SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 28,
1997
LUMISYS INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-26832 77-0133232
(Commission File No.) (IRS Employer Identification No.)
225 Humboldt Court
Sunnyvale, CA 94089
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (408) 733-6565
---------------------------------------
Item 5. Other Events.
This Current Report on Form 8-K (the "Report") contains forward-
looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The forward-looking
statements contained herein involve risks and uncertainties,
including those relating to the possible inability to complete the
merger transaction involving the Company and CompuRAD, Inc., a
Delaware corporation ("CompuRAD"), as scheduled, if at all, and
those associated with the ability of the combined company to
achieve the anticipated benefits of the merger. Actual results
and developments may differ materially from those described or
incorporated by reference in this Report. For more information
about the Company and risks arising when investing in the Company,
investors are directed to the Company's most recent report on Form
10-K as filed with the Securities and Exchange Commission (the
"SEC").
On September 28, 1997, the Company entered into an Agreement and
Plan of Merger and Reorganization (the "Reorganization
Agreement"), among the Company, CompuRAD and SAC Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary
of the Company ("Merger Sub"). The description contained in this
Item 5 of the transactions contemplated by the Reorganization
Agreement is qualified in its entirety by reference to the full
text of the Reorganization Agreement, a copy of which is attached
to this Report as Exhibit 2.
The Reorganization Agreement contemplates that, subject to the
satisfaction of certain conditions set forth therein, including
the approval and adoption of the Reorganization Agreement by the
requisite vote of CompuRAD's stockholders and the approval of the
issuance of Company common stock in the Merger by the Company's
stockholders, Merger Sub would be merged into CompuRAD. As a
result of the merger of Merger Sub into CompuRAD (the "Merger"),
CompuRAD would become a wholly-owned subsidiary of the Company.
Under the terms of the Reorganization Agreement, each outstanding
share of CompuRAD's common stock would be converted into 0.928 of
a share of the Company's common stock. The Merger is intended to
be a tax-free reorganization under the Internal Revenue Code of
1986, as amended, and is intended to be accounted for as a pooling
of interests.
On September 29, 1997, the Company and CompuRAD issued a joint
press release relating to the execution of the Reorganization
Agreement. A copy of the press release is attached hereto as
Exhibit 99.1 and is incorporated herein by reference.
In connection with the execution of the Reorganization Agreement,
certain directors of CompuRAD, who collectively beneficially own
approximately 41% of the outstanding shares of common stock of
CompuRAD, entered into Voting Agreements pursuant to which each
such director agreed to vote his shares in favor of the Merger.
The description contained in this Item 5 of the transactions
contemplated by the Voting Agreement is qualified in its entirety
by reference to the full text of the Voting Agreement, the form of
which is attached to this Report as Exhibit 99.2.
A registration statement relating to the Company common stock to
be issued in connection with the Merger has not yet been filed
with the SEC, nor has a proxy statement relating to a vote of
CompuRAD's stockholders on the Merger or relating to a vote of the
Company's stockholders on the issuance of Company common stock in
the Merger been filed with the SEC. The Company common stock may
not be offered, nor may offers to acquire such stock be accepted,
prior to the time such a registration statement becomes effective.
This Report shall not constitute an offer to sell or the
solicitation of an offer to buy any Company common stock or any
other security, and shall not constitute the solicitation of any
vote with respect to the Merger.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(c) Exhibits
Exhibit No. Description
2 Agreement and Plan of Merger and Reorganization dated
as of September 28, 1997, among Lumisys Incorporated,
SAC Acquisition Corporation and CompuRAD, Inc.
99.1 Joint Press Release of Lumisys Incorporated and
CompuRAD, Inc., dated September 28, 1997
99.2 Form of Voting Agreement dated as of September 28,
1997, between the Company and certain directors of
CompuRAD, Inc., and Irrevocable Proxy executed by
such directors
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
LUMISYS INCORPORATED
Date: October 3, 1997 By:/s/ Stephen J. Weiss
--------------------
Stephen J. Weiss,
CEO and President
EXHIBIT 2
EXHIBIT 99.1
EXHIBIT 99.2
(..continued)
21389141
100197
21389141
100197
- - -----------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
Lumisys Incorporated
a Delaware corporation;
SAC Acquisition Corporation,
a Delaware corporation; and
CompuRad, Inc.,
a Delaware corporation
------------------------------
Dated as of September 28, 1997
------------------------------
- - -----------------------------------------------------------------
TABLE OF CONTENTS
Page
Section 1. Description of Transaction 2
1.1 Merger of Merger Sub into the Company 2
1.2 Effect of the Merger 2
1.3 Closing; Effective Time 2
1.4 Certificate of Incorporation and Bylaws;
Directors and Officers 2
1.5 Conversion of Shares 3
1.6 Closing of the Company's Transfer Books 4
1.7 Exchange of Certificates 4
1.8 Dissenting Shares 6
1.9 Tax Consequences 6
1.10 Accounting Consequences 7
1.11 Further Action 7
Section 2. Representations and Warranties of the Company 7
2.1 Due Organization; Subsidiaries; Etc. 7
2.2 Certificate of Incorporation and Bylaws. 7
2.3 Capitalization, Etc. 8
2.4 SEC Filings; Financial Statements. 9
2.5 Absence of Changes. 10
2.6 Title to Assets 12
2.7 Receivables. 12
2.8 Real Property; Equipment; Leasehold. 12
2.9 Proprietary Assets. 12
2.10 Contracts. 14
2.11 Liabilities. 16
2.12 Compliance with Legal Requirements. 16
2.13 Certain Business Practices. 16
2.14 Governmental Authorizations. 17
2.15 Tax Matters. 17
2.16 Employee and Labor Matters; Benefit Plans. 18
2.17 Environmental Matters. 20
2.18 Insurance. 20
2.19 Transactions with Affiliates. 21
2.20 Legal Proceedings; Orders. 21
2.21 Authority; Binding Nature of Agreement. 21
2.22 No Existing Discussions 22
2.23 Accounting Matters 22
i
2.24 Vote Required 22
2.25 Non-Contravention; Consents. 22
2.26 Fairness Opinion 23
2.27 Financial Advisor 23
2.28 Section 203 of the DGCL Not Applicable 23
Section 3. Representations and Warranties of Parent and
Merger Sub 24
3.1 Organization, Standing and Power. 24
3.2 Certificate of Incorporation and Bylaws 24
3.3 Capitalization, Etc. 24
3.4 SEC Filings; Financial Statements 25
3.5 Absence of Certain Changes or Events. 26
3.6 Title to Assets 27
3.7 Receivables. 27
3.8 Real Property; Equipment; Leasehold. 27
3.9 Proprietary Assets 28
3.10 Contracts. 29
3.11 Liabilities. 30
3.12 Compliance with Legal Requirements. 31
3.13 Certain Business Practices. 31
3.14 Governmental Authorizations. 31
