EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER (the "Merger Agreement") is entered into
as of _________, 1998 by and between Enact Health Management Systems, a
California corporation ("Enact California"), and Enact Health Management Systems
Delaware Corporation, a Delaware corporation ("Enact Delaware").
WITNESSETH:
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WHEREAS, Enact Delaware is a corporation duly organized and existing under
the laws of the State of Delaware;
WHEREAS, Enact California is a corporation duly organized and existing
under the laws of the State of California;
WHEREAS, on the date of this Merger Agreement, Enact Delaware has authority
to issue 1,000 shares of Common Stock, par value $0.001 per share (the "Enact
Delaware Common Stock"), of which 100 shares are issued and outstanding and
owned by Enact California;
WHEREAS, on the date of this Merger Agreement, Enact California has
authority to issue 20,000,000 shares of Common Stock (the "Enact California
Common Stock"), of which ___________ shares are issued and outstanding, and
10,000,000 shares of Preferred Stock (the "Enact California Preferred Stock"),
of which ________ shares are issued and outstanding;
WHEREAS, the respective Boards of Directors for Enact Delaware and Enact
California have determined that, for the purpose of effecting the
reincorporation of Enact California in the State of Delaware, it is advisable
and to the advantage of said two corporations and their shareholders that Enact
California merge with and into Enact Delaware upon the terms and conditions
herein provided; and
WHEREAS, the respective Boards of Directors of Enact Delaware and Enact
California, the shareholders of Enact California, and the sole stockholder of
Enact Delaware have adopted and approved this Merger Agreement;
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, Enact California and Enact Delaware hereby agree to merge as
follows:
1. Merger. Enact California shall be merged with and into Enact Delaware,
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and Enact Delaware shall survive the merger ("Merger"), effective upon the date
when this Merger Agreement is made effective in accordance with applicable law
(the "Effective Date").
2. Governing Documents. The Certificate of Incorporation of Enact
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Delaware shall be amended to read in full as follows:
FIRST: The name of the Corporation is Enact Health Management Systems
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(hereinafter sometimes referred to as the "Corporation").
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SECOND: The address of the registered office of the Corporation in the
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State of Delaware is Incorporating Services, Ltd., 00 Xxxx Xxxxx
Xxxxxx, xx xxx Xxxx xx Xxxxx, Xxxxxx of Kent. The name of the
registered agent at that address is Incorporating Services, Ltd.
THIRD: The purpose of the Corporation is to engage in any lawful act or
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activity for which a corporation may be organized under the
General Corporation Law of Delaware.
FOURTH:
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The Corporation is authorized to issue two classes of shares to be
designated respectively Preferred Stock and Common Stock. The total number of
shares of all series of Preferred Stock that the Corporation shall have
authority to issue is 5,795,522/1/ and the total number of shares of Common
Stock that the Corporation shall have authority to issue is 50,000,000. All the
authorized shares shall have a par value of $0.001.
The shares of Preferred Stock may be divided into such number of series as
the Board of Directors may determine. The Board of Directors is authorized to
determine and alter the rights, preferences, privileges and restrictions granted
to and imposed upon the Preferred Stock or any series thereof with respect to
any wholly unissued series of Preferred Stock, and to fix the number of shares
of any such series of Preferred Stock. The Board of Directors, within the
limits and restrictions stated in any resolution or resolutions of the Board of
Directors originally fixing the number of shares constituting any series, may
increase or decrease (but not below the number of shares of such series then
outstanding) the number of shares of any series subsequent to the issue of
shares of that series.
The Corporation shall from time to time in accordance with the laws of the
State of Delaware increase the authorized amount of its Common Stock if at any
time the number of shares of Common Stock remaining unissued and available for
issuance shall not be sufficient to permit conversion of the Preferred Stock.
The first series of Preferred Stock shall be comprised of 2,340,160 shares,
designated as "Series A Preferred Stock." The second series of Preferred Stock
shall be comprised of 220,385 shares, designated as "Series B Preferred Stock."
The third series of Preferred Stock shall be comprised of 684,231 shares,
designated as "Series C Preferred Stock." The fourth series of Preferred Stock
shall be comprised of 550,746 shares, designated as "Series D Preferred Stock."
Unless otherwise specified, as used below "Preferred Stock" shall refer to the
Series A Preferred
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/1/ Reflects current authorized number of Preferred Stock (2,340,160 Series A,
220,385 Series B, 684,231 Series C and 550,746 Series D plus an additional
2,000,000 shares). The number will be changed to reflect the outstanding
shares existing at the time of filing of this Agreement and Plan of Merger,
plus an additional 2,000,000 shares. Currently, the number of shares of
Preferred Stock outstanding are: 2,325,960 Series A, 220,385 Series B,
381,024 Series C and 275,373 Series D. These numbers are subject to change
based on (i) the date of completion of the Initial Public Offering, (ii)
exercise of warrants, and (iii) conversion of convertible notes.
