EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
INTERNATIONAL NETWORK SERVICES
VALIANT ACQUISITION CORP.
AND
VITALSIGNS SOFTWARE, INC.
AMENDED AND RESTATED AS OF OCTOBER 30, 1998
INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
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Exhibit A Form of Voting Agreement
Exhibit B Form of Company Affiliate Agreement
Exhibit C Form of Parent Affiliate Agreement
Exhibit D Form of Legal Opinion of Counsel to Parent
Exhibit E Form of Legal Opinion of Counsel to the Company
Exhibit F Form of Noncompetition Agreement
Exhibit G Form of Escrow Agreement
Exhibit H Amended and Restated Declaration of Registration Rights
TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER........................................................................ 1
1.1 The Merger......................................................................... 1
1.2 Effective Time..................................................................... 2
1.3 Effect of the Merger............................................................... 2
1.4 Certificate of Incorporation; Bylaws............................................... 2
1.5 Directors and Officers............................................................. 2
1.6 Maximum Shares to Be Issued; Effect on Capital Stock............................... 2
1.7 Dissenting Shares.................................................................. 4
1.8 Surrender of Certificates.......................................................... 5
1.9 No Further Ownership Rights in Company Capital Stock............................... 6
1.10 Lost, Stolen or Destroyed Certificates............................................. 6
1.11 Tax and Accounting Consequences.................................................... 6
1.12 Taking of Necessary Action; Further Action......................................... 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................... 7
2.1 Organization of the Company........................................................ 7
2.2 Company Capital Structure.......................................................... 7
2.3 Subsidiaries....................................................................... 8
2.4 Authority.......................................................................... 8
2.5 No Conflicts....................................................................... 8
2.6 Company Financial Statements....................................................... 8
2.7 No Undisclosed Liabilities......................................................... 9
2.8 No Changes......................................................................... 9
2.9 Tax and Other Returns and Reports.................................................. 10
2.10 Restrictions on Business Activities................................................ 12
2.11 Title to Properties; Absence of Liens and Encumbrances............................. 12
2.12 Intellectual Property.............................................................. 12
2.13 Agreements, Contracts and Commitments.............................................. 14
2.14 Interested Party Transactions...................................................... 16
2.15 Compliance with Laws............................................................... 16
2.16 Litigation......................................................................... 16
2.17 Insurance.......................................................................... 16
2.18 Minute Books....................................................................... 16
2.19 Environmental Matters.............................................................. 16
2.20 Brokers' and Finders' Fees; Third Party Expenses................................... 17
2.21 Employee Matters and Benefit Plans................................................. 17
2.22 Pooling of Interests............................................................... 20
2.23 Change of Control and Non-Compete Payments......................................... 20
2.24 Year 2000 Compliance............................................................... 20
2.25 Backlog............................................................................ 20
2.26 Certain Payments................................................................... 20
2.27 Representations Complete........................................................... 21
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB......................... 21
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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3.1 Organization, Standing and Power............................................... 21
3.2 Authority...................................................................... 21
3.3 Capital Structure.............................................................. 21
3.4 SEC Documents; Parent Financial Statements..................................... 22
3.5 No Material Adverse Change..................................................... 22
3.6 Litigation..................................................................... 22
3.7 Liabilities of Merger Sub...................................................... 22
3.8 Pooling of Interests........................................................... 22
3.9 Restrictions on Business Activities............................................ 22
3.10 Absence of Liens and Encumbrances.............................................. 22
3.11 Intellectual Property.......................................................... 23
3.12 Brokers' and Finders' Fees..................................................... 23
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.......................................... 23
4.1 Conduct of Business of the Company............................................. 23
4.2 No Solicitation................................................................ 25
4.3 Conduct of Business of Parent.................................................. 26
ARTICLE V ADDITIONAL AGREEMENTS......................................................... 27
5.1 Consent Solicitation Statement/Information Statement; Board Recommendations.... 27
5.2 Access to Information.......................................................... 27
5.3 Confidentiality................................................................ 27
5.4 Expenses....................................................................... 27
5.5 Public Disclosure.............................................................. 28
5.6 Consents....................................................................... 28
5.7 FIRPTA Compliance.............................................................. 28
5.8 Reasonable Efforts............................................................. 28
5.9 Notification of Certain Matters................................................ 28
5.10 Pooling Accounting............................................................. 28
5.11 Affiliate Agreements........................................................... 29
5.12 Additional Documents and Further Assurances.................................... 29
5.13 Form S-8....................................................................... 29
5.14 NMS Listing.................................................................... 29
5.15 Cooperation With Financial Statements.......................................... 29
5.16 Employment Matters............................................................. 29
5.17 Director and Officer Indemnification........................................... 29
5.18 Final Company Capitalization................................................... 29
5.19 Additional HSR Filings......................................................... 30
5.20 Resale Registration Statement.................................................. 30
ARTICLE VI CONDITIONS TO THE MERGER..................................................... 30
6.1 Conditions to Obligations of Each Party to Effect the Merger................... 30
6.2 Additional Conditions to Obligations of the Company............................ 31
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TABLE OF CONTENTS
(CONTINUED)
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6.3 Additional Conditions to the Obligations of Parent and Merger Sub............... 31
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION;
ESCROW................................................................................. 33
7.1 Survival of Representations and Warranties...................................... 33
7.2 Obligation of the Company to Indemnify, Reimburse, etc.......................... 33
7.3 Obligation of Parent to Indemnify, Reimburse, etc............................... 34
7.4 Limits on Indemnification, Reimbursement, etc................................... 34
7.5 Escrow Arrangements............................................................. 34
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER........................................... 34
8.1 Termination..................................................................... 34
8.2 Effect of Termination........................................................... 36
8.3 Termination Fee................................................................. 36
8.4 Amendment....................................................................... 36
8.5 Extension; Waiver............................................................... 36
ARTICLE IX GENERAL PROVISIONS............................................................ 36
9.1 Notices......................................................................... 36
9.2 Interpretation.................................................................. 37
9.3 Material Adverse Effect......................................................... 37
9.4 Counterparts.................................................................... 38
9.5 Entire Agreement; Assignment.................................................... 38
9.6 Severability.................................................................... 38
9.7 Other Remedies.................................................................. 38
9.8 Governing Law................................................................... 38
9.9 Rules of Construction........................................................... 39
9.10 Specific Performance............................................................ 39
9.11 Stock Certificate Legends....................................................... 39
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is amended and
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restated as of October 30, 1998, among International Network Services, a
California corporation ("Parent"), Valiant Acquisition Corp., a Delaware
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corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and
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VitalSigns Software, Inc., a Delaware corporation (the "Company").
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RECITALS
A. The Boards of Directors of each of the Company, Parent and Merger Sub
believe it is in the best interests of each company and their respective
stockholders that Parent acquire the Company through the statutory merger of
Merger Sub with and into the Company (the "Merger") and, in furtherance thereof,
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have approved the Merger.
B. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, all of the issued and outstanding shares of
capital stock of the Company ("Company Capital Stock") and all outstanding
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options and other rights to acquire or receive shares of Company Capital Stock
shall be converted to issued and outstanding shares of capital stock of Parent
("Parent Capital Stock") and outstanding options and other rights to acquire or
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receive shares of Parent Capital Stock.
C. Certain affiliates of the Company previously entered into Voting
Agreements in substantially the form attached hereto as Exhibit A (the "Voting
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Agreement") at the time this Agreement was originally executed.
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D. A portion of the shares of Parent Common Stock otherwise issuable by
Parent in connection with the Merger shall be placed in escrow by Parent, the
release of which amount shall be contingent upon certain events and conditions.
E. The parties intend, having executed this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
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F. The parties intend for the Merger to qualify for accounting treatment
as a pooling of interests.
G. The parties previously entered into that certain Agreement and Plan of
Reorganization, dated as of October 9, 1998 and desire to make certain
amendments to such Agreement and Plan of Reorganization.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
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subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law (the "DGCL"),
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Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation and as a wholly-owned subsidiary of
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Parent. The Company as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "Surviving Corporation".
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1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
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to Section 8.1, the closing of the Merger (the "Closing") will take place as
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promptly as practicable, but no later than five (5) business days, following
satisfaction or waiver of the conditions set forth in Article VI, at the offices
of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx,
unless another place or time is agreed to by Parent and the Company. The date
upon which the Closing actually occurs is herein referred to as the "Closing
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Date". On the Closing Date, the parties hereto shall cause the Merger to be
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consummated by filing a Certificate of Merger with the Delaware Secretary of
State (the "Certificate of Merger"), in accordance with the relevant provisions
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of applicable law. The date and time the Merger becomes effective in accordance
with the provisions of the DGCL is the "Effective Time".
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1.3 Effect of the Merger. At the Effective Time, the effect of the
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Merger shall be as provided in the applicable provisions of the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
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(a) Unless otherwise determined by Parent prior to the Effective Time,
at the Effective Time, the Certificate of Incorporation of Merger Sub shall be
the Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation.
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. The director(s) of Merger Sub immediately
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prior to the Effective Time shall be the initial director(s) of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, each to hold office in accordance with the Bylaws of the
Surviving Corporation.
1.6 Maximum Shares to Be Issued; Effect on Capital Stock. Subject to
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Section 1.6(e), the maximum number of shares of Parent Common Stock to be issued
(including Parent Common Stock to be reserved for issuance upon exercise of any
of the Company's options to be assumed by Parent) in exchange for the
acquisition by Parent of all outstanding Company Capital Stock and all unexpired
and unexercised options to acquire Company Capital Stock shall be 4,235,000 (the
"Aggregate Share Number"). No adjustment shall be made in the number of shares
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of Parent Common Stock issued in the Merger as a result of any cash proceeds
received by the Company from October 9, 1998 to the Closing Date pursuant to the
exercise of options to acquire Company Capital Stock. Subject to the terms and
conditions of this Agreement, as of the Effective Time, by virtue of the Merger
and
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without any action on the part of Merger Sub, the Company or the holder of any
shares of the Company Capital Stock, the following shall occur:
(a) Conversion of Company Capital Stock.
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(i) Common Stock. Each share of Common Stock of the Company
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("Company Common Stock") issued and outstanding immediately prior to the
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Effective Time (other than any shares of Company Common Stock to be canceled
pursuant to Section 1.6(c) and any Dissenting Shares (as defined and to the
extent provided in Section 1.7(a)) will be canceled and extinguished and be
converted automatically into the right to receive that number of shares of
Parent Common Stock equal to the product of each such share of Company Common
Stock multiplied by the Exchange Ratio (as defined in paragraph (g) below), upon
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surrender of the certificate representing such share of Company Common Stock in
the manner provided in Section 1.8.
(ii) Preferred Stock. The parties acknowledge that the Exchange
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Ratio set forth herein has been established assuming the conversion of all
shares of issued and outstanding Company Preferred Stock into shares of Company
Common Stock. The parties further acknowledge that there is no assurance that
such conversion will occur prior to the Closing. In the event that any shares
of presently issued and outstanding Company Preferred Stock remain outstanding
as of the Closing, appropriate adjustment shall be made to the Exchange Ratio as
necessary to give effect to, and shall be made in accordance with, the Company's
Certificate of Incorporation as in effect on October 9, 1998.
(b) Cancellation of Parent-Owned and Company-Owned Stock. Each share
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of Company Capital Stock owned by Merger Sub, Parent, the Company or any direct
or indirect wholly-owned subsidiary of Parent or of the Company immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(c) Stock Options. At the Effective Time, all options to purchase
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Company Common Stock then outstanding under the Company's 1996 Stock Option Plan
(the "Option Plan"), or otherwise, shall be assumed by Parent in accordance with
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provisions described below.
(i) At the Effective Time, each outstanding option to purchase
shares of Company Common Stock (each a "Company Option") under the Option Plan
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or otherwise, whether vested or unvested, shall be, in connection with the
Merger, assumed by Parent. Each Company Option so assumed by Parent under this
Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the Option Plan and/or as provided in the respective
option agreements governing such Company Option immediately prior to the
Effective Time, except that (A) such Company Option shall be exercisable for
that number of whole shares of Parent Common Stock equal to the product of the
number of shares of Company Common Stock that were issuable upon exercise of
such Company Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounded down to the nearest whole number of shares of Parent
Common Stock and (B) the per share exercise price for the shares of Parent
Common Stock issuable upon exercise of such assumed Company Option shall be
equal to the quotient determined by dividing the exercise price per share of
Company Common Stock at which such Company Option was exercisable immediately
prior to the Effective Time by the Exchange Ratio, rounded up to the nearest
whole cent.
