EXHIBIT 2.1
-----------
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
BY AND AMONG
NATURAL MICROSYSTEMS CORPORATION,
NMS CALIFORNIA ACQUISITION CORP.
and
XXXX.XXX, INC.
Dated as of November 30, 1999
TABLE OF CONTENTS
Page
----
ARTICLE I THE MERGER ...................................................... 2
SECTION 1.01. Merger; Effective Time ..................................... 2
SECTION 1.02. Closing .................................................... 2
SECTION 1.03. Effect of the Merger ....................................... 2
SECTION 1.04. Certificate of Incorporation; By-laws ...................... 2
SECTION 1.05. Directors and Officers ..................................... 2
SECTION 1.06. Merger Consideration ....................................... 3
SECTION 1.07. Effect on Capital Stock and Options and Warrants therefor .. 3
SECTION 1.08. Exchange of Certificates and ISO Agreements ................ 5
SECTION 1.09. Stock Transfer Books ....................................... 6
SECTION 1.10. Dissenting Shares .......................................... 6
SECTION 1.11. No Further Ownership Rights in XXXX.XXX Capital Stock or
XXXX.XXX ISOs .............................................. 7
SECTION 1.12. Lost, Stolen or Destroyed Certificates or ISO Agreements ... 7
SECTION 1.13. Tax and Accounting Consequences ............................ 7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF XXXX.XXX ..................... 8
SECTION 2.01. Organization ............................................... 8
SECTION 2.02. Capitalization ............................................. 8
SECTION 2.03. Qualification in Foreign Jurisdictions ..................... 9
SECTION 2.04. Authority Relative to this Agreement ....................... 9
SECTION 2.05. No Conflict: Required Filings and Consents ................. 9
SECTION 2.06. Compliance; Permits ........................................ 10
SECTION 2.07. Financial Statements ....................................... 10
SECTION 2.08. Absence of Certain Changes or Events ....................... 11
SECTION 2.09. Material Contracts ......................................... 11
SECTION 2.10. Accounts Receivable and Notes Receivable ................... 12
SECTION 2.11. No Undisclosed Liabilities ................................. 12
SECTION 2.12. Absence of Litigation ...................................... 12
SECTION 2.13. Employee Benefit Plans; Employment Agreements .............. 13
SECTION 2.14. Labor Matters .............................................. 16
SECTION 2.15. Restrictions on Business Activities ........................ 16
SECTION 2.16. Real Property .............................................. 16
SECTION 2.17. Taxes ...................................................... 17
SECTION 2.18. Environmental Matters ...................................... 19
SECTION 2.19. Brokers .................................................... 19
SECTION 2.20. Intellectual Property ...................................... 19
SECTION 2.21. Interested Party Transactions .............................. 21
SECTION 2.22. Insurance .................................................. 21
SECTION 2.23. Vote Required .............................................. 21
(i)
SECTION 2.24. Pooling Matters ............................................ 22
SECTION 2.25. Accredited Investors ....................................... 22
SECTION 2.26. Other Negotiations ......................................... 22
SECTION 2.27. Full Disclosure ............................................ 22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF NMS AND THE
ACQUISITION SUB....................................................... 22
SECTION 3.01. Organization ............................................... 22
SECTION 3.02. Capitalization ............................................. 23
SECTION 3.03. Qualification in Foreign Jurisdictions ..................... 23
SECTION 3.04. Authority Relative to this Agreement ....................... 24
SECTION 3.05. No Conflict: Required Filings and Consents ................. 24
SECTION 3.06. SEC Filings ................................................ 25
SECTION 3.07. Financial Statements ....................................... 25
SECTION 3.08. Absence of Certain Changes or Events ....................... 25
SECTION 3.09. No Undisclosed Liabilities ................................. 26
SECTION 3.10. Absence of Litigation ...................................... 26
SECTION 3.11. Taxes ...................................................... 26
SECTION 3.12. Vote Required .............................................. 26
SECTION 3.13. Pooling Matters ............................................ 27
SECTION 3.14. Interim Operations of Acquisition Sub ...................... 27
SECTION 3.15. Full Disclosure ............................................ 27
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER ......................... 27
SECTION 4.01. Conduct of Business by XXXX.XXX Pending the Merger ......... 27
SECTION 4.02. No Solicitation by XXXX.XXX ................................ 29
ARTICLE V ADDITIONAL AGREEMENTS ........................................... 30
SECTION 5.01. Stockholders' Meeting ...................................... 30
SECTION 5.02. Access to Information: Confidentiality ..................... 30
SECTION 5.03. Consents, Approvals ........................................ 30
SECTION 5.04. Nonstatutory Stock Options and Warrants .................... 31
SECTION 5.05. Compliance with Rule 506 ................................... 31
SECTION 5.06. Notification of Certain Matters ............................ 31
SECTION 5.07. Further Action/Tax Treatment ............................... 31
SECTION 5.08. Public Announcements ....................................... 32
SECTION 5.09. Prospectus; Registration Statement ......................... 32
SECTION 5.10. Pooling Accounting Treatment ............................... 33
SECTION 5.11. Quotation of NMS Common Stock on Nasdaq .................... 33
SECTION 5.12. Employee Benefits .......................................... 33
SECTION 5.13. Non-Compete and Non-Solicitation Agreements ................ 33
(ii)
ARTICLE VI CONDITIONS TO THE MERGER ...................................... 33
SECTION 6.01. Conditions to Obligation of NMS, the Acquisition Sub and
XXXX.XXX to Effect the Merger .............................. 33
SECTION 6.02. Additional Conditions to Obligations of NMS and the
Acquisition Sub ............................................ 34
SECTION 6.03. Additional Conditions to Obligation of XXXX.XXX ............ 35
ARTICLE VII TERMINATION ................................................... 36
SECTION 7.01. Termination ................................................ 36
SECTION 7.02. Effect of Termination ...................................... 37
SECTION 7.03. Fees and Expenses .......................................... 37
ARTICLE VIII GENERAL PROVISIONS ........................................... 37
SECTION 8.01. Survival of Representations, Warranties and Agreements;
Knowledge, Etc ............................................. 37
SECTION 8.02. Notices .................................................... 37
SECTION 8.03. Certain Definitions ........................................ 38
SECTION 8.04. Amendment .................................................. 40
SECTION 8.05. Waiver ..................................................... 40
SECTION 8.06. Severability ............................................... 40
SECTION 8.07. Entire Agreement ........................................... 40
SECTION 8.08. Assignment ................................................. 40
SECTION 8.09. Parties in Interest ........................................ 40
SECTION 8.10. Failure or Indulgence Not Waiver; Remedies Cumulative ...... 40
SECTION 8.11. Governing Law .............................................. 41
SECTION 8.12. Counterparts ............................................... 41
(iii)
Schedule
--------
2.02 Capitalization
2.03 Qualification in Foreign Jurisdictions
2.05(a) Conflicts, etc.
2.06(a) Compliance
2.06(b) List of Licenses, Permits and Authorizations
2.08 Certain Changes or Events
2.09(a) Material Contracts of XXXX.XXX
2.09(b) Defaults
2.10(b) Notes Receivable
2.11 Undisclosed Liabilities
2.12 XXXX.XXX Litigation
2.13(a) List of Employee Benefit Plans
2.13(b) Matters Concerning Employee Benefit Plan
2.13(c) List of Outstanding Options and Option Holders
2.13(d) List of Employment and Consulting Contracts
2.14 Labor Matters
2.15 Restrictions on Business Activities
2.16(b) Real Property Leased by XXXX.XXX
2.17(b) Tax Returns
2.17(c) Certain Tax Matters
2.18 Environmental Matters
2.20(a) XXXX.XXX Intellectual Property Rights
2.20(b) XXXX.XXX Third Party Intellectual Property Rights
2.20(c) Royalties for XXXX.XXX Intellectual Property Rights
2.20(d) Protection of XXXX.XXX Intellectual Property Rights
2.20(e) XXXX.XXX Developers
2.20(f) Parties Holding XXXX.XXX Source Code
2.21 Interested Party Transactions
2.22 Insurance
2.26 XXXX.XXX's Other Negotiations
3.02 Capitalization
3.08 Certain Changes or Events
4.01(g)(ii) Permitted Indebtedness
5.13 Non-Compete and Non-Solicitation Agreements
Exhibit
-------
1.04(a) Form of XXXX.XXX Amended and Restated Articles of Incorporation
1.07(h) Form of Escrow Agreement
1.08(b) Investment Representations
5.13 Form of Non-Compete and Non-Solicitation Agreement
6.02(g) Matters to be Included in Legal Opinion of Stradling, Yocca,
Xxxxxxx & Xxxxx
6.03(d) Matters to be Included in Legal Opinion of Xxxxxx, Hall & Xxxxxxx
(iv)
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of November 30,
1999 (this "Agreement"), by and among Natural MicroSystems Corporation, a
Delaware corporation ("NMS"), NMS California Acquisition Corp., a California
corporation and a wholly owned subsidiary of NMS (the "Acquisition Sub"), and
XXXX.xxx, Inc., a California corporation ("XXXX.XXX").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of NMS and XXXX.XXX have determined that
it is advisable and in the best interests of their respective stockholders for
NMS and XXXX.XXX to enter into a strategic business combination upon the terms
and subject to the conditions set forth herein; and
WHEREAS, in furtherance of such combination, the Board of Directors of NMS
has approved the creation of the Acquisition Sub, and the Boards of Directors of
NMS and XXXX.XXX have each approved the merger (the "Merger") of the Acquisition
Sub with and into XXXX.XXX in accordance with the applicable provisions of the
California General Corporation Law (the "California Law"), and upon the terms
and subject to the conditions set forth herein; and
WHEREAS, as a condition and inducement to NMS and the Acquisition Sub to
enter into this Agreement and incur the obligations set forth herein, several of
the stockholders of XXXX.XXX holding in the aggregate approximately 83.9% of the
outstanding shares of the common stock, $.00l par value, of XXXX.XXX and 54.2%
of the outstanding shares of the preferred stock, $.001 par value, of XXXX.XXX
have entered into a Stockholder Support Agreement (the "Stockholder Support
Agreement"), dated the date hereof, pursuant to which, among other things, they
have agreed to vote all of their Shares in favor of the Merger and not to
dispose of their Shares within a certain period of time; and
WHEREAS, the parties intend this Agreement to be a plan of reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations thereunder; and
WHEREAS, for financial accounting purposes, it is intended that the Merger
will be accounted for as a pooling of interests transaction;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, the parties hereby agree as follows:
ARTICLE I
THE MERGER
----------
SECTION 1.01. Merger; Effective Time. At the Effective Time (as defined
below), and subject to and upon the terms and conditions of this Agreement and
the California Law, the Acquisition Sub shall be merged with and into XXXX.XXX
and XXXX.XXX shall continue as the surviving corporation. XXXX.XXX as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation." As promptly as practicable after the satisfaction
or waiver, as the case may be, of the conditions set forth in Article VI, NMS,
the Acquisition Sub and XXXX.XXX shall cause the Merger to be consummated by
filing a copy of this Agreement and an officers' certificate of each of XXXX.XXX
and the Acquisition Sub as contemplated by Section 1103 of the California Law
(the "Merger Documents"), together with any required related instruments, with
the Secretary of State of California, in such form as required by, and executed
in accordance with the applicable provisions of, the California Law (the time of
such filing being referred to herein as the "Effective Time").
SECTION 1.02. Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 7.01, and subject to the satisfaction or waiver of all the conditions
set forth in Article VI, the consummation of the Merger shall take place as
promptly as practicable (and in any event within two business days) after
satisfaction or waiver of the conditions set forth in Article VI at the offices
of Xxxxxx, Hall & Xxxxxxx, Exchange Place, 00 Xxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx, unless another time or place is agreed to in writing by XXXX.XXX
and NMS.
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement and the applicable provisions
of the California Law. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, the separate existence of the
Acquisition Sub shall cease and the Acquisition Sub shall be merged with and
into XXXX.XXX.
SECTION 1.04. Certificate of Incorporation; By-laws.
(a) Articles of Incorporation. The Articles of Incorporation of XXXX.XXX,
as amended in the form attached as Exhibit 1.04(a), shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with the California Law and said Articles of Incorporation.
(b) By-laws. The By-laws of the Acquisition Sub, as in effect immediately
prior to the Effective Time, shall be the By-laws of the Surviving Corporation
until thereafter amended in accordance with the California Law, the Articles of
Incorporation of the Surviving Corporation and said By-laws.
2
SECTION 1.05. Directors and Officers.
(a) The initial directors of the Surviving Corporation shall be the
directors of the Acquisition Sub immediately prior to the Effective Time.
(b) The initial officers of the Surviving Corporation shall be the officers
of the Acquisition Sub immediately prior to the Effective Time.
SECTION 1.06. Merger Consideration. The aggregate merger consideration
to be issued in connection with the Merger (the "Merger Consideration") shall be
shares of NMS common stock, $.01 par value per share ("NMS Common Stock") in an
amount equal to 1,500,000, less the number of shares of NMS Common Stock to be
reserved by NMS in connection with the assumption of nonstatutory stock options
and warrants pursuant to Section 5.04. The Merger Consideration shall be issued
as provided in Sections 1.07(a), (b) and (h). The Merger Consideration shall be
adjusted to reflect fully the effect of any subdivision, combination, stock
dividend, reorganization, recapitalization or similar capital change with
respect to NMS Common Stock.
SECTION 1.07. Effect on Capital Stock and Options and Warrants therefor.