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Stock, the Series B Preferred Stock, the Series C Preferred Stock and the Series
D Preferred Stock./2/
On the date (the "Series D Dividend Date") which is two hundred ten (210)
days after the date of the first issuance of any shares of Series D Preferred
Stock (the "Initial Series D Issuance Date"), if the Corporation has not
received ten million dollars ($10,000,000) or more in aggregate proceeds from
one or a series of related sales of equity securities of Corporation made
following July 18, 1997, then on such Series D Dividend Date the Corporation
shall without further action or consideration issue as a stock dividend one
share of Series D Stock to the holder of each outstanding share of Series D
Preferred Stock with respect to each such share (the "Series D Dividend") and
all other then outstanding shares of Common Stock or Preferred Stock shall
remain outstanding without change.
The rights, preferences, privileges and restrictions granted to and imposed
upon the Common Stock and Preferred Stock are as follows:
Section 1. Dividends
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(a) The holders of Preferred Stock shall be entitled to receive
dividends out of any funds legally available therefor, payable in preference and
priority to any payment of any dividend on Common Stock, when, as and if
declared by the Board of Directors. The right to dividends on the Preferred
Stock shall not be cumulative, and no right shall accrue to holders of the
Preferred Stock by reason of the fact that dividends on such shares are not
declared or paid in any prior year. No dividends on Common Stock shall be
declared or paid unless and until a dividend in an equal amount per share on an
as-converted basis has been declared and paid on the Preferred Stock.
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/2/ Reflects current authorized number of Preferred Stock (2,340,160 Series A,
220,385 Series B, 684,231 Series C and 550,746 Series D) and will be changed
as referenced in footnote 1 above.
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Section 2. Preference on Liquidation
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(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Preferred
Stock then outstanding shall be entitled to be paid, out of the assets of the
Corporation available for distribution to its stockholders, whether from capital
surplus or earnings, before any payment shall be made with respect to the Common
Stock, an amount equal to (i) $0.7042254 per share of Series A Preferred Stock
then held by them, $3.63 per share of Series B Preferred Stock then held by
them, $5.249 per share of Series C Preferred Stock then held by them and $12.00
($6.00 after the Series D Dividend) per share of Series D Preferred Stock then
held by them (each such amount to be adjusted to reflect subsequent stock
dividends, stock splits or recapitalizations), and (ii) an amount equal to all
declared and unpaid dividends with respect to each such series to the date fixed
for distribution.
(b) If upon liquidation, dissolution or winding up of the Corporation,
the assets of the Corporation available for distribution to its stockholders
shall be insufficient to pay the holders of Preferred Stock the full amounts to
which they shall be entitled under Section 2(a) above, the holders of the
Preferred Stock shall share ratably in any distribution of assets according to
the respective amounts which would be payable with respect to the shares held by
them upon such distribution if all amounts payable on or with respect to said
shares were paid in full.
(c) After setting apart or paying in full the amounts due the holders
of the Preferred Stock under Sections 2(a) and 2(b), above, the remaining assets
of the Corporation available for distribution to stockholders, if any, shall be
distributed ratably on a per share basis among the holders of Common Stock and
the holders of Preferred Stock as if fully converted to Common Stock.
(d) The (i) merger or consolidation of the Corporation into or with
another corporation in which the stockholders of the Corporation shall own less
than 50% of the voting securities of the surviving corporation, (ii) sale,
transfer or lease (but not including a transfer or lease by pledge or mortgage
to a bona fide lender) of all or substantially all of the assets of the
Corporation, or (iii) sale by the Corporation's stockholders of 50% or more of
the Corporation's outstanding securities in one or more related transactions
shall be deemed to be a liquidation, dissolution or winding up of the
Corporation as those terms are used in this Section 2; provided that the
transactions described in subsections (i), (ii) and (iii) of the foregoing
sentence shall not be deemed to be a liquidation, dissolution or winding up if
the holders of the shares of Preferred Stock would receive under the terms of
the agreement regarding the transaction described in clause (i), (ii) or (iii)
above, an amount per share of Preferred Stock which is equal to or greater than
the amount which would be received upon a liquidation, dissolution or winding up
of the Corporation on the date of such transaction, assuming for such purpose
that the
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aggregate consideration received by such holders in such transaction were
treated as an asset of the Corporation.
Section 3. Voting.
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(a) Voting for Directors. The holders of Series A Preferred Stock,
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voting together as one class, shall be entitled to elect one director. The
holders of Common Stock and the holders of Preferred Stock, voting together as
one class at any annual or special meeting of stockholders of the Corporation,
or by written consent, shall be entitled to elect the remaining directors upon
the following basis: each holder of shares of Preferred Stock shall be entitled
to such number of votes for the Preferred Stock held by him on the record date
fixed for such meeting, or on the effective date of such written consent, as
shall be equal to the whole number of shares of the Common Stock into which all
of his shares of Preferred Stock are convertible immediately after the close of
business on the record date fixed for such meeting or the effective date of such
written consent (such basis for voting of shares of the Corporation's stock
shall hereinafter be referred to as an "As Converted Basis"). Any vacancy in the
Board occurring because of the death, resignation or removal of a director
elected by the holders of the outstanding class with voting power entitled to
elect him or her shall be filled by the vote or written consent of the holders
of the outstanding class with voting power entitled to elect him or her or, in
the absence of action by such holders, by action of the remaining directors. A
director may be removed with or without cause by the vote or consent of the
holders of the outstanding class with voting power entitled to elect him or her.