(ii) It is the intention of the parties that the Company Options
assumed by Parent qualify following the Effective Time as incentive stock
options as defined in Section 422 of the Code to the extent the Company Options
qualified as incentive stock options immediately prior to the Effective Time.
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(iii) Promptly following the Effective Time, Parent will issue to
each holder of an outstanding Company Option a document evidencing the foregoing
assumption of such Company Option by Parent.
(d) Capital Stock of Merger Sub. Each share of Common Stock of Merger
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Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any such shares shall continue
to evidence ownership of such shares of capital stock of the Surviving
Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
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adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or Company Capital Stock), reorganization, recapitalization
or other like change with respect to Parent Common Stock or Company Capital
Stock occurring after October 9, 1998 and prior to the Effective Time.
(f) Fractional Shares. No fraction of a share of Parent Common Stock
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will be issued, but in lieu thereof, each holder of shares of Company Capital
Stock who would otherwise be entitled to a fraction of a share of Parent Common
Stock (after aggregating all fractional shares of Parent Common Stock to be
received by such holder) shall be entitled to receive from Parent an amount of
cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the average closing price of a share of Parent
Common Stock for the five (5) consecutive trading days ending on the trading day
immediately prior to the Closing Date, as reported on the Nasdaq National
Market.
(g) Definitions.
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(i) Exchange Ratio. The "Exchange Ratio" shall mean the
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quotient obtained by dividing (x) the Aggregate Share Number less any Parent
Common Stock issued in exchange for Company Preferred Stock by (y) the sum of
(A) the Outstanding Common Amount plus (B) the Outstanding Option Amount.
(ii) Escrow Amount. The "Escrow Amount" shall be that number of
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shares of Parent Common Stock issuable pursuant to Section 1.6(a) upon
conversion of all of the shares of Company Capital Stock issued and outstanding
as of the Effective Time multiplied by 0.10. The Escrow Amount shall consist
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entirely of fully-vested shares of Parent Common Stock, except that to the
extent any stockholder of the Company does not have sufficient vested shares of
Parent Common Stock to fund fully such stockholder's share of the Escrow Amount,
any such shortfall shall be satisfied with unvested shares of Parent Common
Stock.
(iii) Outstanding Common Amount. The "Outstanding Common Amount"
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shall mean the aggregate number of shares of Company Common Stock outstanding
immediately prior to the Effective Time (taking into account all shares of
Company Preferred Stock that shall have been converted into Company Common Stock
as of such time).
(iv) Outstanding Option Amount. The "Outstanding Option Amount"
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shall mean the aggregate number of shares of Company Common Stock issuable upon
the exercise of all outstanding options to acquire shares of Company Common
Stock immediately prior to the Effective Time.
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1.7 Dissenting Shares.
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(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Capital Stock held by a holder who has demanded and
perfected appraisal or dissenters' rights for such shares in accordance with the
DGCL and, to the extent applicable to the Company, the California Corporations
Code (the "CCC") who, as of the Effective Time, has not effectively withdrawn or
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lost such appraisal or dissenters' rights ("Dissenting Shares"), shall not be
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converted into or represent a right to receive Parent Common Stock pursuant to
Section 1.6, but the holder thereof shall only be entitled to such rights as are
granted by the DGCL.
(b) Notwithstanding the provisions of subsection (a), if any holder of
shares of Company Capital Stock who demands appraisal of such shares under the
DGCL shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the later of the Effective Time
and the occurrence of such event, such holder's shares shall automatically be
converted into and represent only the right to receive Parent Common Stock and
cash in lieu of fractional shares as provided in Section 1.6, without interest
thereon, upon surrender of the certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal of any shares of Company Capital Stock, withdrawals of
such demands, and any other instruments served pursuant to the DGCL and received
by the Company and (ii) the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal under the DGCL. The Company
shall not, except with the prior written consent of Parent, voluntarily make any
payment with respect to any demands for appraisal of capital stock of the
Company or offer to settle or settle any such demands.
1.8 Surrender of Certificates.
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(a) Exchange Agent. Prior to the Effective Time, Parent shall
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designate a bank or trust company reasonably acceptable to the Company to act as
exchange agent (the "Exchange Agent") in the Merger.
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(b) Parent to Provide Common Stock. Promptly after the Effective
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Time, Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I, the aggregate number of shares of Parent Common
Stock issuable pursuant to Section 1.6 in exchange for outstanding shares of
Company Capital Stock; provided that, on behalf of the holders of Company
Capital Stock, Parent shall deposit into an escrow account a number of shares of
Parent Common Stock equal to the Escrow Amount out of the aggregate number of
shares of Parent Common Stock otherwise issuable pursuant to Section 1.6. The
portion of the Escrow Amount contributed on behalf of each holder of Company
Capital Stock shall be in proportion to the aggregate number of shares of Parent
Common Stock which such holder would otherwise be entitled to receive under
Section 1.6 by virtue of ownership of outstanding shares of Company Capital
Stock.
(c) Exchange Procedures. Promptly after the Effective Time, the
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Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
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Effective Time represented outstanding shares of Company Capital Stock whose
shares were converted into the right to receive shares of Parent Common Stock
pursuant to Section 1.6, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such
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Certificate shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Parent Common Stock (less the number
of shares of Parent Common Stock, if any, to be deposited in the Escrow Fund (as
defined in Section 7.5 below) on such holder's behalf pursuant to Section 7.5
hereof), plus cash in lieu of fractional shares in accordance with Section 1.6,
to which such holder is entitled pursuant to Section 1.6, and the Certificate so
surrendered shall forthwith be canceled. As soon as practicable after the
Effective Time, and subject to and in accordance with the provisions of Article
VII hereof, Parent shall cause to be distributed to the Escrow Agent a
certificate or certificates representing that number of shares of Parent Common
Stock equal to the Escrow Amount which shall be registered in the name of the
Escrow Agent. Such shares shall be beneficially owned by the holders on whose
behalf such shares were deposited in the Escrow Fund and shall be available to
compensate Parent as provided in Article VII. Until so surrendered, each
outstanding Certificate that, prior to the Effective Time, represented shares of
Company Capital Stock will be deemed from and after the Effective Time, for all
corporate purposes, other than the payment of dividends, to evidence the
ownership of the number of full shares of Parent Common Stock into which such
shares of Company Capital Stock shall have been so converted and the right to
receive an amount in cash in lieu of the issuance of any fractional shares in
accordance with Section 1.6.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
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other distributions declared or made after the Effective Time with respect to
Parent Common Stock with a record date after the Effective Time will be paid to
the holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock represented thereby until the holder of record of such Certificate
shall surrender such Certificate. Subject to applicable law, following surrender
of any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of Parent
----------------------
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
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Section 1.8, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to a holder of shares of Parent Common Stock or Company
Capital Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.9 No Further Ownership Rights in Company Capital Stock. All shares of
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Parent Common Stock issued upon the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof (including any cash paid in
respect thereof) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Capital Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Company Capital Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any certificates
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evidencing shares of Company Capital Stock shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange for such lost,
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stolen or destroyed certificates, upon the making of an affidavit of that fact
by the holder thereof, such shares of Parent Common Stock and cash for
fractional shares, if any, as may be required pursuant to Section 1.6.
1.11 Tax and Accounting Consequences. It is intended by the parties hereto
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that the Merger shall (i) constitute a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code") and
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(ii) qualify for accounting treatment as a pooling of interests.
1.12 Taking of Necessary Action; Further Action. If, at any time after the
------------------------------------------
Effective Time, any such further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub
effective as of October 9, 1998, subject to such exceptions as are specifically
disclosed in the disclosure letter supplied by the Company to Parent (the
"Company Schedules") and dated as of October 9, 1998, as follows:
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2.1 Organization of the Company. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has the corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified to
do business and in good standing as a foreign corporation in each jurisdiction
in which the failure to be so qualified would have a Material Adverse Effect (as
defined in Section 9.3) on the Company. The Company has delivered a true,
correct and complete copy of its Certificate of Incorporation and Bylaws, each
as amended to date, to Parent.
2.2 Company Capital Structure.
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(a) The authorized capital stock of the Company consists of 30,000,000
shares of Common Stock, of which 7,458,012 shares are issued and outstanding and
10,000,000 shares of Company Preferred Stock. The authorized Company Preferred
Stock consists of 954,000 shares of Series A Preferred, of which 954,000 shares
are issued and outstanding, 3,235,227 shares of Series B Preferred, of which
3,235,227 shares are issued and outstanding, and 797,006 shares of Series C
Preferred, of which 797,006 shares are issued and outstanding. The Company
Capital Stock is held of record by the persons, with the domicile addresses and
in the amounts set forth on Schedule 2.2(a). All outstanding shares of Company
Capital Stock are duly authorized, validly issued, fully paid and non-assessable
and not subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of the Company or any agreement to which the Company is
a party or by which it is bound.
(b) The Company has reserved 3,948,500 shares of Common Stock for
issuance to employees and consultants pursuant to the Option Plan, of which
778,650 shares are subject to outstanding, unexercised options and 1,134,524
shares remain available for future grant. The Company has reserved 76,500 shares
of Common Stock for issuance upon exercise of outstanding Company Options
granted outside the Option Plan. Schedule 2.2(b) sets forth for each Company
Option outstanding at October 9, 1998, the name of the holder of such option,
the domicile address of such holder, the number of shares of Common Stock
subject to such option, the
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exercise price of such option and the vesting schedule for such option,
including the extent vested to date and whether the exercisability of such
option will be accelerated and become exercisable by the transactions
contemplated by this Agreement. Except for the Company Options described in
Schedule 2.2(b), there are no options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which the Company is a party or
by which it is bound obligating the Company to issue, deliver, sell, repurchase
or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the capital stock of the Company. Except for the Company Options
described in Schedule 2.2(b), there are no options, warrants, calls, rights,
commitments or agreements of any character, written or oral, to which the
Company is a party or by which it is bound obligating the Company to grant,
extend, accelerate the vesting of, change the price of, otherwise amend or enter
into any such option, warrant, call, right, commitment or agreement. The holders
of Company Options (in their capacity as such) do not have any rights to prior
notice of the Merger. As a result of the Merger, Parent will be the record and
sole beneficial owner of all Company Capital Stock and rights to acquire or
receive Company Capital Stock.
2.3 Subsidiaries. The Company does not have and has never had any
------------
subsidiaries or affiliated companies and does not otherwise own and has never
otherwise owned any shares of capital stock or any interest in, or control,
directly or indirectly, any other corporation, partnership, association, joint
venture or other business entity.
2.4 Authority. Subject only to the approval of the Merger and this
---------
Agreement by the Company's stockholders, the Company has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The vote required of the Company's
stockholders to duly approve the Merger and this Agreement is (i) the approval
by vote or written consent of the holders of a majority of the Company Preferred
voting together as a single, separate class, (ii) the approval by vote or
written consent of a majority of the Series A Preferred and Company Common Stock
voting together as a single, separate class, (iii) the approval by vote or
written consent of the Series B Preferred and Series C Preferred voting together
as a single, separate class, and (iv) the approval by vote or written consent of
a majority of the holders of the Company Capital Stock voting together as a
single, separate class. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, subject only to
the approval of the Merger by the Company's stockholders. The Company's Board
of Directors has unanimously approved the Merger and this Agreement. This
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company, enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy and other
similar laws and general principles of equity.
2.5 No Conflicts. Except as set forth on Schedule 2.5, subject only to
------------
the approval of the Merger and this Agreement by the Company's stockholders, the
execution and delivery of this Agreement by the Company does not, and, as of the
Effective Time, the consummation of the transactions contemplated hereby will
not, conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (any such event, a "Conflict") (i) any provision of the
--------
Certificate of Incorporation or Bylaws of the Company or (ii) any mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or its properties or assets. No consent,
waiver, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other federal,
state, county, local or foreign governmental authority, instrumentality, agency
or commission ("Governmental Entity") or any third party (so as not to trigger
-------------------
any Conflict), is required by or with respect to the Company in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, except for (i) the filing of the Certificate
of Merger with the Delaware Secretary of State, (ii) such consents, waivers,
approvals, orders, authorizations, registrations,
8
declarations and filings as may be required under applicable federal and state
securities laws, (iii) expiration or early termination of the applicable waiting
period under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and (iv) such other consents, waivers, authorizations,
-------
filings, approvals and registrations which are set forth on Schedule 2.4.