At the Effective Time, by virtue of the Merger and without any action on the
part of NMS, the Acquisition Sub or XXXX.XXX or the holders of any securities
issued by any of them:
(a) Conversion of XXXX.XXX Common Stock and XXXX.XXX Preferred Stock. Each
share of XXXX.XXX's common stock, $.001 par value (the "XXXX.XXX Common Stock")
and each share of XXXX.XXX's preferred stock, $.001 par value (the "XXXX.XXX
Preferred Stock" and together with the XXXX.XXX Common Stock, the "XXXX.XXX
Capital Stock") that is outstanding immediately prior to the Effective Time
(excluding any Dissenting Shares, as defined in Section 1.10) shall be converted
into the right to receive such number of shares of NMS Common Stock as is
determined pursuant to Section 1.07(c).
(b) Conversion of XXXX.XXX ISOs. All XXXX.XXX ISOs (as defined below) that
are outstanding immediately prior to the Effective Time shall be converted into
the right to receive such number of shares of NMS Common Stock as is determined
pursuant to Section 1.07(c). The term "XXXX.XXX ISOs" means options to purchase
XXXX.XXX Common Stock that are intended to qualify as ISOs (as such term is
defined in Section 2.13(c) below).
(c) Allocation of Merger Consideration. Ninety percent of the Merger
Consideration shall be issued at the Effective Time in exchange for all
outstanding XXXX.XXX Capital Stock and XXXX.XXX ISOs pursuant to Section 1.07(a)
and 1.07(b) above. The respective number of shares to be allocated to each
share of XXXX.XXX Capital Stock and to the XXXX.XXX ISOs shall be as determined
by the board of directors of XXXX.XXX on a fair value basis, provided that NMS
shall be reasonably satisfied that such determination shall not adversely affect
the ability of NMS to treat the Merger as a pooling of interests.
(d) Assumption of XXXX.XXX Nonstatutory Stock Options and Warrants. At the
Effective Time, all XXXX.XXX Nonstatutory Options and XXXX.XXX Warrants (each
term as defined below) then outstanding shall be assumed by NMS in accordance
with Section 5.04
3
hereof. The term "XXXX.XXX Nonstatutory Options" means options to purchase
XXXX.XXX Common Stock that are not intended to qualify as ISOs (together with
the XXXX.XXX ISOs, the XXXX.XXX Nonstatutory Options are sometimes referred to
herein as the "XXXX.XXX Options"). The term "XXXX.XXX Warrants" means warrants
to purchase XXXX.XXX Common Stock.
(e) Cancellation of XXXX.XXX Capital Stock. Each share (a "Share") of
XXXX.XXX Capital Stock held in the treasury of XXXX.XXX and each Share owned by
any direct or indirect subsidiary of XXXX.XXX immediately prior to the Effective
Time (the "Cancelled Shares") shall, by virtue of the Merger and without any
action on the part of the holder thereof, be canceled and retired without
payment of any consideration therefor.
(f) Fractional Shares. No fraction of a share of NMS Common Stock shall be
issued, but in lieu thereof each holder of XXXX.XXX Capital Stock and/or
XXXX.XXX ISOs who would otherwise be entitled to a fraction of a share of NMS
Common Stock (after aggregating all fractional shares of NMS Common Stock to be
received by such holder, it being the intention of the parties that no holder
will receive cash in an amount equal to or greater than the value of one full
share of NMS Common Stock) shall receive from NMS an amount of cash (rounded to
the nearest cent), without interest, equal to the product of (i) such fraction,
multiplied by (ii) the closing price of NMS Common Stock on the Nasdaq National
Market System on the date of the Effective Time.
(g) Conversion of Acquisition Sub Shares. At and as of the Effective Time,
by virtue of the Merger and without any action on the part of any holder of any
capital stock of the Acquisition Sub, each issued and outstanding share of
Common Stock, no par value, of Acquisition Sub shall be converted into one share
of Common Stock, no par value, of the Surviving Corporation.
(h) Escrowed Shares. As of the Effective Time, NMS shall issue that number
of shares of NMS Common Stock equal to ten percent (10%) of the Merger
Consideration (the "Escrowed Shares") and deliver a certificate or certificates
therefor to Xxxxxx, Hall & Xxxxxxx and Stradling, Yocca, Xxxxxxx & Xxxxx (the
"Escrow Agents") to be held and distributed in accordance with an agreement
substantially in the form of Exhibit 1.07(h) (the "Escrow Agreement"). The
Escrowed Shares shall be part of the Merger Consideration. In the event either
Escrow Agent declines or is unable to serve prior to the Closing, it shall be
succeeded by such person or entity as NMS and XXXX.XXX shall mutually agree.
(i) NMS Shares. Except as contemplated pursuant to Section 5.09 below, NMS
Common Stock issued to holders of XXXX.XXX Capital Stock and/or XXXX.XXX ISOs
shall not be registered for such issuance under the Securities Act of 1933, as
amended (the "Securities Act"), and shall bear a legend in substantially the
following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
SUCH SHARES MAY NOT BE SOLD OR
4
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS NMS RECEIVES AT ITS
REQUEST AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SAID ACT.
SECTION 1.08. Exchange of Certificates and ISO Agreements.
-------------------------------------------
(a) Exchange Agent. As of the Effective Time, NMS shall supply, or shall
cause to be supplied, to or for the account of a bank or trust company to be
designated by NMS (the "Exchange Agent"), in trust for the benefit of the
holders of XXXX.XXX Capital Stock (other than Dissenting Shares and Cancelled
Shares) and XXXX.XXX ISOs for exchange in accordance with this Section 1.08,
certificates evidencing the NMS Common Stock issuable pursuant to Section 1.07
in exchange for outstanding Shares and XXXX.XXX ISOs and all cash required to be
paid pursuant to Sections 1.07(f) and 1.08(c).
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, NMS shall instruct the Exchange Agent to mail to each holder of
record of a certificate or certificates (the "Certificates") which immediately
prior to the Effective Time evidenced outstanding Shares, other than Dissenting
Shares and Cancelled Shares, and to each holder of a XXXX.XXX ISO (a copy of the
agreement evidencing such grant of an ISO, an "ISO Agreement") outstanding
immediately prior to the effective time (i) a letter of transmittal, which
letter shall specify, among other conditions, that delivery shall be effected,
and risk of loss and title to the Certificates and/or ISO Agreements shall pass,
only upon proper delivery of the Certificates and/or ISO Agreements to the
Exchange Agent, and which letter shall contain certain investment
representations substantially in the form attached as Exhibit 1.08(b), and (ii)
instructions to effect the surrender of the Certificates and ISO Agreements in
exchange for the certificates evidencing shares of NMS Common Stock (the "NMS
Certificates") and, in lieu of any fractional shares thereof, cash. Upon
surrender of a Certificate and/or ISO Agreement for cancellation to the Exchange
Agent together with such letter of transmittal, duly executed, and such other
customary documents as may be reasonably required by NMS or the Exchange Agent,
the holder of such Certificate and/or ISO Agreement shall be entitled to receive
in exchange therefor (A) NMS Certificates evidencing that whole number of shares
of NMS Common Stock which such holder has the right to receive in accordance
with the Merger in respect of such Certificate and/or ISO Agreement, (B) any
dividends or other distributions to which such holder is entitled pursuant to
Section 1.08(c), and (C) cash in lieu of fractional NMS Common Stock to which
such holder is entitled pursuant to Section 1.07(e) (the NMS Common Stock,
dividends, distributions and cash in lieu of fractional shares described in
clause (C) being collectively referred to as the "Merger Payment"), and the
Certificate or ISO Agreement so surrendered shall forthwith be cancelled. In
the event of a transfer of ownership of Shares or XXXX.XXX ISOs which is not
registered in the transfer records of XXXX.XXX as of the Effective Time, NMS
Common Stock and cash may be issued and paid in accordance with this Article I
to a transferee if the Certificate and/or ISO Agreement evidencing such Shares
or XXXX.XXX ISOs, as the case may be, is presented to the Exchange Agent,
accompanied by all documents required by law to evidence and effect such
transfer pursuant to this Section
5
1.08(b) and by evidence that any applicable stock transfer taxes have been paid.
Until so surrendered, each outstanding Certificate or ISO Agreement which, prior
to the Effective Time, represented shares of XXXX.XXX Common Stock or XXXX.XXX
ISOs, shall be deemed from and after the Effective Time, for all corporate
purposes other than the payment of dividends, to evidence the ownership of the
number of full shares of NMS Common Stock into which such shares of XXXX.XXX
Capital Stock or XXXX.XXX ISOs shall have been so converted and the right to
receive an amount in cash in lieu of the issuance of any fractional shares in
accordance with Section 1.07(e).
(c) Distributions With Respect to Unexchanged XXXX.XXX Capital Stock. No
dividends or other distributions with respect to NMS Common Stock with a record
date after the Effective Time shall be paid to the holder of any unsurrendered
Certificate or ISO Agreement with respect to the NMS Common Stock such holder is
entitled to receive until such holder shall surrender such Certificate or ISO
Agreement. Subject to applicable law, following the surrender of any such
Certificate or ISO Agreement, there shall be paid to the record holder of the
certificates representing whole shares of NMS Common Stock issued in exchange
therefor, without interest, at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of NMS Common Stock.
(d) Transfers of Ownership. If any certificate evidencing shares of NMS
Common Stock is to be issued in a name other than that in which the Certificate
or ISO Agreement surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the Certificate or ISO Agreement so
surrendered shall be properly endorsed and otherwise in proper form for transfer
and that the person requesting such exchange shall have paid to NMS, or any
agent designated by NMS, any transfer or other taxes required by reason of the
issuance of a certificate for shares of NMS Common Stock in any name other than
that of the registered holder of the Certificate surrendered.
(e) No Liability. NMS and XXXX.XXX shall have no liability to any holder
of XXXX.XXX Common Stock, XXXX.XXX Preferred Stock, XXXX.XXX Options or XXXX.XXX
Warrants for any Merger Consideration (or dividends or distributions with
respect thereto) which are delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
SECTION 1.09. Stock Transfer Books. At the Effective Time, the stock
transfer books of XXXX.XXX shall be closed, and there shall be no further
registration of transfers of XXXX.XXX Capital Stock on the records of XXXX.XXX.
SECTION 1.10. Dissenting Shares.
-----------------
(a) Notwithstanding any provision of this Agreement to the contrary, any
shares of XXXX.XXX Capital Stock held by a holder who has exercised appraisal
rights for such shares in accordance with the applicable provisions of the
California Law and who, as of the Effective Time, has not effectively withdrawn
or lost such appraisal rights (the "Dissenting Shares"), shall
6
not be converted into, or represent a right to receive, the Merger Consideration
pursuant to Section 1.06, but the holder thereof shall be entitled only to such
rights as are granted by the California Law with respect to the Dissenting
Shares.
(b) Notwithstanding the provisions of Section 1.10(a), if any holder of
Dissenting Shares shall effectively withdraw or lose (through failure to perfect
such rights or otherwise) such holder's appraisal rights, then, as of the later
of Effective Time or the occurrence of such withdrawal or loss, such holder's
shares shall automatically be converted into and represent only the right to
receive the Merger Consideration, without interest thereon, upon surrender of
the Certificate or Certificates in accordance with the terms hereof.
(c) XXXX.XXX shall give NMS prompt written notice of any demands received
by XXXX.XXX to require XXXX.XXX to purchase Dissenting Shares, the withdrawal of
any such demands, and any other notices or ISO Agreements served pursuant to the
California Law and received by XXXX.XXX. XXXX.XXX shall not, except with the
prior written consent of NMS, voluntarily make any payment with respect to any
Dissenting Shares or offer to settle, or settle, any such demands with respect
thereto.
SECTION 1.11. No Further Ownership Rights in XXXX.XXX Capital Stock or
XXXX.XXX ISOs. The Merger Consideration delivered upon the surrender for
exchange of Shares and XXXX.XXX ISOs in accordance with the terms hereof shall
be deemed to have been delivered in full satisfaction of all rights pertaining
to such Shares and XXXX.XXX ISOs, and there shall be no further registration of
transfers on the records of the Surviving Corporation of Shares or XXXX.XXX ISOs
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates or ISO Agreements are presented to the Surviving
Corporation for any reason, they shall be cancelled and exchanged as provided in
this Article I.
SECTION 1.12. Lost, Stolen or Destroyed Certificates or ISO Agreements.
In the event any Certificate or ISO Agreement shall have been lost, stolen or
destroyed (respectively, a "Lost Certificate" or a "Lost ISO Agreement"), the
Exchange Agent shall, upon the making of an affidavit of that fact by the
registered owner thereof, deliver to such owner such Merger Consideration as may
be required pursuant to Section 1.06; provided, however, that NMS may, in its
sole discretion and as a condition precedent to the delivery thereof, require
the registered owner of such Lost Certificate or Lost ISO Agreement to deliver a
bond in such sum as it may reasonably direct as indemnity against any claim that
may be made against NMS or the Exchange Agent with respect to the Lost
Certificate or Lost ISO Agreement.
SECTION 1.13. Tax and Accounting Consequences. It is intended by NMS and
XXXX.XXX that the Merger shall (i) constitute a reorganization within the
meaning of Section 368(a) of the Code, and (ii) qualify for accounting treatment
as a pooling of interests. NMS and XXXX.XXX hereby adopt this Agreement as a
"plan of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-
3(a) of the United States Treasury Regulations.
7
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF XXXX.XXX
------------------------------------------
XXXX.XXX hereby represents and warrants to NMS that the following is true
and complete as of the date hereof:
SECTION 2.01. Organization.