Any vacancy in the Board caused by an increase in the number of authorized
directors of the Corporation shall be filled by the vote or written consent of
the holders of the outstanding shares of Preferred Stock and the holders of the
outstanding Common Stock voting together as a single class.
(b) All Other Matters. On all other matters, except as otherwise
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required by law or as set forth herein, the shares of Preferred Stock shall be
voted on an equal basis with the shares of the Common Stock at any annual or
special meeting of stockholders of the Corporation, or may act by written
consent in the same manner as the Common Stock, upon an As Converted Basis.
(c) Series B Voting Exception. Notwithstanding the foregoing, in the
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event of a "liquidation, dissolution or winding up" pursuant to Section 2 above
wherein the holders of Series B Preferred Stock do not receive an amount equal
to or in excess of the amount due to such holders under Section 2(a), then such
liquidation, dissolution or winding up shall require, in addition to any other
vote required by law or under this Certificate, the approval by vote or written
consent of at least a majority of the outstanding shares of Series B Preferred
Stock voting together as one class, separate and apart from the holders of any
other series of Preferred Stock or the holders of Common Stock (hereafter,
referred to as a "Series B Voting Exception").
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(d) Series C Voting Exception. Notwithstanding the foregoing, in the
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event of a "liquidation, dissolution or winding up" pursuant to Section 2 above
wherein the holders of Series C Preferred Stock do not receive an amount equal
to or in excess of the amount due to such holders under Section 2(a), then such
liquidation, dissolution or winding up shall require, in addition to any other
vote required by law or under this Certificate, the approval by vote or written
consent of at least a majority of the outstanding shares of Series C Preferred
Stock voting together as one class, separate and apart from the holders of any
other series of Preferred Stock or the holders of Common Stock (hereafter,
referred to as a "Series C Voting Exception").
(e) Series D Voting Exception. Notwithstanding the foregoing, in the
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event of a "liquidation, dissolution or winding up" pursuant to Section 2 above
wherein the holders of Series D Preferred Stock do not receive an amount equal
to or in excess of the amount due to such holders under Section 2(a), then such
liquidation, dissolution or winding up shall require, in addition to any other
vote required by law or under this Certificate, the approval by vote or written
consent of at least a majority of the outstanding shares of Series D Preferred
Stock voting together as one class, separate and apart from the holders of any
other series of Preferred Stock or the holders of Common Stock (hereafter,
referred to as a "Series D Voting Exception").
Section 4. Conversion
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The holders of the Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):
(a) Each share of Preferred Stock shall be convertible, at the option
of the holder thereof, at any time after the date of issuance of such share at
the office of the Corporation or any transfer agent for the Preferred Stock,
into Common Stock as more fully described below. The number of shares of fully
paid and nonassessable Common Stock into which each share of Series A Preferred
Stock may be converted shall be determined by dividing $0.7042254 by the
Conversion Price (as hereinafter defined) in effect at the time of conversion.
The number of shares of fully paid and nonassessable Common Stock into which
each share of Series B Preferred Stock may be converted shall be determined by
dividing $3.63 by the Conversion Price (as hereinafter defined). The number of
shares of fully paid and nonassessable Common Stock into which each share of
Series C Preferred Stock may be converted shall be determined by dividing $5.249
by the Conversion Price (as hereinafter defined) in effect at the time of
conversion. The number of shares of fully paid and nonassessable Common Stock
into which each share of Series D Preferred Stock may be converted shall be
determined by dividing $12.00 ($6.00 in the event of the Series D Dividend) by
the Conversion Price (as hereinafter defined) in effect at the time of
conversion. The Conversion Price shall initially be $0.7042254 for the Series A
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Preferred Stock, $3.63 for the Series B Preferred Stock, $5.249 for the Series C
Preferred Stock and $12.00 for the Series D Preferred Stock, subject to
adjustment as provided in Section 4(e) below.
(b) Each share of a particular series of Preferred Stock shall
automatically be converted into shares of Common Stock utilizing the then
effective Conversion Price for each such share immediately upon (i) the holders
of more than two-thirds of that series of Preferred Stock then outstanding
consenting to the conversion of that series of Preferred Stock to Common Stock,
(ii) such date as two-thirds of the authorized number of that series of
Preferred Stock shall have been converted to Common Stock, or (iii) the closing
of the Corporation's sale of Common Stock pursuant to an effective registration
statement under the Securities Act of 1933, as amended, pursuant to a firm
commitment underwritten public offering in which the Corporation receives or is
to receive aggregate cash proceeds of more than $10,000,000, and the public
offering price of which is not less than $10.00 per share (adjusted to reflect
subsequent stock dividends, stock splits or recapitalizations).