2.6 Company Financial Statements. Schedule 2.6 sets forth the Company's
----------------------------
audited balance sheets as of December 31, 1997 and 1996 (the "Balance Sheets")
--------------
and the related audited statements of operations, stockholders' equity and cash
flows for the year ended December 31, 1997 and for the period from August 15,
1996 (inception) through December 31, 1996 and the Company's unaudited balance
sheets dated as of June 30, 1998 and August 31, 1998 and the unaudited
statements of operations for the six-month period ended June 30, 1998
(collectively, the "Company Financials"). The Company Financials have been
------------------
prepared in accordance with generally accepted accounting principles ("GAAP")
----
applied on a consistent basis throughout the periods presented except that the
unaudited Company Financials do not contained the footnotes required by GAAP and
are subject to normal year-end adjustments which will not be material
individually or in the aggregate. The Company Financials fairly present the
financial position of the Company as of their dates and results of operations
for the periods then ended.
2.7 No Undisclosed Liabilities. Except as set forth in Schedule 2.7, the
--------------------------
Company does not have any liability, indebtedness, obligation, expense, claim,
deficiency, guaranty or endorsement of any type, whether accrued, absolute,
contingent, matured, unmatured or other (whether or not required to be reflected
in financial statements in accordance with generally accepted accounting
principles), which individually or in the aggregate, (i) has not been recorded
in the Balance Sheet or disclosed in the Company Financials, or (ii) has not
arisen in the ordinary course of the Company's business since December 31, 1997,
consistent with past practices.
2.8 No Changes. Except as set forth in Schedule 2.8, there has not been,
----------
occurred or arisen any:
(a) transaction by the Company except in the ordinary course of
business as conducted on that date and consistent with past practices since
August 31, 1998;
(b) amendments or changes to the Certificate of Incorporation or
Bylaws of the Company since August 31, 1998;
(c) capital expenditure or commitment by the Company of $100,000 in
any individual case or $250,000 (other than the real estate lease set forth on
Schedule 2.11(a))in the aggregate since August 31, 1998;
(d) destruction of, damage to or loss of any material assets, placed
order of the Company (whether or not covered by insurance) since August 31,
1998;
(e) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action since August 31, 1998;
(f) change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by the Company since December
31, 1997;
(g) revaluation by the Company of any of its assets since December 31,
1997;
(h) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the
9
Company of any of its capital stock since August 31, 1998 other than the
redemption of Company Common Stock from terminated employees of the Company at
the original sales price pursuant to the terms of the agreements pursuant to
which such Company Common Stock was issued and sold;
(i) increase in the salary or other compensation payable or to become
payable by the Company to any of its officers, directors, employees or advisors,
or the declaration, payment or commitment or obligation of any kind for the
payment, by the Company, of a bonus or other additional salary or compensation
to any such person except as otherwise contemplated by this Agreement since
August 31, 1998;
(j) sale, lease, license or other disposition of any of the assets or
properties of the Company, except in the ordinary course of business as
conducted on that date and consistent with past practices since August 31, 1998;
(k) amendment or termination of any material contract, agreement or
license to which the Company is a party or by which it is bound since August 31,
1998 except in the ordinary course of business;
(l) loan by the Company to any person or entity, incurring by the
Company of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others except for advances to employees for travel and
business expenses in the ordinary course of business, consistent with past
practices since August 31, 1998;
(m) waiver or release of any right or claim of the Company, including
any write-off or other compromise of any account receivable of the Company since
August 31, 1998 except in the ordinary course of business;
(n) commencement or notice or threat of commencement of any lawsuit or
proceeding against or investigation of the Company or its affairs since December
31, 1997;
(o) notice of any claim of ownership by a third party of the Company's
Intellectual Property (as defined in Section 2.12 below) or of infringement by
the Company of any third party's Intellectual Property rights since December 31,
1997;
(p) issuance or sale by the Company of any of its shares of capital
stock since August 31, 1998 other than issuances of Company securities upon the
conversion of other securities issued by the Company or pursuant to the exercise
of stock options granted by the Company;
(q) issuance or sale by the Company of any securities exchangeable,
convertible or exercisable for Company Capital Stock, or of any other of its
securities since August 31, 1998;
(r) change in pricing or royalties set or charged by the Company to
its customers or licensees except in the ordinary course of business or in
pricing or royalties set or charged by persons who have licensed Intellectual
Property to the Company since August 31, 1998;
(s) event or condition of any character that has had a Material
Adverse Effect on the Company since August 31, 1998; or
10
(t) agreement by the Company or any officer or employees thereof to do
any of the things described in the preceding clauses (a) through (r) (other than
negotiations with Parent and its representatives regarding the transactions
contemplated by this Agreement).
2.9 Tax and Other Returns and Reports.
---------------------------------
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
------------------- ---
or, collectively, "Taxes", means any and all federal, state, local and foreign
-----
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Schedule 2.9:
----------------------
(i) The Company as of the Effective Time will have prepared and
filed all federal, state, local and foreign returns, estimates, information
statements and reports ("Returns") required to be filed by such date relating to
-------
any and all Taxes concerning or attributable to the Company or its operations
and such Returns are or will be true and correct and have been completed in
accordance with applicable law.
(ii) The Company as of the Effective Time: (A) will have paid
or accrued all Taxes it is required to pay or accrue and (B) will have withheld
with respect to its employees all federal and state income taxes, FICA, FUTA and
other Taxes required to be withheld.
(iii) The Company has not been delinquent in the payment of any
Tax nor is there any Tax deficiency outstanding, proposed or assessed against
the Company, nor has the Company executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
(iv) No audit or other examination of any Return of the Company
is presently in progress, nor has the Company been notified of any request for
such an audit or other examination.
(v) The Company does not have any liabilities for unpaid
federal, state, local or foreign Taxes which have not been accrued or reserved
against on the Company Financials, whether asserted or unasserted, contingent or
otherwise, and the Company has no knowledge of any basis for the assertion of
any such liability attributable to the Company, its assets or operations.
(vi) The Company has provided to Parent copies of all federal
and state income and all state sales and use Tax Returns filed to date for all
periods since the date of Company's incorporation.
(vii) There are (and as of immediately following the Closing
there will be) no liens, pledges, charges, claims, security interests or other
encumbrances of any sort ("Liens") on the assets of the Company relating to or
-----
attributable to Taxes except liens for current taxes not yet delinquent.
(viii) The Company has no knowledge of any basis for the assertion
of any claim relating or attributable to Taxes which, if adversely determined,
would result in any Lien on the assets of the Company.
11
(ix) None of the Company's assets are treated as "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(x) As of the Effective Time, there will not be any contract,
agreement, plan or arrangement, including but not limited to the provisions of
this Agreement, covering any employee or former employee of the Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to Section 280G or 162 of the Code.
(xi) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company.
(xii) The Company is not a party to a tax sharing or allocation
agreement nor does the Company owe any amount under any such agreement.
(xiii) The Company is not, and has not been at any time, a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
2.10 Restrictions on Business Activities. There is no agreement
-----------------------------------
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company which has or
reasonably could be expected to have the effect of prohibiting or impairing any
business practice of the Company, any acquisition of property (tangible or
intangible) by the Company or the conduct of business by the Company. Without
limiting the foregoing, the Company has not entered into any agreement under
which the Company is restricted from selling, licensing or otherwise
distributing any of its products to any class of customers, in any geographic
area, during any period of time or in any segment of the market.
2.11 Title to Properties; Absence of Liens and Encumbrances.
------------------------------------------------------
(a) The Company owns no real property, nor has it ever owned any
real property. Schedule 2.11(a) sets forth a list of all real property
currently, or at any time in the past, leased by the Company, the name of the
lessor and the date of the lease and each amendment thereto and, with respect to
any current lease, the aggregate annual rental and/or other fees payable under
any such lease. All such current leases are in full force and effect, are valid
and effective in accordance with their respective terms. The Company is not in
default under any of such leases. To the Company's knowledge, no other party to
any of such leases is in default under any of such leases.
(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens (as defined in Section 2.8(b)(vii)),
except as reflected in the Company Financials or in Schedule 2.11(b) and except
for liens for taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which are not material in character, amount or extent, and
which do not materially detract from the value, or materially interfere with the
present use, of the property subject thereto or affected thereby.
2.12 Intellectual Property.
---------------------
(a) The Company owns, or is licensed or otherwise possesses legally
enforceable rights to use, all trademarks (as well as all
12
goodwill associated therewith), trade names, service marks (as well as all
goodwill associated therewith), copyrights and mask works, any applications for
and registrations of such trademarks, trade names, service marks owned or
presented licensed by the Company, copyrights, and all proprietary processes,
formulae, methods, schematics, technology, know-how, computer software programs
(including all source code), object code, firmware, development tools, files
records and data) or applications and other tangible or intangible proprietary
information or material constituting or incorporating trade secrets of the
Company, all World Wide Web addresses, sites and domain names and any
corresponding or equivalent rights to any of the foregoing anywhere in the
world, that are used in and/or necessary to conduct the business of the Company
as currently conducted (the "Company Intellectual Property Rights"). Schedule
--------
2.12(a) identifies (i) all patents and patent applications and all trademarks,
-------
registered copyrights, trade names and service marks owned or licensed by the
Company and used in connection with the operation or conduct of its business,
including the jurisdictions in which each such Company Intellectual Property
Right has been issued or registered or in which any such application for such
issuance and registration has been filed; (ii) all material licenses,
sublicenses, distribution agreements and other agreements as to which the
Company is a party and pursuant to which any entity is authorized to use any the
Company Intellectual Property Rights or has the right to manufacture, reproduce,
market or exploit any Company product or any adaptation, translation or
derivative work based on a Company product or any portion thereof; (iii) all
material licenses, sublicenses and other agreements as to which the Company is a
party and pursuant to which the Company is authorized to use any third party
Intellectual Property rights whatsoever ("Company Third Party Intellectual
Property Rights") which are incorporated in, are, or form a part of any Company
product that is material to the business of the Company, and (iv) all contacts
and agreement pursuant to which any entity, including any third party developer
or consultant, has developed any device or technology, authored any work, or
otherwise created anything in which any intellectual property rights might
arise, either separately or jointly with the Company or any other entity, which
the Company uses or possesses, or which the Company believes it owns.
(b) The Company is not in breach of any of the contracts, licenses and
agreements set forth in Sections 2.12(a)(ii), (iii) and (iv) above and, to the
knowledge of the Company, no other party to such contracts, licenses and
agreements is in breach of or has failed to perform materially thereunder.
(c) The Company is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations under this
Agreement, (i) in breach of any license, sublicense or other agreement relating
to the Company Intellectual Property Rights or the Company Third Party
Intellectual Property Rights, or (ii) obligated to grant to any third party any
rights or licenses with respect to any Company Intellectual Property Rights.
(d) To the Company's knowledge, all patents registered trademarks,
service marks and copyrights held by the Company are valid and subsisting.
(e) To the Company's knowledge, the operation of the Business,
including (i) the making, using, selling, marketing, or importing of any product
or device, (ii) the practice of any process, (iii) the offering or performance
of any service, or (iv) the copying, distribution, performance, display,
creation of derivative works of, or the exploitation of any device or work,
including any of the foregoing with respect to products, technology or services
currently under development by Company, does not, and will not when conducted in
substantially the same manner following the Closing by Buyer, infringe or
misappropriate any copyrights, trademark, trade secret or mask work of any
entity, or constitute unfair competition or trade practices under the laws of
any jurisdiction, and except as set forth on Schedule 2.12, the Company has not
received notice from any entity claiming that such operation or any act,
product, technology or service of the Business infringes or misappropriates the
Intellectual Property of any entity or constitutes unfair competition or trade
practices under the laws of any jurisdiction (nor is the Company aware of any
basis therefor). Without limiting the foregoing, The Company has not
13
misappropriated the trade secrets of, or infringed the copyright or mask work of
any third party. To the Company's knowledge, the operation of the Company's
business does not infringe any specific patent of any particular third party.
The Company makes no representation with respect to third party patent rights
except as expressly set forth herein.
(f) Schedule 2.12(f) lists all agreements, licenses and contracts
----------------
pursuant to which Company has agreed to indemnify, hold harmless, or otherwise
agree to be liable for any losses cost or damages of, a third party with respect
to any Intellectual Property or product or service of Company.
(g) Except as set forth on Schedule 2.12(g), the consummation of the
----------------
transactions contemplated by this Agreement will not result in the loss of, or
otherwise adversely affect, any ownership rights of Company in any Company
Intellectual Property Right or result in the breach or termination of any
license, contract or agreement to which Company is a party respecting any
material Company Intellectual Property.
(h) To the knowledge of the Company, no entity is infringing or
misappropriating any Company Intellectual Property Right.
