.com, Inc.
October 25, 1999
Page 4
Based upon and subject to the foregoing considerations, it is our opinion
that, as of the date hereof, the Exchange Ratio is fair to bamboo.com from a
financial point of view.
Very truly yours,
/s/ BANCBOSTON ROBERTSON STEPHENS INC.
------------------------------------------------------
BANCBOSTON ROBERTSON STEPHENS INC.
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ANNEX E
October 25, 1999
Board of Directors
IPIX
1009 Commerce Park Dr.
Oak Ridge, TN 37830
Attention: James M. Phillip
Chairman and CEO
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the shareholders of Interactive Pictures Corporation (the "Company")
of the consideration to be received by them in connection with the proposed
merger (the "Merger") of the Company with a wholly-owned subsidiary ("Merger
Sub") of bamboo.com, Inc. (the "Merger Partner"). Pursuant to the Agreement and
Plan of Merger, dated as of October 25, 1999 (the "Agreement"), between the
Company and the Merger Partner, Merger Sub will merge with and into the Company
with the Company continuing as the surviving corporation, and each share of
common stock, par value $.001 per share (the "Company Common Stock"), of the
Company issued and outstanding immediately prior to the effective time of the
Merger (other than certain shares which are to be canceled pursuant to the
Agreement) will be converted into 1.369 shares of common stock, par value $.001
per share (the "Merger Partner Common Stock"), of the Merger Partner.
In arriving at our opinion, we have reviewed (i) the Agreement; (ii)
certain publicly available information concerning the business of the Company
and the Merger Partner and of certain other companies engaged in businesses
comparable to those of the Company and the Merger Partner, and the reported
market prices for certain other companies' securities deemed comparable; (iii)
publicly available terms of certain transactions involving companies comparable
to the Company and the consideration received for such companies; (iv) current
and historical market prices of the Company Common Stock and the Merger Partner
Common Stock; (v) the audited financial statements of the Company and the Merger
Partner for the fiscal year ended December 31, 1998; (vi) the unaudited
financial statements of the Company for the period ended June 30, 1999; (vii)
certain agreements with respect to outstanding indebtedness or obligations of
the Company and the Merger Partner; (viii) certain internal financial analyses
and forecasts prepared by the Company and the Merger Partner and their
respective management; and (ix) the terms of other business combinations that we
deemed relevant.
In addition, we have held discussions with certain members of the
management of the Company and the Merger Partner with respect to certain aspects
of the Merger, the past and current business operations of the Company and the
Merger Partner, the financial condition and future prospects and operations of
the Company and the Merger Partner, the effects of the Merger on the financial
condition and future prospects of the Company and the Merger Partner, and
certain other matters we believed necessary or appropriate to our inquiry. We
have visited certain representative facilities of the Merger partner, and
reviewed such other financial studies and analyses and considered such other
information as we deemed appropriate for the purposes of this opinion.
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In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the Company and the Merger Partner or
otherwise reviewed by us, and we have not assumed any responsibility or
liability therefor. We have not conducted any valuation or appraisal of any
assets or liabilities, nor have any such valuations or appraisals been provided
to us. In relying on financial analyses and forecasts provided to us, we have
assumed that they have been reasonably prepared based on assumptions reflecting
the best currently available estimates and judgments by management as to the
expected future results of operations and financial condition of the Company and
the Merger Partner to which such analyses or forecasts relate. We have also
assumed that the Merger will have the tax consequences described in discussions
with, and materials furnished to us by, representatives of the Company, and that
the Merger and other transactions contemplated by the Agreement will be
consummated as described in the Agreement. We have relied as to all legal
matters relevant to rendering our opinion upon the advice of counsel.
Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof. It should be understood that subsequent developments may affect this
opinion and that we do not have any obligation to update, revise, or reaffirm
this opinion. We are expressing no opinion herein as to the price at which the
Company Common Stock or the Merger Partner Common Stock will trade at any future
time.
We have acted as financial advisor to the Company with respect to the
proposed Merger and will receive a fee from the Company for our services. We
will also receive an additional fee if the proposed Merger is consummated. As
you are aware, J.P. Morgan Ventures holds 116,278 shares of the Company Common
Stock. In addition, J.P. Morgan has acted as placement agent for the Company in
raising private equity and acted as lead underwriter in the Company's initial
public offering. Please be advised that we have no other financial advisory or
other relationships with the Merger Partner. In the ordinary course of their
businesses, J.P. Morgan Securities Inc. and its affiliates may actively trade
the debt and equity securities of the Company or the Merger Partner for their
own account or for the accounts of customers and, accordingly, they may at any
time hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the consideration to be received by the Company's shareholders
in the proposed Merger is fair, from a financial point of view, to such
shareholders.
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This letter is provided to the Board of Directors of the Company in
connection with and for the purposes of its evaluation of the Merger. This
opinion does not constitute a recommendation to any shareholder of the Company
as to how such shareholder should vote with respect to the Merger. This opinion
may be reproduced in full in any proxy or information statement mailed to
shareholders of bamboo.com.
Very truly yours,
J.P. Morgan Securities Inc.
By: /s/ TODD MARIN
----------------------------------
Name: Todd Marin
Title: Managing Director
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ANNEX F
AMENDMENT TO BAMBOO.COM'S
RESTATED CERTIFICATE OF INCORPORATION
Article IV of bamboo.com's Restated Certificate of Incorporation shall be
amended by deleting the first two paragraphs of said Article IV and inserting
the following in lieu thereof:
The Corporation is authorized to issue three classes of stock to be
designated, respectively, "Common Stock," "Class B Common Stock" and
"Preferred Stock." The total number of Shares that the Corporation is
authorized to issue is 162,422,536. The total number of shares of Common
Stock that the Corporation is authorized to issue is 150,000,000, with a
par value of $0.001 per share. The total number of shares of Class B Common
Stock that the Corporation is authorized to issue is 7,421,536, with a par
value of $0.0001 per share. The total number of shares of Preferred Stock
that the Corporation is authorized to issue is 5,001,100 with a par value
of $0.001 per share, 1,100 of which are designated "Series C Redeemable
Preferred Stock."
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ANNEX G
BAMBOO.COM, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1999 Employee Stock Purchase
Plan of bamboo.com, Inc.
1. PURPOSE. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan, accordingly, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. DEFINITIONS.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the common stock of the Company.
(d) "Company" shall mean bamboo.com, Inc. and any Designated
Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings
and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary that has been
designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at
least twenty (20) hours per week and more than five (5) months in any
calendar year. For purposes of the Plan, the employment relationship shall
be treated as continuing intact while the individual is on sick leave or
other leave of absence approved by the Company. Where the period of leave
exceeds 90 days and the individual's right to reemployment is not
guaranteed either by statute or by contract, the employment relationship
shall be deemed to have terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each
Offering Period.
(i) "Exercise Date" shall mean the last Trading Day of each Purchase
Period.
(j) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market
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Value shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the date of determination, as
reported in The Wall Street Journal or such other source as the Board
deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean of the closing bid and asked prices for the
Common Stock prior to the date of determination, as reported in The Wall
Street Journal or such other source as the Board deems reliable;
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Board; or
(iv) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price
to the public as set forth in the final prospectus included within the
registration statement in Form S-1 filed with the Securities and
Exchange Commission for the initial public offering of the Company's
Common Stock (the "Registration Statement").
(k) "Offering Periods" shall mean the periods of approximately
twenty-four (24) months during which an option granted pursuant to the Plan
may be exercised, commencing on the first Trading Day on or after May 1 and
November 1 of each year and terminating on the last Trading Day in the
periods ending twenty-four months later; provided, however, that the first
Offering Period under the Plan shall commence with the first Trading Day on
or after the date on which the Securities and Exchange Commission declares
the Company's Registration Statement effective and end on the last Trading
Day on or before April 30, 2001. The duration and timing of Offering
Periods may be changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this 1999 Employee Stock Purchase Plan.
(m) "Purchase Period" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence
on the Enrollment Date and end with the next Exercise Date; provided,
however, that the first Purchase Period under the Plan shall commence with
the first Trading Day on or after the date on which the Securities and
Exchange Commission declares the Company's Registration Statement effective
and end on the last Trading Day on or before April 30, 2000.
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a
share of Common Stock on the Enrollment Date or on the Exercise Date,
whichever is lower; provided however, that the Purchase Price may be
adjusted by the Board pursuant to Section 20.
(o) "Reserves" shall mean the number of shares of Common Stock covered
by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or
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not such corporation now exists or is hereafter organized or acquired by
the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges
and the Nasdaq System are open for trading.
3. ELIGIBILITY.
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the
Code) would own capital stock of the Company and/or hold outstanding
options to purchase such stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of the capital stock of
the Company or of any Subsidiary, or (ii) to the extent that his or her
rights to purchase stock under all employee stock purchase plans of the
Company and its subsidiaries accrues at a rate which exceeds Twenty-Five
Thousand Dollars ($25,000) worth of stock (determined at the fair market
value of the shares at the time such option is granted) for each calendar
year in which such option is outstanding at any time.
4. OFFERING PERIODS. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1 and November 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
April 30, 2001. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by completing
a subscription agreement authorizing payroll deductions in the form of Exhibit A
to this Plan and filing it with the Company's payroll office prior to the
applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding 15% of the
Compensation which he or she receives on each pay day during the Offering
Period.
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(b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into
such account.
(c) A participant may discontinue his or her participation in the Plan
as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or
filing with the Company a new subscription agreement authorizing a change
in payroll deduction rate. The Board may, in its discretion, limit the
number of participation rate changes during any Offering Period. The change
in rate shall be effective with the first full payroll period following
five (5) business days after the Company's receipt of the new subscription
agreement unless the Company elects to process a given change in
participation more quickly. A participant's subscription agreement shall
remain in effect for successive Offering Periods unless terminated as
provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during
a Purchase Period. Payroll deductions shall recommence at the rate provided
in such participant's subscription agreement at the beginning of the first
Purchase Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise
upon the exercise of the option or the disposition of the Common Stock. At
any time, the Company may, but shall not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to
make available to the Company any tax deductions or benefits attributable
to sale or early disposition of Common Stock by the Employee.
7. GRANT OF OPTION. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than
10,000 shares of the Company's Common Stock (subject to any adjustment pursuant
to Section 19), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 12 hereof. The Board may, for future
Offering Periods, increase or decrease, in its absolute discretion, the maximum
number of shares of the Company's Common Stock an Employee may purchase during
each Purchase Period of such Offering Period. Exercise of the option shall occur
as provided in Section 8 hereof, unless the participant has withdrawn pursuant
to Section 10 hereof. The option shall expire on the last day of the Offering
Period.
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8. EXERCISE OF OPTION.
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at
the applicable Purchase Price with the accumulated payroll deductions in
his or her account. No fractional shares shall be purchased; any payroll
deductions accumulated in a participant's account which are not sufficient
to purchase a full share shall be retained in the participant's account for
the subsequent Purchase Period or Offering Period, subject to earlier
withdrawal by the participant as provided in Section 10 hereof. Any other
monies left over in a participant's account after the Exercise Date shall
be returned to the participant. During a participant's lifetime, a
participant's option to purchase shares hereunder is exercisable only by
him or her.
(b) If the Board determines that, on a given Exercise Date, the number
of shares with respect to which options are to be exercised may exceed (i)
the number of shares of Common Stock that were available for sale under the
Plan on the Enrollment Date of the applicable Offering Period, or (ii) the
number of shares available for sale under the Plan on such Exercise Date,
the Board may in its sole discretion (x) provide that the Company shall
make a pro rata allocation of the shares of Common Stock available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as
uniform a manner as shall be practicable and as it shall determine in its
sole discretion to be equitable among all participants exercising options
to purchase Common Stock on such Exercise Date, and continue all Offering
Periods then in effect, or (y) provide that the Company shall make a pro
rata allocation of the shares available for purchase on such Enrollment
Date or Exercise Date, as applicable, in as uniform a manner as shall be
practicable and as it shall determine in its sole discretion to be
equitable among all participants exercising options to purchase Common
Stock on such Exercise Date, and terminate any or all Offering Periods then
in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the
Company's shareholders subsequent to such Enrollment Date.
9. DELIVERY. As promptly as practicable after each Exercise Date on which
a purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.
10. WITHDRAWAL.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his
or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's
payroll deductions credited to his or her account shall be paid to such
participant promptly after receipt of notice of withdrawal and such
participant's option for the Offering Period shall be automatically
terminated, and no further payroll deductions for the purchase of shares
shall be made for such Offering Period. If a participant withdraws from an
Offering Period, payroll deductions
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shall not resume at the beginning of the succeeding Offering Period unless
the participant delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan
which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from
which the participant withdraws.
11. TERMINATION OF EMPLOYMENT.
Upon a participant's ceasing to be an Employee, for any reason, he or she
shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. INTEREST. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. STOCK.