(c) No fractional shares of Common Stock shall be issued upon
conversion of the Preferred Stock, and any shares of Preferred Stock surrendered
for conversion which would otherwise result in a fractional share of Common
Stock shall be redeemed for the then fair market value thereof as determined by
the Corporation's Board of Directors, payable as promptly as possible whenever
funds are legally available therefor. If more than one share of Preferred Stock
is surrendered for conversion at any one time by the same holder, the number of
full shares of Common Stock to be issued upon conversion shall be computed on
the basis of the aggregate number of shares of Preferred Stock so surrendered.
(d) Before any holder of Preferred Stock shall be entitled to convert
the same into shares of Common Stock, it shall surrender the certificate or
certificates therefor at the office of the Corporation or of any transfer agent
for the Preferred Stock, and shall give written notice to the Corporation at
such office that it elects to convert the same and shall state therein the name
or names in which it wishes the certificate or certificates for shares of Common
Stock to be issued. The Corporation shall, as soon as practicable thereafter,
issue and deliver at such office to such holder of Preferred Stock, or to its
nominee or nominees, a certificate or certificates for the number of shares of
Common Stock to which it shall be entitled as aforesaid. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
(e) The Conversion Price for each series of Preferred Stock shall be
subject to adjustment from time to time as follows:
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(1) In case the Corporation shall at any time subdivide the
outstanding shares of Common Stock, or shall issue a stock dividend on its
outstanding Common Stock, without an equivalent subdivision of, or dividend on,
the Preferred Stock, the Conversion Price in effect immediately prior to such
subdivision or the issuance of such dividend shall be proportionately decreased,
and in case the Corporation shall at any time combine the outstanding shares of
Common Stock, without an equivalent combination of the Preferred Stock, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased, effective at the close of business on the date of
such subdivision, dividend or combination, as the case may be.
(2) In the event of the Series D Dividend the Conversion Price
for the Series D Preferred Stock in effect immediately prior to the Series D
Stock Split shall be proportionately decreased (for example, from $12.00 to
$6.00 per share), effective at the close of business on Series D Dividend Date.
(3) Notwithstanding anything to the contrary in this
Certificate of Incorporation immediately prior to the closing of an equity
financing in excess of $10,000,000 (the "Financing") on a date which is not more
than one hundred twenty (120) days after the date of the first issuance of
shares of Series D Preferred Stock, the effective Conversion Price for the
Series D Preferred Stock shall be the per share price of the shares sold in the
Financing multiplied by .8; immediately prior to the closing of a Financing on a
date which is not less than one hundred twenty-one (121) nor more than two
hundred ten (210) days after the date of the first issuance of shares Series D
Preferred Stock, the effective Conversion Price for the Series D Preferred Stock
shall be the per share price of the shares sold in the Financing multiplied by
.65; and immediately prior to the closing of a Financing on a date more than two
hundred ten (210) days after the first issuance of the Series D Preferred Stock,
the effective Conversion Price for the Series D Preferred Stock shall be the per
share price of the shares sold in the Financing multiplied by .5; provided, that
in no event shall the effective Conversion Price as recalculated pursuant to
this section 4(e)(3) be reduced to an amount less than $5.25 (adjusted to
reflect subsequent stock dividends, stock splits or recapitalizations, other
than the Series D Dividend).
(4) If the Corporation shall issue or sell Equity Securities as
defined in Section 4(f)(1) below at a consideration per share (the "Lower
Price") less than the Conversion Price for any series of Preferred Stock in
effect immediately prior to the time of such issue or sale, then forthwith upon
such issue or sale, the Conversion Price of each share of such series of
Preferred Stock shall be adjusted to a price (calculated to the nearest cent)
determined by dividing:
(A) an amount equal to the sum of (x) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by the then existing Conversion Price, (y) the number of shares of
Common Stock issuable upon conversion or exchange of any shares of stock or
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convertible securities of the Corporation outstanding immediately prior to such
issue or sale multiplied by the then existing Conversion Price, and (z) an
amount equal to the aggregate "consideration actually received" by the
Corporation upon such issue or sale; by
(B) the sum of the number of shares of Common Stock
outstanding immediately after such issue or sale and the number of shares of
Common Stock issuable upon conversion or exchange of any shares of stock of the
Corporation outstanding immediately after such issue or sale.
(f) For purposes hereof the following provisions shall be applicable:
(1) The term "Equity Securities" shall mean any shares of
Common Stock, or any obligation, any share of stock or other security of the
Corporation convertible into, exercisable or exchangeable for Common Stock
except for (i) up to 3,151,500 shares of Common Stock issued or issuable on or
after the date of incorporation of the Corporation to officers, directors,
employees or consultants of the Corporation pursuant to stock grants, stock
purchase and stock option plans or other stock incentive programs, agreements or
arrangements approved by the Board of Directors prior to June 30, 1997 such
amount to increase by 200,000 shares on December 31, 1996 and annually on
December 31 thereafter; provided, however, that such increases shall in no event
exceed 600,000 shares in the aggregate, (ii) shares issued pursuant to
transactions described in subsection (e)(1) of this Section 4, (iii) shares of
capital stock issued upon the exercise of warrants to purchase 52,000 shares of
Common Stock and warrants to purchase 131,420 shares of Series C Preferred Stock
issued on or after the date of incorporation, (iv) shares of Series C Preferred
Stock issued upon conversion of a convertible note issued on August 30, 1996 in
the amount of $1,000,000, (v) shares of capital stock issued upon conversion of
convertible notes issued in October of 1996 in aggregate amount of up to
$2,000,000 (vi) shares of Common Stock issued upon conversion of the Preferred
Stock and (vii) shares issued pursuant to the Series D Dividend.