------------
(a) XXXX.XXX is a corporation duly organized, validly existing and in good
standing under the laws of California. XXXX.XXX has full corporate power and
authority to own, lease and operate its properties and to carry on its business
as such business is now conducted and proposed to be conducted. The copies of
the Articles of Incorporation of XXXX.XXX, certified by the Secretary of State
of California, and the By-laws of XXXX.XXX which have been delivered to NMS by
XXXX.XXX are true and complete copies thereof.
(b) Subsidiaries. XXXX.XXX has no subsidiaries and does not, directly or
indirectly, own or have the contractual right or obligation to acquire any
equity interest in any other corporation, partnership, joint venture, trust or
other business organization. Except as disclosed on Schedule 2.02, XXXX.XXX has
not made any investment in, loan to, or advance of cash or other extension of
credit to any person other than in the ordinary course of its business.
SECTION 2.02. Capitalization. The authorized capital stock of XXXX.XXX
consists of 18,000,000 shares of XXXX.XXX Common Stock, of which 7,178,693
shares are currently issued and outstanding and no shares are held in treasury,
and 5,000,000 shares of XXXX.XXX Preferred Stock, of which 273,334 are currently
issued and outstanding and no shares are held in treasury. In addition, 863,728
shares of XXXX.XXX Common Stock are reserved for issuance on exercise of the
XXXX.XXX Options and the XXXX.XXX Warrants and (based on the conversion ratio
of ten shares of XXXX.XXX Common Stock for each share of XXXX.XXX Preferred
Stock) 2,733,340 shares of XXXX.XXX Common Stock are reserved for issuance on
conversion of the XXXX.XXX Preferred Stock. Schedule 2.02 and Schedule 2.13(c)
together set forth a true and complete summary of the number of XXXX.XXX's
issued and outstanding shares of capital stock and the issued and outstanding
options and warrants to purchase capital stock. XXXX.XXX has delivered to NMS
as of or prior to the date hereof: (a) true and complete lists setting forth, as
of the date herof, XXXX.XXX's issued and outstanding shares of capital stock and
the issued and outstanding options and warrants to purchase capital stock; (b)
true and complete copies of each of the XXXX.XXX Warrants; and (c) the form of
agreement used for the XXXX.XXX Options. All of the outstanding shares of
capital stock of XXXX.XXX have been duly authorized, are validly issued, fully
paid and non-assessable, and except as set forth on Schedule 2.02 the holders
thereof are not entitled to cumulative voting rights or preemptive rights. All
of the XXXX.XXX Options and all of the XXXX.XXX Warrants are duly authorized and
validly issued. There are no obligations, contingent or otherwise, of XXXX.XXX
or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares
of XXXX.XXX Capital Stock or the capital stock of any subsidiary
8
or to provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any such subsidiary or any other entity other than
guarantees of bank obligations of subsidiaries entered into in the ordinary
course of business. Except as set forth on Schedule 2.02 or Schedule 2.13(c),
there are no outstanding options to purchase or warrants, privileges or rights
to subscribe to or purchase any shares of XXXX.XXX's capital stock or securities
issued by XXXX.XXX convertible into or exchangeable for shares of XXXX.XXX's
capital stock or other securities of XXXX.XXX or commitments, understandings or
intentions to issue any additional shares or options, warrants, privileges or
rights to subscribe for shares of XXXX.XXX's capital stock.
SECTION 2.03. Qualification in Foreign Jurisdictions. Except as set
forth in Schedule 2.03, XXXX.XXX and each of its subsidiaries is duly qualified
or licensed and in good standing as a foreign corporation duly authorized to do
business in each jurisdiction in which the character of the properties owned or
leased or the nature of the activities conducted by it makes such qualification
or licensing necessary, except for any jurisdiction(s) in which the failure to
so qualify would not have a material adverse effect upon XXXX.XXX.
SECTION 2.04. Authority Relative to this Agreement. XXXX.XXX has all
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by XXXX.XXX
and the consummation by XXXX.XXX of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of XXXX.XXX (other than the approval and
adoption of the Merger by the holders of at least a majority of the outstanding
shares of XXXX.XXX Capital Stock voting as a single class and at least a
majority of the outstanding shares of XXXX.XXX Preferred Stock voting as a
separate class in accordance with the California Law and XXXX.XXX's Articles of
Organization and By-laws) are necessary to authorize this Agreement or to
consummate the transactions so contemplated. The Board of Directors of XXXX.XXX
has determined that it is advisable and in the best interest of XXXX.XXX's
stockholders for XXXX.XXX to enter into a strategic business combination with
NMS upon the terms and subject to the conditions of this Agreement. This
Agreement has been duly and validly executed and delivered by XXXX.XXX and,
assuming the due authorization, execution and delivery by NMS, constitutes a
legal, valid and binding obligation of XXXX.XXX enforceable in accordance with
its terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
SECTION 2.05. No Conflict: Required Filings and Consents.
------------------------------------------
(a) Except as set forth on Schedule 2.05(a), the execution and delivery of
this Agreement by XXXX.XXX does not, and the performance of this Agreement by
XXXX.XXX will not, (i) conflict with or violate the Articles of Incorporation or
By-laws of XXXX.XXX, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to XXXX.XXX or any of its subsidiaries or
by which any of their respective properties is bound or affected, (iii) result
in any breach of or constitute a default (or an event that with notice or
9
lapse of time or both would constitute a default), or impair XXXX.XXX's or any
of its subsidiaries' rights or alter the rights or obligations of any third
party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any XXXX.XXX Material Contract (as defined in
Section 2.08), or (iv) result in the creation of a lien or encumbrance on any of
the properties or assets of XXXX.XXX or any of its subsidiaries pursuant to any
note, bond mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which XXXX.XXX or any of its
subsidiaries is a party or by which XXXX.XXX or any of its subsidiaries, or any
of their respective properties, is bound or affected, except in the case of
clauses (ii), (iii) or (iv), for such breaches, defaults or other occurrences
that would not, individually or in the aggregate, have a material adverse effect
on XXXX.XXX.
(b) The execution and delivery of this Agreement by XXXX.XXX does not, and
the performance of this Agreement and the transactions contemplated hereby by
XXXX.XXX will not, require XXXX.XXX to apply for or obtain any consent,
approval, authorization or permit of, or to file with or notify, any
governmental or regulatory authority, domestic or foreign, except for the filing
and recordation of appropriate merger or other documents as required by the
California Law.
SECTION 2.06. Compliance; Permits.
-------------------
(a) Except as set forth on Schedule 2.06(a), XXXX.XXX and its subsidiaries
are in compliance in all material respects with all foreign, Federal, state or
local statutes, laws, ordinances, judgments, decrees, orders or governmental
rules, regulations, policies and guidelines applicable to them, except where
noncompliance would not have a material adverse effect upon XXXX.XXX. XXXX.XXX
and its subsidiaries have not received any written notice from any governmental
or regulatory authority or otherwise of any alleged violation or noncompliance.
(b) Schedule 2.06(b) hereto sets forth a true and complete list of all
licenses, permits and authorizations of governmental authorities held by
XXXX.XXX or any of its subsidiaries which are material to their respective
businesses (collectively, the "Authorizations"). XXXX.XXX and its subsidiaries
are in material compliance with all Authorizations, and all of the
Authorizations are, in all material respects, in full force and effect.
SECTION 2.07. Financial Statements. XXXX.XXX has delivered to NMS
(i) audited balance sheets of XXXX.XXX as of December 31, 1998 and June 30,
1999, and an unaudited balance sheet of XXXX.XXX as of September 30, 1999 (the
"XXXX.XXX Balance Sheet"), and (ii) audited statements of Operations,
Stockholders' Equity and Accumulated Deficit, and Cash Flows of XXXX.XXX for the
six months ended June 30, 1999, the period from April 3, 1998 (inception) to
December 31, 1998, and the period from April 3, 1998 to June 30, 1999, and
unaudited statements of Operations, Stockholders' Equity and Accumulated
Deficit, and Cash Flows of XXXX.XXX for the nine months ended September 30, 1999
(collectively, the "XXXX.XXX Financial Statements"). Such financial statements
and the notes thereto fairly present in all material respects the financial
position of XXXX.XXX at the respective dates
10
thereof and the results of its operations and its cash flows for the periods
then ended, and were prepared in accordance with the books and records of
XXXX.XXX in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis during the periods covered thereby.
SECTION 2.08. Absence of Certain Changes or Events. Except as set
forth on Schedule 2.08 or reflected in the XXXX.XXX Financial Statements, since
September 30, 1999, XXXX.XXX has conducted its business in the ordinary course
and there has not occurred: (i) any damage to, destruction or loss of any assets
of XXXX.XXX or its subsidiaries, (whether or not covered by insurance) that
could have a material adverse effect upon XXXX.XXX; (ii) any change by XXXX.XXX
in its accounting methods, principles or practices, (iii) any revaluation by
XXXX.XXX of any of its assets, including, without limitation, the writing down
of the value of capitalized software or inventory or the writing off of
promissory notes or accounts receivable other than in the ordinary course of
business in amounts that would not individually or in the aggregate have a
material adverse effect on XXXX.XXX or as reflected in the XXXX.XXX Financial
Statements, (iv) any sale of a material amount of property or assets of XXXX.XXX
or its subsidiaries, (v) any other action or event that would have required the
consent of NMS pursuant to Section 4.01 had such action or event occurred after
the date of this Agreement, or (vi) any event, circumstance or condition
relating specifically to XXXX.XXX or any subsidiary (rather than to general
economic conditions or generally to the industries in which they operate) which
materially and adversely affects or is likely to materially and adversely affect
XXXX.XXX and its subsidiaries, taken as a whole.
SECTION 2.09. Material Contracts.
------------------
(a) Schedule 2.09(a) sets forth for XXXX.XXX and its subsidiaries a true
and complete list of (i) (A) all contracts with respect to which XXXX.XXX or any
of its subsidiaries have any liability or obligation, contingent or otherwise,
involving more than $10,000, or which place any material limitations on the
method of conducting or scope of their respective businesses; (B) all contracts
of XXXX.XXX or any of its subsidiaries pursuant to which any material benefits
accrue to the other parties to such contracts as a result of the Merger; (C) all
contracts of XXXX.XXX and its subsidiaries with their respective directors,
officers, employees, agents or consultants, or their "affiliates", as defined in
Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"); (D) all agreements, contracts or instruments to which XXXX.XXX or any of
its subsidiaries is a party relating to the borrowing of money, or the guaranty
of any obligation for the borrowing of money; (E) all agreements relating to any
securities of XXXX.XXX and its subsidiaries or rights in connection therewith,
and (ii) all agreements which, as of the date hereof, would be required to be
filed by XXXX.XXX with the Securities Exchange Commission (the "SEC"), assuming
XXXX.XXX were subject to the periodic reporting requirements of the Securities
Exchange Act of 1934, as amended, pursuant to the requirements of the Exchange
Act as "material contracts" ((i) and (ii) being collectively referred to as the
"XXXX.XXX Material Contracts"). Neither XXXX.XXX nor any of its subsidiaries is
a party to any oral contract, agreement or other arrangement which, if reduced
to written form, would be required to be listed in Schedule 2.09(a).
11
(b) XXXX.XXX Material Contracts set forth the entire arrangement and
understanding between XXXX.XXX and its subsidiaries and the respective third
parties with respect to the subject matter thereof, and, except as indicated on
Schedule 2.09(a), there have been no material amendments or side or supplemental
arrangements to or in respect of any XXXX.XXX Material Contract. XXXX.XXX has
made available for review by NMS and its representatives true and correct copies
of all XXXX.XXX Material Contracts as currently in effect, and will furnish any
further information that NMS may reasonably request in connection therewith. To
the knowledge of XXXX.XXX, each XXXX.XXX Material Contract is valid and in full
force and effect and XXXX.XXX and its subsidiaries have each performed all
material obligations required to be performed thereunder. Except as set forth
on Schedule 2.09(b), XXXX.XXX and its subsidiaries are not in default under or
in breach or violation of any material term of any XXXX.XXX Material Contract
and, to the knowledge of XXXX.XXX, no third party is in default under any
material provision of any XXXX.XXX Material Contract, except, in each such case,
for such defaults, breaches or violations which would not, individually or in
the aggregate, have a material adverse effect on XXXX.XXX.
SECTION 2.10. Accounts Receivable and Notes Receivable.
(a) The accounts receivable of XXXX.XXX reflected on the XXXX.XXX Balance
Sheet are bona fide claims against debtors and, to the knowledge of XXXX.XXX,
are collectible in full in the ordinary course of business subject to any
amounts reserved on said balance sheet for doubtful accounts, except for any
amounts the failure of which to collect would not have, individually or in the
aggregate, a material adverse effect on XXXX.XXX.
(b) The notes receivable of XXXX.XXX set forth on Schedule 2.10(b) have an
aggregate principal amount outstanding equal to $65,448.48, are bona fide claims
against debtors and, to the knowledge of XXXX.XXX, are collectible in full in
the ordinary course of business subject to any amounts reserved on said balance
sheet for doubtful accounts, except for any amounts the failure of which to
collect would not have, individually or in the aggregate, a material adverse
effect on XXXX.XXX.
SECTION 2.11. No Undisclosed Liabilities. Except as set forth on Schedule
2.11, neither XXXX.XXX nor any of its subsidiaries has any liabilities
(absolute, accrued, contingent or otherwise) which are, in the aggregate,
material to the business, operations or financial condition of XXXX.XXX and its
subsidiaries, taken as a whole, except (a) liabilities adequately provided for
in the XXXX.XXX Balance Sheet, (b) contractual liabilities incurred in the
ordinary course of business and not required under GAAP to be reflected on the
XXXX.XXX Balance Sheet, (c) liabilities incurred in connection with this
Agreement, and (d) other liabilities not in excess of $100,000 incurred since
September 30, 1999 in the ordinary course of business.