3.15 Tax Matters. 31
3.16 Employee and Labor Matters; Benefit Plans. 32
3.17 Environmental Matters. 32
3.18 Insurance. 33
3.19 Transactions with Affiliates. 33
3.20 Legal Proceedings; Orders. 33
3.21 Authority; Binding Nature of Agreement. 33
3.22 Vote Required. 34
3.23 Non-Contravention; Consents. 34
3.24 No Existing Discussions 34
3.25 Accounting Matters 34
3.26 Financial Advisor 34
3.27 Fairness Opinion 34
3.28 Valid Issuance. 35
Section 4. Certain Covenants of the Parties 35
4.1 Access and Investigation. 35
4.2 Operation of the Company's Business. 35
4.3 Operation of Parent's Business. 38
ii
4.4 No Solicitation. 39
Section 5. Additional Covenants of the Parties 40
5.1 Registration Statement; Joint Proxy Statement. 40
5.2 Company Stockholders' Meeting. 41
5.3 Parent Stockholders' Meeting. 42
5.4 Regulatory Approvals. 43
5.5 Stock Options, Warrants, and Employee Stock
Purchase Plans. 43
5.6 Indemnification of Officers and Directors. 45
5.7 Pooling of Interests. 46
5.8 Additional Agreements. 46
5.9 Disclosure. 47
5.10 Affiliate Agreements 47
5.11 Tax Matters. 47
5.12 Comfort Letters. 47
5.13 Resignation of Officers and Directors. 48
5.14 Appointment of Additional Directors. 48
5.15 Consents 48
5.16 Financial Information and Reporting 48
Section 6. Conditions Precedent to Obligations of Parent and
Merger Sub 48
6.1 Accuracy of Representations. 49
6.2 Performance of Covenants 49
6.3 Effectiveness of Registration Statement 49
6.4 Stockholder Approval 49
6.5 Agreements and Document 49
6.6 No Material Adverse Effect 50
6.7 Listing 50
6.8 No Restraints 50
6.9 No Governmental Litigation 50
Section 7. Conditions Precedent to Obligation of the Company 51
7.1 Accuracy of Representations 51
7.2 Performance of Covenants 51
7.3 Effectiveness of Registration Statement 51
7.4 Stockholder Approval 51
7.5 Documents 51
7.6 No Material Adverse Effect 52
7.7 Listing 52
7.8 No Restraints 52
iii
Section 8. Termination 52
8.1 Termination 52
8.2 Effect of Termination 54
8.3 Expenses; Termination Fees 54
Section 9. Miscellaneous Provisions 56
9.1 Amendment 56
9.2 Waiver. 57
9.3 No Survival of Representations and Warranties 57
9.4 Entire Agreement; Counterparts; Applicable Law;
Jurisdiction 57
9.5 Attorneys' Fees 57
9.6 Assignability 58
9.7 Notices. 58
9.8 Construction. 59
iv
EXHIBITS
62. - Certain definitions
63. - Form of Certificate of Incorporation of Surviving
Corporation
64. - Form of Affiliate Agreement
Exhibit D - Continuity of Interest Certificate
Exhibit E - Form of Employment Offer Letter
Exhibit F - Individuals to execute Employment Offer Letters
Exhibit G - Voting Agreement
Exhibit H - Individuals to execute the Voting Agreement
v.
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization
("Agreement") is made and entered into as of September 28, 1997,
by and among: Lumisys Incorporated a Delaware corporation
("Parent"); SAC Acquisition Corporation, a Delaware corporation
and a wholly owned subsidiary of Parent ("Merger Sub"); and
CompuRad, Inc., a Delaware corporation (the "Company"). Certain
capitalized terms used in this Agreement are defined in Exhibit
A.
Recitals
A. Parent, Merger Sub and the Company intend to effect a
merger of Merger Sub into the Company in accordance with this
Agreement and the Delaware General Corporation Law (the
"Merger"). Upon consummation of the Merger, Merger Sub will
cease to exist, and the Company will become a wholly owned
subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free
reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). For
financial reporting purposes, it is intended that the Merger be
accounted for as a "pooling of interests."
C. The respective Boards of Directors of Parent, Merger
Sub and the Company have approved this Agreement and approved the
Merger.
1
Agreement
The parties to this Agreement, intending to be legally
bound, agree as follows:
1. Description of Transaction
Merger of Merger Sub into the Company. Upon the terms and
subject to the conditions set forth in this Agreement, at the
Effective Time (as defined in Section 1.3), Merger Sub shall be
merged with and into the Company, and the separate existence of
Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving
Corporation").
1.1 Effect of the Merger. The Merger shall have the
effects set forth in this Agreement and in the applicable
provisions of the Delaware General Corporation Law (the "DGCL").
1.2 Closing; Effective Time. The consummation of the
transactions contemplated by this Agreement (the "Closing") shall
take place at the offices of Cooley Godward llp, Five Palo Alto
Square, 3000 El Camino Real, Palo Alto, California, at 10:00 a.m.
on a date to be designated by Parent (the "Closing Date"), which
(subject to the satisfaction or waiver of the conditions set
forth in Sections 6 and 7) shall be no later than the tenth
business day after the satisfaction of the latest to occur of the
conditions set forth in Sections 6.4 and 7.4. Contemporaneously
with or as promptly as practicable after the Closing, a properly
executed certificate of merger conforming to the requirements of
the DGCL (the "Certificate of Merger") shall be filed with the
Secretary of State of the State of Delaware. The Merger shall
take effect at the time the Certificate of Merger is filed with
the Secretary of State of the State of Delaware (the "Effective
Time").
1.3 Certificate of Incorporation and Bylaws; Directors and
Officers. Unless otherwise determined by Parent prior to the
Effective Time:
(a) the Certificate of Incorporation of the Surviving
Corporation shall be amended and restated as of the Effective
Time to conform to Exhibit B;
(b) the Bylaws of the Surviving Corporation shall be
amended and restated as of the Effective Time to conform to the
Bylaws of Merger Sub as in effect immediately prior to the
Effective Time; and
(c) the directors and officers of the Surviving
Corporation immediately after the Effective Time shall be the
respective individuals who are directors and officers of Merger
Sub immediately prior to the Effective Time.
2
1.5 Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger
and without any further action on the part of Parent, Merger Sub,
the Company or any stockholder of the Company:
(i) any shares of Company Common Stock then held
by the Company or any Subsidiary of the Company (or held in the
Company's treasury) shall be canceled and retired and shall cease
to exist, and no consideration shall be delivered in exchange
therefor;
(ii) any shares of Company Common Stock then
held by Parent, Merger Sub or any other Subsidiary of Parent
shall be canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor;
(iii) except as provided in clauses "(i)" and
"(ii)" above and subject to Sections 1.5(b), 1.5(d), 1.5(e) and
1.8, each share of Company Common Stock then outstanding shall be
converted into the right to receive 0.9280 of a share of Parent
Common Stock, which shares shall have been registered under the
Securities Act pursuant to a registration statement on Form S-4
as described in Section 5.1 hereof; and
(iv) each share of the common stock, $0.001 par
value per share, of Merger Sub then outstanding shall be
converted into one share of common stock of the Surviving
Corporation.