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of
the Company's Common Stock which shall be made available for sale under the
Plan shall be 250,000 shares, plus an annual increase to be added on the
first day of the Company's fiscal year beginning in 2000 equal to the
lesser of (i) 250,000 shares, (ii) 2.5% of the outstanding shares on such
date or (iii) a lesser amount determined by the Board.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant
and his or her spouse.
14. ADMINISTRATION. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to
such participant of such shares and cash. In addition, a participant may
file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death
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prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required
for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant
and in the absence of a beneficiary validly designated under the Plan who
is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the
estate of the participant, or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such shares and/or cash to the spouse or to any one
or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as
the Company may designate.
16. TRANSFERABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. USE OF FUNDS. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. REPORTS. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION,
MERGER OR ASSET SALE.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves, the maximum number of shares
each participant may purchase each Purchase Period (pursuant to Section 7),
as well as the price per share and the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised
shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to
an option.
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(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in
progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date"), and shall terminate immediately prior to the consummation
of such proposed dissolution or liquidation, unless provided otherwise by
the Board. The New Exercise Date shall be before the date of the Company's
proposed dissolution or liquidation. The Board shall notify each
participant in writing, at least ten (10) business days prior to the New
Exercise Date, that the Exercise Date for the participant's option has been
changed to the New Exercise Date and that the participant's option shall be
exercised automatically on the New Exercise Date, unless prior to such date
the participant has withdrawn from the Offering Period as provided in
Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each outstanding option shall be
assumed or an equivalent option substituted by the successor corporation or
a Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the option, any
Purchase Periods then in progress shall be shortened by setting a new
Exercise Date (the "New Exercise Date") and any Offering Periods then in
progress shall end on the New Exercise Date. The New Exercise Date shall be
before the date of the Company's proposed sale or merger. The Board shall
notify each participant in writing, at least ten (10) business days prior
to the New Exercise Date, that the Exercise Date for the participant's
option has been changed to the New Exercise Date and that the participant's
option shall be exercised automatically on the New Exercise Date, unless
prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
20. AMENDMENT OR TERMINATION.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19
hereof, no such termination can affect options previously granted, provided
that an Offering Period may be terminated by the Board of Directors on any
Exercise Date if the Board determines that the termination of the Offering
Period or the Plan is in the best interests of the Company and its
shareholders. Except as provided in Section 19 and this Section 20 hereof,
no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Section 423 of the Code (or any successor rule or provision or
any other applicable law, regulation or stock exchange rule), the Company
shall obtain shareholder approval in such a manner and to such a degree as
required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods,
limit the frequency and/or number of changes in the amount withheld during
an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding
in excess of the amount designated by a participant in order to adjust for
delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied
toward the purchase of Common Stock for each participant properly
correspond with amounts withheld from the participant's Compensation, and
establish such other
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limitations or procedures as the Board (or its committee) determines in its
sole discretion advisable which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the
Board may, in its discretion and, to the extent necessary or desirable,
modify or amend the Plan to reduce or eliminate such accounting consequence
including, but not limited to:
(i) altering the Purchase Price for any Offering Period including
an Offering Period underway at the time of the change in Purchase Price;
(ii) shortening any Offering Period so that Offering Period ends on
a new Exercise Date, including an Offering Period underway at the time
of the Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.
21. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
24. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD. To the extent
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
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EXHIBIT A
BAMBOO.COM, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
[ ] Original Application Enrollment Date:
[ ] Change in Payroll Deduction Rate
[ ] Change of Beneficiary(ies)
1. hereby elects to participate in the bamboo.com, Inc. 1999
Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and subscribes
to purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of % of my Compensation on each payday (from 0 to %) during the
Offering Period in accordance with the Employee Stock Purchase Plan. (Please
note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price determined
in accordance with the Employee Stock Purchase Plan. I understand that if I do
not withdraw from an Offering Period, any accumulated payroll deductions will be
used to automatically exercise my option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in all
respects subject to the terms of the Plan. I understand that my ability to
exercise the option under this Subscription Agreement is subject to shareholder
approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only).
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the Offering
Period during which I purchased such shares) or one year after the Exercise
Date, I will be treated for federal income tax purposes as having received
ordinary income at the time of such disposition in an amount equal to the excess
of the fair market value of the shares at the time such shares were purchased by
me over the price which I paid for the shares. I hereby agree to notify the
Company in writing within 30 days after the date of any disposition of my shares
and I will make adequate provision for Federal, state or other tax withholding
obligations, if any, which arise upon the disposition of the Common Stock. The
Company may, but will not be obligated to, withhold from my compensation the
amount necessary to meet any applicable withholding obligation including any
withholding necessary to make available to the Company any tax deductions or
benefits attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year and 1-year
holding periods, I understand that I will be treated for federal income tax
purposes as having received income only at the time of such disposition,
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and that such income will be taxed as ordinary income only to the extent of an
amount equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I paid for
the shares, or (2) 15% of the fair market value of the shares on the first day
of the Offering Period. The remainder of the gain, if any, recognized on such
disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Employee
Stock Purchase Plan:
Name: (Please print)
- ------------------------------------------------------------------------------
(First) (Middle) (Last)
<TABLE>
<S> <C>
- ------------------------------------ -----------------------------------------------------------
Relationship (Address)
-----------------------------------------------------------
Employee's Social
Security Number: -----------------------------------------------------------
Employee's Address: -----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
</TABLE>
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
<TABLE>
<S> <C>
Dated: ---------------------------- -----------------------------------------------------------
Signature of Employee
-----------------------------------------------------------
Spouse's Signature (If beneficiary other than spouse)
</TABLE>
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EXHIBIT B
BAMBOO.COM, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the bamboo.com, Inc.
1999 Employee Stock Purchase Plan which began on ,
(the "Enrollment Date") hereby notifies the Company that he or
she hereby withdraws from the Offering Period. He or she hereby directs the
Company to pay to the undersigned as promptly as practicable all the payroll
deductions credited to his or her account with respect to such Offering Period.
The undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
--------------------------------------
--------------------------------------
--------------------------------------
Signature:
--------------------------------------
Date:
--------------------------------------
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ANNEX H
BAMBOO.COM, INC.
AMENDED AND RESTATED 1998 EMPLOYEE, DIRECTOR
AND CONSULTANT STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this Amended and Restated 1998
Employee, Director and Consultant Stock Plan are:
- to attract and retain the best available personnel for positions of
substantial responsibility,
- to provide additional incentive to Employees, Directors and
Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Options or
Stock Purchase Rights are, or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the Board
in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means bamboo.com, Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any
leave of absence approved by the Company or (ii) transfers between
locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. For purposes of Incentive
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Stock Options, no such leave may exceed ninety days, unless reemployment
upon expiration of such leave is guaranteed by statute or contract. If
reemployment upon expiration of a leave of absence approved by the Company
is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock
Option. Neither service as a Director nor payment of a director's fee by
the Company shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day
prior to the day of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "Notice of Grant" means a written or electronic notice evidencing
certain terms and conditions of an individual Option or Stock Purchase
Right grant. The Notice of Grant is part of the Option Agreement.
(q) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "Option Agreement" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.
(t) "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise
price.
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(u) "Optioned Stock" means the Common Stock subject to an Option or
Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this Amended and Restated 1998 Employee, Director and
Consultant Stock Plan.
(y) "Restricted Stock" means shares of Common Stock acquired pursuant
to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted
Stock Purchase Agreement is subject to the terms and conditions of the Plan
and the Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised
with respect to the Plan.
(bb) "Section 16(b)" means Section 16(b) of the Exchange Act.
(cc) "Service Provider" means an Employee, Director or Consultant.
(dd) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 2,921,212 Shares, plus an annual increase to be added on the
first day of the Company's fiscal year beginning in 2000 equal to the lesser of
(i) 500,000 shares, (ii) 5% of the outstanding shares on such date or (iii) a
lesser amount determined by the Board. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
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4. ADMINISTRATION OF THE PLAN.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be administered
by different Committees with respect to different groups of Service
Providers.
(ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of
the Code, the Plan shall be administered by a Committee of two or more
"outside directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption
under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the Plan
shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option or Stock Purchase Right granted
hereunder. Such terms and conditions include, but are not limited to,
the exercise price, the time or times when Options or Stock Purchase
Rights may be exercised (which may be based on performance criteria),
any vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Option or Stock Purchase Right
or the shares of Common Stock relating thereto, based in each case on
such factors as the Administrator, in its sole discretion, shall
determine;
(vi) to reduce the exercise price of any Option or Stock Purchase
Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall
have declined since the date the Option or Stock Purchase Right was
granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
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(ix) to prescribe, amend and rescind rules and regulations relating
to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right (subject
to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than
is otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld.
The Fair Market Value of the Shares to be withheld shall be determined
on the date that the amount of tax to be withheld is to be determined.
All elections by an Optionee to have Shares withheld for this purpose
shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on
all Optionees and any other holders of Options or Stock Purchase Rights.
5. ELIGIBILITY. Nonstatutory Stock Options and Stock Purchase Rights may
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. LIMITATIONS.
(a) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by the Optionee during any calendar year
(under all plans of the Company and any Parent or Subsidiary) exceeds
$100,000, such Options shall be treated as Nonstatutory Stock Options. For
purposes of this Section 6(a), Incentive Stock Options shall be taken into
account in the order in which they were granted. The Fair Market Value of
the Shares shall be determined as of the time the Option with respect to
such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they
interfere in any way with the Optionee's right or the Company's right to
terminate such relationship at any time, with or without cause.
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(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of the
Company, Options to purchase more than 500,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 500,000
Shares which shall not count against the limit set forth in subsection
(i) above.
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as
described in Section 13.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a
transaction described in Section 13), the cancelled Option will be
counted against the limits set forth in subsections (i) and (ii) above.
For this purpose, if the exercise price of an Option is reduced, the
transaction will be treated as a cancellation of the Option and the
grant of a new Option.
7. TERM OF PLAN. Subject to Section 19 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a term
of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. TERM OF OPTION. The term of each Option shall be stated in the Option
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price
shall be no less than 110% of the Fair Market Value per Share on
the date of grant.
(B) granted to any Employee other than an Employee described
in paragraph (A) immediately above, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of
a Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per
Share exercise price shall be no less than 100% of the Fair Market Value
per Share on the date of grant.
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(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price of less than 100% of the Fair Market Value per
Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may
be exercised and shall determine any conditions that must be satisfied
before the Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the
Administrator shall determine the acceptable form of consideration at the
time of grant. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six
months on the date of surrender, and
(B) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised;
(v) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. EXERCISE OF OPTION.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the
Administrator and set forth in the Option Agreement. Unless the
Administrator provides otherwise, vesting of Options granted hereunder
shall be tolled during any unpaid leave of absence. An Option may not be
exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized
by the Administrator and permitted by the Option Agreement and the Plan.
Shares issued upon exercise of an Option shall be issued in the name of the
Optionee or, if requested by the Optionee, in the
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name of the Optionee and his or her spouse. Until the Shares are issued (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to
the Optioned Stock, notwithstanding the exercise of the Option. The Company
shall issue (or cause to be issued) such Shares promptly after the Option
is exercised. No adjustment will be made for a dividend or other right for
which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period
of time as is specified in the Option Agreement to the extent that the
Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for three (3) months following the
Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by
the Administrator, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within such period of time as is specified in
the Option Agreement to the extent the Option is vested on the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). In the absence of a specified
time in the Option Agreement, the Option shall remain exercisable for
twelve (12) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the
Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
the Option may be exercised within such period of time as is specified in
the Option Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's
estate or by a person who acquires the right to exercise the Option by
bequest or inheritance, but only to the extent that the Option is vested on
the date of death. In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months
following the Optionee's termination. If, at the time of death, the
Optionee is not vested as to his or her entire Option, the Shares covered
by the unvested portion of the Option shall immediately revert to the Plan.
The Option may be exercised by the executor or administrator of the
Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If
the Option is not so exercised within the time specified
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herein, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
11. STOCK PURCHASE RIGHTS.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it
shall advise the offeree in writing or electronically, by means of a Notice
of Grant, of the terms, conditions and restrictions related to the offer,
including the number of Shares that the offeree shall be entitled to
purchase, the price to be paid, and the time within which the offeree must
accept such offer. The offer shall be accepted by execution of a Restricted
Stock Purchase Agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise,
the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination
of the purchaser's service with the Company for any reason (including death
or Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at a rate
determined by the Administrator.
(c) OTHER PROVISIONS. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.
(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment will be made for a dividend or other right for which the record
date is prior to the date the Stock Purchase Right is exercised, except as
provided in Section 13 of the Plan.
12. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option and Stock Purchase Right, and the number of
shares of Common
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Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which
have been returned to the Plan upon cancellation or expiration of an Option
or Stock Purchase Right, as well as the price per share of Common Stock
covered by each such outstanding Option or Stock Purchase Right, shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock,
or any other increase or decrease in the number of issued shares of Common
Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall
not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that
respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify
each Optionee as soon as practicable prior to the effective date of such
proposed transaction. The Administrator in its discretion may provide for
an Optionee to have the right to exercise his or her Option until ten (10)
days prior to such transaction as to all of the Optioned Stock covered
thereby, including Shares as to which the Option would not otherwise be
exercisable. In addition, the Administrator may provide that any Company
repurchase option applicable to any Shares purchased upon exercise of an
Option or Stock Purchase Right shall lapse as to all such Shares, provided
the proposed dissolution or liquidation takes place at the time and in the
manner contemplated. To the extent it has not been previously exercised, an
Option or Stock Purchase Right will terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the
assets of the Company, each outstanding Option and Stock Purchase Right
shall be assumed or an equivalent option or right substituted by the
successor corporation or a Parent or Subsidiary of the successor
corporation. In the event that the successor corporation refuses to assume
or substitute for the Option or Stock Purchase Right, the Optionee shall
fully vest in and have the right to exercise the Option or Stock Purchase
Right as to all of the Optioned Stock, including Shares as to which it
would not otherwise be vested or exercisable. If an Option or Stock
Purchase Right becomes fully vested and exercisable in lieu of assumption
or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that
the Option or Stock Purchase Right shall be fully vested and exercisable
for a period of fifteen (15) days from the date of such notice, and the
Option or Stock Purchase Right shall terminate upon the expiration of such
period. For the purposes of this paragraph, the Option or Stock Purchase
Right shall be considered assumed if, following the merger or sale of
assets, the option or right confers the right to purchase or receive, for
each Share of Optioned Stock subject to the Option or Stock Purchase Right
immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the
merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction
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(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the
merger or sale of assets is not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon
the exercise of the Option or Stock Purchase Right, for each Share of
Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair
market value to the per share consideration received by holders of Common
Stock in the merger or sale of assets.
14. DATE OF GRANT. The date of grant of an Option or Stock Purchase Right
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to
comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the
Optionee and the Company. Termination of the Plan shall not affect the
Administrator's ability to exercise the powers granted to it hereunder with
respect to Options granted under the Plan prior to the date of such
termination.
16. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
shall comply with Applicable Laws and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
Option or Stock Purchase Right, the Company may require the person
exercising such Option or Stock Purchase Right to represent and warrant at
the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation
is required.
17. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
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18. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
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ANNEX I
INTERACTIVE PICTURES CORPORATION
AMENDED AND RESTATED
1997 EQUITY COMPENSATION PLAN
The purpose of the Interactive Pictures Corporation 1997 Equity
Compensation Plan (the "Plan") is to provide (i) designated employees (including
employees who are also officers or directors) of Interactive Pictures
Corporation (the "Company") and its subsidiaries, (ii) certain consultants and
advisors to the Company or its subsidiaries and (iii) non-employee members of
the Board of Directors of the Company (the "Board") with the opportunity to
receive grants of incentive stock options and nonqualified stock options
("Options"). The Company believes that the Plan will encourage the participants
to contribute materially to the growth of the Company, thereby benefitting the
Company's shareholders, and will align the economic interests of the
participants with those of the shareholders.
1. ADMINISTRATION
(a) The Plan may be administered by the Board or by a committee (the
"Committee") or two or more directors appointed by the Board. If no
administrative committee is appointed, all references in the Plan to the
"Committee" shall be deemed to refer to the Board. All actions of the
Committee shall be subject to ratification by the Board.
(b) The Committee shall have the sole authority to (i) determine the
individuals to whom Options shall be granted under the Plan, (ii) determine
the type, size and terms of the Options to be granted to each such
individual, (iii) determine the time when the Options will be granted and
the duration of any applicable exercise period, including the criteria for
exercisability and the acceleration of exercisability and (iv) deal with
any other matters arising under the Plan.
(c) The Committee shall have full power and authority to administer
and interpret the Plan, to make factual determinations and to adopt or
amend such rules, regulations, agreements and instruments for implementing
the Plan and for the conduct of its business as it deems necessary or
advisable, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers
vested in it hereunder shall be conclusive and binding on all persons
having any interest in the Plan or in any awards granted hereunder. All
powers of the Committee shall be executed in its sole discretion, in the
best interest of the Company, not as a fiduciary, and in keeping with the
objectives of the Plan and need not be uniform as to similarly situated
individuals.
2. OPTIONS
Options granted under the Plan may be incentive stock options
("Incentive Stock Options") or nonqualified stock options ("Nonqualified
Stock Options") as described in Section 5. All Options shall be subject to
the terms and conditions set forth herein and to such other terms and
conditions consistent with the Plan as the Committee deems appropriate and
as are specified in writing by the Committee to the individual in a grant
instrument (the "Grant Instrument") or an amendment to the Grant
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Instrument. The Committee shall approve the form and provisions of each
Grant Instrument.
3. SHARES SUBJECT TO THE PLAN
(a) Subject to the adjustment specified below, the aggregate number of
shares of common stock of the Company ("Company Stock") that may be issued
under the Plan is 2,998,559 shares. The shares may be authorized but
unissued shares of Company Stock or reacquired shares of Company Stock,
including shares purchased by the Company on the open market for purposes
of the Plan. If and to the extent Options granted under the Plan terminate,
expire, or are canceled, forfeited, exchanged or surrendered without having
been exercised, the shares subject to such Options shall again be available
for purposes of the Plan.
(b) If there is any change in the number or kind of shares of Company
Stock outstanding (i) by reason of a stock dividend, spin off,
recapitalization, stock split, or combination or exchange of shares, (ii)
by reason of a merger, reorganization or consolidation in which the Company
is the surviving corporation, (iii) by reason of a reclassification or
change in par value, or (iv) by reason of any other extraordinary or
unusual event affecting the outstanding Company Stock as a class without
the Company's receipt of consideration, or if the value of outstanding
shares of Company Stock is substantially reduced as a result of a spinoff
or the Company's payment of an extraordinary dividend or distribution, the
maximum number of shares of Company Stock available for Options, the
maximum number of shares of Company Stock for which any individual
participating in the Plan may receive Options in any year, the number of
shares covered by outstanding Options, the kind of shares issued under the
Plan, and the price per share of such Options shall be appropriately
adjusted by the Committee to reflect any increase or decrease in the number
of, or change in the kind or value of, issued shares of Company Stock to
preclude, to the extent practicable, the enlargement or dilution of rights
and benefits under such Options; provided, however, that any fractional
shares resulting from such adjustment shall be eliminated. Any adjustments
determined by the Committee shall be final, binding and conclusive.
4. ELIGIBILITY FOR PARTICIPATION
(a) All employees of the Company and its subsidiaries ("Employees"),
including Employees who are officers or members of the Board, and members
of the Board who are not Employees ("Non-Employee Directors") shall be
eligible to participate in the Plan. Consultants and advisors who perform
services to the Company or any of its subsidiaries ("Key Advisors") shall
be eligible to participate in the Plan if the Key Advisors render bona fide
services and such services are not in connection with the offer or sale of
securities in a capital-raising transaction.
(b) The Committee shall select the Employees, Non-Employee Directors
and Key Advisors to receive Options and shall determine the number of
shares of Company Stock subject to a particular grant in such manner as the
Committee determines. The Board must approve the grant and terms of any
Options granted to Non-Employee Directors and to any other directors who
are members of the Committee. Employees, Key Advisors and Non-Employee
Directors who receive Options under this Plan shall hereinafter be referred
to as "Grantees."
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5. GRANTING OF OPTIONS
(a) Number of Shares. The Committee shall determine the number of
shares of Company Stock that will be subject to each grant of Options to
Employees, Non-Employee Directors and Key Advisors, subject to approval of
the Board with respect to Options granted to Non-Employee Directors or
members of the Committee.
(b) Type of Option and Price.
(i) The Committee may grant Incentive Stock Options that are
intended to qualify as "incentive stock options" within the meaning of
section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or Nonqualified Stock Options that are not intended so to
qualify, or any combination of Incentive Stock Options and Nonqualified
Stock Options, all in accordance with the terms and conditions set forth
herein. Incentive Stock Options may be granted only to Employees.
Nonqualified Stock Options may be granted to Employees, Non-Employee
Directors and Key Advisors.
(ii) The purchase price (the "Exercise Price") of Company Stock
subject to an Option shall be determined by the Committee and may be
equal to, greater than, or less than the Fair Market Value (as defined
below) of a share of such Stock on the date the Option is granted;
provided, however, that (x) the Exercise Price of an Incentive Stock
Option shall be equal to, or greater than, the Fair Market Value of a
share of Company Stock on the date the Incentive Stock Option is
granted, (y) an Incentive Stock Option may not be granted to an Employee
who, at the time of grant, owns stock possessing more than 10 percent of
the total combined voting power of all classes of stock of the Company
or any parent or subsidiary of the Company, unless the Exercise Price
per share is not less than 110% of the Fair Market Value of Company
Stock on the date of grant and (z) in no circumstances will the Exercise
Price be less than 90% of the per share price of a share of Company
Stock established in the stock placement transaction immediately
preceding such determination.
(iii) If Company Stock is publicly traded, then the Fair Market
Value per share shall be determined as follows: (x) if the principal
trading market for the Company Stock is a national securities exchange
or the Nasdaq National Market, the last reported sale price thereof on
the relevant date or, if there were no trades on that date, the latest
preceding date upon which a sale was reported, or (y) if the Company
Stock is not principally traded on such exchange or market, the mean
between the last reported "bid" and "asked" prices of Company Stock on
the relevant date, as reported on Nasdaq or, if not so reported, as
reported by the National Daily Quotation Bureau, Inc. or as reported in
a customary financial reporting service, as applicable and as the
Committee determines. If the Company Stock is not publicly traded or, if
publicly traded, not subject to reported transactions or "bid" or
"asked" quotations as set forth above, the Fair Market Value per share
shall be as determined by the Committee.
(c) Option Term. The Committee shall determine the term of each
Option, subject to approval of the Board with respect to Options granted to
Non-Employee Directors or members of the Committee. The term of any Option
shall not exceed ten years from the date of grant. However, an Incentive
Stock Option that is granted to an Employee who, at the time of grant, owns
stock possessing more than 10 percent
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of the total combined voting power of all classes of stock of the Company,
or any parent or subsidiary of the Company, may not have a term that
exceeds five years from the date of grant.
(d) Exercisability of Options. Options shall become exercisable in
accordance with such terms and conditions, consistent with the Plan, as may
be determined by the Committee and specified in the Grant Instrument or an
amendment to the Grant Instrument, subject to approval of the Board with
respect to Options granted to Non-Employee Directors or members of the
Committee. The Committee may accelerate the exercisability of any or all
outstanding Options at any time for any reason.
(e) Termination of Employment, Disability or Death.
(i) Except as provided below, an Option may only be exercised while
the Grantee is employed by, or providing service to, the Company as an
Employee, Key Advisor or member of the Board. In the event that a
Grantee ceases to be employed by, or provide service to, the Company for
any reason other than "disability," "death," or "termination for cause,"
any Option which is otherwise exercisable by the Grantee shall terminate
unless exercised within 90 days of the date on which the Grantee ceases
to be employed by, or provide service to, the Company (or within such
other period of time as may be specified by the Committee), but in any
event no later than the date of expiration of the Option term. Unless
otherwise specified by the Committee, any of the Grantee's Options that
are not otherwise exercisable as of the date on which the Grantee ceases
to be employed by the Company shall terminate as of such date.
(ii) In the event the Grantee ceases to be employed by, or provide
service to, the Company on account of a "termination for cause" by the
Company, any Option held by the Grantee shall terminate as of the date
the Grantee ceases to be employed by, or provide service to, the
Company.
(iii) In the event the Grantee ceases to be employed by, or provide
service to, the Company because the Grantee is "disabled," any Option
which is otherwise exercisable by the Grantee shall terminate unless
exercised within one year after the date on which the Grantee ceases to
be employed by, or provide service to, the Company (or within such other
period of time as may be specified by the Committee), but in any event
no later than the date of expiration of the Option term. Any of the
Grantee's Options which are not otherwise exercisable as of the date on
which the Grantee ceases to be employed by, or provide service to, the
Company shall terminate as of such date.
(iv) If the Grantee dies while employed by, or providing service
to, the Company or within 90 days after the date on which the Grantee
ceases to be employed, or provide service, on account of a termination
of employment or service specified in Section 5(e)(i) above (or within
such other period of time as may be specified by the Committee), any
Option that is otherwise exercisable by the Grantee shall terminate
unless exercised within one year after the date on which the Grantee
ceases to be employed by, or provide service to, the Company (or within
such other period of time as may be specified by the Committee), but in
any event no later than the date of expiration of the Option term. Any
of the Grantee's Options that are not otherwise exercisable as of the
date on which the
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Grantee ceases to be employed by, or provide service to, the Company
shall terminate as of such date.