SECTION 2.12. Absence of Litigation. Except as set forth on Schedule
2.12, there are no claims, actions, suits, proceedings or investigations pending
or, to the knowledge of XXXX.XXX, overtly threatened against XXXX.XXX or any of
its subsidiaries, or any properties or rights of XXXX.XXX or any of its
subsidiaries, before any court, arbitrator or
12
administrative, governmental or regulatory authority or body, domestic or
foreign, that, individually or in the aggregate, could have a material adverse
effect upon XXXX.XXX.
SECTION 2.13. Employee Benefit Plans; Employment Agreements.
(a) Schedule 2.13(a) sets forth a true and complete list of all employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and any other bonus, stock option,
stock right, stock appreciation right, stock purchase, incentive compensation,
deferred compensation, supplemental retirement, severance, salary continuation,
death benefit, hospitalization, medical, dental, vision, life insurance,
disability, tuition, education or legal assistance, dependent care assistance,
day care, cafeteria, and other similar fringe or employee benefit plans,
programs or arrangements, and any current or former employment or executive
compensation or severance agreements, written or otherwise, (i) which are for
the benefit of, or relating to, any employee of XXXX.XXX, any trade or business
(whether or not incorporated) which is a member of a controlled group including
XXXX.XXX or which is under common control with XXXX.XXX within the meaning of
Section 414 of the Code (each an "ERISA Affiliate"), or any subsidiary of
XXXX.XXX, (ii) which are currently maintained, administered, or contributed to
by XXXX.XXX or any ERISA Affiliate, or (iii) under which XXXX.XXX or any ERISA
Affiliate has any present or future obligations (including each plan with
respect to which XXXX.XXX or an ERISA Affiliate could incur liability under
Section 4069 (if such plan has been or were terminated) or Section 4212(c) of
ERISA (together, the "Employee Plans"), excluding agreements with former
employees under which XXXX.XXX and its subsidiaries have no remaining
obligations.
A true and complete copy of each such written Employee Plan, including each
amendment thereto and any trust agreement, insurance contract, collective
bargaining agreement, or other funding or investment arrangements for the
benefits under such Employee Plan, has been delivered to NMS. In addition, with
respect to each Employee Plan which is an employee benefit plan as defined in
Section 3(3) of ERISA, XXXX.XXX has delivered to NMS the three most recently
filed Forms 5500, an accurate summary plan description (including any summary of
material modifications), the most recent IRS determination letter, if
applicable, and all other material employee communications with respect to each
such Employee Plan.
(b) Except as set forth on Schedule 2.13(b):
----------------
(i) none of the Employee Plans (A) promises or provides (or previously
promised or provided) retiree medical or other retiree welfare
benefits to any person, except as required in Section 4980B of the
Code (nor has XXXX.XXX or any ERISA Affiliate ever maintained such a
plan), (B) is subject to Title IV of ERISA or the funding requirements
of Section 412 of the Code, or (C) is a "multiemployer plan" as such
term is defined in Section 3(37) of ERISA;
(ii) to XXXX.XXX's knowledge, there has been no non-exempt "prohibited
transaction," as such term is defined in Section 406 of ERISA or
Section 4975 of
13
the Code, with respect to any Employee Plan, which could result,
directly or indirectly, in any material liability of XXXX.XXX or any
of its subsidiaries;
(iii) all Employee Plans have been maintained and operated, and
currently are, in compliance in all material respects with their
terms, all material requirements prescribed by any and all statutes
(including ERISA and the Code), orders, or governmental rules and
regulations in effect with respect thereto (including all applicable
requirements for notification to participants or the Department of
Labor, Internal Revenue Service (the "IRS") or Secretary of the
Treasury), and XXXX.XXX and its subsidiaries have performed all
material obligations required to be performed by them under, are not
in any material respect in default under or violation of, and have no
knowledge of any material default or violation by any other party to,
any of the Employee Plans;
(iv) each Employee Plan intended to qualify under Section 401(a) or
Section 403(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code is the subject of a favorable determination
letter from the IRS, a copy of which has been delivered to NMS, and
nothing has occurred which may reasonably be expected to impair such
determination or otherwise adversely affect the tax-qualified status
of the Employee Plan;
(v) neither XXXX.XXX nor any ERISA Affiliate has incurred, nor
reasonably expects to incur, any liability under Title IV of ERISA
(other than liability for premium payments to the Pension Benefit
Guaranty Corporation arising in the ordinary course);
(vi) there has been no amendment to, written interpretation of or
announcement (whether or not written) by XXXX.XXX or any of its ERISA
Affiliates relating to, or change in employee participation, coverage
or benefits under, any Employee Plan that would increase materially
the expense of maintaining such Employee Plan above the level of the
expense incurred in respect thereof for the fiscal year ended prior to
the date hereof;
(vii) there is no contract, agreement, plan or arrangement covering
any employee, former employee, director or agent of XXXX.XXX or any
ERISA Affiliate that, individually or collectively, could give rise to
the payment of any amount that would not be deductible pursuant to the
terms of Section 280G of the Code;
(viii) there has been no violation of (or tax incurred under) Section
4980B of the Code or Sections 601-609 of ERISA with respect to any
Employee Plan that could result in any material liability;
(ix) no employee, former employee, director or agent of XXXX.XXX will
become entitled to any bonus, retirement, severance or similar benefit
or enhanced or
14
accelerated benefit as a result of the transactions contemplated
hereby (either alone or upon the occurrence of any additional or
subsequent events);
(x) subject to the applicable requirements of ERISA, neither any
provision of any Employee Plan nor any agreement with any employee nor
any representation or course of conduct by or on behalf of XXXX.XXX
would prevent the amendment or termination after the Effective Time of
any Employee Plan without liability to XXXX.XXX, NMS or their
respective affiliates;
(xi) there is no suit, action, dispute, claim, arbitration or legal,
administrative, or other proceeding or governmental investigation
pending, or, to the best knowledge of XXXX.XXX, threatened, alleging
any breach of the terms of any Employee Plan or of any fiduciary
duties thereunder or violation of any applicable law with respect to
any such Employee Plan where the foregoing would have a material
adverse effect;
(xii) no Employee Plan constitutes a "multiple employer welfare
arrangement" within the meaning of Section 3(40) of ERISA;
(xiii) with respect to any Employee Plan that is self-funded (in whole
or in part), no material claims have been made that have not yet been
paid and, to the best knowledge of XXXX.XXX, no injury, sickness, or
other medical condition has been incurred with respect to which
material claims may be made pursuant to such Employee Plan (such
disclosure to include the amount thereof);
(xiv) XXXX.XXX does not maintain or have any obligation to contribute
to any "voluntary employees' beneficiary association" (within the
meaning of Section 501(c)(9) of the Code) or other funding arrangement
for the provision of welfare benefits (such disclosure to include the
amount of any such funding);
(xv) since January 1, 1980, neither XXXX.XXX nor any ERISA Affiliate
has made or been obligated to make any contributions, or has otherwise
participated in, any employee benefit plan which is a multiemployer
plan as defined under Section 3(37) or Section 4001(a)(3) of ERISA.
(c) Schedule 2.13(c) sets forth a true and complete summary of the number
of outstanding options to purchase XXXX.XXX Common Stock as of the date hereof.
A true and complete list of each outstanding option to purchase XXXX.XXX common
stock as of the date hereof, together with the identity of the holder of such
option, the number of shares of XXXX.XXX Common Stock subject to such option,
the date of grant of such option, the extent to which such option is or will
become vested, the option price of such option (to the extent determined as of
the date hereof), whether such option is intended to qualify as an incentive
stock option within the meaning of Section 422(b) of the Code (an "ISO"), and
the expiration date of such option has been delivered by XXXX.XXX to NMS prior
to the date hereof. Schedule 2.13(c) also sets forth the total number of such
ISOs and such nonstatutory options.
15
(d) XXXX.XXX has made available for review by NMS and its representatives
and Schedule 2.13(d) sets forth a list of (i) (A) the names and positions of all
of the employees and officers of XXXX.XXX and (B) the names of all of the
consultants of XXXX.XXX since April 3, 1998; (ii) true and complete copies of
all employment agreements with officers and Directors of XXXX.XXX; (iii) true
and complete copies of all agreements with consultants since April 3, 1998; (iv)
a schedule listing all officers of XXXX.XXX who have executed a non-competition
agreement with XXXX.XXX; (v) true and complete copies of all severance
agreements, programs and policies of XXXX.XXX with or relating to its employees,
excluding programs and policies required to be maintained by law; and (vi) true
and complete copies of all plans, programs, agreements and other arrangements of
XXXX.XXX with or relating to its employees which contain change in control
provisions.
SECTION 2.14. Labor Matters. Except as set forth on Schedule 2.14, (i)
there are no controversies pending or, to the knowledge of XXXX.XXX, threatened,
between XXXX.XXX or its subsidiaries and any of their respective employees,
which controversies would have a material adverse effect upon XXXX.XXX; (ii)
neither XXXX.XXX nor any of its subsidiaries is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by XXXX.XXX or its subsidiaries nor does XXXX.XXX or any of its
subsidiaries know of any activities or proceedings of any labor union to
organize any such employees; and (iii) neither XXXX.XXX nor any of its
subsidiaries is subject to any strikes, slowdowns, work stoppages, lockouts, or
threats thereof, by or with respect to any employees of XXXX.XXX or any of its
subsidiaries.
SECTION 2.15. Restrictions on Business Activities. Except for this
Agreement or as set forth on Schedule 2.15, there is no material agreement,
judgment, injunction, order or decree binding upon XXXX.XXX or any of its
subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or impairing any material business practice of XXXX.XXX or any of
its subsidiaries, the acquisition of property by XXXX.XXX or any of its
subsidiaries or the conduct of business by XXXX.XXX or any of its subsidiaries
as currently conducted or as proposed to be conducted by XXXX.XXX.
SECTION 2.16. Real Property.
(a) XXXX.XXX does not own any interest in real property, and the shares of
XXXX.XXX Capital Stock do not constitute "United States Real Property Interests"
as such term is defined in Section 897(c) of the Code.
(b) Schedule 2.16(b) describes each interest in real property leased by
XXXX.XXX and its subsidiaries, including the location and a brief description
thereof, the lessor of such leased property and the principal terms of each
lease or any other arrangement under which such property is leased. XXXX.XXX
and its subsidiaries enjoy peaceful and quiet possession of their respective
leased premises in all material respects and have not received any notice
asserting the existence of a default under any such leasehold and are not aware
of any default by the landlord of any such leased premises of any material term
of the applicable lease.
16
SECTION 2.17. Taxes.
(a) For purposes of this Agreement, "Tax" or "Taxes" shall mean any
federal, state, local or foreign taxes, fees, levies, duties, tariffs, imposts
and governmental impositions or charges of any kind in the nature of taxes,
including (without limitation) (i) income, franchise, profits, gross receipts,
ad valorem, net worth, value added, sales, use, service, real or personal
property, special assessments, capital stock, license, payroll, withholding,
estimated, employment, social security, workers' compensation, unemployment
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, transfer and gains taxes, and (ii) interest,
penalties, and additions to tax imposed with respect thereto; and "Tax Returns"
shall mean returns, reports, declarations, information statements, refund
claims, amended returns, or other statements with respect to Taxes and schedules
and attachments thereto, including, without limitation, consolidated, combined
and unitary tax returns.
(b) Except as set forth on Schedule 2.17(b), XXXX.XXX and its subsidiaries
have timely filed all Tax Returns required to be filed by them, and XXXX.XXX and
its subsidiaries have paid and discharged all material Taxes due in connection
with or with respect to the filing of all Tax Returns and have paid all other
material Taxes when due, and there are no other Taxes that would be due if
asserted by a taxing authority, except such as are being contested in good faith
by appropriate proceedings (to the extent that any such proceedings are
required) and with respect to which XXXX.XXX is maintaining reserves to the
extent currently required in all respects adequate for their payment. As of the
time of filing, all Tax Returns were (and, as to Tax Returns not filed as of the
date hereof, will be) complete and correct in all material respects. XXXX.XXX
and its subsidiaries have complied in all material respects with all applicable
laws, rules and regulations relating to the payment and withholding of Taxes and
have timely withheld from employee wages or other payments to creditors or
independent contractors and paid over to the proper governmental authorities all
amounts required to be so withheld and paid over. Except as set forth on
Schedule 2.17(b) no notice of claim has ever been made by a government authority
in a jurisdiction where XXXX.XXX does not file Returns that it is or may be
subject to Taxes in that jurisdiction. XXXX.XXX and each of its subsidiaries
have disclosed to the relevant taxing authority any position taken where the
failure to make such disclosure would enable the taxing authority to subject
such person to penalties or additions to tax that would have a material adverse
effect upon XXXX.XXX. Neither the IRS nor any other taxing authority or agency
is now asserting or, to XXXX.XXX's knowledge, is threatening to assert against
XXXX.XXX or any of its subsidiaries any deficiency or claim for additional Taxes
other than additional Taxes with respect to which an adequate reserve (in
conformity with GAAP) has been established, as set forth in the XXXX.XXX
Financial Statements. Neither XXXX.XXX nor any of its subsidiaries is currently
being audited by any taxing authority. There are no Tax liens on any assets of
XXXX.XXX or any of its subsidiaries. No extension or waiver of a statute of
limitations or assessment of Taxes is currently in effect for XXXX.XXX or any of
its subsidiaries. The accruals and reserves for Taxes reflected in XXXX.XXX
Balance Sheet are in all material respects adequate to cover all Taxes accruable
and unpaid through the date thereof (including interest and penalties, if any,
thereon and Taxes being contested) in accordance with GAAP, consistently applied
with past practice. Neither XXXX.XXX nor any of its subsidiaries is required to
include in income (i) any amount in
17
respect of any adjustment under Sections 263A or 481 of the Code, or (ii) any
installment sale gain. XXXX.XXX is not a party to any joint venture,
partnership, or other arrangement or contract treated as a partnership for
Federal income tax purposes. No material issues have been raised by the relevant
taxing authorities on audit that are of a recurring nature and that would have
an effect upon the Taxes of XXXX.XXX or any of its subsidiaries. XXXX.XXX has
made available for inspection all Tax Returns of XXXX.XXX and its subsidiaries
for which the applicable statute of limitations has not expired. All material
elections with respect to Taxes affecting XXXX.XXX or its subsidiaries as of the
date hereof are set forth on Schedule 2.17(b).