(2) In the case of an issue or sale for cash of shares of
Common Stock or shares convertible into or exchangeable for Common Stock, the
"consideration actually received" by the Corporation therefor shall be deemed to
be the amount of cash received, before deducting therefrom any commissions or
expenses paid by the Corporation.
(3) In case of the issuance (otherwise than upon conversion or
exchange of obligations or shares of stock of the Corporation) of additional
shares of Common Stock for a consideration other than cash or a consideration
partly other than cash, the amount of the consideration other than cash received
by the Corporation for such shares shall be deemed to be the value of such
consideration as determined reasonably and in good faith by the Board of
Directors.
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(4) In case of the issuance by the Corporation in any manner of
any rights to subscribe for or to purchase shares of Common Stock, or any
options for the purchase of shares of Common Stock or stock convertible into
Common Stock, all shares of Common Stock or stock convertible into Common Stock
to which the holders of such rights or options shall be entitled to subscribe
for or purchase pursuant to such rights or options shall be deemed "outstanding"
as of the date of the offering of such rights or the granting of such options,
as the case may be, and the minimum aggregate consideration named in such rights
or options for the shares of Common Stock or stock convertible into Common Stock
covered thereby, plus the consideration, if any, received by the Corporation for
such rights or options, shall be deemed to be the "consideration actually
received" by the Corporation (as of the date of the offering of such rights or
the granting of such options, as the case may be) for the issuance of such
shares.
(5) In case of the issuance or issuances by the Corporation in
any manner of any obligations or of any shares of stock of the Corporation that
shall be convertible into or exchangeable for Common Stock, all shares of Common
Stock issuable upon the conversion or exchange of such obligations or shares
shall be deemed issued as of the date such obligations or shares are issued, and
the amount of the "consideration actually received" by the Corporation for such
additional shares of Common Stock shall be deemed to be the total of (x) the
amount of consideration received by the Corporation upon the issuance of such
obligations or shares, as the case may be, plus (y) the minimum aggregate
consideration, if any, other than such obligations or shares, receivable by the
Corporation upon such conversion or exchange, except in adjustment of dividends.
(6) The amount of the "consideration actually received" by the
Corporation upon the issuance of any rights or options referred to in subsection
(4) above or upon the issuance of any obligations or shares which are
convertible or exchangeable as described in subsection (5) above, and the amount
of the consideration, if any, other than such obligations or shares so
convertible or exchangeable, receivable by the Corporation upon the exercise,
conversion or exchange thereof shall be determined in the same manner provided
in subsections (2) and (3) above with respect to the consideration received by
the Corporation in case of the issuance of additional shares of Common Stock;
provided, however, that if such obligations or shares of stock so convertible or
exchangeable are issued in payment or satisfaction of any dividend upon any
stock of the Corporation other than Common Stock, the amount of the
"consideration actually received" by the Corporation upon the original issuance
of such obligations or shares or stock so convertible or exchangeable shall be
deemed to be the value of such obligations or shares of stock, as of the date of
the adoption of the resolution declaring such dividend, as determined by the
Board of Directors at or as of that date. On the expiration of any rights or
options referred to in subsection (4), or the termination of any right of
conversion or exchange referred to in subsection (5), or any change in the
number of shares of Common Stock deliverable upon exercise of
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such options or rights or upon conversion of or exchange of such convertible or
exchangeable securities, the Conversion Price then in effect shall forthwith be
readjusted to such Conversion Price as would have obtained had the adjustments
made upon the issuance of such option, right or convertible or exchangeable
securities been made upon the basis of the delivery of only the number of shares
of Common Stock actually delivered or to be delivered upon the exercise of such
rights or options or upon the conversion or exchange of such securities.
(7) In the event the Corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by the
Corporation or other persons or options or rights not referred to in this
Section 4(f), then, in each such case, the holders of the Preferred Stock shall
be entitled to the distributions provided for in Section 1 above, and no
adjustment to the Conversion Price provided for in this Section 4 shall be
applicable.
(g) The Corporation will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 4
and in the taking of all such action as may be necessary or appropriate in order
to protect the conversion rights of the holders of the Preferred Stock against
impairment.
(h) Upon the occurrence of each adjustment or readjustment of the
Conversion Price pursuant to this Section 4, the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof, and shall prepare and furnish to each holder of Preferred Stock
affected thereby a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustment or readjustment, (ii) the
Conversion Price at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of such holder's shares of Preferred Stock.