(v) For purposes of this Section 5(e):
(A) The term "Company" shall mean the Company and its parent
and subsidiary corporations.
(B) "Employed by, or providing service to, the Company" shall
mean employment as an Employee or the provision of services to the
Company as a Key Advisor or member of the Board (so that, for
purposes of exercising Options, a Grantee shall not be considered
to have terminated employment or ceased to provide services until
the Grantee ceases to be an Employee, Key Advisor and member of the
Board).
(C) "Disability" shall mean a Grantee's becoming disabled
within the meaning of section 22(e)(3) of the Code.
(D) "Termination for cause" shall mean a finding by the
Committee that the Grantee has breached his or her employment or
service contract with the Company, or has been engaged in
disloyalty to the Company, including, without limitation, fraud,
embezzlement, theft, commission of a felony or proven dishonesty in
the course of his or her employment or service, or has disclosed
trade secrets or confidential information of the Company to persons
not entitled to receive such information. In the event a Grantee's
employment or service is terminated for cause, in addition to the
immediate termination of all Options, the Grantee shall
automatically forfeit all shares underlying any exercised portion
of an Option for which the Company has not yet delivered the share
certificates, upon refund by the Company of the Exercise Price paid
by the Grantee for such shares.
(f) Exercise of Options. A Grantee may exercise an Option that has
become exercisable, in whole or in part, by delivering a notice of exercise
to the Company with payment of the Exercise Price. The Grantee shall pay
the Exercise Price for an Option (i) in cash, (ii) by delivering shares of
Company Stock owned by the Grantee (including Company Stock acquired in
connection with the exercise of an Option, subject to such restrictions as
the Committee deems appropriate) and having a Fair Market Value on the date
of exercise equal to the Exercise Price or (iii) by such other method as
the Committee may approve, including payment through a broker in accordance
with procedures permitted by Regulation T of the Federal Reserve Board.
Shares of Company Stock used to exercise an Option shall have been held by
the Grantee for the requisite period of time to avoid adverse accounting
consequences to the Company with respect to the Option. The Grantee shall
pay the Exercise Price and the amount of any withholding tax due (pursuant
to Section 6) at the time of exercise. Shares of Company Stock shall not be
issued upon exercise of an Option until the Exercise Price is fully paid
and any required withholding is made.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option
shall provide that, if the aggregate Fair Market Value of the stock on the
date of the grant with respect to which Incentive Stock Options are
exercisable for the first time by a Grantee during any calendar year, under
the Plan or any other stock option plan of the Company or a parent or
subsidiary, exceeds $100,000, then the option, as to the excess, shall be
treated as a Nonqualified Stock Option. An Incentive Stock Option
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shall not be granted to any person who is not an Employee of the Company or
a parent or subsidiary (within the meaning of section 424(f) of the Code).
If and to the extent that an Option designated as an Incentive Stock Option
fails so to qualify under the Code, the Option shall remain outstanding
according to its terms as a Nonqualified Stock Option.
6. WITHHOLDING OF TAXES
(a) Required Withholding. All Options under the Plan shall be granted
subject to any applicable federal (including FICA), state and local tax
withholding requirements. The Company shall have the right to deduct from
wages paid to the Grantee any federal, state or local taxes required by law
to be withheld with respect to Options, or the Company may require the
Grantee or other person receiving such shares to pay to the Company the
amount of any such taxes that the Company is required to withhold.
(b) Election to Withhold Shares. If the Committee so permits, a
Grantee may elect to satisfy the Company's income tax withholding
obligation with respect to an Option by having shares withheld up to an
amount that does not exceed the Grantee's maximum marginal tax rate for
federal (including FICA), state and local tax liabilities. The election
must be in a form and manner prescribed by the Committee and shall be
subject to the prior approval of the Committee.
7. TRANSFERABILITY OF OPTIONS
(a) Except as provided below, only the Grantee or his or her
authorized representative may exercise rights under an Option. A Grantee
may not transfer those rights except by will or by the laws of descent and
distribution or, with respect to Nonqualified Options, if permitted in any
specific case by the Committee in its sole discretion, pursuant to a
qualified domestic relations order (as defined under the Code or Title I of
the Employee Retirement Income Security Act of 1974, as amended, or the
rules thereunder). When a Grantee dies, the representative or other person
entitled to succeed to the rights of the Grantee ("Successor Grantee") may
exercise such rights. A Successor Grantee must furnish proof satisfactory
to the Company of his or her right to receive the Grant under the Grantee's
will or under the applicable laws of descent and distribution.
(b) Notwithstanding the foregoing, the Committee may provide, in a
Grant Instrument, that a Grantee may transfer Nonqualified Stock Options to
family members or other persons or entities according to such terms as the
Committee may determine.
8. CHANGE OF CONTROL OF THE COMPANY
As used herein, a "Change of Control" shall be deemed to have occurred if:
(a) After the effective date of the Plan, any "person" (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 35% or
more of the voting power of the then outstanding securities of the Company,
except where the acquisition is approved by the Board;
(b) The shareholders of the Company approve (or, if shareholder
approval is not required, the Board approves) an agreement providing for
(i) the merger or
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consolidation of the Company with another corporation where the
shareholders of the Company, immediately prior to the merger or
consolidation, will not beneficially own, immediately after the merger or
consolidation, shares entitling such shareholders to a majority of all
votes to which all shareholders of the surviving corporation would be
entitled in the election of directors, or where the members of the Board,
immediately prior to the merger or consolidation, would not, immediately
after the merger or consolidation, constitute a majority of the board of
directors of the surviving corporation, (ii) a sale or other disposition of
all or substantially all of the assets of the Company, or (iii) a
liquidation or dissolution of the Company;
(c) Any person has commenced a tender offer or exchange offer for 35%
or more of the voting power of the then outstanding shares of the Company;
or
(d) After this Plan is approved by the shareholders of the Company,
directors are elected such that a majority of the members of the Board
shall have been members of the Board for less than two years, unless the
election or nomination for election of each new director who was not a
director at the beginning of such two-year period was approved by a vote of
at least two-thirds of the directors then still in office who were
directors at the beginning of such period.
9. CONSEQUENCES OF A CHANGE OF CONTROL
(a) Upon a Change of Control, unless the Committee determines
otherwise, (i) the Company shall provide each Grantee with outstanding
Options written notice of such Change of Control and (ii) all outstanding
Options shall automatically accelerate and become fully exercisable.
(b) In addition, upon a Change of Control described in Section 8(b)(i)
where the Company is not the surviving corporation (or survives only as a
subsidiary of another corporation), unless the Committee determines
otherwise, all outstanding Options that are not exercised shall be assumed
by, or replaced with comparable options by, the surviving corporation. Any
replacement options shall entitle the Grantee to receive the same amount
and type of securities as the Grantee would have received as a result of
the Change of Control had the Grantee exercised the Options immediately
prior to the Change of Control.
(c) Notwithstanding the foregoing, in the event of a Change of
Control, the Committee may require that Grantees surrender their
outstanding Options in exchange for a payment by the Company, in cash or
Company Stock as determined by the Committee, in an amount equal to the
amount by which the then Fair Market Value of the shares of Company Stock
subject to the Grantee's outstanding Options exceeds the Exercise Price of
the Options.
(d) Notwithstanding anything in the Plan to the contrary, in the event
of a Change of Control, the Committee shall not have the right to take any
actions described in the Plan (including without limitation actions
described in Subsection (c) above) that would make the Change of Control
ineligible for pooling of interest accounting treatment or that would make
the Change of Control ineligible for desired tax treatment if, in the
absence of such right, the Change of Control would qualify for such
treatment and the Company intends to use such treatment with respect to the
Change of Control.
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10. AMENDMENT AND TERMINATION OF THE PLAN
(a) Amendment. The Board may amend or terminate the Plan at any time;
provided, however, that if the Company Stock becomes publicly traded, the
Board shall not amend the Plan without shareholder approval if such
approval is required by Section 162(m) of the Code and if Section 162(m) is
applicable to the Plan; and provided further that the Board cannot increase
the number of shares that may be issued under the Plan without the approval
of the shareholders.
(b) Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date unless
terminated earlier by the Board or unless extended by the Board with the
approval of the shareholders.
(c) Termination and Amendment of Outstanding Options. A termination
or amendment of the Plan that occurs after an Option is granted shall not
materially impair the rights of a Grantee unless the Grantee consents or
unless the Committee acts under Section 17(b). The termination of the Plan
shall not impair the power and authority of the Committee with respect to
an outstanding Option. Whether or not the Plan has terminated, an
outstanding Option may be terminated or modified under Sections 9 and 17(b)
or may be amended by agreement of the Company and the Grantee consistent
with the Plan.
(d) Governing Document. The Plan shall be the controlling document.
No other statements, representations, explanatory materials or examples,
oral or written, may amend the Plan in any manner. The Plan shall be
binding upon and enforceable against the Company and its successors and
assigns.
11. FUNDING OF THE PLAN
This Plan shall be unfunded. The Company shall not be required to establish
any special or separate fund or to make any other segregation of assets to
assure the payment of any Options under this Plan. In no event shall interest be
paid or accrued on any Options.
12. RIGHTS OF PARTICIPANTS
Nothing in this Plan shall entitle any Employee, Key Advisor or other
person to any claim or right to be granted an Option under this Plan. Neither
this Plan nor any action taken hereunder shall be construed as giving any
individual any rights to be retained by or in the employ of the Company or any
other employment rights.
13. NO FRACTIONAL SHARES
No fractional shares of Company Stock shall be issued or delivered pursuant
to the Plan or any Option. The Committee shall determine whether cash, other
awards or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
14. REQUIREMENTS FOR ISSUANCE OF SHARES
No Company Stock shall be issued or transferred in connection with any
Option hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Option granted to any Grantee hereunder on such Grantee's undertaking in
writing to comply with such restrictions on his or her
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subsequent disposition of such shares of Company Stock as the Committee shall
deem necessary or advisable as a result of any applicable law, regulation or
official interpretation thereof and certificates representing such shares may be
legended to reflect any such restrictions. Certificates representing shares of
Company Stock issued under the Plan will be subject to such stop-transfer orders
and other restrictions as may be applicable under such laws, regulations and
interpretations, including any requirement that a legend or legends be placed
thereon.
15. HEADINGS
Section headings are for reference only. In the event of a conflict between
a title and the content of a Section, the content of the Section shall control.
16. EFFECTIVE DATE OF THE PLAN.
Subject to the approval of the Company's shareholders, this Plan shall be
effective on November 21, 1997.
17. MISCELLANEOUS
(a) Options in Connection with Corporate Transactions and
Otherwise. Nothing contained in this Plan shall be construed to (i) limit
the right of the Committee to grant Options under this Plan in connection
with the acquisition, by purchase, lease, merger, consolidation or
otherwise, of the business or assets of any corporation, firm or
association, including options granted to employees thereof who become
Employees of the Company, or for other proper corporate purpose, or (ii)
limit the right of the Company to grant stock options or make other awards
outside of this Plan. Without limiting the foregoing, the Committee may
grant Options to an employee of another corporation who becomes an Employee
by reason of a corporate merger, consolidation, acquisition of stock or
property, reorganization or liquidation involving the Company or any of its
subsidiaries in substitution for a stock option or restricted stock grant
made by such corporation. The Committee shall prescribe the provisions of
the substitute Options.
(b) Compliance with Law. The Plan, the grant and exercise of Options,
and the obligations of the Company to issue or transfer shares of Company
Stock under Options shall be subject to all applicable laws and to
approvals by any governmental or regulatory agency as may be required. The
Committee may revoke any Grant if it is contrary to law or modify a Grant
to bring it into compliance with any valid and mandatory government
regulation. The Committee may also adopt rules regarding the withholding of
taxes on payments to Grantees. The Committee may, in its sole discretion,
agree to limit its authority under this Section.
(c) Ownership of Stock. A Grantee or Successor Grantee shall have no
rights as a shareholder with respect to any shares of Company Stock covered
by an Option until the shares are issued or transferred to the Grantee or
Successor Grantee on the stock transfer records of the Company.
(d) Governing Law. The validity, construction, interpretation and
effect of the Plan and Grant Instruments issued under the Plan shall
exclusively be governed by and determined in accordance with the law of the
State of Tennessee.
I-9
<PAGE> 335
ADOPTED: The original Plan was adopted by the Board of Directors on
November 21, 1997, and approved by the Shareholders on December 8, 1997.
AMENDED: This amendment and restatement of the Plan was approved and
adopted by the Board of Directors on October 25, 1999.*
- -------------------------
* Amended to increase the number of shares reserved under the Plan from
1,998,559 to 2,998,559 which amendment will be submitted to the Company's
shareholders for approval at the Company's Annual Shareholders Meeting in 2000.