(c) Except as set forth on Schedule 2.17(c), neither XXXX.XXX nor any of
its subsidiaries is a party to any agreement, contract or arrangement, including
this Agreement, that may result, separately or in the aggregate, in the payment
of any "excess parachute payment" within the meaning of Section 280G of the
Code. Neither XXXX.XXX nor any of its subsidiaries owns stock in a passive
foreign investment company within the meaning of Section 1296 of the Code. None
of XXXX.XXX or its subsidiaries has filed a consent pursuant to Section 341(f)
of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of any asset owned by XXXX.XXX or any of its subsidiaries. Except as
set forth on Schedule 2.17(c), no property used by XXXX.XXX or its subsidiaries
is property that XXXX.XXX or any such subsidiary is or will be required to treat
as being owned by another person pursuant to the provisions of Section 168(f)(8)
of the Internal Revenue Code of 1954 as it existed prior to the enactment of the
Tax Reform Act of 1986 or is "tax-exempt use property" within the meaning of
Section 168(h) of the Code. Neither XXXX.XXX nor any of its subsidiaries is
obligated under any agreement with respect to industrial development bonds or
other obligations with respect to which the excludability from gross income of
the holder for Federal or state income tax purposes could be affected by the
transactions contemplated hereunder. Neither XXXX.XXX nor any of its
subsidiaries has entered into any intercompany transaction within the meaning of
Section 1.1502 13(b)(1) of the United States Treasury Regulations as to which
deferred gains or loss has not been restored. No excess loss account within the
meaning of Section 1.1502 19(a)(2) of the United States Treasury Regulations
exists with respect to the stock of any of its subsidiaries. Neither XXXX.XXX
nor any of its subsidiaries owns any property of a character, the indirect
transfer of which, pursuant to the transactions contemplated by this Agreement
would give rise to any documentary, stamp or other transfer tax. Except as set
forth on Schedule 2.17(b), the transactions contemplated herein are not subject
to the tax withholding provisions of Section 3406 of the Code, or of Subchapter
A of Chapter 3 of the Code, or of any other provision of law. Except as set
forth on Schedule 2.17(b), XXXX.XXX does not have and has not had a branch in
any foreign country. XXXX.XXX has provided to NMS or its representatives copies
of all tax allocation or tax sharing agreements to which it is a party, all of
which are listed on Schedule 2.17(b), and XXXX.XXX is not liable for the Taxes
of any other person or entity under United States Treasury Regulation Section
1.1502-6 (or any similar provision of state, foreign or local law), or as a
transferee or successor, or by contract, or otherwise, except for Taxes of any
subsidiaries that are members at the time of closing of an affiliated group
within the meaning of Section 1504(a) of which XXXX.XXX is the common parent or
Taxes which, in the aggregate, are not expected to be a material amount.
18
(d) The Merger is intended to qualify as a reorganization under Section
368(a)(1)(A) of the Code. In respect thereof, the following representations are
made: (i) the liabilities of XXXX.XXX to be assumed by NMS and the liabilities
to which the transferred assets of XXXX.XXX are subject were incurred by
XXXX.XXX in the ordinary course of business; (ii) XXXX.XXX is not under the
jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code; (iii) XXXX.XXX continues to operate at least
one significant historic business line, or owns at least a significant portion
of its historic business assets, in each case within the meaning of Section
1.368-1(d) of the United States Treasury Regulations; and (iv) XXXX.XXX is not
an "investment company" as defined in Section 368 (a) (2) (F) of the Code.
SECTION 2.18. Environmental Matters. Except as set forth on Schedule
2.18, XXXX.XXX and each of its subsidiaries (i) have obtained all material
applicable permits, licenses and other authorization which are required under
Federal, state or local laws relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants or hazardous or toxic materials
or wastes into ambient air, surface water, ground water or land or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants or hazardous or
toxic materials or wastes by XXXX.XXX or its subsidiaries (or their respective
agents); (ii) are in substantial compliance with all material terms and
conditions of such required permits, licenses and authorization, and also are in
substantial compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in such laws or contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder; (iii) as of the date hereof, are not aware of nor have
received notice of any event, condition, circumstance, activity, practice,
incident, action or plan which would interfere with or prevent continued
compliance with or which would give rise to any material common law or statutory
liability, or otherwise form the basis of any claim, action, suit or proceeding,
based on or resulting from XXXX.XXX's or any of its subsidiaries' (or any of
their respective agent's) manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge or release
into the environment, of any pollutant, contaminant or hazardous or toxic
material or waste, and (iv) have taken all actions necessary under applicable
requirements of Federal, state or local laws, rules or regulations to register
any products or materials required to be registered by XXXX.XXX or its
subsidiaries (or any of their respective agents) thereunder.
SECTION 2.19. Brokers. No investment bank, broker or finder is entitled
to any fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of XXXX.XXX.
SECTION 2.20. Intellectual Property.
(a) XXXX.XXX has the right to use, sell, license and dispose of, has the
right to bring actions for the infringement of, and, where necessary, has made
timely and proper application for all Intellectual Property Rights (as defined
below) employed in, necessary or
19
required for the conduct of its business as presently conducted and as presently
proposed to be conducted (such Intellectual Property Rights, collectively, the
"XXXX.XXX Rights") and to the knowledge of XXXX.XXX such rights to use, sell,
license, dispose of and bring actions are exclusive with respect to XXXX.XXX
Rights developed or owned by XXXX.XXX and are sufficient for such conduct its
business in the case of all other XXXX.XXX Rights. "Intellectual Property
Rights" shall mean all industrial and intellectual property rights, including
without limitation, patents, patent applications, patent rights, registered and
unregistered trademarks, trademark applications, trade names, design marks,
service marks, service xxxx applications, copyrights, copyright applications,
mask works, licenses, skills, methods, know-how, trade secrets, proprietary
processes, and formulae, all source and object code, algorithms, architecture,
engineering and technical data, designs, drawings, layouts, display screens,
inventions, development tools and all documentation and media constituting,
describing or relating to the above, manuals, memoranda and records. Schedule
2.20(a) sets forth a true and complete list (without extensive or revealing
descriptions) of all Intellectual Property Rights and any applications therefor
owned by XXXX.XXX and its subsidiaries, including the respective registration or
application numbers and the names of all registered owners.
(b) The execution, delivery and performance of this Agreement, the
consummation of the Merger and the consummation of the other transactions
contemplated hereby and thereby, will not breach, violate or conflict with any
instrument or agreement governing any XXXX.XXX Rights, will not cause the
forfeiture or termination or give rise to a right of forfeiture or termination
of any XXXX.XXX Right or in any way impair the right of XXXX.XXX or the
Surviving Corporation to use, sell, license or dispose of or bring any action
for the infringement of, any XXXX.XXX Right or portion thereof. To the knowledge
of XXXX.XXX, there are no licenses or other authorizations not possessed by
XXXX.XXX which are required for the Surviving Corporation to utilize, modify,
market and distribute XXXX.XXX's current products and any products currently
under development. Schedule 2.20(b) sets forth a true and complete list of all
Intellectual Property Rights belonging to third parties ("Third Party
Intellectual Property Rights") which are incorporated in, are, or form a part
of, any XXXX.XXX product or which are used by XXXX.XXX in the development of
such product. Schedule 2.20(b) sets forth a true and complete list of (i) all
material licenses, sublicenses and other agreements as to which XXXX.XXX is a
party and pursuant to which any person is authorized to use any XXXX.XXX
Intellectual Property Right, and (ii) all material licenses, sublicenses and
other agreements as to which XXXX.XXX is a party and pursuant to which XXXX.XXX
is authorized to use any Third Party Intellectual Property Rights.
(c) There are no royalties, honoraria, fees or other payments payable by
XXXX.XXX to any third party by reason of the ownership, use, license sale or
disposition of XXXX.XXX Rights.
(d) The manufacture, marketing, license, sale or use of any product
currently or proposed to be licensed or sold by XXXX.XXX or currently under
development by XXXX.XXX, will not violate (in the case of any product under
development, to the extent of its current state of development) any license or
agreement with any third party or infringe any Intellectual Property Right of
any other party; except as set forth on Schedule 2.20(d), there is
20
no pending or, to the knowledge of XXXX.XXX, threatened claim or litigation
contesting the validity, ownership or right to use, sell, license or dispose of
any XXXX.XXX product or XXXX.XXX Right nor to the knowledge of XXXX.XXX, is
there any basis for any such claim, nor has XXXX.XXX received any written notice
asserting that any XXXX.XXX Right, XXXX.XXX product or the proposed use, sale,
license or disposition thereof conflicts or will conflict with the rights of any
other party, nor, to the best knowledge of XXXX.XXX, is there any basis for any
such assertion.
(e) Each current employee and consultant, each former employee and
consultant and each other person involved in the development of any XXXX.XXX
Right, XXXX.XXX'S current products or products under development ("XXXX.XXX
Developer") has executed an agreement regarding confidentiality and proprietary
information and assignment of inventions to XXXX.XXX, copies of which have been
provided to NMS; to the knowledge of XXXX.XXX, none of the employees or
consultants of XXXX.XXX is in violation of such agreement; nor to the knowledge
of XXXX.XXX, is any current employee or consultant obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would materially impair such individual's ability to perform his
duties as an employee or consultant of XXXX.XXX or that would conflict in any
material respect with XXXX.XXX's business as conducted or as proposed to be
conducted or that would prevent any such employee or consultant from assigning
inventions to XXXX.XXX. Schedule 2.20(e) sets forth a true and complete list of
all XXXX.XXX Developers.
(f) Except as set forth on Schedule 2.20(f), all copies of the source code
for XXXX.XXX Software (as defined below) are in XXXX.XXX's possession and
control and no officers, employees, agents or actual or potential customers of
XXXX.XXX, or any other third party, have any rights to or possess such source
code.
(g) XXXX.XXX has taken reasonable and appropriate actions to protect the
secrecy and confidentiality of the XXXX.XXX Rights. To the knowledge of
XXXX.XXX, XXXX.XXX Rights are presently protectable and are not part of the
public domain or literature, nor have they been used, divulged or appropriated
for the benefit of any past or present employees or other persons, or to the
detriment of XXXX.XXX.
SECTION 2.21. Interested Party Transactions. Except as set forth on
Schedule 2.21, no event has occurred that would be required to be reported as a
Certain Relationship or Related Transaction, pursuant to Item 404 of Regulation
S-K promulgated by the SEC.
SECTION 2.22. Insurance. XXXX.XXX and its business, properties and/or
employees are insured under the insurance policies set forth on Schedule 2.22,
all of which are valid and in full force.
SECTION 2.23. Vote Required. The affirmative votes of the holders of at
least a majority of the outstanding shares of XXXX.XXX Capital Stock voting as a
single class and at least a majority of the outstanding shares of XXXX.XXX
Preferred Stock voting as a separate
21
class are the only votes of the holders of any class or series of XXXX.XXX's
capital stock necessary under its Articles of Incorporation and By-laws to
approve the Merger and the other transactions contemplated hereby.
SECTION 2.24. Pooling Matters. Neither XXXX.XXX nor any of its
subsidiaries or affiliates has, to XXXX.XXX's knowledge and based upon
consultation with its independent certified public accountants, taken or agreed
to take any action that (without giving effect to any action taken or agreed to
be taken by NMS or any of its affiliates) would affect the ability of NMS to
account for the business combination to be effected by the Merger as a pooling
of interests.
SECTION 2.25. Accredited Investors. Not more than 35 of the holders of
record of the XXXX.XXX Common Stock, XXXX.XXX Preferred Stock, XXXX.XXX Options
and XXXX.XXX Warrants, as set forth on Schedule 2.02 and Schedule 2.13(c), do
not meet the definition of the term "accredited investor" as such term is
defined in the Securities Act.
SECTION 2.26. Other Negotiations. Except as set forth in Schedule 2.26,
XXXX.XXX is not actively engaged in discussions or negotiations with any person
or persons with respect to, and has not solicited or furnished any information
to any person or persons who, to XXXX.XXX's knowledge, is currently
contemplating negotiations or an offer regarding, a consolidation or merger or
other business combination, recapitalization, liquidation, or similar
transaction, or any other transaction which could be conditioned upon, or
otherwise require, the termination of this Agreement.