(i) Schedule 2.12(i) lists all action, including the payment of any
----------------
fees, that must, or should be performed by, or on behalf of, the Company in the
ninety-day period following the Closing Date, with respect to any application
for, perfection of, preservation of, or continuation of any rights of Company
with respect to any Company Intellectual Property Right, including the filing of
any patent applications, response to Patent Office actions or payment of fees,
including renewal fees.
(j) The Company has not claimed small business status, or other
particular status in the application for any Company Intellectual Property
Rights which claim of status was not at the time made, or which has since become
inaccurate or false or that will no longer be true and accurate as a result of
the Closing.
(k) All software products of the Company were written and created
solely by either (i) employees of the Company acting within the scope of their
employment or (ii) by third parties who have validly assigned all of their
rights, including Intellectual Property rights in such products to the Company,
and no third party owns or has any rights to the software products or any
Intellectual Property rights developed by or on behalf of the Company other than
pursuant to contracts identified on Schedule 2.12 and licenses granted pursuant
to the Company's standard form of license agreement.
(l) The Company has no knowledge of any facts or circumstances that
would render any Company Intellectual Property Rights invalid or unenforceable.
Without limiting the foregoing, Company knows of no information, materials,
facts, or circumstances, including any information or fact that would constitute
prior art, that would render any of the Company Intellectual Property for which
it has obtained registrations invalid or unenforceable, or would adversely
effect any pending application for any Company Intellectual Property Rights and
the Company has not misrepresented, or failed to disclose, and is not aware of
any misrepresentation or failure to disclose, any fact or circumstances in any
application for any such Company Intellectual Property that would constitute
fraud or a material misrepresentation with respect to such application or that
would otherwise effect the validity or enforceability of any registration for
Company Intellectual Property.
(m) Except as set forth on Schedule 2.12(m), the Company has taken all
steps reasonable under the circumstances to protect the confidentiality and
trade secret status of any material confidential information of the Company and
knows of no basis on which it could be claimed that the Company has failed to
protect the confidentiality of any material Confidential Information of the
Company.
14
(n) All employees of the Company have entered into a valid and
binding agreement with the company sufficient to vest title in the Company of
all Intellectual Property created by such employee in the scope of his or her
employment with the Company.
2.13 Agreements, Contracts and Commitments. Except as set forth on
-------------------------------------
Schedule 2.13(a), the Company does not have, is not a party to nor is it bound
by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any severance
pay or post-employment liabilities or obligations,
(iii) any bonus, deferred compensation, pension, profit sharing
or retirement plans, or any other employee benefit plans or arrangements,
(iv) any employment or consulting agreement with an employee
or individual consultant or salesperson or consulting or sales agreement with a
firm or other organization,
(v) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value
individually in excess of $100,000,
(viii) any agreement of indemnification or guaranty other than
those substantially the same as the agreements of indemnification or guarantees
attached hereto as Schedule 2.13,
(ix) any agreement containing any covenant limiting the
freedom of the Company to engage in any line of business or to compete with any
person,
(x) any agreement relating to capital expenditures and
involving future payments in excess of $100,000,
(xi) any agreement relating to the disposition or acquisition
of assets or any interest in any business enterprise outside the ordinary course
of the Company's business,
(xii) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit, including guaranties referred to in clause
(viii) hereof,
(xiii) any purchase order or contract for the purchase of raw
materials involving $100,000 or more,
15
(xiv) any construction contracts,
(xv) any distribution, joint marketing or development
agreement,
(xvi) any agreement pursuant to which the Company has granted
or may grant in the future, to any party a source-code license or option or
other right to use or acquire source-code, or
(xvii) any other agreement that involves $100,000 or more or is
not cancelable without penalty within thirty (30) days.
Except for such alleged breaches, violations and defaults, and events that
would constitute a breach, violation or default with the lapse of time, giving
of notice, or both, as are all noted in Schedule 2.13(b), the Company has not
breached, violated or defaulted under, or received notice that it has breached,
violated or defaulted under, any of the terms or conditions of any agreement,
contract or commitment required to be set forth on Schedule 2.13(a) or Schedule
2.12 (any such agreement, contract or commitment, a "Contract"). Each Contract
--------
is in full force and effect and, except as otherwise disclosed in Schedule
2.13(b), is not subject to any default thereunder of which the Company has
knowledge by any party obligated to the Company pursuant thereto.
2.14 Interested Party Transactions. Except as set forth on Schedule 2.14,
-----------------------------
to the Company's knowledge, no officer, director or stockholder of the Company
(nor any ancestor, sibling, descendant or spouse of any of such persons, or any
trust, partnership or corporation in which any of such persons has or has had an
economic interest), has or has had, directly or indirectly, (i) an economic
interest in any entity which furnished or sold, or furnishes or sells, services
or products that the Company furnishes or sells, or proposes to furnish or sell,
(ii) an economic interest in any entity that purchases from, or sells or
furnishes to, the Company, any goods or services or (iii) a beneficial interest
in any contract or agreement set forth in Schedule 2.13(a) or Schedule 2.12;
provided, that (x) ownership of no more than one percent (1%) of the outstanding
voting stock of a publicly traded corporation and no more than ten percent (10%)
of the outstanding equity of any other entity shall not be deemed an "economic
interest in any entity" for purposes of this Section 2.14 and (y) this provision
shall only apply if the terms and conditions applicable to the subject
relationship are materially less favorable to the Company than the terms and
conditions that could be obtained in an arms-length relationship.
2.15 Compliance with Laws. The Company has complied in all material
--------------------
respects with, is not in material violation of, and has not received any notices
of violation with respect to, any foreign, federal, state or local statute, law
or regulation.
2.16 Litigation. Except as set forth in Schedule 2.16, there is no
---------- -------------
action, suit or proceeding of any nature pending or to the Company's knowledge
threatened against the Company, its properties or any of its officers or
directors, in their respective capacities as such. Except as set forth in
Schedule 2.16, to the Company's knowledge, there is no investigation pending or
threatened against the Company, its properties or any of its officers or
directors, in their respective capacities as such, by or before any governmental
entity. Schedule 2.16 sets forth, with respect to any pending or threatened
action, suit, proceeding or investigation, the forum, the parties thereto, the
subject matter thereof and the amount of damages claimed or other remedy
requested. No governmental entity has at any time challenged or questioned the
legal right of the Company to manufacture, offer or sell any of its products in
the present manner or style thereof.
2.17 Insurance. With respect to the insurance policies and fidelity bonds
---------
covering the assets, business, equipment, properties, operations, employees,
officers and directors of the Company, there is no claim by the Company pending
under any of such policies or bonds as to which coverage has been questioned,
denied or
16
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and the Company is
otherwise in material compliance with the terms of such policies and bonds (or
other policies and bonds providing substantially similar insurance coverage).
The Company has no knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies.
2.18 Minute Books. The minute books of the Company provided to counsel
------------
for Parent are the only minute books of the Company and contain a reasonably
accurate summary of all meetings of directors (or committees thereof) and
stockholders or actions by written consent since the time of incorporation of
the Company.
2.19 Environmental Matters.
---------------------
(a) Hazardous Material. The Company has not: (i) operated any
------------------
underground storage tanks at any property that the Company has at any time
owned, operated, occupied or leased; or (ii) illegally released any material
amount of any substance that has been designated by any Governmental Entity or
by applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including, without limitation,
PCBs, asbestos, petroleum, urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws, (a
"Hazardous Material"), but excluding office and janitorial supplies properly and
-------------------
safely maintained. No Hazardous Materials are present, as a result of the
deliberate actions of the Company, or, to the Company's knowledge, as a result
of any actions of any third party or otherwise, in, on or under any property,
including the land and the improvements, ground water and surface water thereof,
that the Company has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not transported,
------------------------------
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before the
Closing Date, nor has the Company disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (any or all of the
foregoing being collectively referred to as "Hazardous Materials Activities") in
------------------------------
violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of October 9, 1998 to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental approvals,
-------
permits, licenses, clearances and consents (the "Environmental Permits")
---------------------
necessary for the conduct of the Company's Hazardous Material Activities and
other businesses of the Company as such activities and businesses are currently
being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
-------------------------
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Company's knowledge, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activities of the Company. The Company is
not aware of any fact or circumstance which could involve the Company in any
environmental litigation or impose upon the Company any environmental liability.
2.20 Brokers' and Finders' Fees; Third Party Expenses. Except as set forth
------------------------------------------------
on Schedule 2.20, the Company has not incurred, nor will it incur, directly or
-------------
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement or any transaction
contemplated hereby. Schedule 2.20 sets forth the principal terms and
conditions of any agreement, written or oral, with respect to such fees.
17
2.21 Employee Matters and Benefit Plans.
----------------------------------
(a) Definitions. With the exception of the definition of "Affiliate"
-----------
set forth in Section 2.21(a)(i) below (such definition shall only apply to this
Section 2.21), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under
---------
common control with the Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations thereunder;
(ii) "ERISA" shall mean the Employee Retirement Income
-----
Security Act of 1974, as amended;
(iii) "Company Employee Plan" shall refer to any plan, program,
---------------------
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or stock-
related awards, fringe benefits or other employee benefits or remuneration of
any kind, whether formal or informal, funded or unfunded, including without
limitation, each "employee benefit plan", within the meaning of Section 3(3) of
ERISA which is or has been maintained, contributed to, or required to be
contributed to, by the Company or any Affiliate for the benefit of any
"Employee" (as defined below), and pursuant to which the Company or any
Affiliate has or may have any material liability contingent or otherwise;
(iv) "Employee" shall mean any current, former, or retired
--------
employee, officer, or director of the Company or any Affiliate;
(v) "Employee Agreement" shall refer to each management,
------------------
employment, severance, consulting, relocation, repatriation, expatriation, visa,
work permit or similar agreement or contract between the Company or any
Affiliate and any Employee or consultant;
(vi) "IRS" shall mean the Internal Revenue Service;
---
(vii) "Multiemployer Plan" shall mean any "Pension Plan" (as
------------------
defined below) which is a "multiemployer plan", as defined in Section 3(37) of
ERISA; and
(viii) "Pension Plan" shall refer to each Company Employee Plan
------------
which is an "employee pension benefit plan", within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Schedule 2.21(b) contains an accurate and complete list
--------
of each Company Employee Plan and each Employee Agreement, together with a
schedule of all liabilities, whether or not accrued, under each such Company
Employee Plan or Employee Agreement. The Company does not have any plan or
commitment to establish any new Company Employee Plan or Employee Agreement, to
modify any Company Employee Plan or Employee Agreement (except to the extent
required by law or to conform any such Company Employee Plan or Employee
Agreement to the requirements of any applicable law, in each case as previously
disclosed to Parent in writing, or as required by this Agreement), or to enter
into any Company Employee Plan or Employee Agreement, nor does it have any
intention or commitment to do any of the foregoing.
(c) Documents. The Company has provided to Parent (i) correct and
---------
complete copies of all documents embodying or relating to each Company Employee
Plan and each Employee Agreement including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Company Employee Plan; (iii) the three most recent annual
reports (Series 5500 and all
18
schedules thereto), if any, required under ERISA or the Code in connection with
each Company Employee Plan or related trust; (iv) if the Company Employee Plan
is funded, the most recent annual and periodic accounting of Company Employee
Plan assets; (v) the most recent summary plan description together with the most
recent summary of material modifications, if any, required under ERISA with
respect to each Company Employee Plan; (vi) all IRS determination letters and
rulings relating to Company Employee Plans and copies of all applications and
correspondence to or from the IRS or the Department of Labor ("DOL") with
---
respect to any Company Employee Plan; (vii) all communications material to any
Employee or Employees relating to any Company Employee Plan and any proposed
Company Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to the Company; and (viii) all registration statements and prospectuses prepared
in connection with each Company Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule
------------------------
2.21(d), (i) the Company has performed in all material respects all obligations
required to be performed by it under each Company Employee Plan and each Company
Employee Plan has been established and maintained in all material respects in
accordance with its terms and in compliance with all applicable laws, statutes,
orders, rules and regulations, including but not limited to ERISA or the Code;
(ii) no "prohibited transaction", within the meaning of Section 4975 of the Code
or Section 406 of ERISA, has occurred with respect to any Company Employee Plan;
(iii) there are no actions, suits or claims pending, or, to the knowledge of the
Company, threatened or anticipated (other than routine claims for benefits)
against any Company Employee Plan or against the assets of any Company Employee
Plan; and (iv) each Company Employee Plan can be amended, terminated or
otherwise discontinued after the Effective Time in accordance with its terms,
without liability to the Company, Parent or any of its Affiliates (other than
ordinary administration expenses typically incurred in a termination event); (v)
there are no inquiries or proceedings pending or, to the knowledge of the
Company or any affiliates, threatened by the IRS or DOL with respect to any
Company Employee Plan; and (vi) neither the Company nor any Affiliate is subject
to any penalty or tax with respect to any Company Employee Plan under Section
402(i) of ERISA or Section 4975 through 4980 of the Code.