NOTE: References to number of shares reserved under the Plan reflect a
0.34009-for-1 reverse stock split effected on August 4, 1999.
I-10
<PAGE> 336
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware Law permits a corporation to indemnify any of
its directors, officers, employees or agents who was or is a party, or is
threatened to be made a party to any third party proceeding by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or firm, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding, if such person acted in good faith and in a
manner such person reasonably believed to be in and not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reason to believe that such person's conduct was unlawful. In
a derivative action, i.e., one by or in the right a corporation, the corporation
is permitted to indemnify any of its directors, officers, employees or agents
against expenses (including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of an action or suit if
the person acted in good faith and in a manner that he or she reasonably
believed to be in or not opposed to the best interests of the corporation,
except that no indemnification shall be made if such person shall have been
adjudged liable to the corporation, unless and only to the extent that the court
in which the action or suit was brought shall determine upon application that
such person is fairly and reasonably entitled to indemnity for such expenses
despite the adjudication of liability. The bamboo.com certificate of
incorporation and bylaws provide for indemnification of directors, officers,
employees or agents for any liability incurred in their official capacity to the
fullest extent permissible under Delaware Law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) List of Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C> <C>
2.1 -- Agreement and Plan of Merger dated as of October 25, 1999
among bamboo.com, IPIX and merger sub (included as Annex A
to the joint proxy statement/prospectus contained in this
Registration Statement).
2.2 -- Stock Option Agreements dated as of October 25, 1999 between
bamboo.com and IPIX (included as Annex B and Annex C to the
joint proxy statement/prospectus contained in this
Registration Statement).
3.1 -- Restated Certificate of Incorporation of bamboo.com
(incorporated herein by reference to Form S-1 as declared
effective on August 25, 1999 (File No. 333-80639)).
3.2 -- Restated Bylaws of bamboo.com (incorporated herein by
reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
</TABLE>
II-1
<PAGE> 337
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C> <C>
4.1 -- Specimen Common Stock Certificate (incorporated herein by
reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
4.2 -- Investors' Rights Agreement dated as of March 12, 1999 by
and between bamboo.com and certain investors (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)).
5.1 -- Opinion of Davis Polk & Wardwell regarding the validity of
the securities being registered.
8.1 -- Opinion of Davis Polk & Wardwell regarding certain federal
income tax consequences relating to the merger.
8.2 -- Opinion of Baker, Donelson, Bearman & Caldwell regarding
certain federal income tax consequences relating to the
merger.
10.1 -- Form of Indemnification Agreement between the Registrant and
each of its directors and officers (incorporated herein by
reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.2 -- [Reserved]
10.3 -- Amended and Restated 1998 Employee, Director and Consultant
Stock Plan (included as Annex H to the joint proxy
statement/prospectus contained in this Registration
Statement)).
10.4 -- 1999 Employee Stock Purchase Plan (included as Annex G to
the joint proxy statement/prospectus contained in this
Registration Statement).
10.5 -- [Reserved]
10.6 -- Joint Services Agreement with RealSelect, Inc. dated as of
Nov. 11, 1998, as amended June 11, 1999 (incorporated herein
by reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.7 -- Distribution Agreement with Microsoft Corporation dated as
of March 16, 1999 (incorporated herein by reference to Form
S-1 as declared effective on August 25, 1999 (File No.
333-80639)).
10.8 -- Distribution Agreement with HomeSeekers.com, Inc. dated as
of Nov. 20, 1998 (incorporated herein by reference to Form
S-1 as declared effective on August 25, 1999 (File No.
333-80639)).
10.9 -- Distribution Agreement with Homes.com, a division of PCL
Media Limited, dated as of May 10, 1999 (incorporated herein
by reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.10 -- Form of bamboo.com Approved Web Pro Agreement (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)).
10.11 -- Line of Credit with Silicon Valley Bank dated April 16, 1999
(incorporated herein by reference to Form S-1 as declared
effective on August 25, 1999 (File No. 333-80639)).
10.12 -- Master lease agreement with Silicon Valley Bank dated March
24, 1999 (incorporated herein by reference to Form S-1 as
declared effective on August 25, 1999 (File No. 333-80639)).
</TABLE>
II-2
<PAGE> 338
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C> <C>
10.13 -- Sublease with Pete's Brewing Company dated November 2, 1998
(incorporated herein by reference to Form S-1 as declared
effective on August 25, 1999 (File No. 333-80639)).
10.14 -- Sublease with Pete's Brewing Company dated December 1, 1998
(incorporated herein by reference to Form S-1 as declared
effective on August 25, 1999 (File No. 333-80639)).
10.15 -- Sublease with Information Access Inc. dated Nov. 15, 1998,
and amendment dated Feb. 22, 1999 (incorporated herein by
reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.16 -- Service Provider Agreement with TBI Imaging dated Nov. 23,
1998 (also form of) (incorporated herein by reference to
Form S-1 as declared effective on August 25, 1999 (File No.
333-80639)).
10.17 -- Employment Agreement with Leonard B. McCurdy (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)), as amended on October
15, 1999 (which amendment is hereby incorporated by
reference bamboo.com's quarterly report on Form 10Q filed on
November 15, 1999).
10.18 -- Employment Agreement with Kevin B. McCurdy (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)), as amended on October
15, 1999 (which amendment is hereby incorporated by
reference bamboo.com's quarterly report on Form 10Q filed on
November 15, 1999).
10.19 -- Employment Agreement with Andrew P. Laszlo (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)), as amended on October
15, 1999 (which amendment is hereby incorporated by
reference bamboo.com's quarterly report on Form 10Q filed on
November 15, 1999).
10.20 -- Employment Agreement with Howard D. Field (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)), as amended on October
15, 1999 (which amendment is hereby incorporated by
reference bamboo.com's quarterly report on Form 10Q filed on
November 15, 1999).
10.21 -- Amended and Restated Employment Agreement with Mark R.
Searle dated June 1, 1999 (incorporated herein by reference
to Form S-1 as declared effective on August 25, 1999 (File
No. 333-80639)), as amended on October 15, 1999 (which
amendment is hereby incorporated by reference bamboo.com's
quarterly report on Form 10Q filed on November 15, 1999).
10.22 -- Employment Agreement with Randall I. Bresee (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)), as amended on October
15, 1999 (which amendment is hereby incorporated by
reference bamboo.com's quarterly report on Form 10Q filed on
November 15, 1999).
10.23 -- Employment Agreement with Andrew J. Aicklen (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639))
</TABLE>
II-3
<PAGE> 339
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C> <C>
10.24 -- Sublease with Transmode Consultants Inc./Traxis Inc. dated
May 27, 1999 (incorporated herein by reference to Form S-1
as declared effective on August 25, 1999 (File No.
333-80639)).
10.25 -- Distribution and Co-Marketing Agreement with The Equity
Group dated May 5, 1999 (incorporated herein by reference to
Form S-1 as declared effective on August 25, 1999 (File No.
333-80639)).
10.25 -- Distribution and Co-Marketing Agreement with Northside
Realty dated June 3, 1999 (incorporated herein by reference
to Form S-1 as declared effective on August 25, 1999 (File
No. 333-80639)).
10.27 -- Distribution and Co-Marketing Agreement with Carlson Real
Estate dated May 19, 1999 (incorporated herein by reference
to Form S-1 as declared effective on August 25, 1999 (File
No. 333-80639)).
10.28 -- Sales and Co-Marketing Agreement with Metropolitan Regional
Information Systems, Inc. dated June 9, 1999 (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)).
10.29 -- Distribution and Co-Marketing Agreement with Sudler/Beliard
Gordon dated May 28, 1999 (incorporated herein by reference
to Form S-1 as declared effective on August 25, 1999 (File
No. 333-80639)).
10.30 -- Distribution and Co-Marketing Agreement with Keller Williams
Southwest Region dated May 25, 1999 (incorporated herein by
reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.31 -- Distribution and Co-Marketing Agreement with Pacific Union
Real Estate Group, Inc. dated June 9, 1999 (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)).
10.32 -- Services Agreement with The Prudential Real Estate
Affiliates, Inc. dated June 8, 1999 (incorporated herein by
reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.33 -- Non-Exclusive Distribution Agreement with Multiple Listing
Service of Northern Illinois dated May 26, 1999
(incorporated herein by reference to Form S-1 as declared
effective on August 25, 1999 (File No. 333-80639)).
10.34 -- Distribution and Co-Marketing Agreement with Keller Williams
Fox & Associates dated June 10, 1999 (incorporated herein by
reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.35 -- Distribution Agreement with Toronto Real Estate Board dated
April 14, 1999 (incorporated herein by reference to Form S-1
as declared effective on August 25, 1999 (File No.
333-80639)).
10.36 -- Distribution and Co-Marketing Agreement with John L. Scott,
Inc. dated April 7, 1999 (incorporated herein by reference
to Form S-1 as declared effective on August 25, 1999 (File
No. 333-80639)).
10.37 -- Distribution Agreement with Windermere Real Estate Services
Company dated March 17, 1999 (incorporated herein by
reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.38 -- Distribution Agreement with St. Joe Real Estate Services,
Inc., d/b/a Arvida Realty Services dated March 5, 1999
(incorporated herein by reference to Form S-1 as declared
effective on August 25, 1999 (File No. 333-80639)).
</TABLE>
II-4
<PAGE> 340
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C> <C>
10.39 -- Distribution Agreement with GTE Enterprise Solutions dated
January 12, 1999 as amended January 19, 1999 (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)).
10.40 -- Agreement with Loop Ventures, Inc. dated Nov. 6, 1998
(incorporated herein by reference to Form S-1 as declared
effective on August 25, 1999 (File No. 333-80639)).
10.41 -- Access Agreement with Cendant Corporation dated July 15,
1999 (incorporated herein by reference to Form S-1 as
declared effective on August 25, 1999 (File No. 333-80639)).
10.42 -- RE/MAX Approved Supplier License Agreement with RE/MAX
International, Inc. dated April 5, 1999 (incorporated herein
by reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.43 -- Distribution Agreement with State-Wide Multiple Listings
Service, Inc. dated May 27, 1999 (incorporated herein by
reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.44 -- Distribution Agreement with Metrolist, Inc. dated March 16,
1999 (incorporated herein by reference to Form S-1 as
declared effective on August 25, 1999 (File No. 333-80639)).
10.45 -- Strategic Alliance Agreement with Data Management Services,
a division of Moore North America, Inc. dated July 27, 1999
(incorporated herein by reference to Form S-1 as declared
effective on August 25, 1999 (File No. 333-80639)).
10.46 -- Executive Employment Agreement dated January 24, 1997,
between IPIX and James M. Phillips, as amended (incorporated
herein by reference to IPIX's Form S-1 as declared effective
on August 4, 1999 (File No. 333-78983)).
10.47 -- Employment and Noncompetition Agreement dated June 20, 1997,
between IPIX and John M. Murphy (incorporated herein by
reference to IPIX's Form S-1 as declared effective on August
4, 1999 (File No. 333-78983)).
10.48 -- Employment and Noncompetition Agreement dated August 17,
1998, between IPIX and Jeffrey D. Peters (incorporated
herein by reference to IPIX's Form S-1 as declared effective
on August 4, 1999 (File No. 333-78983)).
10.49 -- Employment and Noncompetition Agreement dated August 24,
1998, between IPIX and John J. Kalec (incorporated herein by
reference to IPIX's Form S-1 as declared effective on August
4, 1999 (File No. 333-78983)).
10.50 -- Employment Agreement dated June 23, 1997, between IPIX and
Steven D. Zimmermann (incorporated herein by reference to
IPIX's Form S-1 as declared effective on August 4, 1999
(File No. 333-78983)).
10.51 -- License Agreement dated January 17, 1997, between IPIX and
Discovery Communications, Inc (incorporated herein by
reference to IPIX's Form S-1 as declared effective on August
4, 1999 (File No. 333-78983)).
10.52 -- Patent License Agreement dated January 17, 1997, between
IPIX and Motorola, Inc (incorporated herein by reference to
IPIX's Form S-1 as declared effective on August 4, 1999
(File No. 333-78983)).
10.53 -- 1997 Equity Compensation Plan (included as Annex I to the
joint proxy statement/prospectus contained in this
Registration Statement)).
</TABLE>
II-5
<PAGE> 341
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C> <C>
10.54 -- Marketing Agreement dated March 22, 1999, between IPIX and
GE Capital Equity Investments, Inc (incorporated herein by
reference to IPIX's Form S-1 as declared effective on August
4, 1999 (File No. 333-78983)).
10.55 -- Warrant Agreement dated March 22, 1999, between IPIX and GE
Capital Equity Investments, Inc. (incorporated herein by
reference to IPIX's Form S-1 as declared effective on August
4, 1999 (File No. 333-78983)).