SECTION 2.27. Full Disclosure. No statement contained in this Agreement
or in any certificate or schedule furnished or to be furnished by or on behalf
of XXXX.XXX or its subsidiaries to NMS pursuant to this Agreement, taken in the
context of the entire Agreement, contains any untrue statement of a material
fact or omits to state any material fact necessary, in the light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
OF NMS AND THE ACQUISITION SUB
------------------------------
NMS and the Acquisition Sub hereby jointly and severally represent and
warrant to XXXX.XXX that the following are true and complete as of the date
hereof:
SECTION 3.01. Organization.
------------
(a) Each of NMS and its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has full corporate power and authority to own, lease and
operate its properties and to carry on its business as such
22
business is now conducted and proposed to be conducted, except where the failure
to do so would not, individually or in the aggregate, have a material adverse
effect on NMS. The copies of the Certificate of Incorporation of NMS, certified
by the Secretary of State of The State of Delaware, and the By-laws of NMS which
have been delivered to XXXX.XXX by NMS, and the copies of the Articles of
Incorporation of the Acquisition Sub, certified by the Secretary of State of The
State of California, and the By-laws of the Acquisition Sub which have been
delivered to XXXX.XXX by NMS, are true and complete copies thereof.
(b) Subsidiaries. Except as set forth in the NMS SEC Reports, NMS has no
subsidiaries and does not, directly or indirectly, own or have the contractual
right or obligation to acquire any equity interest in any other corporation,
partnership, joint venture, trust or other business organization. NMS is the
record and beneficial owner of all of the capital stock of each of the
corporations listed in the NMS SEC Reports. There are no outstanding options,
warrants, convertible or exchangeable securities or other rights that would
obligate NMS to issue shares of capital stock in any of its subsidiaries. All
shares of the capital stock of NMS's subsidiaries are duly authorized, validly
issued, fully paid and non-assessable, and all of such shares are owned by NMS
free and clear of all security interests, liens, claims, pledges, agreements,
limitations of NMS's voting rights, charges or other encumbrances of any nature
whatsoever. Except as disclosed in the NMS SEC Reports, NMS has not made any
investment in, loan to, or advance of cash or other extension of credit to any
person, other than in the ordinary course of its business.
SECTION 3.02. Capitalization. The authorized capital stock of NMS
consists of 45,000,000 shares of NMS Common Stock, of which 11,236,912 are
currently issued and outstanding and 3,000,000 shares of preferred stock, $.05
par value, of which none are issued and outstanding. All of the outstanding
shares of capital stock of NMS have been duly authorized, are validly issued,
fully paid and non-assessable, and the holders thereof are not entitled to
cumulative voting rights or preemptive rights. Except as set forth on Schedule
3.02, there are no outstanding options to purchase or warrants, privileges or
rights to subscribe to or purchase any shares of NMS's capital stock or
securities issued by NMS convertible into or exchangeable for shares of NMS's
capital stock or other securities of NMS or commitments or understandings to
issue any additional shares or options, warrants, privileges or rights to
subscribe for shares of NMS's capital stock. The shares of NMS Common Stock to
be delivered to the holders of XXXX.XXX Capital Stock and XXXX.XXX ISOs will be
validly issued, fully paid and non-assessable, and the shares of NMS Common
Stock to be issued upon exercise of the XXXX.XXX Nonstatutory Options and
XXXX.XXX Warrants will be validly issued, fully paid and non-assessable.
SECTION 3.03. Qualification in Foreign Jurisdictions. NMS and each of
its subsidiaries is duly qualified or licensed and in good standing as a foreign
corporation duly authorized to do business in each jurisdiction in which the
character of the properties owned or leased or the nature of the activities
conducted by it makes such qualification or licensing necessary, except for any
jurisdiction(s) in which the failure to so qualify would not have a material
adverse effect upon NMS.
23
SECTION 3.04. Authority Relative to this Agreement. Each of NMS and the
Acquisition Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by NMS and the Acquisition Sub and the consummation by NMS and
the Acquisition Sub of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of NMS or the Acquisition Sub are necessary to authorize
this Agreement or to consummate the transactions so contemplated. The Board of
Directors of NMS has determined that it is advisable and in the best interest of
NMS's stockholders for NMS to enter into a strategic business combination with
XXXX.XXX upon the terms and subject to the conditions of this Agreement. This
Agreement has been duly and validly executed and delivered by NMS and the
Acquisition Sub and, assuming the due authorization, execution and delivery by
XXXX.XXX, constitutes a legal, valid and binding obligation of each of NMS and
the Acquisition Sub, enforceable in accordance with its terms.
SECTION 3.05. No Conflict: Required Filings and Consents.
(a) The execution and delivery of this Agreement by NMS and the Acquisition
Sub does not, and the performance of this Agreement by NMS and the Acquisition
Sub will not, (i) conflict with or violate the Certificate of Incorporation or
By-laws of NMS or the Acquisition Sub; (ii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to NMS or any of its
subsidiaries or by which any of their respective properties is bound or
affected; (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default), or impair
NMS's or any of its subsidiaries' rights or alter the rights or obligations of
any third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material contract of NMS; or (iv) result in
the creation of a lien or encumbrance on any of the properties or assets of NMS
or any of its subsidiaries pursuant to, any note, bond mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which NMS or any of its subsidiaries is a party or by which NMS or
any of its subsidiaries, or any of their respective properties, is bound or
affected, except in the case of clauses (ii), (iii) and (iv) for such breaches,
defaults or other occurrences that would not, individually or in the aggregate,
have a material adverse effect upon NMS.
(b) The execution and delivery of this Agreement by NMS and the Acquisition
Sub does not, and the performance of this Agreement and the transactions
contemplated hereby by NMS and the Acquisition Sub will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
for applicable requirements, if any, of the Securities Act, the Exchange Act,
state securities laws and the filing and recordation of appropriate merger or
other documents as required by the California Law, and (ii) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay consummation of the Merger,
or otherwise prevent or delay either of NMS or the Acquisition Sub from
performing its obligations under this Agreement, or would not otherwise have a
material adverse effect on NMS.
24
SECTION 3.06. SEC Filings. NMS has made available to XXXX.XXX true and
complete copies of (i) its Annual Reports on Form 10-K for the fiscal years
ended December 31, 1997 and 1998, respectively, (ii) its Quarterly Reports on
Form 10-Q for the periods ended March 31, June 30, and September 30, 1999, (iii)
all proxy statements relating to NMS's meetings of stockholders (whether annual
or special) held since June 1, 1998, (iv) its Annual Report to Stockholders for
the fiscal year ended December 31, 1998, (v) all other reports (other than those
on Form 10-Q filed prior to December 31, 1998) or registration statements filed
by NMS with the SEC since June 1, 1998, and (vi) all amendments, supplements and
exhibits (including, without duplication, exhibits incorporated by reference) to
all such reports and registration statements (collectively, the "NMS SEC
Reports"). The NMS SEC Reports (i) were prepared in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
(ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statement
therein, in the light of the circumstances under which they were made, not
misleading. None of NMS's subsidiaries is required to file any forms, reports
or other documents with the SEC.
SECTION 3.07. Financial Statements. Each of the consolidated financial
statements (including, in each case, any notes thereto) contained in or
incorporated by reference into the NMS SEC Reports was prepared in accordance
with SEC requirements and such consolidated financial statements (including the
notes thereto) were prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto) and each fairly presented in all material respects the consolidated
financial position of NMS and its subsidiaries as at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which are not in the
aggregate material in amount.
SECTION 3.08. Absence of Certain Changes or Events. Except as set
forth on Schedule 3.08, since September 30, 1999, NMS has conducted its business
in the ordinary course and there has not occurred: (i) any damage to,
destruction or loss of any assets of NMS or its subsidiaries, (whether or not
covered by insurance) that could have a material adverse effect upon NMS; (ii)
any change by NMS in its accounting methods, principles or practices, (iii) any
revaluation by NMS of any of its assets, including, without limitation, the
writing down of the value of capitalized software or inventory or the writing
off of promissory notes or accounts receivable other than in the ordinary course
of business in amounts that would not individually or in the aggregate have a
material adverse effect on NMS or as reflected in the financial statements
incorporated by references in the NMS SEC Reports, (iv) any sale of a material
amount of property or assets of NMS or its subsidiaries, or (v) any event,
circumstance or condition relating specifically to NMS or any subsidiary (rather
than to general economic conditions or generally to the industries in which they
operate) which materially and adversely affects or is likely to materially and
adversely affect NMS and its subsidiaries, taken as a whole.
25
SECTION 3.09. No Undisclosed Liabilities. Neither NMS nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise)
which are, in the aggregate, material to the business, operations or financial
condition of NMS and its subsidiaries, taken as a whole, except (a) liabilities
adequately provided for in the NMS SEC Reports, (b) contractual liabilities
incurred in the ordinary course of business and not required under GAAP to be
reflected in the financial statements incorporated by reference in the NMS SEC
Reports, (c) liabilities incurred in connection with this Agreement, or (d)
other liabilities incurred since September 30, 1999 in the ordinary course of
business.
SECTION 3.10. Absence of Litigation. Except as set forth in the NMS SEC
Reports, there are no claims, actions, suits, proceedings or investigations
pending or, to the knowledge of NMS, overtly threatened against NMS or any of
its subsidiaries, or any properties or rights of NMS or any of its subsidiaries,
before any court, arbitrator or administrative, governmental or regulatory
authority or body, domestic or foreign, that, individually or in the aggregate,
could have a material adverse effect upon NMS.
SECTION 3.11. Taxes. The Merger is intended to qualify as a
reorganization under Section 368(a)(1)(A) of the Code. In respect thereof, the
following representations are made: (i) NMS has no plan or intention to
reacquire, directly or indirectly, any of its stock issued in the Merger; (ii)
NMS has no plan or intention to sell or otherwise dispose of or to cause
XXXX.XXX to sell or otherwise dispose of any of the assets of XXXX.XXX acquired
in the Merger, except for dispositions made in the ordinary course of business
or transfers described in Section 368(a)(2)(C) of the Code; (iii) following the
Merger, NMS will continue the historic business of XXXX.XXX or use a significant
portion of XXXX.XXX's historic business assets in a business; (iv) the payment
of cash in lieu of fractional shares of NMS stock is solely for the purpose of
avoiding the expense and inconvenience to NMS of issuing fractional shares and
does not represent separately bargained for consideration; (v) the total cash
consideration to be paid in the Merger to the XXXX.XXX stockholders instead of
issuing fractional shares of NMS stock will not exceed one percent of the total
consideration that will be issued in the Merger to the XXXX.XXX shareholders in
exchange for their Shares; (vi) NMS will pay the expenses incurred in connection
with the Merger which is allocated to it pursuant to Section 7.03, if any; (vii)
there is no intercorporate indebtedness existing between XXXX.XXX and NMS that
was issued, acquired or will be settled at a discount; (viii) NMS is not an
"investment company" as defined in Section 368(a)(2)(F) of the Code; (ix) NMS
has no plan or intention to take any action that would result in NMS losing
control of XXXX.XXX within the meaning of Section 368(c) of the Code; (x)
immediately prior to and at the Effective Time, NMS will be in control of
Acquisition Sub within the meaning of Section 368(c) of the Code; and (xi)
neither NMS nor Acquisition Sub is under the jurisdiction of a court in a Title
11 or similar case within the meaning of Section 368(a)(3)(A) of the Code.
SECTION 3.12. Vote Required. No vote of the holders of any class or
series of NMS's capital stock is necessary under applicable law or rules of the
National Association of Securities Dealers, Inc. to approve the Merger and the
other transactions contemplated hereby.
26
SECTION 3.13. Pooling Matters. Neither NMS nor any of its subsidiaries
or affiliates has, to NMS's knowledge and based upon consultation with its
independent certified public accountants, taken or agreed to take any action
that (without giving effect to any action taken or agreed to be taken by
XXXX.XXX or any of its affiliates) would affect the ability of NMS to account
for the business combination to be effected by the Merger as a pooling of
interests.