(e) Pension Plans. The Company does not now, nor has it ever,
-------------
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company contributed to or
-------------------
been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. Except as set forth in Schedule
------------------------------
2.21(g), no Company Employee Plan provides, or has any liability to provide,
life insurance, medical or other employee benefits to any Employee upon his or
her retirement or termination of employment for any reason, except as may be
required by statute, and the Company has never represented, promised or
contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) that such Employee(s) would be provided
with life insurance, medical or other employee welfare benefits upon their
retirement or termination of employment, except to the extent required by
statute.
(h) Effect of Transaction.
---------------------
(i) Except as provided in Section 1.6 of this Agreement or as
set forth on Schedule 2.21(h)(i), the execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Company Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment
19
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(ii) Except as set forth on Schedule 2.21(h)(ii) with respect to
any written agreement entered into by the Company, no payment or benefit which
will or may be made by the Company or Parent or any of their respective
affiliates with respect to any Employee will be characterized as an "excess
parachute payment", within the meaning of Section 280G(b)(1) of the Code.
(i) Employment Matters. The Company (i) is in compliance in all
------------------
material respects with all applicable federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii)
has withheld all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to Employees; (iii) is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing; and (iv) is not liable for any payment to any trust or other fund
or to any governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice).
(j) Labor. No work stoppage or labor strike against the Company is
-----
pending or, to the knowledge of the Company, threatened. Except as set forth in
Schedule 2.21(j), the Company is not involved in or, to the knowledge of the
Company, threatened with, any labor dispute, grievance, or litigation relating
to labor, safety or discrimination matters involving any Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in material liability to the Company. Neither the Company nor
any of its subsidiaries has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act which would, individually or in the
aggregate, directly or indirectly result in a material liability to the Company.
Except as set forth in Schedule 2.21(j), the Company is not presently, nor has
it been in the past, a party to, or bound by, any collective bargaining
agreement or union contract with respect to Employees and no collective
bargaining agreement is being negotiated by the Company.
2.22 Pooling of Interests. The Company, to its knowledge and based upon
--------------------
consultation with its independent auditors, has not taken or agreed to take any
action, and is not aware of any condition, that (without giving effect to any
action taken or agreed to be taken by the Company) would affect the ability of
Parent to account for the business combination to be effected by the Merger as a
pooling of interests.
2.23 Change of Control and Non-Compete Payments. Schedule 2.23 sets
------------------------------------------ -------------
forth each plan or agreement pursuant to which any amounts may become payable
(whether currently or in the future) to current or former employees, officers
and directors of the Company as a result of or in connection with the Merger.
2.24 Year 2000 Compliance. The Company's computer systems, software and
--------------------
software products are able to accurately (i) process any date rollover, (ii)
process calculations or computations regardless of the dates used in such
calculations whether before, on or after January 1, 2000, (iii) accept and
respond to two digit year date input in a manner that resolves any ambiguities
as to the century in an appropriate manner and (iv) store and display date data
in a manner that is unambiguous as to the century.
2.25 Backlog. Schedule 2.25 sets forth a summary of the Company's
------- -------------
backlog (including deferred revenue recorded on the Company Financials) as of
August 31, 1998, which includes the total backlog at such date reflected in
written agreements and a monthly breakdown of the expected shipment dates for
the orders represented
20
by such backlog. All orders reflected in such backlog are evidenced by written
purchase orders or contracts. All such orders or contracts are firm, fixed,
committed and non-cancelable. To the Company's knowledge, the Company will
collect the revenue from such orders and contracts in accordance with the terms
of their respective purchase orders or contracts, including without limitation
receiving payment in accordance with the payment deadlines set forth therein.
2.26 Certain Payments. At the Effective Time, the holders of Series B
----------------
Preferred and Series C Preferred will not be entitled to any consideration other
than the right to receive Parent Common Stock and cash in lieu of fractional
shares to which such holders would be entitled pursuant to the terms of this
Agreement.
2.27 Representations Complete. None of the representations or warranties
------------------------
made by the Company (as modified by the Company Schedules), nor any statement
made in any Schedule or certificate furnished by the Company pursuant to this
Agreement taken as a whole contained at October 9, 1998 or will contain at the
Effective Time, any untrue statement of a material fact, or omitted at October
9, 1998 or will omit at the Effective Time to state any material fact necessary
in order to make the statements contained herein or therein, in the light of the
circumstances under which they were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company and its
stockholders as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
California. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of Parent and
Merger Sub has the corporate power to own its properties and to carry on its
business as now being conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified would
have a material adverse effect on the ability of Parent and Merger Sub to
consummate the transactions contemplated hereby.
3.2 Authority. Parent and Merger Sub have all requisite corporate power
---------
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub. The
Boards of Directors of Parent and Merger Sub have unanimously approved the
Merger and this Agreement. This Agreement has been duly executed and delivered
by Parent and Merger Sub and constitutes the valid and binding obligation of
Parent and Merger Sub, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity.
3.3 Capital Structure.
-----------------
(a) The authorized stock of Parent consists of 75,000,000 shares of
Common Stock, of which 33,010,460 shares were issued and outstanding as of
September 14, 1998, and 5,000,000 shares of Preferred Stock, none of which is
issued or outstanding. The authorized capital stock of Merger Sub consists of
1,000 shares of Common Stock, 1,000 shares of which, as of October 9, 1998, are
issued and outstanding and are held by Parent. All such shares have been duly
authorized, and all such issued and outstanding shares have been validly issued,
21
are fully paid and nonassessable and are free of any liens or encumbrances other
than any liens or encumbrances created by or imposed upon the holders thereof.
The Company has reserved 2,000,000 shares of Parent Common Stock for issuance to
employees and consultants pursuant to its 1998 Nonstatutory Stock Option Plan,
of which at September 14, 1998, 1,475,200 shares are subject to outstanding,
unexercised options and 524,800 shares remain available for future grant.
Parent has reserved 5,500,000 shares of Parent Common Stock for issuance to
employees and consultants pursuant to its 1996 Stock Plan, of which at
September 14, 1998, 4,544,957 shares are subject to outstanding, unexercised
options and 955,043 shares remain available for future grant.
(b) The shares of Parent Common Stock to be issued pursuant to the
Merger will, when issued in accordance with the terms of this Agreement, be duly
authorized, validly issued, fully paid, nonassessable.
3.4 SEC Documents; Parent Financial Statements. Parent has furnished to
------------------------------------------
the Company true and complete copies of all forms, reports or registration
statements filed by it with the U.S. Securities and Exchange Commission (the
"SEC") under the Securities Exchange Act of 1934, as amended (the "Exchange
---- --------
Act"), for all periods subsequent to March 31, 1998, all in the form so filed
---
(all of the foregoing being collectively referred to as the "SEC Documents").
-------------
As of their respective filing dates and at the date of any amendment thereto,
the SEC Documents complied in all material respects with the requirements of the
Exchange Act, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein not misleading, except to the
extent corrected by a subsequently filed document with the SEC. The financial
statements of Parent, including the notes thereto, included in the SEC Documents
(the "Parent Financial Statements") comply as to form in all material respects
---------------------------
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles consistently applied (except as
may be indicated in the notes thereto) and present fairly the consolidated
financial position of Parent at the dates thereof and of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal audit adjustments). Parent has furnished to the Company a complete
and correct copy of any amendments or modifications which have not yet been
filed with the SEC but which are required to be filed to forms, reports or
registration statements which previously have been filed by Parent with the SEC
pursuant to the Securities Act or Exchange Act.
3.5 No Material Adverse Change. Since June 30, 1998, Parent has
--------------------------
conducted its business in the ordinary course and there has not occurred (a) any
material adverse change in the financial condition, liabilities, assets or
business of Parent, or (b) any damage to, destruction or loss of any assets of
the Parent (whether or not covered by insurance) that materially and adversely
affects the financial condition or business of Parent.
3.6 Litigation. There is no action, suit, proceeding, claim, arbitration
----------
or investigation pending, or as to which Parent has received any notice of
assertion against Parent which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay any of the transactions contemplated by this
Agreement.
3.7 Liabilities of Merger Sub. Merger Sub has no liabilities and has
-------------------------
conducted no operations.
3.8 Pooling of Interests. Neither Parent nor Merger Sub, to its
--------------------
knowledge and based upon consultation with its independent auditors, has taken
or agreed to take any action, or is aware of any condition, that (without giving
effect to any action taken or agreed to be taken by the Company) would affect
the ability of Parent to account for the business combination to be effected by
the Merger as a pooling of interests.
3.9 Restrictions on Business Activities. There is no agreement
-----------------------------------
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which Parent or Merger Sub is a party or otherwise binding
22
upon Parent or Merger Sub which has or reasonably could be expected to have the
effect of prohibiting or impairing any material business practice of Parent or
Merger Sub, any material acquisition of property (tangible or intangible) by
Parent or Merger Sub or the material conduct of business by Parent or Merger
Sub. Without limiting the foregoing, Parent or Merger Sub have not entered into
any agreement under which Parent or Merger Sub is materially restricted from
selling, licensing or otherwise distributing any of their products to any class
of customers, in any geographic area, during any period of time or in any
segment of the market.
3.10 Absence of Liens and Encumbrances. Parent and Merger Sub have good
---------------------------------
and valid title to, or, in the case of leased properties and assets, valid
leasehold interests in, all of its tangible properties and assets, real,
personal and mixed, used or held for use in its business, free and clear of any
liens and except for liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the value,
or materially interfere with the present use, of the property subject thereto or
affected thereby.
3.11 Intellectual Property. Parent owns, or has licensed or otherwise
---------------------
possesses legally enforceable rights to use, all patents (as well as all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations in part thereof, and the equivalent or similar rights anywhere in
the world in inventions and discoveries), trademarks (as well as all goodwill
associated therewith, copyrights and maskworks, any applications for and
registrations of such patents, trademarks, trade names, service marks,
copyrights and maskworks, and all proprietary customer lists, processes,
formulae, methods, schematics, technology, know-how, computer software programs,
object code, firmware, development tools, file records and data or applications
and other tangible or intangible proprietary information or material
constituting or incorporating trade secrets of Parent and any corresponding or
equivalent rights to any of the foregoing anywhere in the world, that are
necessary to conduct the business of Parent as currently conducted, as conducted
since the inception of Parent, or is reasonably contemplated to be conducted by
Parent in the future, except where the failure to do so would have a material
adverse effect on Parent. Parent is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
under this Agreement in material breach of any license, sublicense or other
agreement relating to its intellectual property or any third party intellectual
property.
3.12 Brokers' and Finders' Fees. Except for fees payable to its financial
--------------------------
advisor, which are customary as to amount for transactions of this type, Parent
and Merger Sub have not incurred, nor will they incur, directly or indirectly,
any liability for brokers' or finders' fees, or agents' commissions or any
similar charges in connection with the execution of this Agreement or the
consummation of any transaction contemplated hereby.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date
----------------------------------
of this Agreement and continuing until the earlier of (i) the termination of
this Agreement and (ii) the Effective Time, the Company agrees (except to the
extent that Parent shall otherwise consent in writing) to carry on its business
in the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay its debts and Taxes when due, to pay or perform
other obligations when due, and, to the extent consistent with such business, to
use all reasonable efforts consistent with past practice and policies to
preserve intact its present business organization, keep available the services
of its present officers and key employees and preserve their relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it, all with the goal of preserving unim paired its
goodwill and ongoing businesses at the Effective Time. The Company shall
promptly notify Parent of
23
any event or occurrence or emergency not in the ordinary course of its business,
and any material event involving the Company or its business. Except as
expressly contemplated by this Agreement or disclosed in Schedule 4.1, the
Company shall not, without the prior written consent of Parent:
(a) Enter into any commitment or transaction not in the ordinary
course of business.