(b) The fraction of a share of Parent Common Stock
specified in Section 1.5(a)(iii) (as such fraction may be
adjusted in accordance with this Section 1.5(b)) is referred to
as the "Exchange Ratio." If, between the date of this Agreement
and the Effective Time, the outstanding shares of Company Common
Stock or Parent Common Stock are changed into a different number
or class of shares by reason of any stock split, stock dividend,
reverse stock split, reclassification, recapitalization or other
similar transaction, then the Exchange Ratio shall be
appropriately adjusted.
(c) In accordance with rules and regulations relating
to pooling of interests accounting, if any shares of Company
Common Stock outstanding immediately prior to the Effective Time
are unvested or are subject to a repurchase option, risk of
forfeiture or other condition under any applicable restricted
stock purchase agreement or other agreement with the Company or
under which the Company has any rights, then the shares of Parent
Common Stock issued in exchange for such shares of Company Common
Stock will also be unvested and subject to the same repurchase
option, risk of forfeiture or other condition, and the
certificates representing such shares of Parent Common Stock may
accordingly be marked with appropriate legends. The Company
shall take all action that may be necessary to ensure that, from
and after the Effective Time, Parent is entitled to exercise any
such repurchase option or other right set forth in any such
restricted stock purchase agreement or other agreement.
3
(d) No fractional shares of Parent Common Stock shall
be issued in connection with the Merger, and no certificates or
scrip for any such fractional shares shall be issued. Any holder
of Company Common Stock who would otherwise be entitled to
receive a fraction of a share of Parent Common Stock (after
aggregating all fractional shares of Parent Common Stock issuable
to such holder) shall, in lieu of such fraction of a share and,
upon surrender of such holder's Company Stock Certificate(s) (as
defined in Section 1.6), be paid in cash the dollar amount
(rounded to the nearest whole cent), without interest, determined
by multiplying such fraction by the closing price of a share of
Parent Common Stock on the Nasdaq National Market System on the
date the Merger becomes effective.
(e) If there are any Excess Company Merger Expenses
(as defined in Section 8.3(a)), the Exchange Ratio shall be
adjusted as follows:
New Exchange Ratio = Exchange Ratio x (Number of Company Common
Stock to be exchanged in
the Merger + Company
options (as defined in
Section 2.3) and Company
Warrants (as defined in
Section 2.3) x 7.50 -
Excess Company Merger
Expenses
7.50 x Number of Company
Common Stock to be
exchanged in the Merger +
Company Options and
Company Warrants)
1.6 Closing of the Company's Transfer Books. At the
Effective Time: (a) all shares of Company Common Stock
outstanding immediately prior to the Effective Time shall
automatically be canceled and retired and shall cease to exist,
and all holders of certificates representing shares of Company
Common Stock that were outstanding immediately prior to the
Effective Time shall cease to have any rights as stockholders of
the Company; and (b) the stock transfer books of the Company
shall be closed with respect to all shares of Company Common
Stock outstanding immediately prior to the Effective Time. No
further transfer of any such shares of Company Common Stock shall
be made on such stock transfer books after the Effective Time.
If, after the Effective Time, a valid certificate previously
representing any of such shares of Company Common Stock (a
"Company Stock Certificate") is presented to the Exchange Agent
(as defined in Section 1.7) or to the Surviving Corporation or
Parent, such Company Stock Certificate shall be canceled and
shall be exchanged as provided in Section 1.7.
4
1.7 Exchange of Certificates.
(a) On or prior to the Closing Date, Parent shall
select a reputable bank or trust company to act as exchange agent
in the Merger (the "Exchange Agent"). Promptly after the
Effective Time, Parent shall deposit with the Exchange Agent (i)
certificates representing the shares of Parent Common Stock
issuable pursuant to this Section 1, and (ii) cash sufficient to
make payments in lieu of fractional shares in accordance with
Section 1.5(d). The shares of Parent Common Stock and cash
amounts so deposited with the Exchange Agent, together with any
dividends or distributions received by the Exchange Agent with
respect to such shares, are referred to collectively as the
"Exchange Fund."
(b) As soon as reasonably practicable after the
Effective Time, (but in any event within 10 business days
thereafter) Parent shall cause the Exchange Agent to mail to the
holders of Company Stock Certificates (i) a letter of transmittal
in customary form and containing such provisions as Parent may
reasonably specify (including a provision confirming that
delivery of Company Stock Certificates shall be effected, and
risk of loss and title to Company Stock Certificates shall pass,
only upon delivery of such Company Stock Certificates to the
Exchange Agent), and (ii) instructions for use in effecting the
surrender of Company Stock Certificates in exchange for
certificates representing Parent Common Stock. Upon surrender of
a Company Stock Certificate to the Exchange Agent for exchange,
together with a duly executed letter of transmittal and such
other documents as may be reasonably required by the Exchange
Agent or Parent, (A) the holder of such Company Stock Certificate
shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Parent Common Stock
that such holder has the right to receive pursuant to the
provisions of Section 1.5 (and cash in lieu of any fractional
share of Parent Common Stock and any dividends or other
distributions to which such holder is entitled pursuant to
Section 1.7(c)), and (B) the Company Stock Certificate so
surrendered shall be canceled. Until surrendered as contemplated
by this Section 1.7, each Company Stock Certificate shall be
deemed, from and after the Effective Time, to represent only the
right to receive shares of Parent Common Stock (and cash in lieu
of any fractional share of Parent Common Stock and any dividends
or other distributions to which such holder is entitled pursuant
to Section 1.7(c)) as contemplated by Section 1. If any Company
Stock Certificate shall have been lost, stolen or destroyed,
Parent may, in its discretion and as a condition precedent to the
issuance of any certificate representing Parent Common Stock,
require the owner of such lost, stolen or destroyed Company Stock
Certificate to provide an appropriate affidavit and to deliver a
bond (in such sum as Parent may reasonably direct) as indemnity
against any claim that may be made against the Exchange Agent,
Parent or the Surviving Corporation with respect to such Company
Stock Certificate.
(c) No dividends or other distributions declared or
made with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any
unsurrendered Company Stock Certificate with respect to the
shares of Parent Common Stock represented thereby, and no cash
payment in lieu of any fractional shares shall be paid to such
holder, until such holder surrenders such Company Stock
5
Certificate in accordance with this Section 1.7 (at which time
such holder shall be entitled, subject to the effect of
applicable escheat or similar laws, to receive all such dividends
and distributions, without interest).
(d) Any portion of the Exchange Fund that remains
undistributed to holders of Company Stock Certificates as of the
date 180 days after the date on which the Merger becomes
effective shall be delivered to Parent upon demand, and any
holders of Company Stock Certificates who have not theretofore
surrendered their Company Stock Certificates in accordance with
this Section 1.7 shall thereafter look only to Parent for
satisfaction of any claims for Parent Common Stock, cash in lieu
of fractional shares of Parent Common Stock and any dividends or
distributions with respect to Parent Common Stock.
(e) Each of the Exchange Agent, Parent and the
Surviving Corporation shall be entitled to deduct and withhold
from any consideration payable or otherwise deliverable pursuant
to this Agreement to any holder or former holder of Company
Common Stock such amounts as may be required to be deducted or
withheld therefrom under the Code or any provision of state,
local or foreign tax law or under any other applicable Legal
Requirement. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under
this Agreement as having been paid to the Person to whom such
amounts would otherwise have been paid.