SECTION 3.14. Interim Operations of Acquisition Sub. The Acquisition Sub
was formed solely for the purpose of engaging in the transactions contemplated
hereby, has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
SECTION 3.15. Full Disclosure. No statement contained in this Agreement
or in any certificate or schedule furnished or to be furnished by or on behalf
of NMS or its subsidiaries to XXXX.XXX pursuant to this Agreement, taken in the
context of the entire Agreement, contains any untrue statement of a material
fact or omits to state any material fact necessary, in the light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
--------------------------------------
SECTION 4.01. Conduct of Business by XXXX.XXX Pending the Merger. During
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, unless NMS shall
otherwise agree in writing, XXXX.XXX shall conduct its business and shall cause
the businesses of its subsidiaries to be conducted only in, and each of XXXX.XXX
and its subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice; and XXXX.XXX shall use
reasonable efforts to preserve the business organization of it and its
subsidiaries, to keep available the services of the present officers, key
employees and consultants of it and its subsidiaries and to preserve the present
relationships of it and its subsidiaries with customers, suppliers and other
persons with which it or any of its subsidiaries has significant business
relations. By way of amplification and not limitation, except as contemplated
by this Agreement, neither XXXX.XXX nor any of its subsidiaries shall, during
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time do, or propose to do,
any of the following without the prior written consent of NMS:
(a) amend or otherwise change its Articles or Certificate of Incorporation
or By-laws;
(b) issue, sell, pledge, dispose of or encumber, or authorize the issuance,
sale, pledge, disposition or encumbrance of, any shares of capital stock of any
class (other than the sale or issuance of common stock upon the exercise of
outstanding options listed on Schedule 2.03 or Schedule 2.13(c) hereto or any
options, warrants, convertible securities or other rights of any kind to acquire
any shares of capital stock, or any other ownership interest (including, without
27
limitation, any phantom interest) of XXXX.XXX, or any of its subsidiaries (other
than grants of employee stock options pursuant to existing stock option plans
consistent with past practice);
(c) sell, pledge, dispose of or encumber any of its assets or any assets of
its subsidiaries, except for (i) sales of products (or licenses thereto) and
services in the ordinary course of business consistent with past practice, (ii)
dispositions of obsolete or worthless assets, and (iii) sales of immaterial
assets not in excess of $5,000 in the aggregate;
(d) alter the price or accelerate, amend or change the period (or permit
any acceleration, amendment or change) of exercisability of options or
restricted stock granted under the Employee Plans (including stock option plans)
or authorize cash payments in exchange for any options granted under any of such
plans;
(e) (i) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its capital stock, except that a wholly owned subsidiary of XXXX.XXX may
declare and pay a dividend to XXXX.XXX, (ii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (iii) amend the terms of, repurchase, redeem or otherwise
acquire, or permit any subsidiary to repurchase, redeem or otherwise acquire,
any of its securities or any securities of its subsidiaries, or propose to do
any of the foregoing;
(f) sell, transfer, license, sublicense or otherwise dispose of any
XXXX.XXX Intellectual Property Rights, or amend or modify any existing
agreements with respect to any XXXX.XXX Intellectual Property Rights, or Third
Party Intellectual Property Rights, other than nonexclusive licenses of
commercial products in the ordinary course of business;
(g) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof; (ii) except as set forth on Schedule 4.01(g)(ii), incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee (other than guarantees of bank debt of such party's subsidiaries
entered into in the ordinary course of business) or endorse or otherwise as an
accommodation become responsible for, the obligations of any person, or make any
loans or advances; (iii) enter into or amend any XXXX.XXX Material Contract;
(iv) authorize any capital expenditures or purchase of fixed assets which are,
in the aggregate, in excess of $25,000 for XXXX.XXX and its subsidiaries taken
as a whole; or (v) enter into or amend any contract, agreement, commitment or
arrangement to effect any of the matters prohibited by this Section 4.01;
(h) increase the compensation payable or to become payable to the officers
or employees of XXXX.XXX or its subsidiaries, or grant any severance or
termination pay to, or enter into any employment or severance agreement with any
director, officer (except for officers who are terminated on an involuntary
basis) or other employee of XXXX.XXX or any of its subsidiaries, or establish,
adopt, enter into or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, stock purchase, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust,
28
fund, policy or arrangement for the benefit of any current or former directors,
officers or employees, except, in each case, as may be required by law and
except for ministerial updating of plans and trusts which does not affect the
benefits thereunder;
(i) take any action to change accounting policies or procedures (including,
without limitation, procedures with respect to revenue recognition, the
capitalization of software development costs, payments of accounts payable and
collection of accounts receivable);
(j) make any material tax election inconsistent with past practices or
settle or compromise any material Federal, state, local or foreign tax liability
or agree to an extension of a statute of limitations except to the extent the
amount of any such settlement has been reserved for on the XXXX.XXX Balance
Sheet;
(k) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other then
the payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against in
the financial statements of XXXX.XXX or incurred in the ordinary course of
business and consistent with past practice; or
(l) take any action which would make any of the representations or
warranties of XXXX.XXX contained in this Agreement materially untrue or
incorrect or prevent such party from performing in all material respects or
cause such party not to perform in all material respects its covenants
hereunder.
SECTION 4.02. No Solicitation by XXXX.XXX.
(a) During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, XXXX.XXX
shall not, directly or indirectly, through any officer, director, employee,
representative or agent, or any of its subsidiaries, solicit, encourage,
negotiate, approve or recommend any inquiries or proposals regarding any merger,
sale of assets, sale of shares of capital stock (including without limitation by
way of a tender offer) or similar transactions involving XXXX.XXX or any of its
subsidiaries (any of the foregoing inquiries or proposals being referred to
herein as an "Acquisition Proposal").
(b) XXXX.XXX shall immediately notify NMS after receipt of any Acquisition
Proposal or any request for nonpublic information relating to XXXX.XXX or any of
its subsidiaries in connection with an Acquisition Proposal or for access to the
properties, books or records of XXXX.XXX or any subsidiary by any person that
informs the Board of Directors or officers of XXXX.XXX or such subsidiary that
it intends to make, or has made, an Acquisition Proposal. Such notice to NMS
shall be made orally and in writing and shall indicate in reasonable detail the
identity of the offeror and the terms and conditions of such proposal, inquiry
or contact.
29
(c) XXXX.XXX shall immediately cease and cause to be terminated any
existing discussions or negotiations with any parties (other than with NMS)
conducted heretofore with respect to any of the foregoing. XXXX.XXX shall not
release any third party from any confidentiality or standstill agreement to
which such XXXX.XXX is a party.
(d) XXXX.XXX shall use reasonable efforts to ensure that the officers and
directors of XXXX.XXX and its subsidiaries and any investment banker or other
advisor or representative retained by XXXX.XXX are aware of, and comply with,
the restrictions described in this Section 4.02.
ARTICLE V
ADDITIONAL AGREEMENTS
---------------------
SECTION 5.01. Stockholders' Meeting. XXXX.XXX shall call and hold its
Stockholders' Meeting as promptly as practicable for the purpose of voting upon
the approval of the Merger. XXXX.XXX shall solicit from its stockholders
proxies in favor of the approval of the Merger, and subject to the applicable
fiduciary duties of the directors of XXXX.XXX, as determined by such directors
in good faith after consultation with and based upon the advice of legal
counsel, shall take all other action necessary or advisable to secure the vote
or consent of stockholders required by the California Law to obtain such
approval.
SECTION 5.02. Access to Information: Confidentiality. Upon reasonable
notice and subject to restrictions contained in confidentiality agreements to
which XXXX.XXX may be subject (from which XXXX.XXX shall each use reasonable
efforts to be released), XXXX.XXX shall (and shall cause each of its
subsidiaries to) afford to the officers, employees, accountants, counsel and
other representatives of NMS, reasonable access, during the period prior to the
Effective Time, to all of the properties, books, contracts, commitments and
records of XXXX.XXX and, during such period, XXXX.XXX shall (and shall cause its
subsidiaries to) furnish promptly to NMS all information concerning the
business, properties and personnel of XXXX.XXX as NMS may reasonably request,
and XXXX.XXX shall make available to NMS the appropriate individuals (including
attorneys, accountants and other professionals) for discussion of the business,
properties and personnel of XXXX.XXX as NMS may reasonably request.
SECTION 5.03. Consents, Approvals. XXXX.XXX shall use reasonable efforts
to obtain all consents, waivers, approvals, authorizations or orders (including,
without limitation, all United States and foreign governmental and regulatory
rulings and approvals), and XXXX.XXX shall make all filings (including, without
limitation, all filings with United States and foreign governmental or
regulatory agencies) required in connection with the authorization, execution
and delivery of this Agreement by XXXX.XXX and the consummation by XXXX.XXX of
the transactions contemplated hereby. XXXX.XXX shall furnish all information
required to be included in any application or other filing to be made pursuant
to the rules and regulations of any United States or foreign governmental body
in connection with the transactions contemplated by this Agreement.
30
SECTION 5.04. Nonstatutory Stock Options and Warrants. At the Effective
Time, NMS shall assume all obligations under the XXXX.XXX Nonstatutory Options
set forth on Schedule 2.13(c) and the XXXX.XXX Warrants set forth on Schedule
2.02 if and to the extent then outstanding, and the holders of the XXXX.XXX
Nonstatutory Options and the XXXX.XXX Warrants thereafter shall have the right
to acquire, on the same terms and conditions as are currently applicable under
the XXXX.XXX Nonstatutory Option Agreements and the XXXX.XXX Warrants,
respectively, the same number of shares of NMS Common Stock as the holders of
the XXXX.XXX Nonstatutory Options and the XXXX.XXX Warrants would have been
entitled to receive in the Merger had such holder exercised the XXXX.XXX
Nonstatutory Options and the XXXX.XXX Warrants, as the case may be, in full
immediately prior to the Effective Time (rounded downward to the nearest whole
number), at the price per share (rounded downward to the nearest whole cent)
equal to (y) the aggregate exercise price for the shares of XXXX.XXX Common
Stock purchasable pursuant to each XXXX.XXX Nonstatutory Option or XXXX.XXX
Warrant immediately prior to the Effective Time divided by (z) the number of
full shares of NMS Common Stock deemed purchasable pursuant to such XXXX.XXX
Nonstatutory Option or XXXX.XXX Warrant in accordance with the foregoing.
SECTION 5.05. Compliance with Rule 506. XXXX.XXX shall furnish to
each holder of record of the XXXX.XXX Common Stock, XXXX.XXX Preferred Stock,
XXXX.XXX Options and XXXX.XXX Warrants, as set forth on Schedule 2.02 and
Schedule 2.13(c), such information as may be provided by NMS in order to comply
with Rule 506 under the Securities Act.
SECTION 5.06. Notification of Certain Matters. XXXX.XXX shall give
prompt notice to NMS, and NMS shall give prompt notice to XXXX.XXX, of (i) the
occurrence or non-occurrence of any event of which such party becomes aware and
which would cause any representation or warranty made by the respective parties
in this Agreement to be untrue or inaccurate, and (ii) any failure of XXXX.XXX
or NMS, as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5.06 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice, and provided further, that failure to give such notice shall not be
treated as a breach of covenant for the purposes of Sections 6.02(b) or 6.03(b)
unless the failure to give such notice results in material prejudice to the
other party.
SECTION 5.07. Further Action/Tax Treatment. Upon the terms and subject
to the conditions hereof, each of the parties hereto shall use reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable, and to the extent practicable, on or
before December 31, 1999, the transactions contemplated by this Agreement, to
obtain in a timely manner all necessary waivers, consents and approvals and to
effect all necessary registrations and filings, and to otherwise satisfy or
cause to be satisfied all conditions precedent to its obligations under this
Agreement. The foregoing covenant shall not include any obligation by NMS to
agree to divest, abandon, license or take similar action with respect to any
assets (tangible or intangible) of NMS or XXXX.XXX. Both NMS and XXXX.XXX shall
each use
31
reasonable efforts to cause the Merger to qualify, and will not (either before
or after consummation of the Merger) take any actions which could prevent the
Merger from qualifying, as a reorganization within the meaning of Section 368(a)
of the Code.
SECTION 5.08. Public Announcements. Neither XXXX.XXX nor any of the
Major Stockholders shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without the prior written
consent of NMS. NMS shall afford XXXX.XXX an opportunity to review and comment
before issuing any press release or making any public announcement relating to
the subject matter of this Agreement.
SECTION 5.09. Prospectus; Registration Statement.
(a) NMS shall prepare and file with the SEC a registration statement on
Form S-3 in connection with the registration under the Securities Act of one-
third of the shares of NMS Common Stock issued to each holder of QWES. Common
Stock pursuant to Section 1.07(c) and one-third of the shares of NMS Common
Stock issued or issuable to each holder of a XXXX.XXX Warrant (together with the
prospectus therefor, the "First Registration Statement"). NMS shall use
commercially reasonable best efforts to cause the First Registration Statement
to become effective as soon as practicable after the Holders (as such term is
defined in the Stockholder Support Agreement) are permitted to sell their NMS
Common Stock under the terms of the Stockholder Support Agreement and to
maintain the effectiveness thereof for twelve months or, if a shorter period,
until all shares registered and not sold thereunder may be sold without
limitation pursuant to Rule 144 under the Securities Act.
(b) NMS shall prepare and file with the SEC a registration statement on
Form S-3 in connection with the registration under the Securities Act of the
remainder of the shares of NMS Common Stock to be issued pursuant to Section
1.07(c) and issued or issuable pursuant to the XXXX.XXX Warrants, plus the
Escrowed Shares distributed to the Holders (as defined in the Escrow Agreement)
pursuant to the terms of the Escrow Agreement (together with the prospectus
therefor, the "Second Registration Statement"). NMS shall use commerically
reasonable best efforts to cause the Second Registration Statement to become
effective within one year after the Effective Date.
(c) NMS shall cause the First Registration Statement and the Second
Registration Statement to comply in all material respects with the Securities
Act, the Exchange Act and the rules and regulations thereunder. The obligations
of NMS hereunder to file a registration statement and to maintain its
effectiveness may be suspended for up to 120 calendar days in the aggregate if
the Board of Directors of NMS shall have determined that the filing of such
registration statement or the maintenance of its effectiveness would require
premature disclosure of material nonpublic information that would materially and
adversely affect NMS or otherwise interfere with or adversely affect any pending
or proposed offering of securities of NMS or any other material transaction
involving NMS.
(d) NMS shall use commercially reasonable best efforts after the Effective
Time to maintain the effectiveness of a registration statement under the
Securities Act with respect to the
32
issuance by NMS of shares of NMS Common Stock which may be issued pursuant to
the XXXX.XXX Nonstatutory Options as provided for in Section 5.04.
SECTION 5.10. Pooling Accounting Treatment. Neither XXXX.XXX nor NMS
shall take any action which would adversely affect the ability to treat the
Merger as a pooling of interests and XXXX.XXX and NMS shall take such actions as
may be reasonably required to negate the impact of any past actions which would
adversely affect the ability to treat the Merger as a pooling of interests.
SECTION 5.11. Quotation of NMS Common Stock on Nasdaq. NMS shall cause
the shares of NMS Common Stock issued as Merger Consideration to be approved for
quotation on the Nasdaq National Market System.
SECTION 5.12. Employee Benefits.