(b) Transfer to any person or entity any rights to the Company
Intellectual Property Rights (other than pursuant to Licenses in the ordinary
course of business);
(c) Enter into or amend any agreements pursuant to which any other
party is granted marketing, distribution or similar rights of any type or scope
with respect to any products of the Company outside the ordinary course of
business;
(d) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the agreements set
forth or described in the Company Schedules outside the ordinary course of
business;
(e) Commence any litigation;
(f) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of the Company;
(g) Except for the redemption of Company Common Stock from terminated
employees at the original cost therefor in accordance with agreements in effect
as of the date of this Agreement, repurchase, redeem or otherwise acquire,
directly or indirectly, any shares of its capital stock or options, warrants or
other rights exercisable therefor;
(h) Except as set forth on Schedule 4.1 and except for the issuance of
shares of Company Capital Stock upon exercise or conversion of presently
outstanding Company Options or Company Preferred Stock, issue, grant, deliver or
sell or authorize or propose the issuance, grant, delivery or sale of, or
purchase or propose the purchase of, any shares of its capital stock or
securities convertible into, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities;
(i) Cause or permit any amendments to its Certificate of
Incorporation or Bylaws;
(j) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof;
(k) Acquire or agree to acquire any assets in an amount in excess of
$100,000 in the case of a single transaction or in excess of $250,000 in the
aggregate in any 30-day period;
(l) Sell, lease, license or otherwise dispose of any of its properties
or assets, except in the ordinary course of business;
24
(m) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities of the Company or guarantee
any debt securities of others;
(n) Grant any severance or termination pay (i) to any director or
officer or (ii) to any other employee, except payments made pursuant to written
agreements outstanding on October 9, 1998;
(o) Adopt or amend any employee benefit plan, if such plan or
amendment would have general application to employees of the Company;
(p) Enter into any employment contract, extend employment offers, pay
or agree to pay any special bonus or special remuneration to any director or
employee, or increase the salaries or wage rates of its employees other than in
the ordinary course of business;
(q) Revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business;
(r) Pay, discharge or satisfy, in an amount in excess of $100,000 (in
any one case) or $250,000 (in the aggregate) any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
(i) the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or provided for in the Company Financial Statements (or
the notes thereto), (ii) expenses consistent with the provisions of this
Agreement incurred in connection with any transaction contemplated and permitted
hereby or (iii) in the ordinary course of business; provided that, subject to
Section 5.4, the Company may pay its professional service providers providing
services in connection with the transactions contemplated by this Agreement;
(s) Make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(t) Enter into any strategic alliance;
(u) Enter into any development agreement or joint marketing agreement
other than in the ordinary course of business; or
(v) Take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through (u) above, or any other action that would
prevent the Company from performing or cause the Company not to perform its
covenants hereunder.
4.2 No Solicitation.
---------------
(a) Until the earlier of (i) the Effective Time and (ii) the date of
termination of this Agreement pursuant to the provisions of Section 8.1 hereof,
the Company will not (nor will the Company permit any of the Company's officers,
directors, agents or representatives to) directly or indirectly, take any of the
following actions with any party other than Parent and its designees: (a)
solicit, conduct discussions with or engage in negotiations with any person,
relating to the possible acquisition of the Company (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise) or any material
portion of its capital stock or assets, (b) provide information with respect to
it to any person, other than Parent, relating to the possible acquisition of the
25
Company (whether by way of merger, purchase of capital stock, purchase of assets
or otherwise) or any material portion of its capital stock or assets, (c) enter
into an agreement with any person, other than Parent, providing for the
acquisition of the Company (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise) or any material portion of its capital stock or
assets or (d) make or authorize any statement, recommendation or solicitation in
support of any possible acquisition of the Company (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise) or any material
portion of its capital stock or assets by any person, other than by Parent (each
of the transactions described in clauses (a) through (d) above being an
"ACQUISITION PROPOSAL"). In addition to the foregoing, if the Company receives
--------------------
prior to the Effective Time or the termination of this Agreement any offer or
proposal relating to any of the above, the Company shall immediately notify
Parent thereof, including information as to the identity of the offeror or the
party making any such offer or proposal and the specific terms of such offer or
proposal, as the case may be, and such other information related thereto as
Parent may reasonably request. The receipt of unsolicited communications shall
not be a violation of this Section 4.2.
(b) Notwithstanding anything to the contrary in this Agreement, prior
to the Effective Time, the Company may, to the extent the Company's board of
directors determines in good faith after consultation with outside legal counsel
that it is required in the exercise of its fiduciary duties to do so,
participate in discussions or negotiations with, and, subject to the
requirements of paragraph (c) below, furnish information and afford access to
any person, entity or group after such person, entity or group has delivered to
the Company, an unsolicited bona fide Acquisition Proposal that the Company's
board of directors determines, in its good faith reasonable judgment after
consultation with outside counsel and its independent financial advisors would
more likely than not result in a transaction more favorable than the Merger to
the stockholders of the Company (a "SUPERIOR PROPOSAL"); provided, however, that
-------- -------
the Company shall (i) provide Parent at least 24 hours prior notice of any
meeting at which the Company's board of directors is reasonably expected to
contemplate a Superior Proposal and (ii) not accept any Superior Proposal for a
period of not less than 48 hours after Parent receives a copy of such Superior
Proposal (or a description of the significant terms and conditions thereof, if
not in writing). In addition, notwithstanding the provisions of paragraph (a)
above or any other provisions of this Agreement, in connection with a possible
Acquisition Proposal, the Company may refer any third party to this Section 4.2
or make a copy of this Section 4.2 available to a third party.
(c) Notwithstanding anything to the contrary in this Section 4.2, the
Company will not provide any non-public information to a third party unless: (i)
the Company provides such non-public information pursuant to a nondisclosure
agreement with terms regarding the protection of confidential information at
least as restrictive as such terms in the Confidentiality Agreement referenced
in Section 5.3, and (ii) such non-public information has been previously
delivered or made available to Parent.
4.3 Conduct of Business of Parent. During the period from the date of
-----------------------------
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Parent shall not (without
the prior consent of the Company) (except in connection with a change of
domicile of Parent): (i) declare, accrue, set aside or pay any dividend or any
other distribution with respect to shares of Parent Common Stock, (ii)
repurchase, redeem or otherwise reacquire any shares of Parent Common Stock in
an extraordinary manner, (iii) amend or permit the adoption of any amendments to
the Certificate of Incorporation of Parent, (iv) take any action that would
interfere with its ability to account for the Merger as a pooling of interests,
or (v) acquire or agree to acquire, by merging or consolidating with, by
purchasing any equity interest in or a portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or a division thereof, or otherwise acquire or agree to
acquire any assets of any other person, or agree to dispose of a material
portion of its assets, which, in case, would materially delay or prevent the
consummation of the transactions contemplated by this Agreement.
26
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Consent Solicitation Statement/Information Statement; Board
-----------------------------------------------------------
Recommendations.
---------------
(i) As promptly as practicable after the date of this Agreement, the
Company shall prepare materials which shall constitute the Company's stockholder
solicitation materials with respect to the Merger and the transactions
contemplated by this Agreement (the "Consent Solicitation Statement") and Parent
will prepare the information statement of Parent with respect to the Parent
Common Stock to be issued in connection with the Merger in which the Consent
Solicitation Statement will be included (the "Information Statement"). The
Information Statement shall include the information required pursuant to Rule
502 promulgated under the Securities Act and an investor suitability
questionnaire. Each of Parent and the Company shall use its reasonable best
efforts to cause the Information Statement to be mailed to the Company's
stockholders at the earliest practicable time. Whenever any event occurs which
should be set forth in a supplement to the Information Statement, Parent or the
Company, as the case may be, shall promptly inform the other company of such
occurrence and cooperate in preparing such supplement. All information
contained in the Information Statement relating to the Company shall be the
responsibility of the Company and all information contained or incorporated by
reference in the Information Statement relating to Parent or Merger Sub shall be
the responsibility of Parent.
(ii) The Company shall use its best efforts to solicit and obtain the
consent of its stockholders sufficient to approve the Merger and this Agreement
and to enable the Closing to occur as promptly as practicable. The Information
Statement shall include the unanimous recommendation of the Board of Directors
of the Company in favor of the approval and adoption of the Merger and this
Agreement.
5.2 Access to Information. Subject to any applicable contractual
---------------------
confidentiality obligations (which the Company shall use its best efforts to
cause to be waived) each party shall afford the others and its auditors, counsel
and other representatives, reasonable access during normal business hours during
the period prior to the Effective Time to (a) all of its properties, books,
contracts, agreements and records, and (b) all other information concerning the
business, properties and personnel (subject to restrictions imposed by
applicable law) of it as the others may reasonably request. No information or
knowledge obtained in any investigation pursuant to this Section 5.2 shall
affect or be deemed to modify any representation or warranty contained herein or
the conditions to the obligations of the parties to consummate the Merger.
Prior to the Closing, Parent shall deliver to the Company written notice if it
has actual knowledge that any representation or warranty made by the Company is
inaccurate, referencing the section number of the representation and warranty
and specifying the nature of such inaccuracy.
5.3 Confidentiality. Each of the parties hereto hereby agrees to and
---------------
reaffirms the terms and provisions of the Confidentiality Agreement between
Parent and the Company dated as of August 12, 1998.
5.4 Expenses. Whether or not the Merger is consummated, all fees and
--------
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("Third Party Expenses") incurred by a party in
--------------------
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall be the obligation
of the respective party incurring such fees and expenses.
27
5.5 Public Disclosure. Upon execution and delivery of this Agreement by
-----------------
the parties hereto, Parent and the Company shall release a jointly prepared
announcement describing the Merger. Except as aforesaid, unless otherwise
required by law (including, without limitation, securities laws) or, as to
Parent, by the rules and regulations of the National Association of Securities
Dealers, Inc., prior to the Effective Time, no disclosure (whether or not in
response to an inquiry) of the subject matter of this Agreement shall be made by
any party hereto unless approved by Parent and the Company prior to release,
provided that such approval shall not be unreasonably withheld.
5.6 Consents. The Company shall use its best efforts to obtain the
--------
consents, waivers and approvals under any of the Contracts as may be required in
connection with the Merger (all of such consents, waivers and approvals are set
forth in Company Schedules) so as to preserve all rights of, and benefits to the
Company thereunder.
5.7 FIRPTA Compliance. On the Closing Date, the Company shall deliver to
-----------------
Parent a properly executed statement in a form reasonably acceptable to Parent
for purposes of satisfying Parent's obligations under Treasury Regulation
Section 1.1445-2(c)(3).
5.8 Reasonable Efforts. Subject to the terms and conditions provided in
------------------
this Agreement, each of the parties hereto shall use its reasonable efforts to
take promptly, or cause to be taken, all actions, and to do promptly, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby to obtain all necessary waivers, consents and approvals and to effect all
necessary registrations and filings and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement for the purpose of
securing to the parties hereto the benefits contemplated by this Agreement;
provided that Parent shall not be required to agree to any divestiture by Parent
or the Company or any of Parent's subsidiaries or affiliates of shares of
capital stock or of any business, assets or property of Parent or its
subsidiaries or affiliates or the Company or its affiliates, or the imposition
of any material limitation on the ability of any of them to conduct their
businesses or to own or exercise control of such assets, properties and capital
stock.
5.9 Notification of Certain Matters. The Company shall give prompt
-------------------------------
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company and
Parent or Merger Sub, respectively, contained in this Agreement to be untrue or
inaccurate at or prior to the Effective Time except as contemplated by this
Agreement (including the Company Schedules) and (ii) any failure of the Company
or Parent, as the case may be, to comply with or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.9 shall not limit or otherwise affect any remedies available to the
party receiving such notice.
5.10 Pooling Accounting. Parent and the Company shall each use its best
------------------
efforts to cause the business combination to be effected by the Merger to be
accounted for as a pooling of interests. Each of Parent and the Company shall
use its best efforts to cause its respective employees, directors, stockholders
and affiliates not to take any action that would adversely affect the ability of
Parent to account for the business combination to be effected by the Merger as a
pooling of interests. Neither Parent nor the Company shall take any action,
including the acceleration of vesting of any options, restricted stock or other
rights to acquire shares of the capital stock of the Company, which reasonably
would be expected to (i) interfere with Parent's ability to account for the
Merger as a pooling of interests or (ii) jeopardize the tax-free nature of the
reorganization hereunder.
28
5.11 Affiliate Agreements. Schedule 5.11 sets forth those persons who, in
--------------------
the Company's reasonable judgment, are or may be "affiliates" (as that term is
used in paragraphs (c) and (d) of Rule 145 under the Securities Act) of the
Company (collectively, the "Company Affiliates"). Prior to the Closing Date,
------------------
Parent shall cause to be delivered to the Company a certificate of an officer of
Parent on behalf of Parent identifying all persons who were, in Parent's view,
immediately prior to the Closing Date, "affiliates" (as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities Act) of Parent (the
"Parent Affiliates" and, together with the Company Affiliates, the
-----------------
"Affiliates"). Prior to the Closing Date, the Company and Parent shall cause
----------
each Affiliate to execute and deliver a written Affiliate Agreement, in the
form attached as Exhibit C and Exhibit D, respectively. Parent shall be
--------- ---------
entitled to place appropriate legends on the certificates evidencing any Parent
Common Stock to be received by Company Affiliates, and to issue appropriate stop
transfer instructions to the transfer agent for Parent Common Stock, consistent
with the terms of such Affiliate Agreements.