10.56 -- Employment Agreement with John Assaraf dated as of January
25, 1999 and amended as of October 22, 1999 (incorporated
herein by reference to Form 10-Q filed November 15, 1999).
21.1 -- Subsidiaries of the Registrant (incorporated herein by
reference to Form S-1 as declared effective on August 26,
1999 (File No. 333-80639)).
23.1 -- Consent of PricewaterhouseCoopers on behalf of bamboo.com.
23.2 -- Consent of PricewaterhouseCoopers on behalf of IPIX.
23.3 -- Consent of Davis Polk & Wardwell (included in the opinion
filed as Exhibit 8.1 to this Registration Statement).
23.4 -- Consent of Baker, Donelson, Bearman & Caldwell (included in
the opinion filed as Exhibit 8.2 to this Registration
Statement).
23.5 -- Consent of BancBoston Robertson Stephens Inc.
23.6 -- Consent of J.P. Morgan Securities Inc.
24.1 -- Power of Attorney.
27.1 -- Financial Data Schedule for bamboo.com (for SEC use only).
27.2 -- Financial Data Schedule for IPIX (for SEC use only).
99.1 -- Form of bamboo.com Proxy Card.
99.2 -- Form of IPIX Proxy Card.
</TABLE>
(b) Not applicable.
(c) The opinions of BancBoston Robertson Stephens and J.P. Morgan
Securities Inc. are included as Annex D and Annex E, respectively, to the joint
proxy statement/ prospectus contained in this Registration Statement.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the registration
II-6
<PAGE> 342
statement and will not be used until such amendment is effective, and that,
for purposes of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall deemed to be the initial bona fide
offering thereof.
(3) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(4) To respond to requests for information that is incorporated by
reference into the joint proxy statement/prospectus pursuant to Item 4,
10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and bamboo.com being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-7
<PAGE> 343
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-4
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Palo Alto, State of California, on December 16, 1999.
bamboo.com
(Registrant)
By: /s/ RANDALL I. BRESEE
-----------------------------------
Name: Randall I. Bresee
Title: Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chief Executive December 16, 1999
- ------------------------------------------------ Officer, Chairman
Leonard B. McCurdy and Director
* Executive Vice December 16, 1999
- ------------------------------------------------ President and
Kevin B. McCurdy Director
* Chief Financial December 16, 1999
- ------------------------------------------------ Officer
Randall I. Bresee
* Director December 16, 1999
- ------------------------------------------------
Duncan Fortier
* Director December 16, 1999
- ------------------------------------------------
John Moragne
* Director December 16, 1999
- ------------------------------------------------
Phillip Sanderson
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C>
*By: /s/ RANDALL I. BRESEE Chief Financial December 16, 1999
------------------------------------------ Officer
Randall I. Bresee
Attorney-In-Fact
</TABLE>
II-8
<PAGE> 344
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C> <C>
2.1 -- Agreement and Plan of Merger dated as of October 25, 1999
among bamboo.com, IPIX and merger sub (included as Annex A
to the joint proxy statement/prospectus contained in this
Registration Statement).
2.2 -- Stock Option Agreements dated as of October 25, 1999 between
bamboo.com and IPIX (included as Annex B and Annex C to the
joint proxy statement/prospectus contained in this
Registration Statement).
3.1 -- Restated Certificate of Incorporation of bamboo.com
(incorporated herein by reference to Form S-1 as declared
effective on August 25, 1999 (File No. 333-80639)).
3.2 -- Restated Bylaws of bamboo.com (incorporated herein by
reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
4.1 -- Specimen Common Stock Certificate (incorporated herein by
reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
4.2 -- Investors' Rights Agreement dated as of March 12, 1999 by
and between bamboo.com and certain investors (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)).
5.1 -- Opinion of Davis Polk & Wardwell regarding the validity of
the securities being registered.
8.1 -- Opinion of Davis Polk & Wardwell regarding certain federal
income tax consequences relating to the merger.
8.2 -- Opinion of Baker, Donelson, Bearman & Caldwell regarding
certain federal income tax consequences relating to the
merger.
10.1 -- Form of Indemnification Agreement between the Registrant and
each of its directors and officers (incorporated herein by
reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.2 -- [Reserved]
10.3 -- Amended and Restated 1998 Employee, Director and Consultant
Stock Plan (included as Annex H to the joint proxy
statement/prospectus contained in this Registration
Statement)).
10.4 -- 1999 Employee Stock Purchase Plan (included as Annex G to
the joint proxy statement/prospectus contained in this
Registration Statement).
10.5 -- [Reserved]
10.6 -- Joint Services Agreement with RealSelect, Inc. dated as of
Nov. 11, 1998, as amended June 11, 1999 (incorporated herein
by reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.7 -- Distribution Agreement with Microsoft Corporation dated as
of March 16, 1999 (incorporated herein by reference to Form
S-1 as declared effective on August 25, 1999 (File No.
333-80639)).
10.8 -- Distribution Agreement with HomeSeekers.com, Inc. dated as
of Nov. 20, 1998 (incorporated herein by reference to Form
S-1 as declared effective on August 25, 1999 (File No.
333-80639)).
</TABLE>
II-9
<PAGE> 345
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C> <C>
10.9 -- Distribution Agreement with Homes.com, a division of PCL
Media Limited, dated as of May 10, 1999 (incorporated herein
by reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.10 -- Form of bamboo.com Approved Web Pro Agreement (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)).
10.11 -- Line of Credit with Silicon Valley Bank dated April 16, 1999
(incorporated herein by reference to Form S-1 as declared
effective on August 25, 1999 (File No. 333-80639)).
10.12 -- Master lease agreement with Silicon Valley Bank dated March
24, 1999 (incorporated herein by reference to Form S-1 as
declared effective on August 25, 1999 (File No. 333-80639)).
10.13 -- Sublease with Pete's Brewing Company dated November 2, 1998
(incorporated herein by reference to Form S-1 as declared
effective on August 25, 1999 (File No. 333-80639)).
10.14 -- Sublease with Pete's Brewing Company dated December 1, 1998
(incorporated herein by reference to Form S-1 as declared
effective on August 25, 1999 (File No. 333-80639)).
10.15 -- Sublease with Information Access Inc. dated Nov. 15, 1998,
and amendment dated Feb. 22, 1999 (incorporated herein by
reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.16 -- Service Provider Agreement with TBI Imaging dated Nov. 23,
1998 (also form of) (incorporated herein by reference to
Form S-1 as declared effective on August 25, 1999 (File No.
333-80639)).
10.17 -- Employment Agreement with Leonard B. McCurdy (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)), as amended on October
15, 1999 (which amendment is hereby incorporated by
reference bamboo.com's quarterly report on Form 10Q filed on
November 15, 1999).
10.18 -- Employment Agreement with Kevin B. McCurdy (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)), as amended on October
15, 1999 (which amendment is hereby incorporated by
reference bamboo.com's quarterly report on Form 10Q filed on
November 15, 1999).
10.19 -- Employment Agreement with Andrew P. Laszlo (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)), as amended on October
15, 1999 (which amendment is hereby incorporated by
reference bamboo.com's quarterly report on Form 10Q filed on
November 15, 1999).
10.20 -- Employment Agreement with Howard D. Field (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)), as amended on October
15, 1999 (which amendment is hereby incorporated by
reference bamboo.com's quarterly report on Form 10Q filed on
November 15, 1999).
</TABLE>
II-10
<PAGE> 346
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C> <C>
10.21 -- Amended and Restated Employment Agreement with Mark R.
Searle dated June 1, 1999 (incorporated herein by reference
to Form S-1 as declared effective on August 25, 1999 (File
No. 333-80639)), as amended on October 15, 1999 (which
amendment is hereby incorporated by reference bamboo.com's
quarterly report on Form 10Q filed on November 15, 1999).
10.22 -- Employment Agreement with Randall I. Bresee (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)), as amended on October
15, 1999 (which amendment is hereby incorporated by
reference bamboo.com's quarterly report on Form 10Q filed on
November 15, 1999).
10.23 -- Employment Agreement with Andrew J. Aicklen (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)).
10.24 -- Sublease with Transmode Consultants Inc./Traxis Inc. dated
May 27, 1999 (incorporated herein by reference to Form S-1
as declared effective on August 25, 1999 (File No.
333-80639)).
10.25 -- Distribution and Co-Marketing Agreement with The Equity
Group dated May 5, 1999 (incorporated herein by reference to
Form S-1 as declared effective on August 25, 1999 (File No.
333-80639)).
10.25 -- Distribution and Co-Marketing Agreement with Northside
Realty dated June 3, 1999 (incorporated herein by reference
to Form S-1 as declared effective on August 25, 1999 (File
No. 333-80639)).
10.27 -- Distribution and Co-Marketing Agreement with Carlson Real
Estate dated May 19, 1999 (incorporated herein by reference
to Form S-1 as declared effective on August 25, 1999 (File
No. 333-80639)).
10.28 -- Sales and Co-Marketing Agreement with Metropolitan Regional
Information Systems, Inc. dated June 9, 1999 (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)).
10.29 -- Distribution and Co-Marketing Agreement with Sudler/Beliard
Gordon dated May 28, 1999 (incorporated herein by reference
to Form S-1 as declared effective on August 25, 1999 (File
No. 333-80639)).
10.30 -- Distribution and Co-Marketing Agreement with Keller Williams
Southwest Region dated May 25, 1999 (incorporated herein by
reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.31 -- Distribution and Co-Marketing Agreement with Pacific Union
Real Estate Group, Inc. dated June 9, 1999 (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)).
10.32 -- Services Agreement with The Prudential Real Estate
Affiliates, Inc. dated June 8, 1999 (incorporated herein by
reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.33 -- Non-Exclusive Distribution Agreement with Multiple Listing
Service of Northern Illinois dated May 26, 1999
(incorporated herein by reference to Form S-1 as declared
effective on August 25, 1999 (File No. 333-80639)).
10.34 -- Distribution and Co-Marketing Agreement with Keller Williams
Fox & Associates dated June 10, 1999 (incorporated herein by
reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
</TABLE>
II-11
<PAGE> 347
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C> <C>
10.35 -- Distribution Agreement with Toronto Real Estate Board dated
April 14, 1999 (incorporated herein by reference to Form S-1
as declared effective on August 25, 1999 (File No.
333-80639)).
10.36 -- Distribution and Co-Marketing Agreement with John L. Scott,
Inc. dated April 7, 1999 (incorporated herein by reference
to Form S-1 as declared effective on August 25, 1999 (File
No. 333-80639)).
10.37 -- Distribution Agreement with Windermere Real Estate Services
Company dated March 17, 1999 (incorporated herein by
reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.38 -- Distribution Agreement with St. Joe Real Estate Services,
Inc., d/b/a Arvida Realty Services dated March 5, 1999
(incorporated herein by reference to Form S-1 as declared
effective on August 25, 1999 (File No. 333-80639)).
10.39 -- Distribution Agreement with GTE Enterprise Solutions dated
January 12, 1999 as amended January 19, 1999 (incorporated
herein by reference to Form S-1 as declared effective on
August 25, 1999 (File No. 333-80639)).
10.40 -- Agreement with Loop Ventures, Inc. dated Nov. 6, 1998
(incorporated herein by reference to Form S-1 as declared
effective on August 25, 1999 (File No. 333-80639)).
10.41 -- Access Agreement with Cendant Corporation dated July 15,
1999 (incorporated herein by reference to Form S-1 as
declared effective on August 25, 1999 (File No. 333-80639)).
10.42 -- RE/MAX Approved Supplier License Agreement with RE/MAX
International, Inc. dated April 5, 1999 (incorporated herein
by reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.43 -- Distribution Agreement with State-Wide Multiple Listings
Service, Inc. dated May 27, 1999 (incorporated herein by
reference to Form S-1 as declared effective on August 25,
1999 (File No. 333-80639)).
10.44 -- Distribution Agreement with Metrolist, Inc. dated March 16,
1999 (incorporated herein by reference to Form S-1 as
declared effective on August 25, 1999 (File No. 333-80639)).
10.45 -- Strategic Alliance Agreement with Data Management Services,
a division of Moore North America, Inc. dated July 27, 1999
(incorporated herein by reference to Form S-1 as declared
effective on August 25, 1999 (File No. 333-80639)).
10.46 -- Executive Employment Agreement dated January 24, 1997,
between IPIX and James M. Phillips, as amended (incorporated
herein by reference to IPIX's Form S-1 as declared effective
on August 4, 1999 (File No. 333-78983)).
10.47 -- Employment and Noncompetition Agreement dated June 20, 1997,
between IPIX and John M. Murphy (incorporated herein by
reference to IPIX's Form S-1 as declared effective on August
4, 1999 (File No. 333-78983)).