(f) Neither Parent nor the Surviving Corporation
shall be liable to any holder or former holder of Company Common
Stock or to any other Person with respect to any shares of Parent
Common Stock (or dividends or distributions with respect
thereto), or for any cash amounts, delivered to any public
official pursuant to any applicable abandoned property law,
escheat law or similar Legal Requirement.
1.8 Dissenting Shares.
(a) Notwithstanding anything to the contrary
contained in this Agreement, any shares of Company Common Stock
outstanding immediately prior to the Effective Time that were not
voted in favor of the Merger and are held by stockholders who
have complied with the applicable provisions of Title 8, Section
262 of the DGCL ("Dissenting Shares") shall not be converted into
or represent the right to receive Parent Common Stock in
accordance with Section 1.5(a)(iii) (or cash in lieu of
fractional shares in accordance with Section 1.5(d)), and each
holder of Dissenting Shares shall be entitled only to such rights
as may be granted to such holder under Title 8, Section 262 of
the DGCL. From and after the Effective Time, a holder of
Dissenting Shares shall not have and shall not be entitled to
exercise any of the voting rights or other rights of a
stockholder of the Surviving Corporation. If any holder of
Dissenting Shares shall fail to assert or perfect, or shall
waive, rescind, withdraw or otherwise lose, such holder's right
to dissent and obtain payment under Title 8, Section 262 of the
DGCL, then such shares shall automatically be converted into and
shall represent only the right to receive (upon the surrender of
Company Stock Certificate(s) previously representing such shares)
Parent Common Stock in accordance with Section 1.5(a)(iii) (and
cash in lieu of any fractional share in accordance with Section
1.5(d) and any dividends or other distributions to which such
holder is entitled pursuant to Section 1.7(c)).
6
(b) The Company: (i) shall promptly notify Parent in
writing of any notice received by the Company of a stockholder's
intent to demand payment for such stockholder's shares of Company
Common Stock pursuant to Title 8, Section 262 of the DGCL, and
shall promptly notify Parent in writing of any other notice,
demand or instrument delivered to the Company pursuant to the
DGCL; and (ii) shall give Parent's Representatives the
opportunity to participate in all negotiations and proceedings
with respect to any such notice, demand or instrument. The
Company shall not make any payment or settlement offer with
respect to any such notice or demand unless Parent shall have
consented in writing to such payment or settlement offer.
1.9 Tax Consequences. For federal income tax purposes,
the Merger is intended to constitute a reorganization within the
meaning of Section 368 of the Code. The parties to this
Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Treasury Regulations.
1.10 Accounting Consequences. For financial reporting
purposes, the Merger is intended to be accounted for as a
"pooling of interests."
1.11 Further Action. If, at any time after the Effective
Time, any further action is determined by Parent to be necessary
or desirable to carry out the purposes of this Agreement or to
vest the Surviving Corporation with full right, title and
possession of and to all rights and property of Merger Sub and
the Company, the officers and directors of the Surviving
Corporation and Parent shall be fully authorized (in the name of
Merger Sub, in the name of the Company and otherwise) to take
such action.
2. Representations and Warranties of the Company
The Company represents and warrants to Parent and Merger
Sub that, except as set forth in the Company SEC Documents (as
defined in Section 2.4(a)) or in the Company Disclosure Schedule:
2.1 Due Organization; Subsidiaries; Etc.
(a) The Company has no Subsidiaries; and the Company
does not own any capital stock of, or any equity interest of any
nature in, any other Entity, other than the Entities identified
in Part 2.1(a)(ii) of the Company Disclosure Schedule. The
Company has not agreed nor is obligated to make, nor is bound by
any Contract under which it may become obligated to make, any
future investment in or capital contribution to any other Entity.
The Company has not, at any time, been a general partner of any
general partnership, limited partnership or other Entity.
(b) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all necessary power and
authority: (i) to conduct its business in the manner in which
its business is currently being conducted; (ii) to own, lease and
use its assets in the manner in which its assets are currently
owned, leased and used; and (iii) to perform its obligations
under all Contracts by which it is bound.
7
(c) The Company is qualified to do business as a
foreign corporation, and is in good standing, under the laws of
all jurisdictions where the nature of its business requires such
qualification and where the failure to be so qualified would have
a Material Adverse Effect on the Company.
(d) The Company has not conducted any business under
or otherwise used, for any purpose or in any jurisdiction, any
fictitious name, assumed name, trade name, or other name, other
than the names set forth in Part 2.1(d) of the Company's
Disclosure Schedule.
2.2 Certificate of Incorporation and Bylaws. The Company
has delivered to Parent accurate and complete copies of its
certificate of incorporation and bylaws, in each case as amended
as of the date of this Agreement.
2.3 Capitalization, Etc.
(a) The authorized capital stock of the Company
consists of: (i) 20,000,000 shares of Company Common Stock, of
which 3,962,750 shares have been issued and are outstanding and
of which no shares are held by the Company in its treasury as of
the date of this Agreement; and (ii) 5,000,000 shares of
Preferred Stock, $0.01 par value per share, of which no shares
are outstanding or are held by the Company in its treasury as of
the date of this Agreement. All of the outstanding shares of
Company Common Stock have been duly authorized and validly
issued, and are fully paid and nonassessable. Except as set
forth in Part 2.3(a)(i) of the Company Disclosure Schedule: (i)
none of the outstanding shares of Company Common Stock is
entitled or subject to any preemptive right, right of
participation, right of maintenance or any similar right; (ii)
none of the outstanding shares of Company Common Stock is subject
to any right of first refusal in favor of the Company; and (iii)
there is no Company Contract relating to the voting or
registration of, or restricting any Person from purchasing,
selling, pledging or otherwise disposing of (or granting any
option or similar right with respect to), any shares of Company
Common Stock. The Company is not under any obligation, nor is it
bound by any Contract pursuant to which it may become obligated,
to repurchase, redeem or otherwise acquire any outstanding shares
of Company Common Stock.
(b) At the close of business on September 25, 1997:
(i) 151,410 shares of Company Common Stock were subject to
issuance pursuant to outstanding options to purchase shares of
Company Common Stock under the Company's 1994 Stock Option Plan;
(ii) 179,790 shares of Company Common Stock were subject to
issuance pursuant to outstanding options to purchase shares of
Company Common Stock under the Company's 1996 Stock Option Plan;
and (iii) 100,000 shares of Company Common Stock were subject to
issuance pursuant to rights to purchase shares of Company Common
Stock under the 1996 Employee Stock Purchase Plan. (Stock
options granted by the Company pursuant to the 1994 Stock Option
Plan and the 1996 Stock Option Plan are referred to in this
Agreement as "Company Options"; the 1994 Stock Option Plan and
the 1996 Stock Option Plan are collectively referred to as the
"Company Stock Plans.") As of close of business on September 25,
1997, 100,000 shares of Company Common Stock were subject to
issuance pursuant to outstanding warrants to purchase Company
8
Common Stock (the "Company Warrants"). Part 2.3(b)(i) of the
Company Disclosure Schedule sets forth the following information
with respect to each Company Option outstanding as of the date of
this Agreement: (i) the particular plan pursuant to which such
Company Option was granted; (ii) the name of the optionee; (iii)
the number of shares of Company Common Stock subject to such
Company Option; (iv) the exercise price of such Company Option;
(v) the date on which such Company Option was granted; (vi) the
applicable vesting schedules, and the extent to which such
Company Option is vested and exercisable as of the date of this
Agreement; and (vii) the date on which such Company Option
expires. The Company has delivered to Parent accurate and
complete copies of all stock option plans pursuant to which the
Company has ever granted stock options, and the forms of all
stock option agreements evidencing such options. Part 2.3(b)(ii)
of the Company Disclosure Schedule sets forth the following
information with respect to each Company Warrant: (i) the name
of the holder of such Company Warrant; (ii) the number of shares
of Company Common Stock subject to such Company Warrant; (iii)
the exercise price of such Company Warrant; (iv) the date on
which such Company Warrant was issued; (v) vesting and (vi) the
date on which such Company Warrant expires. The Company has
delivered to Parent an accurate and complete copy of each Company
Warrant.