(i) The Corporation shall at all times reserve and keep available, out
of its authorized but unissued Common Stock, solely for the purpose of effecting
the conversion of the Preferred Stock, the full number of shares of Common Stock
deliverable upon the conversion of all Preferred Stock from time to time
outstanding. The Corporation shall from time to time (subject to obtaining
necessary director and stockholder action, which the Corporation shall use its
best efforts to obtain), in accordance with the laws of the State of Delaware,
increase the authorized amount of its Common Stock if at any time the authorized
number of shares of its Common
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Stock remaining unissued shall not be sufficient to permit the conversion of all
of the shares of Preferred Stock at the time outstanding.
Section 5. Status of Converted Stock
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In the event any shares of Preferred Stock shall be converted pursuant
to Section 4 hereof, the shares so converted shall be canceled and shall not be
issuable by the Corporation, and the Certificate of Incorporation of the
Corporation shall be appropriately amended to effect the corresponding reduction
in the Corporation's authorized capital stock.
FIFTH: The following provisions are inserted for the management of the
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business and the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the
Corporation and of its directors and stockholders:
A. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. In addition to the
powers and authority expressly conferred upon them by statute or by
this Certificate of Incorporation or the Bylaws of the Corporation,
the directors are hereby empowered to exercise all such powers and
do all such acts and things as may be exercised or done by the
Corporation.
B. The directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.
C. On and after the closing date of the first sale of the
Corporation's Common Stock pursuant to a firmly underwritten
registered public offering (the "IPO"), any action required or
permitted to be taken by the stockholders of the Corporation must
be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any
consent in writing by such stockholders. Prior to such sale, unless
otherwise provided by law, any action which may otherwise be taken
at any meeting of the stockholders may be taken without a meeting
and without prior notice, if a written consent describing such
actions is signed by the holders of outstanding shares having not
less than the minimum number of votes which would be necessary to
authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
D. Special meetings of stockholders of the Corporation may be called
only (1) by the Board of Directors pursuant to a resolution adopted
by a majority of the total number of authorized directors (whether
or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the
Board for adoption) or (2) by the holders of not less than ten
percent (10%) of all of the shares entitled to cast votes at the
meeting.
12
SIXTH:
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A. The number of directors shall initially be set at six (6) and,
thereafter, shall be fixed from time to time exclusively by the
Board of Directors pursuant to a resolution adopted by a majority
of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the
time any such resolution is presented to the Board for adoption).
Upon the closing of the IPO, the directors shall be divided into
three classes with the term of office of the first class (Class I)
to expire at the first annual meeting of the stockholders following
the IPO; the term of office of the second class (Class II) to
expire at the second annual meeting of stockholders held following
the IPO; the term of office of the third class (Class III) to
expire at the third annual meeting of stockholders; and thereafter
for each such term to expire at each third succeeding annual
meeting of stockholders after such election. Subject to the rights
of the holders of any series of Preferred Stock then outstanding, a
vacancy resulting from the removal of a director by the
stockholders as provided in Article SIXTH, Section C below may be
filled at a special meeting of the stockholders held for that
purpose. All directors shall hold office until the expiration of
the term for which elected, and until their respective successors
are elected, except in the case of the death, resignation, or
removal of any director.
B. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, newly created directorships resulting from
any increase in the authorized number of directors or any vacancies
in the Board of Directors resulting from death, resignation or
other cause (other than removal from office by a vote of the
stockholders) may be filled only by a majority vote of the
directors then in office, though less than a quorum, and directors
so chosen shall hold office for a term expiring at the next annual
meeting of stockholders at which the term of office of the class to
which they have been elected expires, and until their respective
successors are elected, except in the case of the death,
resignation, or removal of any director. No decrease in the number
of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
C. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, any directors, or the entire Board of
Directors, may be removed from office at any time, with or without
cause, but only by the affirmative vote of the holders of at least
a majority of the voting power of all of the then outstanding
shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single
class. Vacancies in the Board of Directors resulting from such
removal may be filled by a majority of the directors then in
office, though less than a quorum, or by the stockholders as
provided in Article SIXTH, Section A above. Directors so chosen
shall hold office for a term expiring
13
at the next annual meeting of stockholders at which the term of
office of the class to which they have been elected expires, and
until their respective successors are elected, except in the case
of the death, resignation, or removal of any director.
SEVENTH: The Board of Directors is expressly empowered to adopt, amend or
-------
repeal Bylaws of the Corporation. Any adoption, amendment or repeal
of Bylaws of the Corporation by the Board of Directors shall
require the approval of a majority of the total number of
authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time any resolution
providing for adoption, amendment or repeal is presented to the
Board). The stockholders shall also have power to adopt, amend or
repeal the Bylaws of the Corporation. Any adoption, amendment or
repeal of Bylaws of the Corporation by the stockholders shall
require, in addition to any vote of the holders of any class or
series of stock of the Corporation required by law or by this
Certificate of Incorporation, the affirmative vote of the holders
of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then outstanding shares of the capital
stock of the Corporation entitled to vote generally in the election
of directors, voting together as a single class.
EIGHTH: A director of the Corporation shall not be personally liable to
------
the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involved intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law, or
(iv) for any transaction from which the director derived an
improper personal benefit.