(a) With respect to each NMS Employee Plan, each XXXX.XXX employee whose
employment is continued immediately after the Effective Time shall receive
credit for all service performed for XXXX.XXX; such service credit shall apply
for all purposes, including but not limited to, any vacation, sick time,
insurance or other benefits and any eligibility requirements under any insurance
policy or medical plan and any retirement plan.
(b) As of the Effective Time, each XXXX.XXX employee whose employment is
continued immediately after the Effective Time shall be enrolled in the NMS
health insurance program or plan and shall be entitled to full benefits without
restrictions, including but not limited to, preexisting condition restrictions,
except to the extent that any such preexisting conditions caused restrictions to
exist under health insurance programs or plans provided by XXXX.XXX prior to the
Effective Time.
SECTION 5.13. Non-Compete and Non-Solicitation Agreements. As of the
Effective Time, NMS, XXXX.XXX and each of the employees of XXXX.XXX designated
on Schedule 5.13 shall enter into a Non-Compete and Non-Solicitation Agreement
substantially in the form of Exhibit 5.13 hereto.
ARTICLE VI
CONDITIONS TO THE MERGER
------------------------
SECTION 6.01. Conditions to Obligation of NMS, the Acquisition Sub and
XXXX.XXX to Effect the Merger. The respective obligations of NMS, the
Acquisition Sub and XXXX.XXX to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions:
33
(a) Stockholder Approval. The Agreement and the Merger shall have been
approved by the requisite vote of the stockholders of XXXX.XXX and NMS in its
capacity as the sole member of the Acquisition Sub.
(b) No Injunctions or Restraints; Illegality. No temporary restraining
order or permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition (each an "Injunction")
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by any administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; and there shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger illegal.
SECTION 6.02. Additional Conditions to Obligations of NMS and the
Acquisition Sub. The obligations of NMS and the Acquisition Sub to effect the
Merger are also subject to the following conditions:
(a) Representations and Warranties. The representations and warranties of
XXXX.XXX contained in this Agreement shall be true and correct in all material
respects on and as of the Effective Time, except for (i) changes contemplated or
permitted by this Agreement, (ii) those representations and warranties which
address matters only as of a specified date (which shall remain true and correct
as of such date), and (iii) where the failure to be true and correct would not
have a material adverse effect upon QWES, and NMS shall have received a
certificate to such effect at the closing signed by the President and Chief
Financial Officer of XXXX.XXX.
(b) Agreements and Covenants. XXXX.XXX shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by XXXX.XXX on or prior to the
Effective Time, and NMS shall have received a certificate to such effect signed
by the President and Chief Financial Officer of XXXX.XXX.
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by XXXX.XXX for the authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated hereby
shall have been obtained and made by XXXX.XXX, except where the failure to
receive such consents, waivers, etc. would not have a material adverse effect on
XXXX.XXX, NMS or the Surviving Corporation.
(d) Governmental Actions. There shall not have been instituted, pending or
threatened any action or proceeding (or any investigation or other inquiry that
might reasonably be expected to result in such an action or proceeding) by any
governmental authority or administrative agency before any governmental
authority, administrative agency or court of competent jurisdiction, nor shall
there be in effect any judgment, decree or order of any governmental authority,
administrative agency or court of competent jurisdiction, in either case,
seeking to
34
prohibit or limit the Surviving Corporation from exercising all material rights
and privileges pertaining to its ownership of all or a material portion of the
business or assets of XXXX.XXX or any of its subsidiaries, or seeking to compel
the Surviving Corporation or any of its subsidiaries to dispose of or hold
separate all or any material portion of the business or assets of XXXX.XXX or
any of its subsidiaries, as a result of the Merger or the transactions
contemplated by this Agreement.
(e) Dissenting Shares. Not more than five percent of XXXX.XXX Common Stock
shall constitute Dissenting Shares as of the Effective Time.
(f) Non-Compete and Non-Solicitation Agreements. Each of the employees of
XXXX.XXX, designated on Schedule 5.13 shall have duly executed a Non-Compete and
Non-Solicitation Agreement substantially in the form of Exhibit 5.13.
(g) Legal Opinion. NMS shall have received the written opinion of
Stradling, Yocca, Xxxxxxx & Xxxxx, substantially in the form attached as Exhibit
6.02(g).
(h) Pooling Letters. NMS shall have received a letter from Ernst & Young
LLP, addressed to XXXX.XXX, and a letter from PriceWaterhouse Coopers LLP,
addressed to NMS, regarding their concurrence with the respective conclusions of
management of XXXX.XXX and NMS, as to the appropriateness of the pooling of
interests accounting, under Accounting Principles Board Opinion No. 16 for the
transactions contemplated hereby, it being agreed that XXXX.XXX and NMS shall
each provide reasonable cooperation to Ernst & Young LLP and PriceWaterhouse
Coopers LLP to enable them to issue such letters.
SECTION 6.03. Additional Conditions to Obligation of XXXX.XXX. The
obligation of XXXX.XXX to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. The representations and warranties of
NMS contained in this Agreement shall be true and correct in all material
respects on and as of the Effective Time, except for (i) changes contemplated or
permitted by this Agreement, (ii) those representations and warranties which
address matters only as of a particular date (which shall remain true and
correct as of such date), and (iii) where the failure to be true and correct
would not have a material adverse effect upon NMS, and XXXX.XXX shall have
received a certificate to such effect signed by the President and Chief
Financial Officer of NMS.
(b) Agreements and Covenants. NMS shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by NMS on or prior to the Effective Time, and
XXXX.XXX shall have received a certificate to such effect signed by the
President and Chief Financial Officer of NMS.
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made, by NMS for the authorization, execution and delivery of this Agreement and
the consummation by NMS of the transactions contemplated hereby shall have been
obtained and made by NMS, except where the
35
failure to receive such consents, waivers, etc. would not have a material
adverse effect on XXXX.XXX, NMS or the Surviving Corporation.
(d) Legal Opinion. XXXX.XXX shall have received the written opinion of
Xxxxxx, Xxxx & Xxxxxxx, substantially in the form of Exhibit 6.03(d).
ARTICLE VII
TERMINATION
-----------
SECTION 7.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
stockholders of XXXX.XXX:
(a) by mutual written consent duly authorized by the Boards of Directors of
NMS and XXXX.XXX; or
(b) by either NMS or XXXX.XXX if the Merger shall not have been consummated
by February 28, 2000 (the "Outside Date"), provided that the right to
terminate this Agreement under this Section 7.01(b) shall not be available
to any party whose willful failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before such date; or
(c) by either NMS or XXXX.XXX if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued a non-appealable final order, decree or ruling or taken any other
action, in each case having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger, except, if the party relying
on such order, decree or ruling or other action has not complied with its
obligations under Section 5.07; or
(d) by either NMS or XXXX.XXX, if, at the XXXX.XXX Stockholders' Meeting,
the requisite vote of the stockholders of XXXX.XXX to effect the merger
shall not have been obtained; or
(e) by NMS or XXXX.XXX, upon a breach on the part of the other of any
representation, warranty, covenant or agreement set forth in this Agreement
such that the conditions set forth in Section 6.02(a) or 6.02(b), or
Section 6.03(a) or 6.03(b), as the case may be, would not be satisfied (a
"Terminating Breach"), provided, however, that if such Terminating Breach
is curable prior to February 20, 2000, by the breaching party through the
exercise of its reasonable efforts and for so long as such party continues
to exercise such reasonable efforts, neither XXXX.XXX nor NMS, as the case
may be, may terminate this Agreement under this Section 7.01(e).
36
SECTION 7.02. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.01, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto except as
set forth in Section 7.03 and Section 8.01 hereof, provided that nothing herein
shall relieve any party from liability for any willful breach hereof.
SECTION 7.03. Fees and Expenses.
(a) Except as set forth in this Section 7.03, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses if the Merger is not
consummated and by the Surviving Corporation if the Merger is consummated.
(b) XXXX.XXX shall pay NMS a termination fee of $1,500,000 in the event
that this Agreement is terminated by either NMS or XXXX.XXX pursuant to Section
7.01(d) or by NMS pursuant to Section 7.01(e) upon a willful breach by XXXX.XXX.
XXXX.XXX's payment of a termination fee pursuant to this subsection
shall be the sole and exclusive remedy of NMS against XXXX.XXX and any of its
subsidiaries; provided that this limitation shall not apply in the event of a
willful breach of this Agreement by XXXX.XXX.
ARTICLE VIII
GENERAL PROVISIONS
------------------
SECTION 8.01. Survival of Representations, Warranties and Agreements;
Knowledge, Etc. Except as otherwise provided in this Section 8.01, the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any person controlling any such party or
any of their officers or directors, whether prior to or after the execution of
this Agreement. The representations, warranties and agreements in this
Agreement shall terminate one year after the Effective Time or upon the
termination of this Agreement pursuant to Section 7.01, as the case may be,
except that the agreements set forth in Article I and Section 5.04 shall survive
the Effective Time indefinitely and those set forth in Section 7.02 and Section
7.03 shall survive termination indefinitely.
SECTION 8.02. Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered to the parties at the following addresses
(or at such other address for a party as shall be specified by like changes of
address shall be effective upon receipt) or sent by electronic transmission,
with confirmation received, to the telecopy number specified below:
37
(a) If to NMS or NMS Acquisition Corp.:
Natural MicroSystems Corporation
000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxxx, XX 00000-0000
Telecopier No. (000) 000-0000
Attention: Xxxxxx X. Xxxx,
Senior Vice President and
Chief Financial Officer
With a copy to:
Xxxxxx, Xxxx & Xxxxxxx
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Telecopier No. (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
(b) If to XXXX.xxx, Inc.:
XXXX.xxx, Inc.
00000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Telecopier No. (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx,
President and CEO
With a copy to:
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000
Telecopier No. (000) 000-0000
Attention: X.X. Xxxxxx, Esq.
SECTION 8.03. Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliates" means 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; including, without limitation,
any partnership or joint venture in which XXXX.XXX (either alone, or
through or together with any other subsidiary) has, directly or indirectly,
an interest of five percent of more;
38
(b) "beneficial owner" with respect to any shares of XXXX.XXX Capital
Stock, means a person who shall be deemed to be the beneficial owner of
such shares (i) which such person or any of its affiliates or associates
beneficially owns, directly or indirectly, (ii) which such person or any of
its affiliates or associates (as such term is defined in Rule 12b-2 of the
Exchange Act) has, directly or indirectly, (A) the right to acquire
(whether such right is exercisable immediately or subject only to the
passage of time), pursuant to any agreement, arrangement or understanding
or upon the exercise of consideration rights, exchange rights, warrants or
options, or otherwise, or (B) the right to vote pursuant to any agreement,
arrangement or understanding or (iii) which are beneficially owned,
directly or indirectly, by any other persons with whom such person or any
of its affiliates or person with whom such person or any of its affiliates
or associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares;
(c) "business day" means any day other than a day on which banks in
Boston are required or authorized to be closed;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of stock,
as trustee or executor, by contract or credit arrangement or otherwise;
(e) "material adverse effect" shall mean any change or effect that is,
or is reasonably likely to be, materially adverse to the business,
properties, assets, prospects or financial condition of XXXX.XXX and its
subsidiaries, or NMS and its subsidiaries, as the case may be provided,
however, that any adverse change or effect that is proximately caused by
conditions affecting the economy or securities markets generally shall not
be taken into account in determining whether there has been or would be a
"material adverse effect" in or with respect to XXXX.XXX and its
subsidiaries or NMS and its subsidiaries, as the case may be;
(f) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act); and
(g) "subsidiary" or "subsidiaries" of XXXX.XXX, NMS, the Surviving
Corporation or any other person means any corporation, partnership, joint
venture or other legal entity of which XXXX.XXX, the Surviving Corporation,
NMS or such other person, as the case may be, (either alone or through or
together with any other subsidiary) owns, directly or indirectly, more than
50% of the stock or other equity interests 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.
39
SECTION 8.04. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that after approval
of the Merger by the stockholders of XXXX.XXX, no amendment may be made which by
law requires further approval by such stockholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed by XXXX.XXX and NMS.
SECTION 8.05. Waiver. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto, (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto, and (c) waive compliance with any of the agreements
or conditions contained herein. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party or parties to
be bound thereby.
SECTION 8.06. Severability. If any term or other provision of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible.
SECTION 8.07. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings, both written and
oral, among the parties, or any of them, through the date hereof with respect to
the subject matter hereof and, except as otherwise expressly provided herein,
are not intended to confer upon any other person any rights or remedies
hereunder.
SECTION 8.08. Assignment. This Agreement shall not be assigned by
operation of law or otherwise, except that NMS may assign all or any of their
rights hereunder to any affiliate provided that no such assignment shall relieve
the assigning party of its obligations hereunder.
SECTION 8.09. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement (other than Section 5.13), express or implied, is intended to or shall
confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
SECTION 8.10. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies
existing under
40
this Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
SECTION 8.11. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware,
without regard to the choice of law provisions thereof.
SECTION 8.12. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
* * * * * * * *
41
IN WITNESS WHEREOF, NMS, the Acquisition Corp. and XXXX.XXX have caused
this Agreement to be executed under seal as of the date first written above by
their respective officers thereunto duly authorized.
NATURAL MICROSYSTEMS CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxxxxx
Chairman of the Board, President and
Chief Executive Officer
NMS CALIFORNIA ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxx
--------------------------------------------
Xxxxxx X. Xxxx
Chief Financial Officer
XXXX.XXX, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxx
President and Chief Executive Officer
42