(c) Other than the Company Options and the Company
Warrants, there is no: (i) outstanding subscription, option,
call, warrant or right (whether or not currently exercisable) to
acquire any shares of the capital stock or other securities of
the Company; (ii) outstanding security, instrument or obligation
that is or may become convertible into or exchangeable for any
shares of the capital stock or other securities of the Company;
(iii) stockholder rights plan (or similar plan commonly referred
to as a "poison pill") or Contract under which the Company is or
may become obligated to sell or otherwise issue any shares of its
capital stock or any other securities; or (iv) condition or
circumstance that may give rise to or provide a basis for the
assertion of a claim by any Person to the effect that such Person
is entitled to acquire or receive any shares of capital stock or
other securities of the Company.
(d) All outstanding shares of Company Common Stock,
all outstanding Company Options, all outstanding warrants to
purchase Company Common Stock and all outstanding shares of
capital stock of the Company have been issued and granted in
compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set
forth in applicable Contracts.
2.4 SEC Filings; Financial Statements.
(a) The Company has delivered to Parent accurate and
complete copies of all registration statements, proxy statements
and other statements, reports, schedules, forms and other
documents filed by the Company with the SEC since December 31,
1996 (the "Company SEC Documents"), including the Company's
registration statement on Form SB-2 filed with the SEC on August
28, 1996. All statements, reports, schedules, forms and other
documents required to have been filed by the Company with the SEC
have been so filed. As of the time it was filed with the SEC
(or, if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing): (i) each of
the Company SEC Documents complied in all material respects with
the applicable requirements of the Securities Act or the Exchange
9
Act (as the case may be); and (ii) none of the Company SEC
Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(b) The financial statements (including any related
notes) contained in the Company SEC Documents ("Company Financial
Statements"): (i) complied as to form in all material respects
with the published rules and regulations of the SEC applicable
thereto; (ii) were prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout
the periods covered (except as may be indicated in the notes to
such financial statements or, in the case of unaudited
statements, as permitted by Form 10-QSB of the SEC, and except
that the unaudited financial statements may not contain footnotes
and are subject to normal and recurring year-end adjustments
which will not, individually or in the aggregate, be material in
amount), and (iii) fairly present the financial position of the
Company as of the respective dates thereof and the results of
operations and cash flows of the Company for the periods covered
thereby.
(c) The Company has delivered to Parent an unaudited
balance sheet of the Company as of June 30, 1997 (the "Company
Unaudited Interim Balance Sheet"), and the related unaudited
statement of operations, statement of stockholders' equity and
statement of cash flows of the Company for the quarter then
ended. The financial statements referred to in this Section
2.4(c): (i) were prepared in accordance with generally accepted
accounting principles applied on a basis consistent with the
basis on which the financial statements referred to in Section
2.4(b) were prepared (except that such financial statements do
not contain footnotes and are subject to normal and recurring
year-end adjustments which will not, individually or in the
aggregate, be material in amount), and (ii) fairly present the
financial position of the Company as of June 30, 1997 thereof and
the results of operations and cash flows of the Company for the
six month period ended June 30, 1997.
2.5 Absence of Changes. Except as disclosed in the
Company SEC Documents, since June 30, 1997:
(a) there has not been any Material Adverse Effect on
the Company;
(b) the Company has not (i) declared, accrued, set
aside or paid any dividend or made any other distribution in
respect of any shares of capital stock, or (ii) repurchased,
redeemed or otherwise reacquired any shares of capital stock or
other securities;
(c) the Company has not sold, issued or granted, or
authorized the issuance of (i) any capital stock or other
security (except for Company Common Stock issued upon the
exercise of outstanding Company Options and outstanding Company
Warrants), (ii) any option, warrant or right to acquire any
capital stock or any other security (except for Company Options
described in Part 2.3(b)(i) of the Company Disclosure Schedule),
or (iii) any instrument convertible into or exchangeable for any
capital stock or other security;
10
(d) the Company has not amended or waived any of its
rights under, or permitted the acceleration of vesting under, (i)
any provision of any of the Company's Stock Plans, (ii) any
provision of any agreement evidencing any outstanding Company
Option, (iii) any restricted stock purchase agreement, or (iv)
any provision of any agreement evidencing any outstanding Company
Warrant;
(e) there has been no amendment to the certificate of
incorporation, bylaws or other charter or organizational
documents of the Company, and the Company has not effected or
been a party to any merger, consolidation, share exchange,
business combination, recapitalization, reclassification of
shares, stock split, reverse stock split or similar transaction;
(f) the Company has not formed any Subsidiary or
acquired any equity interest or other interest in any other
Entity;
(g) the Company has not made any capital expenditure
which, when added to all other capital expenditures made on
behalf of the Company since June 30, 1997, exceeds $100,000 in
the aggregate;
(h) except in the ordinary course of business and
consistent with past practices, the Company has not (i) entered
into or permitted any of the assets owned or used by it to become
bound by any Material Contract (as defined in Section 2.10), or
(ii) amended or terminated, or waived any material right or
remedy under, any Material Contract;
(i) the Company has not (i) acquired, leased or
licensed any material right or other material asset from any
other Person, (ii) sold or otherwise disposed of, or leased or
licensed, any material right or other material asset to any other
Person, or (iii) waived or relinquished any right, except for
rights or other assets acquired, leased, licensed or disposed of
in the ordinary course of business and consistent with past
practices;
(j) the Company has not written off as uncollectible,
or established any extraordinary reserve with respect to, any
account receivable or other indebtedness;
(k) the Company has not made any pledge of any of its
assets or otherwise permitted any of its assets to become subject
to any Encumbrance, except for pledges of immaterial assets made
in the ordinary course of business and consistent with past
practices;
(l) the Company has not (i) lent money to any Person,
or (ii) incurred or guaranteed any indebtedness for borrowed
money except for advances to customers and employees (other than
customers and employees who are also affiliates of the Company as
identified in Part 2.19 of the Company Disclosure Schedule) in
the ordinary course of business and consistent with past
practices;
(m) the Company has not (i) established or adopted
any Plan, Welfare Plan or Pension Plan (as defined in Section
2.16), (ii) caused or permitted any Plan, Welfare Plan or Pension
11
Plan to be amended in any material respect, (iii) paid any bonus
or made any profit-sharing or similar payment to, or materially
increased the amount of the wages, salary, commissions, fringe
benefits or other compensation or remuneration payable to, any of
its directors, officers or employees, or (iv) hired any new
employees;
(n) the Company has not changed any of its methods of
accounting or accounting practices (i) having a Material Adverse
Effect on the Company or (ii) that may have an effect on rules
and regulations related to pooling of interests accounting,
except insofar as such change is required by a change in
generally accepted accounting principles;
(o) the Company has not made any Tax election that
could have a Material Adverse Effect on the Company;
(p) the Company has not entered into any material
transaction or taken any other material action outside the
ordinary course of business or inconsistent with past practices;
and
(q) the Company has not agreed or committed to take
any of the actions referred to in clauses "(c)" through "(p)"
above.