5.12 Additional Documents and Further Assurances. Each party hereto, at
-------------------------------------------
the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be reasonably
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
5.13 Form S-8. Parent shall file a registration statement on Form S-8 for
--------
the shares of Parent Common Stock issuable with respect to assumed Company
Options no later than ten (10) days after the Closing Date.
5.14 NMS Listing. Parent shall authorize for listing on the Nasdaq
-----------
National Market the shares of Parent Common Stock issuable, and those required
to be reserved for issuance, in connection with the Merger, upon official notice
of issuance.
5.15 Cooperation With Financial Statements. The Company will use its
-------------------------------------
commercially reasonable efforts to cause the Company's management and its
independent auditors to provide to or assist Parent with the preparation of, as
applicable and necessary, the unaudited pro forma combined financial statements
of Parent and the unaudited interim financial statements of the Company to be
filed by Parent as required by Parent to comply with applicable SEC regulations.
5.16 Employment Matters. From and after the Effective Time, (i) all
------------------
continuing employees of the Company and all employees of the Company engaged by
Parent shall be eligible for employee benefits generally available to employees
of Parent to the same extent as all other employees of Parent and (ii) Parent
shall grant all continuing employees of the Company credit for service (to the
same extent as service with Parent or any subsidiary of Parent is taken into
account with respect to similarly situated employees of Parent and its
subsidiaries) with the Company for determining benefit levels under such
employee benefits. Nothing contained in this Agreement shall create or imply
any obligation on the part of Parent, Merger Sub, the Company or the Surviving
Corporation to provide any continuing employment right to any individual.
5.17 Director and Officer Indemnification. From and after the Effective
------------------------------------
Time, Parent will fulfill and honor and will cause the Surviving Corporation to
fulfill and honor in all respects the obligations of the Company pursuant to any
indemnification agreements between the Company and its directors and officers or
indemnification provisions under the Company's Certificate of Incorporation or
Bylaws existing prior to October 9, 1998. From and after the Effective Time,
such obligations shall be the joint and several obligations of Parent and the
Surviving Corporation and, by executing this Agreement, Parent hereby assumes
such obligations.
5.18 Final Company Capitalization. Prior to the Effective Time, the
----------------------------
Company shall deliver to Parent a certificate, signed by a duly authorized
officer of the Company and dated as of the Closing Date, that contains
29
a representation and warranty that sets forth the final capital structure of the
Company in at least the same detail as provided in Section 2.2.
5.19 Additional HSR Filings. The parties agree that if filings under the
----------------------
HSR Act are required as a result of Messrs. Xxxxxxx or Xxxxx acquiring shares of
Parent Common Stock, then the Company shall pay any required filing fees and
expenses (including reasonable attorneys fees) incurred in connection with the
preparation of any such filing.
5.20 Resale Registration Statement. Parent shall file a registration
-----------------------------
statement and seek to have it declared effective in accordance with the terms of
the Amended and Restated Declaration of Registration Rights attached hereto as
Exhibit H covering the resale of the Parent Common Stock to be issued pursuant
---------
to this Agreement. Such registration shall be on the time schedule and subject
to the terms and conditions set forth in the Amended and Restated Declaration of
Registration Rights. The information supplied by the Company and, to the
Company's knowledge, by or on behalf of any stockholder of the Company, for
inclusion in the registration statement will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. Parent
shall file with the SEC all reports and other documents required of Parent under
the Exchange Act in accordance with the terms of the Amended and Restated
Declaration of Registration Rights.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have
--------------------
been approved and adopted by the stockholders of the Company by the requisite
vote under applicable law and the Company's Certificate of Incorporation.
(b) No Injunctions or Restraints; Illegality; HSR Act. No temporary
-------------------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect. No
litigation challenging the legality of the transactions contemplated by this
Agreement shall be pending or overtly threatened. All waiting periods under the
HSR Act shall have expired or been terminated early.
(c) Tax Opinions. Parent and the Company shall each have received
------------
written opinions from their respective tax counsel, Xxxxxx Xxxxxxx Xxxxxxxx &
Xxxxxx, Professional Corporation, and Xxxx Xxxx Xxxx & Freidenrich LLP to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code; provided, however, that if the counsel to either
-------- -------
Parent or the Company does not render such opinion, this condition shall
nonetheless be deemed to be satisfied with respect to such party if counsel to
the other party renders such opinion to such party. The parties to this
Agreement agree to make reasonable representations as requested by such counsel
for the purpose of rendering such opinions.
(d) Opinion of Auditors. Each of Parent and the Company shall have
-------------------
received letters dated as of the Closing Date from PricewaterhouseCoopers LLP
and Ernst & Young LLP regarding those firms' concurrence with Parent
management's and the Company management's conclusions, respectively, as to the
30
appropriateness of pooling of interests accounting for the Merger under
Accounting Principles Board Opinion No. 16, if consummated in accordance with
this Agreement.
(e) Nasdaq Listing. The shares of Parent Common Stock issuable to
--------------
stockholders of the Company pursuant to this Agreement and such other shares
required to be reserved for issuance in connection with the Merger shall have
been authorized for listing on the Nasdaq Stock Market upon official notice of
issuance.
6.2 Additional Conditions to Obligations of the Company. The obligations
---------------------------------------------------
of the Company to consummate the Merger and the transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations and Warranties. The representations and warranties
------------------------------
of Parent and Merger Sub contained in this Agreement shall have been true and
correct in all material respects when made, except in such cases (other than the
representation in Section 3.1, 3.2 and 3.3) where the failure to be so true and
correct would not have a Material Adverse Effect on Parent. In addition, the
representations and warranties of Parent and Merger Sub contained in this
Agreement shall be true and correct in all material respects on and as of the
Effective Time except for changes contemplated by this Agreement and except for
those representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such particular
date), with the same force and effect as if made on and as of the Effective
Time, except in such cases (other than the representation in Section 3.1, 3.2
and 3.3) where the failure to be so true and correct would not have a Material
Adverse Effect on Parent. The Company shall have received a certificate with
respect to the foregoing signed on behalf of Parent by the President and the
Chief Financial Officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
------------------------
performed or complied (which performance or compliance shall be subject to
Parent's or Merger Sub's ability to cure as provided in Section 8.1(e) below) in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the Effective
Time, and the Company shall have received a certificate to such effect signed by
a duly authorized officer of Parent.
(c) Legal Opinion. The Company shall have received a legal opinion
-------------
from Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, counsel to
Parent, in substantially the form attached hereto as Exhibit E.
---------
(d) Material Adverse Change. There shall not have occurred any
-----------------------
material adverse change in the business, assets (including intangible assets),
financial condition or results of operations of Parent since June 30, 1998. For
purposes of this condition, a reduction in the trading price of Parent's Common
Stock, whether occurring at any time or from time to time, as reported by Nasdaq
or any other automated quotation system or exchange shall not constitute a
material adverse change.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
-----------------------------------------------------------------
The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. The representations and warranties
------------------------------
of the Company contained in this Agreement shall have been true and correct in
all material respects when made, except in such cases (other than the
representations in Sections 2.1, 2.2 and 2.4) where the failure to be so true
and correct would
31
not have a Material Adverse Effect on the Company. In addition, the
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects on and as of the Effective Time
except for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct as of such particular date), with the
same force and effect as if made on and as of the Effective Time, except in such
cases (other than the representations in Sections 2.1, 2.2 and 2.4) where the
failure to be so true and correct would not have a Material Adverse Effect on
the Company. Parent shall have received a certificate with respect to the
foregoing signed on behalf of the Company by the President and the Chief
Financial Officer of the Company.
(b) Agreements and Covenants. The Company shall have performed or
------------------------
complied (which performance or compliance shall be subject to the Company's
ability to cure as provided in Section 8.1(d) below) in all material respects
with all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time, and Parent and Merger Sub
shall have received a certificate to such effect signed by a duly authorized
officer of the Company.
(c) Legal Opinion. Parent shall have received legal opinions from
-------------
Xxxxxxxxx Xxxxx Morosoli & Maser LLP and Xxxx Xxxx Xxxx & Friedenrich LLP, legal
counsel to the Company, in substantially the form attached hereto as Exhibit F.
---------
(d) Material Adverse Change. There shall not have occurred any
-----------------------
material adverse change in the business, assets (including intangible assets)
financial condition or results of operations of the Company since August 31,
1998. For purposes of this condition, the following shall not be considered a
material adverse change: (i) any effect or change occurring as a result of any
or any combination of any (A) general economic or financial conditions or (B)
other developments that are not unique to such person and its subsidiaries but
also affect other persons who participate or are engaged in the lines of
business in which such person and its subsidiaries participate or are engaged or
(C) any competitor's activities; (ii) any change in or effect on the business,
financial condition, assets (including intangible assets) or results of
operations of a person and its subsidiaries following the date of this Agreement
resulting from a delay or, reduction in or cancellation or change in the terms
of purchases from or other transactions with a person or any of its
subsidiaries, demonstrated to be proximately caused by the pendency or
announcement of this Agreement or the transactions contemplated hereby, to the
extent so proximately caused; or (iii) failure in itself, but not any cause
thereof, of a person's and its subsidiaries' results of operations to meet any
internal or external predictions, projections, estimates or expectations.
(e) Affiliate Agreements. Each of the Company Affiliates shall have
--------------------
delivered an executed Affiliate Agreement which shall be in full force and
effect.
(f) Noncompetition Agreements. Each person listed on Schedule 6.3(g)
------------------------- ---------------
shall have executed and delivered to Parent a Noncompetition and Nonsolicitation
Agreement in substantially the form of Exhibit G and all of such agreements
---------
shall be in full force and effect.
(g) Key Employees. Each person listed on Schedule 6.3(h) shall have
------------- ---------------
accepted an offer of employment with Parent substantially on the terms set forth
in Parent's standard form of offer letter or confirmed that he or she shall
continue employment with the Company after the Effective Time.
(h) Escrow Agreement. Parent, the Company, Escrow Agent and the
----------------
Stockholders' Representative (as defined in the Escrow Agreement) shall have
entered into an Escrow Agreement substantially in the form attached hereto as
Exhibit H (the "Escrow Agreement").
--------- ----------------
32
(i) Dissenters' Rights. Holders of more than 5% of the outstanding
------------------
shares of Company Capital Stock shall not be eligible to exercise appraisal,
dissenters' or similar rights under applicable law with respect to their shares
by virtue of the Merger.
(j) Resignation of Directors and Officers. All directors and officers
-------------------------------------
of the Company shall have resigned their respective offices as directors and
officers of the Company effective as of the Effective Time.
(k) Termination of 401(k) Savings Plan. The Company shall have
----------------------------------
terminated its 401(k) Savings Plan.
(l) Fairness Opinion. On or before October 23, 1998, Parent shall
----------------
have received a fairness opinion from Broadview International LLC.
(m) Investment Representation Statements. Each stockholder of the
------------------------------------
Company who is to receive shares of Parent Common Stock in connection with the
Merger shall have executed and delivered to Parent an Investment Representation
Statement that contains certain representations and agreements and agreeing to
be bound by certain terms of this Agreement in connection with resales of Parent
Common Stock.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; ESCROW
7.1 Survival of Representations and Warranties. All of the Company's
------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement (each as modified by the Company Schedules) shall
survive the Merger and continue until 5:00 p.m., California time, on (i) with
respect to the representations which are subject to resolution through the audit
process, the date which is the earlier of the date of the auditor's report for
the first audit of Parent's financial statements commenced after the Closing
Date or the Expiration Date (as defined below), and (ii) with respect to all
other representations and warranties, the Expiration Date. For purposes of this
Agreement, the "Expiration Date" shall mean the date which is one year following
---------------
the Closing Date.
7.2 Obligation of the Company to Indemnify, Reimburse, etc. Subject to
------------------------------------------------------
the provisions of Section 7.4 and 8.2 hereof, the Company, its successors and
assigns, jointly and severally, shall indemnify, reimburse, defend and hold
harmless Parent and Merger Sub and each of their successors and assigns and each
of their respective directors, officers, employees, affiliates, and their
respective successors and assigns (each a "Parent Indemnitee") from and against
all Losses resulting from, imposed upon, incurred or suffered by any of them,
directly or indirectly, based upon, arising out of or otherwise in respect of
any inaccuracy in or any breach of any representation, warranty, covenant or
agreement of the Company. For purposes of this Agreement, "Losses" shall mean
------
any claims, losses, liabilities, damages, causes of action, costs and expenses
(including reasonable attorney's, accountant's, consultant's and expert's fees
and expenses), net of (i) any tax benefits, savings or reductions and (ii) any
insurance proceeds, in either case to which the Indemnified Party is entitled by
virtue of such claims, losses, liabilities, damages, causes of action, costs and
expenses.