10.48 -- Employment and Noncompetition Agreement dated August 17,
1998, between IPIX and Jeffrey D. Peters (incorporated
herein by reference to IPIX's Form S-1 as declared effective
on August 4, 1999 (File No. 333-78983)).
</TABLE>
II-12
<PAGE> 348
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<C> <S> <C> <C>
10.49 -- Employment and Noncompetition Agreement dated August 24,
1998, between IPIX and John J. Kalec (incorporated herein by
reference to IPIX's Form S-1 as declared effective on August
4, 1999 (File No. 333-78983)).
10.50 -- Employment Agreement dated June 23, 1997, between IPIX and
Steven D. Zimmermann (incorporated herein by reference to
IPIX's Form S-1 as declared effective on August 4, 1999
(File No. 333-78983)).
10.51 -- License Agreement dated January 17, 1997, between IPIX and
Discovery Communications, Inc (incorporated herein by
reference to IPIX's Form S-1 as declared effective on August
4, 1999 (File No. 333-78983)).
10.52 -- Patent License Agreement dated January 17, 1997, between
IPIX and Motorola, Inc (incorporated herein by reference to
IPIX's Form S-1 as declared effective on August 4, 1999
(File No. 333-78983)).
10.53 -- 1997 Equity Compensation Plan (included as Annex I to the
joint proxy statement/prospectus contained in this
Registration Statement)).
10.54 -- Marketing Agreement dated March 22, 1999, between IPIX and
GE Capital Equity Investments, Inc (incorporated herein by
reference to IPIX's Form S-1 as declared effective on August
4, 1999 (File No. 333-78983)).
10.55 -- Warrant Agreement dated March 22, 1999, between IPIX and GE
Capital Equity Investments, Inc. (incorporated herein by
reference to IPIX's Form S-1 as declared effective on August
4, 1999 (File No. 333-78983)).
10.56 -- Employment Agreement with John Assaraf dated as of January
25, 1999 and amended as of October 22, 1999 (incorporated
herein by reference to Form 10-Q filed November 15, 1999).
21.1 -- Subsidiaries of the Registrant (incorporated herein by
reference to Form S-1 as declared effective on August 26,
1999 (File No. 333-80639)).
23.1 -- Consent of PricewaterhouseCoopers on behalf of bamboo.com.
23.2 -- Consent of PricewaterhouseCoopers on behalf of IPIX.
23.3 -- Consent of Davis Polk & Wardwell (included in the opinion
filed as Exhibit 8.1 to this Registration Statement).
23.4 -- Consent of Baker, Donelson, Bearman & Caldwell (included in
the opinion filed as Exhibit 8.2 to this Registration
Statement).
23.5 -- Consent of BancBoston Robertson Stephens Inc.
23.6 -- Consent of J.P. Morgan Securities Inc.
24.1 -- Power of Attorney.
27.1 -- Financial Data Schedule for bamboo.com (for SEC use only).
27.2 -- Financial Data Schedule for IPIX (for SEC use only).
99.1 -- Form of bamboo.com Proxy Card.
99.2 -- Form of IPIX Proxy Card.
</TABLE>
II-13
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF DAVIS POLK & WARDWELL]
November 17, 1999
bamboo.com
124 University Avenue
Palo Alto, CA 94301
Ladies and Gentlemen:
We have acted as special counsel to bamboo.com (the "Company") in
connection with bamboo.com's registration of an aggregate of 24,763,830
shares of common stock (the "Common Shares") to be issued in exchange for IPIX
Corporation ("IPIX") common stock pursuant to a merger agreement among
bamboo.com, IPIX and merger sub, dated October 25, 1999.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments as we have deemed
necessary or advisable for the purpose of rendering this opinion.
Upon the basis of the foregoing, assuming that bamboo.com's
shareholders have approved the issuance of the Common Shares, we are of the
opinion that the Common Shares will have been duly authorized and, upon
issuance, will be validly issued, fully paid and non-assessable.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York and the General
Corporation Law of the State of Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Common Shares. We also consent to the
reference to us under the caption "Legal Matters" in the Prospectus contained
in such Registration Statement.
<PAGE> 2
This opinion is rendered to you in connection with the above matter.
This opinion may not be relied upon by you for any other purpose.
Very truly yours,
/s/ Davis Polk & Wardwell
-----------------------------
Davis Polk & Wardwell
<PAGE> 1
EXHIBIT 8.1
[LETTERHEAD OF DAVIS POLK & WARDWELL]
November 17, 1999
Re: REGISTRATION STATEMENT ON FORM S-4
bamboo.com, Inc.
124 University Avenue
Palo Alto, California 94301
Ladies and Gentlemen:
We have acted as counsel for bamboo.com.com, Inc. ("BAMBOO.COM"), a
Delaware corporation, in connection with (i) the Merger, as defined and
described in the Agreement and Plan of Merger dated as of October 25, 1999 (the
"MERGER AGREEMENT") among Interactive Pictures Corporation ("IPIX"), a Tennessee
corporation, and bamboo.com and (ii) the preparation and filing of the related
Registration Statement on Form S-4 (the "REGISTRATION STATEMENT"), which
includes the Proxy Statement/Prospectus (the "PROXY STATEMENT/PROSPECTUS"),
filed with the Securities and Exchange Commission (the "COMMISSION") under the
Securities Act of 1933, as amended (the "SECURITIES ACT") and the Securities
Exchange Act of 1934, as amended. Unless otherwise indicated, each capitalized
term used herein has the meaning ascribed to it in the Merger Agreement.
In connection with this opinion, we have examined the Merger Agreement,
the Proxy Statement/Prospectus and such other documents as we have deemed
necessary or appropriate in order to enable us to render our opinion. For
purposes of this opinion, we have assumed (i) the validity and accuracy of the
documents that we have examined, (ii) that the Merger would be consummated in
the manner described in Merger Agreement and the Proxy Statement/Prospectus, and
that the representations made and the representations to be made by bamboo.com
(together with Merger Sub) and IPIX pursuant to Sections 5.02(c) and 5.03(d),
respectively, of the Merger Agreement are and will be accurate and complete. In
rendering our opinion, we have considered the applicable provisions of the
Internal Revenue Code of 1986, as amended (the "CODE"), Treasury Department
regulations promulgated thereunder, pertinent judicial authorities, interpretive
rulings of the IRS and such other authorities as we have considered relevant. It
should be noted that statutes, regulations, judicial decisions and
administrative
<PAGE> 2
bamboo.com, Inc. 2 November 17, 1999
interpretations are subject to change at any time (possibly with retroactive
effect). A change in the authorities or the inaccuracy of any of the documents
or assumptions on which our opinion is based could affect our conclusions.
Based upon the foregoing, in our opinion, the Merger will be treated
for Federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code and bamboo.com, IPIX and Merger Sub will each be a
party to that reorganization within the meaning of Section 368(b) of the Code,
and accordingly, for U.S. federal income tax purposes:
(i) holders of bamboo.com stock will not recognize any gain or
loss as a result of the Merger;
(ii) except in respect of cash received instead of fractional
shares of bamboo.com common stock, holders of shares of IPIX
stock will (1) not recognize any gain or loss as a result of
the exchange of their shares of IPIX stock for bamboo.com
stock, (2) have a tax basis in the bamboo.com stock received
in the merger equal to the tax basis of the IPIX stock
surrendered in the Merger, and (3) have a holding period with
respect to the bamboo.com stock received in the Merger that
includes the holding period of the IPIX stock surrendered in
the Merger;
(iii) a holder of IPIX common stock will be required to recognize
gain or loss with respect to cash received instead of a
fractional share of bamboo.com common stock, measured by the
difference between the amount of cash received and the portion
of the tax basis of the holder's shares of IPIX common stock
allocable to the fractional share, which gain or loss will be
capital gain or loss if the holder of IPIX common stock holds
such stock as a capital asset within the meaning of Section
1221 of the Code and will be long-term capital gain or loss if
the share of IPIX common stock exchanged for the fractional
share was held for more than one year at the Effective Time;
(iv) none of bamboo.com, IPIX or Merger Sub will recognize gain or
loss as a result of the Merger.
<PAGE> 3
bamboo.com, Inc. 3 November 17, 1999
The preceding are all of the material U.S. federal income tax
consequences of the Merger. However, our opinion does not address U.S. federal
income tax consequences which may vary with, or are contingent upon, a
shareholder's individual circumstances. In addition, our opinion does not
address any non-income tax or any foreign, state or local tax consequences of
the Merger.
In accordance with the requirements of Item 601(b)(23) of Regulation
S-K under the Securities Act, we hereby consent to the discussion of this
opinion in the Proxy Statement/Prospectus, to the filing of this opinion as an
exhibit to the Proxy Statement/Prospectus and to the reference to our firm under
the headings "THE MERGER-Material Federal Income Tax Consequences" and "LEGAL
MATTERS" in the Proxy Statement/Prospectus. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act or the rules and regulations of the
Commission thereunder.
Very truly yours,
/s/ Davis Polk & Wardwell
-----------------------------------
Davis Polk & Wardwell
<PAGE> 1
EXHIBIT 8.2
[BAKER, DONELSON, BEARMAN & CALDWELL LETTERHEAD]
November 17, 1999
Interactive Pictures Corporation
Board of Directors
12009 Commerce Park Drive
Oak Ridge, Tennessee 37830
RE: TAX OPINION FOR REGISTRATION STATEMENT ON FORM S-4
(FILE NO. )
Ladies and Gentlemen:
We represent Interactive Pictures Corporation, a Tennessee corporation
("IPIX"), in connection with the Agreement and Plan of Merger dated as of
October 25, 1999 ("Merger Agreement"), by and between IPIX and bamboo.com, Inc.,
a Delaware corporation ("bamboo").
The Merger Agreement provides that bamboo will form a wholly-owned
subsidiary ("Merger Sub") under the laws of the State of Tennessee and that
Merger Sub will be merged with an into IPIX ("the Merger") under the applicable
provisions of the Tennessee Business Corporation Act ("TBCA"). The corporate
existence of Merger Sub will cease, and IPIX will become the surviving
corporation that is wholly-owned by bamboo. The Merger Agreement is attached as
Appendix A to Registration Statement on form S-4, File No. (the
"Registration Statement"), filed with the Securities and Exchange Commission in
connection with the Merger.
You have requested our opinion regarding certain Federal income tax
consequences of the Merger. In delivering this opinion, we have reviewed and
relied upon and assumed as accurate (without any independent investigation) the
facts, statements descriptions and representations set forth in the Registration
Statement and such other documents pertaining to the Merger as we have deemed
necessary or appropriate. In connection with rendering this opinion, we have
also assumed (without any independent investigation):
1. The truth and accuracy of the statements, covenants,
representations and warranties contained in the Merger Agreement, in the
representations received from IPIX and bamboo (the "Officers Certificates")
and in all other instruments and documents related to the formation,
organization and operation of IPIX and bamboo that we have reviewed in
connection with the Merger;
2. The authenticity of original documents submitted to us, the
conformity to the originals of documents submitted to us as copies, and the
due and valid execution and delivery of all such documents where due
execution and delivery are a prerequisite to the effectiveness thereof; and
1
<PAGE> 2
Interactive Pictures Corporation
November 17, 1999
Page 2
3. The performance of all covenants contained in the Merger Agreement
and the officers Certificates without waiver or breach of any material
provision thereof.
On the basis of the foregoing, we are of the opinion that:
A. The Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code; and
B. In the Merger, IPIX and Merger Sub will each be a party to the
reorganization within the meaning of Section 368(b) of the Code; and
C. In the Merger, no gain or loss for federal income tax purposes will be
recognized by IPIX, Merger Sub or a shareholder of IPIX as a result of the
Merger (other than with respect to cash received by a shareholder of IPIX in
lieu of a fractional bamboo share).
This opinion expresses our views only as to Federal income tax laws in
effect as of the date hereof, including the Internal Revenue Code of 1986, as
amended, applicable Treasury Regulations, published rulings and administrative
practices of the Internal Revenue Service (the "Service") and court decisions.
This opinion represents our best legal judgment as to the matters addressed
herein, but is not binding on the Service or the courts. Furthermore, the legal
authorities upon which we rely are subject to change either prospectively or
retroactively. Any change in such authorities might adversely affect the
conclusion stated herein. We undertake no responsibility to advise you of any
new developments in the application or interpretation of the federal income tax
laws. This opinion does not address any other federal, state, local or foreign
tax consequences.
We express no opinion with respect to any stock rights, rights or options
to acquire IPIX common stock or with respect to the federal income tax
consequences of the exchange of IPIX shares by any individual who receives such
shares as compensation and holds them at the Effective Time subject to any
restriction related to employment.