2.6 Title to Assets. The Company owns, and has good,
valid and marketable title to, all assets purported to be owned
by it, including: (a) all assets reflected on the Company
Unaudited Interim Balance Sheet; and (b) all other assets
reflected in the books and records of the Company as being owned
by the Company. All of said assets are owned by the Company free
and clear of any Encumbrances, except for (i) any lien for
current taxes not yet due and payable, (ii) liens that have
arisen in the ordinary course of business and that do not (in any
case or in the aggregate) materially detract from the value of
the assets subject thereto or materially impair the operations of
the Company, and (iii) liens described in Part 2.6 of the Company
Disclosure Schedule.
2.7 Receivables.
(a) Except as set forth on the Part 2.7(a) of the
Company's Disclosure Schedule, all existing accounts receivable
of the Company (including those accounts receivable reflected on
the Company Unaudited Interim Balance Sheet that have not yet
been collected and those accounts receivable that have arisen
since June 30, 1997 and have not yet been collected) represent
valid obligations of customers of the Company arising from bona
fide transactions entered into in the ordinary course of
business. All existing accounts receivable of the Company
(including those accounts receivable reflected on the Company's
Unaudited Interim Balance Sheet that have not yet been collected
and those accounts receivable as of September 30, 1997) are
current and, to the Company's knowledge will be collected in full
when due, without any counterclaim or set off (net of an
allowance for doubtful accounts which shall not exceed $150,000
in the aggregate).
(b) Part 2.7(b) of the Company Disclosure Schedule
contains an accurate and complete list as of the date of this
Agreement of all loans and advances made by Company to any
12
employee, director, consultant or independent contractor other
than routine travel advances made to employees in the ordinary
course of business.
2.8 Real Property; Equipment; Leasehold. The Company does
not own any real property or any interest in real property,
except for the leasehold created under the real property lease
previously made available to Parent by the Company and listed on
Part 2.8(a) of the Company Disclosure Schedule.
2.9 Proprietary Assets.
(a) Part 2.9(a)(i) of the Company Disclosure Schedule
identifies each Proprietary Asset owned by the Company and
registered with any Governmental Body or for which an application
has been filed with any Governmental Body and the names of the
jurisdictions covered by the applicable registration or
application. Part 2.9(a)(ii) of the Company Disclosure Schedule
identifies all other Proprietary Assets owned by the Company.
Part 2.9(a)(iii) of the Company Disclosure Schedule identifies
any ongoing royalty or payment obligations of the Company in
excess of $10,000 with respect to, each Proprietary Asset that is
licensed or otherwise made available to the Company by a third
party (except for any Proprietary Asset that is licensed to the
Company under any third party software license generally
available to the public), and identifies the Contract under which
such Proprietary Asset is being licensed or otherwise made
available to the Company. The Company has good, valid and
marketable title to all of the Company Proprietary Assets
identified in Parts 2.9(a)(i) and 2.9(a)(ii) (except for
Proprietary Assets licensed to the Company by a third party) of
the Company Disclosure Schedule, free and clear of all
Encumbrances, except for (i) any lien for current taxes not yet
due and payable, and (ii) minor liens that have arisen in the
ordinary course of business and that do not (individually or in
the aggregate) materially detract from the value of the assets
subject thereto or materially impair the operations of the
Company. The Company has a valid right to use, license and
otherwise exploit (subject to the terms of any Company Contract
pursuant to which Proprietary Assets have been licensed to the
Company by a third party) all Proprietary Assets identified in
Parts 2.9(a)(i), 2.9(a)(ii)(with respect to Proprietary Assets
licensed to the Company by a third party) and 2.9(a)(iii) of the
Company Disclosure Schedule. Except as set forth in Part
2.9(a)(iv) of the Company Disclosure Schedule, the Company has
not developed jointly with any other Person any Company
Proprietary Asset that is material to the business of the Company
as currently conducted or proposed to be conducted with respect
to which such other Person has any rights. Except as set forth
in Part 2.9(a)(v) of the Company Disclosure Schedule, there is no
Company Contract (with the exception of end user license
agreements in the form previously delivered by the Company to
Parent) pursuant to which any Person has any right (whether or
not currently exercisable) to use, license or otherwise exploit
any Company Proprietary Asset.
(b) The Company has taken reasonable measures and
precautions to protect and maintain the confidentiality, secrecy
and value of all material Company Proprietary Assets (except
Company Proprietary Assets whose value would be unimpaired by
disclosure). Without limiting the generality of the foregoing,
except as set forth in Part 2.9(b) of the Company Disclosure
Schedule, (i) all current and former employees of the Company who
are or were involved in, or who have contributed to, the creation
or development of any material Company Proprietary Asset have
13
executed and delivered to the Company an agreement (containing no
exceptions to or exclusions from the scope of its coverage) that
is substantially identical to the form of Non-Disclosure
Agreement previously delivered by the Company to Parent, and (ii)
all current and former consultants and independent contractors to
the Company who are or were involved in, or who have contributed
to, the creation or development of any material Company
Proprietary Asset have executed and delivered to the Company an
agreement (containing no exceptions to or exclusions from the
scope of its coverage) that is substantially identical to the
form of Consultant Confidential Information and Invention
Assignment Agreement previously delivered to Parent. No current
or former employee, officer, director, stockholder, consultant or
independent contractor has any valid right, claim or interest in
or with respect to any Company Proprietary Asset.
(c) Except as set forth in Part 2.9(c) of the Company
Disclosure Schedule: (i) all trademarks, service marks,
copyrights, and to the knowledge of the Company, patents, held by
the Company are valid, enforceable and subsisting; (ii) none of
the Company Proprietary Assets and no Proprietary Asset that is
currently being developed by the Company (either by itself or
with any other Person) infringes, misappropriates or conflicts
with any Proprietary Asset owned or used by any other Person;
(iii) none of the products that are or have been designed,
created, developed, assembled, manufactured or sold by the
Company is infringing, misappropriating or making any unlawful or
unauthorized use of any Proprietary Asset owned or used by any
other Person, and none of such products has at any time
infringed, misappropriated or made any unlawful or unauthorized
use of, and the Company has not received any notice or other
communication (in writing or otherwise) of any actual, alleged,
possible or potential infringement, misappropriation or unlawful
or unauthorized use of, any Proprietary Asset owned or used by
any other Person; and (iv) no other Person is infringing,
misappropriating or making any unlawful or unauthorized use of,
and no Proprietary Asset owned or used by any other Person
infringes or conflicts with, any material Company Proprietary
Asset.