If the Delaware General Corporation Law is hereafter amended to
authorize the further elimination or limitation of the liability of
a director, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing provisions of this
Article EIGHTH by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
NINTH: The Corporation reserves the right to amend or repeal any provision
-----
contained in this Certificate of Incorporation in the manner
prescribed by the laws of the State of Delaware and all rights
conferred upon stockholders are granted subject to this
reservation; provided, however, that, notwithstanding any other
-------- -------
provision of this Certificate of Incorporation or
14
any provision of law which might otherwise permit a lesser vote or
no vote, but in addition to any vote of the holders of any class or
series of the stock of this Corporation required by law or by this
Certificate of Incorporation, the affirmative vote of the holders
of at least 66-2/3% of the voting power of all of the then
outstanding shares of the capital stock of the Corporation entitled
to vote generally in the election of directors, voting together as
a single class, shall be required to amend or repeal this Article
NINTH, Article FIFTH, Article SIXTH, Article SEVENTH or Article
EIGHTH.
The Certificate of Incorporation of Enact Delaware, as amended herein,
shall continue to be the Certificate of Incorporation of Enact Delaware as the
surviving Corporation without change or amendment until further amended in
accordance with the provisions thereof and applicable laws. The Bylaws of Enact
Delaware, in effect on the Effective Date, shall continue to be the Bylaws of
Enact Delaware as the surviving Corporation without change or amendment until
further amended in accordance with the provisions thereof and applicable laws.
3. Directors and Officers. The directors and officers of Enact California
----------------------
shall become the directors and officers of Enact Delaware upon the Effective
Date and any committee of the Board of Directors of Enact California shall
become the members of such committees for Enact Delaware.
4. Succession. On the Effective Date, Enact Delaware shall succeed to
----------
Enact California in the manner of and as more fully set forth in Section 259 of
the General Corporation Law of the State of Delaware.
5. Further Assurances. From time to time, as and when required by Enact
------------------
Delaware or by its successors and assigns, there shall be executed and delivered
on behalf of Enact California such deeds and other instruments, and there shall
be taken or caused to be taken by it such further and other action, as shall be
appropriate or necessary in order to vest, perfect or confirm, of record or
otherwise, in Enact Delaware the title to and possession of all the property,
interests, assets, rights, privileges, immunities, powers, franchises and
authority of Enact California, and otherwise to carry out the purposes of this
Merger Agreement and the officers and directors of Enact Delaware are fully
authorized in the name and on behalf of Enact California or otherwise to take
any and all such action and to execute and deliver any and all such deeds and
other instruments.
6. Stock of Enact California.
-------------------------
a. Common Stock. Upon the Effective Date, by virtue of the Merger
------------
and without any action on the part of the holder thereof, each share of Enact
California Common Stock outstanding immediately prior thereto shall be changed
and converted into one fully paid and nonassessable share of Enact Delaware
Common Stock.
b. Preferred Stock. Upon the Effective Date, by virtue of the Merger
---------------
and without any action on the part of the holder thereof, each share of each
series of Enact California
15
Preferred Stock outstanding immediately prior thereto shall be changed and
converted into one fully paid and nonassessable share of Enact Delaware
Preferred Stock of an equivalent series.
c. Fractional Shares. No fractional shares which a Enact Delaware
-----------------
stockholder would otherwise be entitled to receive by reason of the exchange of
Enact California stock for Enact Delaware stock shall be issued.
7. Stock Certificates. On and after the Effective Date, all of the
------------------
outstanding certificates which prior to that time represented shares of Enact
California stock shall be deemed for all purposes to evidence ownership of and
to represent the shares of Enact Delaware stock into which the shares of Enact
California stock represented by such certificates have been converted as herein
provided. The registered owner on the books and records of Enact Delaware or
its transfer agent of any such outstanding stock certificate shall, until such
certificate shall have been surrendered for transfer or otherwise accounted for
to Enact Delaware or its transfer agent, have and be entitled to exercise any
voting and other rights with respect to and to receive any dividend and other
distributions upon the shares of Enact Delaware stock evidenced by such
outstanding certificate as above provided.
8. Options and Warrants. Upon the Effective Date, each outstanding
--------------------
option, warrant or other right to purchase shares of Enact California stock,
including those options granted under the 1995 Stock Option Plan and the 1997
Stock Option Plan (the "Option Plans") of Enact California, shall be converted
into and become an option, warrant, or right to purchase the number of shares of
Enact Delaware stock at a price per share equal to the exercise price of the
option, warrant or right to purchase Enact California stock and upon the same
terms and subject to the same conditions as set forth in the Option Plans and
other agreements entered into by Enact California pertaining to such options,
warrants, or rights. A number of shares of Enact Delaware stock shall be
reserved for purposes of such options, warrants, and rights equal to the number
of shares of Enact California stock so reserved as of the Effective Date. As of
the Effective Date, Enact Delaware shall assume all obligations of Enact
California under agreements pertaining to such options, warrants, and rights,
including the Option Plans, and the outstanding options, warrants, or other
rights, or portions thereof, granted pursuant thereto.
9. Other Employee Benefit Plans. As of the Effective Date, Enact Delaware
----------------------------
hereby assumes all obligations of Enact California under any and all employee
benefit plans in effect as of said date or with respect to which employee rights
or accrued benefits are outstanding as of said date.