7.3 Obligation of Parent to Indemnify, Reimburse, etc. Subject to the
-------------------------------------------------
provisions of Section 7.4 hereof, Parent and Merger Sub and their respective
successors and assigns, jointly and severally, shall indemnify, defend and hold
harmless the Company and its successors and assigns and each of its directors,
officers,
33
employees, affiliates, and their respective successors and assigns (each a
"Company Indemnitee") from and against any Losses resulting from, imposed upon,
incurred or suffered by any of them, directly or indirectly, based upon, arising
out of or otherwise in respect of any inaccuracy in or breach of any
representation, warranty, covenant or agreement of Parent or Merger Sub.
7.4 Limits on Indemnification, Reimbursement, etc.
---------------------------------------------
(a) Absent fraud or willful misconduct of any party (for which there
shall be no limitation of liability of any party), no Parent Indemnittee or the
Company Indemnittee shall have any right to seek indemnification, reimbursement
or defense under this Agreement or the Escrow Agreement until Losses which would
otherwise be indemnifiable hereunder, and have been incurred by such party and
other indemnitees associated with or related to such party, exceed $150,000 (at
which point, such party or parties to be indemnified hereunder shall be entitled
to receive indemnification only for such Losses in excess of such $150,000
amount); provided, that after such $150,000 amount has been satisfied, no party
--------
shall be entitled to make a claim under this Agreement or the Escrow Agreement
for an amount that is less than $40,000; provided, further, that such party or
-----------------
parties to be indemnified shall be entitled to aggregate all Losses incurred by
such party or other indemnitees associated with or related to such party in
calculating such $40,000 amount.
(b) The sole and exclusive remedy and recourse by any Parent
Indemnittee against the Company' stockholders (in their capacities as such) for
breach of representations, warranties, covenants and agreements in this
Agreement, its schedules, exhibits, attachments and related certificates shall
be pursuant to the Escrow Agreement. Any recovery of any Parent Indemnittee
against the Company's option holders or stockholders (in their capacities as
such) for breach of representations, warranties, covenants and agreements in
this Agreement, its schedules, exhibits, attachments and related certificates
shall in all events limited to the Escrow Fund.
7.5 Escrow Arrangements. Concurrent with the Effective Time, the Escrow
-------------------
Amount shall be placed in an escrow fund (the "Escrow Fund"), to be governed by
the terms of the Escrow Agreement. The Escrow Fund shall be available to
compensate Parent and its affiliates for losses incurred by Parent and its
affiliates in connection with breaches of representations, warranties, or
covenants contained herein or delivered pursuant hereto. The terms and
conditions of the Escrow Fund shall be set forth more fully in the Escrow
Agreement. The Escrow Fund shall terminate at the Expiration Date.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this Agreement
-----------
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual consent of the Company and Parent;
(b) by Parent or the Company if: (i) the Effective Time has not
occurred by February 28, 1999 (provided that the right to terminate this
Agreement under this clause 8.1(b)(i) shall not be available to any party whose
willful failure to fulfill any obligation hereunder has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such date);
(ii) there shall be a final nonappealable order of a federal or state court in
effect preventing consummation of the Merger; or (iii) there shall be any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any governmental entity that would make consummation
of the Merger illegal;
34
(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger, by any Governmental Entity, which would: (i) prohibit Parent's or
the Company's ownership or operation of any material portion of the business of
the Company or (ii) compel Parent or the Company to dispose of or hold separate,
as a result of the Merger, any material portion of the business or assets of the
Company or Parent.
(d) by Parent if it is not in material breach of its obligations under
this Agreement and there has been a breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of the Company and
as a result of such breach the conditions set forth in Section 6.3(a) or 6.3(b),
as the case may be, would not then be satisfied; provided, however, that if such
breach is curable by the Company within thirty (30) days through the exercise of
its reasonable best efforts, then for so long as the Company continues to
exercise such reasonable best efforts Parent may not terminate this Agreement
under this Section 8.1(d) unless such breach is not cured within thirty (30)
days (but no cure period shall be required for a breach which by its nature
cannot be cured);
(e) by the Company if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Parent or Merger Sub and as a result of such breach the conditions set forth in
Section 6.2(a) or 6.2(b), as the case may be, would not then be satisfied;
provided, however, that if such breach is curable by Parent or Merger Sub within
thirty (30) days through the exercise of its reasonable best efforts, then for
so long as Parent or Merger Sub continues to exercise such reasonable best
efforts the Company may not terminate this Agreement under this Section 8.1(e)
unless such breach is not cured within thirty (30) days (but no cure period
shall be required for a breach which by its nature cannot be cured);
(f) by Parent if a Triggering Event (as defined below) shall have
occurred;
(g) by the Company at any time prior to the approval of the Merger by
the stockholders of the Company, if the Company's board of directors determines
to pursue a Superior Proposal (by the execution of a letter of intent with
respect thereto or otherwise).
Where action is taken to terminate this Agreement pursuant to this Section
8.1, it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
For the purposes of this Agreement, a "Triggering Event" shall be deemed to
have occurred if: (i) the Company's board of directors or any committee thereof
shall for any reason have withdrawn or shall have amended or modified in a
manner adverse to Parent its unanimous recommendation in favor of, the adoption
and approval of this Agreement or the approval of the Merger; (ii) the Company
shall have failed to include in the Information Statement the unanimous
recommendation of the Company's board of directors in favor of the adoption and
approval of this Agreement and the approval of the Merger; (iii) the Company's
board of directors fails to reaffirm its unanimous recommendation in favor of
the adoption and approval of this Agreement and the approval of the Merger
within seven (7) business days after Parent requests in writing that such
recommendation be reaffirmed at any time following the date the Company's board
of directors meets to consider an Acquisition Proposal; (iv) the Company's board
of directors or any committee thereof shall have approved or publicly
recommended any Acquisition Proposal; (v) the Company shall have entered into
any letter of intent or similar document or any agreement, contract or
commitment accepting any Acquisition Proposal; or (vi) the Company shall not
have used commercially reasonable efforts to solicit consents or proxies from
the Company's stockholders as promptly as practicable and in any event within
seventy-five (75) days after the initial signing of this Agreement.
35
8.2 Effect of Termination. In the event of termination of this Agreement
---------------------
as provided in Section 8.1, this Agreement shall forthwith become void and,
except as set forth in Section 8.3, there shall be no liability or obligation on
the part of Parent, Merger Sub or the Company, or their respective officers,
directors or stockholders, provided that, the provisions of Sections 5.3 and 5.4
and Article IX of this Agreement shall remain in full force and effect and
survive any termination of this Agreement.
8.3 Termination Fee. If this Agreement is terminated pursuant to
---------------
Section 8.1(g), the Company shall pay to Parent an amount equal to $6,900,000 in
cash within three business days following such termination. Any payment
pursuant to this Section 8.3 shall be liquidated damages and, if paid, there
shall be no further liability under this Agreement.
8.4 Amendment. Except as is otherwise required by applicable law after
---------
the stockholders of the Company approve this Agreement, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto.
8.5 Extension; Waiver. At any time prior to the Effective Time, Parent
-----------------
and Merger Sub, on the one hand, and the Company, on the other, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
International Network Services
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: General Counsel
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
36
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
VitalSigns Software, Inc.
0000 Xxxxxxx Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxx Xxxxx, XX 00000
Attention: Chief Executive Officer
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with copies to:
Xxxxxxxxx Xxxxx Morosoli & Maser LLP
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
and
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
9.2 Interpretation. The words "include," "includes" and "including" when
--------------
used herein shall be deemed in each case to be followed by the words "without
limitation." The word "agreement" when used herein shall be deemed in each case
to mean any contract, commitment or other agreement, whether oral or written,
that is legally binding. As used in this Agreement, the phrase "to the best of
[a party's] knowledge," "to [a party's] knowledge," "[a party] is not aware,"
and similar phrases shall mean the actual knowledge of such party, or of the
officers and directors of such party. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
9.3 Material Adverse Effect. The term "Material Adverse Effect" with
-----------------------
respect to any person means a material adverse effect on the business, financial
condition, assets (including intangible assets) or results of
37
operations of such person and subsidiaries of such person taken as a whole;
provided, however, that a Material Adverse Effect shall not be deemed to have
-------- -------
occurred primarily as a result of any of the following (or any combination of
the following): (i) any effect or change occurring as a result of (A) general
economic or financial conditions or (B) other developments that are not unique
to such person and its subsidiaries but also affect other persons who
participate or are engaged in the lines of business in which such person and its
subsidiaries participate or are engaged or (C) any competitor's activities; (ii)
any change in or effect on the business, financial condition, assets (including
intangible assets) or results of operations of a person and its subsidiaries
following the date of this Agreement resulting from a delay or, reduction in or
cancellation or change in the terms of purchases from or other transactions with
a person or any of its subsidiaries, demonstrated to be proximately caused by
the pendency or announcement of this Agreement or the transactions contemplated
hereby, to the extent so proximately caused; or (iii) failure in itself, but not
any cause thereof, of a person's and its subsidiaries' results of operations to
meet any internal or external predictions, projections, estimates or
expectations.
9.4 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.5 Entire Agreement; Assignment. This Agreement, the schedules and
----------------------------
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided, except
that Parent and Merger Sub may assign their respective rights and delegate their
respective obligations (other than the obligation of Parent to issue Parent
Common Stock in the Merger) hereunder to their respective affiliates.
The parties hereto acknowledge that Parent currently intends to change its
state of incorporation from California to Delaware by way of the merger of
Parent with and into Intrepid, a Delaware corporation and wholly-owned
subsidiary of Parent (the "Reincorporation"). The parties agree that the
---------------
Reincorporation shall not be deemed to be an assignment under this Agreement and
that if the Reincorporation shall occur before the Effective Time, all
references to Parent with respect to periods after the Reincorporation shall
mean Parent, a Delaware corporation, unless the context otherwise requires.
9.6 Severability. In the event that any provision of this Agreement or
------------
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.7 Other Remedies. Except as otherwise provided herein, any and all
--------------
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.8 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof;
provided, however, that the DGCL shall govern all corporation actions to be
undertaken by the Company except to the extent that the CCC applies to the
Company with respect to the Company's status
38
as a quasi-foreign corporation under the CCC. Each of the parties hereto agrees
that process may be served upon them in any manner authorized by the laws of the
State of California for such persons and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction and
such process.
9.9 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.10 Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
9.11 Stock Certificate Legends. Each certificate representing any of the
-------------------------
shares of Parent Common Stock to be issued pursuant to this Agreement shall have
endorsed thereon a legend substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"). SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR
PLEDGED UNLESS: (i) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS
TO SUCH SHARES, (ii) THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHICH MAY
BE COUNSEL FOR THE COMPANY) REASONABLY ACCEPTABLE TO IT STATING THAT SUCH
SALE, TRANSFER OR PLEDGE IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF THE ACT OR (iii) THE SHARES ARE SOLD PURSUANT TO
RULE 144."
Parent covenants and agrees that with respect to transactions in Parent Common
Stock subject to Rule 144 under the Securities Act involving former Company
stockholders, Parent will process or cause to be processed all such transactions
in a manner at least as prompt as similar transactions involving Parent
affiliates. Parent agrees to remove the foregoing legend upon request of any
former Company stockholder that would be entitled to sell such shares under Rule
144(k) under the Securities Act.
(Remainder of page intentionally left blank)
39
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Amended and Restated Agreement to be signed by their duly authorized respective
officers, all as of the date first written above.
INTERNATIONAL NETWORK SERVICES VALIANT ACQUISITION CORP.
By: /s/ Xxxxx X. Xxxxxxxx By: /s/ Xxxxx X. Xxxxxxxx
---------------------------------- ------------------------------
Xxxxx X. Xxxxxxxx Xxxxx X. Xxxxxxxx
Vice President Finance and Chief Chief Financial Officer
Financial Officer
VITALSIGNS SOFTWARE, INC.
By: /s/ Xxxxxxxxxx Xxxxxxx
---------------------------------------
Xxxxxxxxxx Xxxxxxx
President and Chief Executive Officer
***REORGANIZATION AGREEMENT***