(d) The Company Proprietary Assets constitute all the
Proprietary Assets necessary to enable the Company to conduct its
business in the manner in which such business has been and is
being conducted and in the manner in which such business is
currently proposed to be conducted by the Company. The Company
has not (i) licensed any of the material Company Proprietary
Assets to any Person on an exclusive basis, or (ii) entered into
any covenant not to compete or Contract limiting its ability to
exploit fully any material Company Proprietary Assets or to
transact business in any market or geographical area or with any
Person.
(e) Except as set forth in Part 2.9(e)(i) of the
Company Disclosure Schedule, the Company has not disclosed or
delivered to any Person, or permitted the disclosure or delivery
to any escrow agent or other Person, of the source code, or any
portion or aspect of the source code, or any proprietary
information or algorithm contained in any source code, of any
Company Proprietary Asset. Part 2.10(a)(ii) of the Company
Disclosure Schedule identifies each Contract pursuant to which
the Company has deposited or is required to deposit with an
escrowholder or any other Person the source code, or any portion
or aspect of the source code, or any proprietary information or
algorithm contained in or relating to any source code, of any
Company Proprietary Asset (the "Escrow Contracts"), and further
describes whether the execution of this Agreement or the
consummation of any of the transactions contemplated hereby could
reasonably be expected to result in the release or disclosure of
14
the source code, or any portion or aspect of the source code, or
any proprietary information or algorithm contained in or relating
to any source code, of any material Company Proprietary Asset.
To the Company's knowledge, no event has occurred, and no
circumstance or condition exists, that (with or without notice or
lapse of time) will, or could reasonably be expected to, result
in the disclosure or delivery to any Person of the source code,
or any portion or aspect of the source code, or any proprietary
information or algorithm contained in any source code, of any
material Company Proprietary Asset, pursuant to the terms of any
Escrow Contract.
2.10 Contracts.
(a) Part 2.10 of the Company Disclosure Schedule
identifies each Company Contract that constitutes a "Material
Contract" that has not already been disclosed in the Company SEC
Documents. (For purposes of this Agreement, each of the
following and each of the Contracts filed as part of the Company
SEC Documents shall be deemed to constitute a "Material
Contract"):
(i) any Contract relating to the employment of,
or the performance of services by, any employee or consultant,
and any Contract pursuant to which the Company is or may become
obligated to make any severance, termination, bonus or relocation
payment or any other payment (other than payments in respect of
salary) in excess of $60,000, to any current or former employee
or director;
(ii) any Contract (A) relating to the
acquisition, transfer, development, sharing or license of any
Proprietary Asset (except for any Contract pursuant to which (1)
any Proprietary Asset is licensed to the Company under any third
party software license generally available to the public, or (2)
any Proprietary Asset is licensed by the Company to any Person on
a non-exclusive basis); or (B) of the type referred to in Section
2.9(e);
(iii) any Contract which provides for
indemnification of any officer, director, employee or agent;
(iv) any Contract imposing any material
restriction on the right or ability of the Company (A) to engage
in any line of business or to compete with any Person or grant
any exclusive distribution rights, (B) to acquire any product or
other asset or any services from any other Person, to sell any
product or other asset to or perform any services for any other
Person or to transact business or deal in any other manner with
any other Person, or (C) develop or distribute any technology;
(v) any Contract (A) relating to the
acquisition, issuance, voting, registration, sale or transfer of
any securities, (B) providing any Person with any preemptive
right, right of participation, right of maintenance or any
similar right with respect to any securities, or (C) providing
the Company with any right of first refusal with respect to, or
right to repurchase or redeem, any securities;
15
(vi) any Contract requiring that the Company
give any notice or provide any information to any Person prior to
accepting any Acquisition Proposal;
(vii) any Contract (excluding the Company's non-
exclusive license agreements of its products entered into in the
ordinary course of the Company's business) that has a term of
more than 60 days and that may not be terminated by the Company
(without penalty) within 60 days after the delivery of a
termination notice by the Company;
(viii) any Contract that contemplates or
involves (A) the payment or delivery of cash or other
consideration on or after the date hereof having a value in
excess of $60,000 in the aggregate or (B) the performance of
services on or after the date hereof having a value in excess of
$60,000 in the aggregate;
(ix) any Contract to which any Governmental Body
is a party or under which any Governmental Body has any rights or
obligations; and
(x) any other Contract, not otherwise identified
in clauses "(i)" through "(ix)", if the Company's performance or
breach of such Contract could reasonably be expected to have a
Material Adverse Effect on the Company.
(b) To the Company's knowledge, each Company Contract
that constitutes a Material Contract is valid and in full force
and effect, and is enforceable in accordance with its terms,
subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules
of law governing specific performance, injunctive relief and
other equitable remedies.
(c) Except as set forth in Part 2.10 of the Company
Disclosure Schedule: (i) the Company has not violated or
breached, or committed any default under, any Material Contract,
and, to the knowledge of the Company, no other Person has
violated or breached, or committed any default under, any
Material Contract; (ii) to the knowledge of the Company, no event
has occurred, and no circumstance or condition exists, that (with
or without notice or lapse of time) could reasonably be expected
to (A) result in a violation or breach of any of the provisions
of any Material Contract, (B) give any Person the right to
declare a default or exercise any remedy under any Material
Contract, (C) give any Person the right to a rebate, chargeback,
penalty or change in delivery schedule under any Material
Contract, (D) give any Person the right to accelerate the
maturity or performance of any Material Contract, or (E) give any
Person the right to cancel, terminate or modify any Material
Contract; (iii) since June 30, 1995, the Company has not received
any notice or other communication regarding any actual or
possible violation or breach of, or default under, any Material
Contract; and (iv) the Company has not waived any of its material
rights under any Material Contract.
(d) The Company is not currently renegotiating, any
amount paid or payable to the Company under any Material
Contract, or any other material term or provision of any Material
Contract.
16
2.11 Liabilities. As of the date of this Agreement,
except as set forth in the Company SEC Documents, the Company
does not have any accrued, contingent or other liabilities of any
nature, either matured or unmatured except for: (a) liabilities
that would be required under generally accepted accounting
principles to be disclosed on a balance sheet of the Company, and
(b) recurring liabilities that have been incurred by the Company
in the ordinary course of business and consistent with past
practices.
2.12 Compliance with Legal Requirements. The Company is,
and has at all times since inception been, in compliance with all
applicable Legal Requirements, except where the failure to comply
with such Legal Requirements has not had and could not reasonably
be expected to have a Material Adverse Effect on the Company.
2.13 Certain Business Practices. Neither the Company nor
any director, officer, agent or employee of the Company has (i)
used any funds for unlawful contributions, gifts, entertainment
or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or (iii) made any
other unlawful payment.