10. Outstanding Common Stock of Enact Delaware. Forthwith upon the
------------------------------------------
Effective Date, the One Hundred (100) shares of Enact Delaware Common Stock
presently issued and outstanding in the name of Enact California shall be
canceled and retired and resume the status of authorized and unissued shares of
Enact Delaware Common Stock, and no shares of Enact Delaware Common Stock or
other securities of Enact Delaware shall be issued in respect thereof.
11. Covenants of Enact Delaware. Enact Delaware covenants and agrees that
---------------------------
it will, on or before the Effective Date:
16
a. Qualify to do business as a foreign corporation in the State of
California, and in all other states in which Enact California is so qualified
and in which the failure so to qualify would have a material adverse impact on
the business or financial condition of Enact Delaware. In connection therewith,
Enact Delaware shall irrevocably appoint an agent for service of process as
required under the provisions of Section 2105 of the California Corporations
Code and under applicable provisions of state law in other states in which
qualification is required hereunder.
b. File any and all documents with the California Franchise Tax Board
necessary to the assumption by Enact Delaware of all of the franchise tax
liabilities of Enact California.
12. Amendment. At any time before or after approval and adoption by the
---------
stockholders of Enact California, this Merger Agreement may be amended in any
manner as may be determined in the judgment of the respective Boards of
Directors of Enact Delaware and Enact California to be necessary, desirable or
expedient in order to clarify the intention of the parties hereto or to effect
or facilitate the purposes and intent of this Merger Agreement.
13. Abandonment. At any time before the Effective Date, this Merger
-----------
Agreement may be terminated and the Merger may be abandoned by the Board of
Directors of either Enact California or Enact Delaware or both, notwithstanding
approval of this Merger Agreement by the sole stockholder of Enact Delaware and
the shareholders of Enact California.
14. Counterparts. In order to facilitate the filing and recording of this
------------
Merger Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original.
17
IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved
by resolution of the Board of Directors of Enact California and Enact Delaware,
is hereby executed on behalf of each of said two corporations by their
respective officers thereunto duly authorized.
ENACT HEALTH MANAGEMENT SYSTEMS
DELAWARE CORPORATION,
a Delaware corporation
By:______________________________________
Xxxxxxx Xxxxxxx, President
ENACT HEALTH MANAGEMENT SYSTEMS,
a California corporation
By:______________________________________
Xxxxxxx Xxxxxxx, President
18
CERTIFICATE OF SECRETARY
OF
ENACT HEALTH MANAGEMENT SYSTEMS DELAWARE CORPORATION
(a Delaware corporation)
I, Xxxxx Xxxxx, the Secretary of Enact Health Management Systems Delaware
Corporation, a Delaware corporation (the "Corporation"), hereby certify that the
Agreement and Plan of Merger to which this Certificate is attached was duly
signed on behalf of the Corporation by its President and was duly approved and
adopted by a unanimous vote of the outstanding stock entitled to vote thereon by
written consent of the sole stockholder of the Corporation dated January 23,
1998.
Executed effective on the _____ day of ___________, 1998.
_________________________________________________
Xxxxx Xxxxx
19
CERTIFICATE OF APPROVAL OF
AGREEMENT AND PLAN OF MERGER OF
ENACT HEALTH MANAGEMENT SYSTEMS
(a California corporation)
Xxxxxxx Xxxxxxx and Xxxxx Xxxxx certify that:
1. They are the duly elected and acting President and Secretary,
respectively, of Enact Health Management Systems, a California corporation (the
"Corporation").
2. This Certificate is attached to the Agreement and Plan of Merger dated
as of _________, 1998, providing for the merger of the Corporation with and into
a Delaware corporation.
3. The Agreement and Plan of Merger in the form attached hereto (the
"Merger Agreement") was approved by the Board of Directors of the Corporation at
a meeting duly noticed and held on November 17, 1997.
4. The total number of outstanding shares of the Corporation entitled to
vote on the merger was 2,391,900 shares of Common Stock, 2,325,960 shares of
Series A Preferred Stock, 220,385 shares of Series B Preferred Stock, 381,024
shares of Series C Preferred Stock, and 275,373 shares of Series D Preferred
Stock.
5. The principal terms of the Merger Agreement were approved by an
affirmative vote which exceeded the vote required, such vote being a majority of
the total number of outstanding shares of Common Stock, and a majority of the
outstanding shares of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock voting together as a
single class.
Dated: ___________, 1998.
_______________________________________________
Xxxxxxx Xxxxxxx, President
_______________________________________________
Xxxxx Xxxxx, Secretary
20
The undersigned, Xxxxxxx Xxxxxxx and Xxxxx Xxxxx, President and Secretary,
respectively, of Enact Health Management Systems, a California corporation,
declare under penalty of perjury under the laws of the State of California that
the matters set forth in this Certificate are true and correct of their own
knowledge.
Executed at Mountain View, California, on ____________, 1998.
_______________________________________________
Xxxxxxx Xxxxxxx, President
_______________________________________________
Xxxxx Xxxxx, Secretary
21