No opinion is expressed herein to any transaction other than the Merger as
described in the Merger Agreement or to any transaction whatsoever, including
the Merger, if any of the transactions described in the Merger Agreement are not
consummated in terms of such Merger Agreement or if there is a waiver or breach
of any material provision thereof, or if any of the representations, warranties,
statements and assumptions upon which we relied are not true and accurate at all
relevant times. In the event any one of the statements, representations,
warranties or assumptions upon which we have relied to issue this opinion is
incorrect, our opinion might be adversely affected and may not be relied upon.
2
<PAGE> 3
Interactive Pictures Corporation
November 17, 1999
Page 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and further consent to the use of our name under the
caption "THE MERGER-Material Federal Income tax Consequences" and "LEGAL
MATTERS" in the Proxy Statement/Prospectus included in the Registration
Statement.
Very truly yours,
/s/ Baker, Donelson, Bearman &
Caldwell
--------------------------------------
Baker, Donelson, Bearman & Caldwell
PSS/bp
3
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form
S-4 of bamboo.com of our report dated March 12, 1999, except for Note 13 which
is as of July 19, 1999 relating to the financial statements of bamboo.com, which
appears in such Registration Statement. We also consent to the reference to us
under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
San Jose, California
December 15, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-4 of
bamboo.com, Inc. of our report dated January 29, 1999, except as to Notes 5 and
6 for which the date is April 12, 1999 and as to Note 13 for which the date is
July 2, 1999, relating to the financial statements of Interactive Pictures
Corporation, which appear in such Registration Statement. We also consent to
the reference to us under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
- -----------------------------------
PricewaterhouseCoopers LLP
Knoxville, Tennessee
December 16, 1999
<PAGE> 1
EXHIBIT 23.5
CONSENT OF BANCBOSTON ROBERTSON STEPHENS INC.
We hereby consent to the inclusion of and reference to our opinion dated
October 25, 1999 to the Board of Directors of bamboo.com, Inc. ("bamboo.com") in
the Registration Statement on Form S-4 (the "Registration Statement") of
bamboo, covering common stock of bamboo to be issued in connection with the
proposed business combination involving bamboo and Interactive Pictures
Corporation. In giving the foregoing consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended (the "Securities Act"), or the rules and
regulations promulgated thereunder, nor do we admit that we are experts with
respect to any part of the Registration Statement within the meaning of the
term "experts" as used in the Securities Act or the rules and regulations
promulgated thereunder.
/s/ BancBoston Robertson Stephens Inc.
--------------------------------------
BancBoston Robertson Stephens Inc.
San Francisco, California
November 17, 1999
<PAGE> 1
EXHIBIT 23.6
CONSENT OF J.P. MORGAN SECURITIES INC.
We hereby consent to (i) the use of our opinion letter dated October 25,
1999 to the Board of Directors of Interactive Pictures Corporation (the
"Company") included as Annex E to the Joint Proxy Statement/Prospectus which
forms a part of the Registration Statement on Form S-4 relating to the proposed
merger of the Company and a wholly-owned subsidiary of bamboo.com, Inc., and
(ii) the references to such opinion in such Joint Proxy Statement/Prospectus.
In giving such consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder, nor do we hereby admit that we are experts with respect
to any part of such Registration Statement within the meaning of the term
"experts" as used in the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
J.P. MORGAN SECURITIES INC.
By: /s/ Todd R. Marin
------------------------
Name: Todd R. Marin
Title: Managing Director
November 17, 1999
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Randall I. Bresee and Leonard B. McCurdy, and each of them, with full
power to act alone without the other, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign a Registration Statement on Form S-4 relating to the
registration of common stock to be issued by Registrant in connection with the
merger of IPIX with and into a wholly-owned subsidiary of the Registrant and any
and all amendments (including post-effective amendments and other amendments
thereto) to such Registration Statement(s) and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing as he or she could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them or their
or his or her substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ LEONARD B. McCURDY Chief Executive Officer,
- ---------------------------------------- Chairman and Director November 17, 1999
Leonard B. McCurdy
/s/ KEVIN B. McCURDY Executive Vice President
- ----------------------------------------- and Director November 17, 1999
Kevin B. McCurdy
/s/ RANDALL I. BRESEE Chief Financial Officer
- ----------------------------------------- November 17, 1999
Randall I. Bresee
/s/ DUNCAN FORTIER Director
- ----------------------------------------- November 17, 1999
Duncan Fortier
/s/ JOHN MORAGNE Director
- ----------------------------------------- November 17, 1999
John Moragne
/s/ PHILLIP SANDERSON Director
- ----------------------------------------- November 17, 1999
Phillip Sanderson
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.1
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BAMBOO.COM FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001088022
<NAME> BAMBOO.COM
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUN-30-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 27,461
<SECURITIES> 0
<RECEIVABLES> 126
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 28,688
<PP&E> 2,895
<DEPRECIATION> 492
<TOTAL-ASSETS> 31,130
<CURRENT-LIABILITIES> 5,644
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> 25,021
<TOTAL-LIABILITY-AND-EQUITY> 31,130
<SALES> 1,262
<TOTAL-REVENUES> 1,262
<CGS> 1,006
<TOTAL-COSTS> 9,018
<OTHER-EXPENSES> 6,248
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,291
<INCOME-PRETAX> (21,301)
<INCOME-TAX> 0
<INCOME-CONTINUING> (21,301)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,301)
<EPS-BASIC> (1.55)
<EPS-DILUTED> (1.55)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.2
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF INTERACTIVE PICTURES CORP. FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 2,817
<SECURITIES> 65,396
<RECEIVABLES> 2,185
<ALLOWANCES> 110
<INVENTORY> 1,144
<CURRENT-ASSETS> 74,424
<PP&E> 2,743
<DEPRECIATION> 624
<TOTAL-ASSETS> 76,694
<CURRENT-LIABILITIES> 2,796
<BONDS> 15
0
0
<COMMON> 17
<OTHER-SE> 73,866
<TOTAL-LIABILITY-AND-EQUITY> 76,694
<SALES> 5,406
<TOTAL-REVENUES> 5,406
<CGS> 2,690
<TOTAL-COSTS> 2,690
<OTHER-EXPENSES> 19,247
<LOSS-PROVISION> 73
<INTEREST-EXPENSE> 12
<INCOME-PRETAX> (15,727)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,727)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,727)
<EPS-BASIC> (2.28)
<EPS-DILUTED> (2.28)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
REVOCABLE PROXY BAMBOO.COM, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE JANUARY 19, 2000 SPECIAL MEETING OF THE SHAREHOLDERS
THERE ARE THREE WAYS TO VOTE YOUR PROXY
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326 -- QUICK *** EASY *** IMMEDIATE
- - Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week.
- - You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which is located above.
- - Follow the simple instructions the Voice provides you.
VOTE BY INTERNET -- HTTP://WWW.EPROXY.COM/BAMB/ -- QUICK *** EASY *** IMMEDIATE
- - Use the Internet to vote your proxy 24 hours a day, 7 days a week.
- - You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which is located above to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to bamboo.com, c/o Shareowner Services, P.O. Box
64873, St. Paul, MN 55164.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
PLEASE DETACH HERE
The undersigned hereby appoints Leonard B. McCurdy, Kevin B. McCurdy and
Randall I. Bresee, or any of them, as proxies, each with full power of
substitution, to represent the undersigned and vote for and on behalf of the
undersigned the number of shares of Common Stock and/or Class B Common Stock of
bamboo.com, Inc. ("bamboo.com") held of record on December 6, 1999 and which the
undersigned would be entitled to vote if personally present at the Special
Meeting of Shareholders to be held on January 19, 2000 at 10:00 AM, local time,
at the Sheraton Palo Alto Hotel, 625 El Camino Real, Palo Alto, CA 94301, and at
any adjournments or postponements thereof.
The board of directors recommends a vote "FOR" each of the following
proposals.
The undersigned directs that this proxy be voted as follows:
(1) A proposal to consider and vote upon the issuance of bamboo.com shares in
connection with the Agreement and Plan of Merger (the "Merger Agreement"),
dated as of October 25, 1999 between bamboo.com and Interactive Pictures
Corporation ("IPIX") as described in the joint proxy statement/prospectus.
Pursuant to the Merger Agreement, a subsidiary of bamboo.com will be merged
with and into IPIX, and each IPIX shareholder will receive 1.369 shares of
bamboo.com for each share of IPIX common stock held.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(2) A proposal to amend bamboo.com's Restated Certificate of Incorporation to
increase the number of shares of common stock authorized for issuance from
70 million shares to 150 million shares, contingent upon approval of the
above stock issuance proposal one.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) A proposal to amend the Amended and Restated 1998 Employee, Director and
Consultant Stock Plan to increase the number of shares of common stock which
may be added annually to the amount already reserved for issuance thereunder
from 1,400,000 to 2,800,000 shares, contingent upon approval of the above
stock issuance proposal one.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) A proposal to amend the bamboo.com 1999 Employee Stock Purchase Plan to
increase the number of shares of common stock which may be added annually to
the amount already reserved for issuance thereunder from 700,0000 to
1,400,000 shares, contingent upon approval of the above stock issuance
proposal one.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on the other side)
In their discretion, the holders of this proxy are authorized to vote upon such
other business as may properly come before the meeting.
The shares of stock represented by this proxy will be voted as specified
above, unless otherwise directed. The undersigned hereby revokes any proxy or
proxies heretofore given for such stock and ratifies and confirms all that the
above-named proxies or their substitutes may lawfully do by virtue hereof.
PLEASE SIGN, DATE AND RETURN PROMPTLY USING THE ENCLOSED RETURN ENVELOPE
Please sign and date this proxy
exactly as your name appears on
your stock certificate. When
shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
--------------------------------
(Signature) (Date)
--------------------------------
(Signature if held jointly)
(Date)
<PAGE> 1
EXHIBIT 99.2
REVOCABLE PROXY INTERACTIVE PICTURES CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE JANUARY 19, 2000 SPECIAL MEETING OF THE SHAREHOLDERS
VOTE BY TELEPHONE OR INTERNET *** QUICK *** EASY *** IMMEDIATE
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
- - You will be asked to enter a Control Number which is located in the box below.
OPTION A: TO VOTE AS THE BOARD OF DIRECTORS RECOMMENDS ON ALL PROPOSALS: PRESS
1.
OPTION B: IF YOU CHOOSE TO VOTE ON EACH ITEM SEPARATELY, PRESS 0. YOU WILL HEAR
THESE INSTRUCTIONS:
Proposal 1: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0. The
instructions are the same for all remaining items to be voted.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
VOTE BY INTERNET: THE WEB ADDRESS IS WWW.PROXYVOTING.COM/INTER
IF YOU VOTE BY PHONE OR INTERNET -- DO NOT MAIL THE PROXY CARD
THANK YOU FOR VOTING
CALL TOLL FREE ON A TOUCH TONE TELEPHONE 1-800-542-2494 -- ANYTIME.
THERE IS NO CHARGE TO YOU FOR THIS CALL.
CONTROL NUMBER FOR TELEPHONE/INTERNET VOTING
The undersigned hereby appoints James M. Phillips, Jeffrey D. Peters and John
J. Kalec, or any of them, as proxies, each with full power of substitution, to
represent the undersigned and vote for and on behalf of the undersigned the
number of shares of Common Stock of Interactive Pictures Corporation ("IPIX")
held of record on December 6, 1999 and which the undersigned would be entitled
to vote if personally present at the Special Meeting of Shareholders to be held
on January 19, 2000 at 10:00 a.m., local time, at the Civic Center Tower, 675
North First Street, Suite 975, San Jose, CA 95112 and at any adjournments or
postponements thereof.
The board of directors recommends a vote "FOR" each of the following
proposals.
The undersigned directs that this proxy be voted as follows:
(1) A proposal to approve and adopt the Agreement and Plan of Merger (the
"Merger Agreement"), dated as of October 25, 1999 between IPIX and
bamboo.com, Inc. ("bamboo.com") as described in the joint proxy
statement/prospectus. Pursuant to the Merger Agreement, a subsidiary of
bamboo.com will be merged with and into IPIX, and each shareholder of IPIX
will receive 1.3690 shares of bamboo.com common stock for each share of IPIX
common stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(2) A proposal to amend IPIX's 1997 Equity Compensation Plan to increase by
1,000,000 the number of shares of common stock that may be issued
thereunder.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on the other side)
In their discretion, the holders of this proxy are authorized to vote upon such
other business as may properly come before the meeting.
The shares of stock represented by this proxy will be voted as specified
above, unless otherwise directed. The undersigned hereby revokes any proxy or
proxies heretofore given for such stock and ratifies and confirms all that the
above-named proxies or their substitutes may lawfully do by virtue hereof.
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER.
PLEASE SIGN, DATE AND RETURN PROMPTLY USING THE ENCLOSED RETURN ENVELOPE
Please sign and date this proxy
exactly as your name appears on
your stock certificate. When
shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
--------------------------------
(Signature) (Date)
--------------------------------
(Signature if held jointly)
(Date)