2.14 Governmental Authorizations. The Company holds all
Governmental Authorizations necessary to enable the Company to
conduct its business in the manner in which such business is
currently being conducted except where failure to so hold such
Governmental Authorization would not have a Material Adverse
Effect on the Company. All such Governmental Authorizations are
valid and in full force and effect. The Company is, and at all
times since inception has been, in substantial compliance with
the terms and requirements of such Governmental Authorizations.
2.15 Tax Matters.
(a) All Tax Returns required to be filed by or on
behalf of the Company with any Governmental Body with respect to
any taxable period ending on or before the Closing Date (the
"Company Returns") (i) have been or will be filed on or before
the applicable due date (including any extensions of such due
date), and (ii) have been, or will be when filed, prepared in all
material respects in compliance with all applicable Legal
Requirements. All amounts shown on the Company Returns to be due
on or before the Closing Date have been or will be paid on or
before the Closing Date.
(b) The Company Financial Statements fully accrue all
actual and contingent liabilities for Taxes with respect to all
periods through the dates thereof in accordance with generally
accepted accounting principles.
(c) No Company Return has ever been examined or
audited by any Governmental Body. No extension or waiver of the
limitation period applicable to any of the Company Returns has
17
been granted (by the Company or any other Person), and no such
extension or waiver has been requested from the Company.
(d) No claim or Legal Proceeding is pending or, to
the knowledge of the Company, has been threatened against or with
respect to the Company in respect of any material Tax. There are
no unsatisfied liabilities for material Taxes (including
liabilities for interest, additions to tax and penalties thereon
and related expenses) with respect to any notice of deficiency or
similar document received by the Company with respect to any
material Tax (other than liabilities for Taxes asserted under any
such notice of deficiency or similar document which are being
contested in good faith by the Company and with respect to which
adequate reserves for payment have been established). There are
no liens for material Taxes upon any of the assets of the Company
except liens for current Taxes not yet due and payable. The
Company has not entered into or become bound by any agreement or
consent pursuant to Section 341(f) of the Code. The Company has
not been, nor will be, required to include any adjustment in
taxable income for any tax period (or portion thereof) pursuant
to Section 481 or 263A of the Code or any comparable provision
under state or foreign Tax laws as a result of transactions or
events occurring, or accounting methods employed, prior to the
Closing.
(e) There is no agreement, plan, arrangement or other
Contract covering any employee or independent contractor or
former employee or independent contractor of the Company that,
considered individually or considered collectively with any other
such Contracts, will, or could reasonably be expected to, give
rise directly or indirectly to the payment of any amount that
would not be deductible pursuant to Section 280G or Section 162
of the Code as a result of the transactions contemplated by this
Agreement.
2.16 Employee and Labor Matters; Benefit Plans.
(a) Part 2.16(a) of the Company Disclosure Schedule
identifies each salary, bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance pay,
termination pay, hospitalization, medical, life or other
insurance, supplemental unemployment benefits, profit-sharing,
pension or retirement plan, program or agreement (collectively,
the "Plans") sponsored, maintained, contributed to or required to
be contributed to by the Company for the benefit of any current
or former employee of the Company.
(b) Except as set forth in Part 2.16(a) of the
Company Disclosure Schedule, the Company does not maintain,
sponsor or contribute to, nor has at any time in the past
maintained, sponsored or contributed to, any employee pension
benefit plan (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
whether or not excluded from coverage under specific Titles or
Merger Subtitles of ERISA) for the benefit of employees or former
employees of the Company (a "Pension Plan").
(c) Except as set forth in Part 2.16(a) of the
Company Disclosure Schedule, the Company does not maintain,
sponsor or contribute to any: (i) employee welfare benefit plan
(as defined in Section 3(1) of ERISA, whether or not excluded
from coverage under specific Titles or Merger Subtitles of ERISA)
for the benefit of any employees or former employees of the
18
Company (a "Welfare Plan"), or (ii) self-funded medical, dental
or other similar Plan. None of the Plans identified in the
Company Disclosure Schedule is a multiemployer plan (within the
meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, the Company has made
available to Parent: (i) an accurate and complete copy of such
Plan (including all amendments thereto); (ii) an accurate and
complete copy of the annual report, if required under ERISA, with
respect to such Plan for the last two years; (iii) an accurate
and complete copy of the most recent summary plan description,
together with each Summary of Material Modifications, if required
under ERISA, with respect to such Plan, (iv) if such Plan is
funded through a trust or any third party funding vehicle, an
accurate and complete copy of the trust or other funding
agreement (including all amendments thereto) and accurate and
complete copies the most recent financial statements thereof; (v)
accurate and complete copies of all Contracts relating to such
Plan, including service provider agreements, insurance contracts,
minimum premium contracts, stop-loss agreements, investment
management agreements, subscription and participation agreements
and recordkeeping agreements; and (vi) an accurate and complete
copy of the most recent determination letter received from the
Internal Revenue Service with respect to such Plan (if such Plan
is intended to be qualified under Section 401(a) of the Code).
(e) The Company is not and has never been required to
be treated as a single employer with any other Person under
Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of
the Code. The Company has never been a member of an "affiliated
service group" within the meaning of Section 414(m) of the Code.
The Company has never made a complete or partial withdrawal from
a multiemployer plan, as such term is defined in Section 3(37) of
ERISA, resulting in "withdrawal liability," as such term is
defined in Section 4201 of ERISA (without regard to subsequent
reduction or waiver of such liability under either Section 4207
or 4208 of ERISA).
(f) The Company does not have any plan or commitment
to create any Welfare Plan or any additional Pension Plan, or to
modify or change any existing Pension Plan (other than to comply
with applicable law) in a manner that would affect any employee
of the Company.
(g) No Plan provides death, medical or health
benefits (whether or not insured) with respect to any current or
former employee of the Company after any such employee's
termination of service (other than (i) benefit coverage mandated
by applicable law, including coverage provided pursuant to
Section 4980B of the Code, (ii) deferred compensation benefits
accrued as liabilities on the Company Unaudited Interim Balance
Sheet, and (iii) benefits the full cost of which are borne by
current or former employees of the Company (or the employees'
beneficiaries)).
(h) With respect to any Plan constituting a group
health plan within the meaning of Section 4980B(g)(2) of the
Code, the provisions of Section 4980B of the Code ("COBRA") have
been complied with in all material respects. Part 2.16(h) of the
Company Disclosure Schedule describes all obligations of the
Company as of the date of this Agreement under any of the
provisions of COBRA.
19
(i) Each of the Plans has been operated and
administered in all material respects in accordance with
applicable Legal Requirements, including but not limited to ERISA
and the Code.
(j) Each of the Plans intended to be qualified under
Section 401(a) of the Code has received a favorable determination
from the Internal Revenue Service, and the Company is not aware
of any reason why any such determination letter should be
revoked.
(k) Neither the execution, delivery or performance of
this Agreement, nor the consummation of the Merger or any of the
other transactions contemplated by this Agreement, will result in
any payment (including any bonus, golden parachute or severance
payment) to any current or former employee or director of the
Company (whether or not under any Plan), or materially increase
the benefits payable under any Plan, or result in any
acceleration of the time of payment or vesting of any such
benefits.
(l) Part 2.16(l) of the Company Disclosure Schedule
contains a list of all salaried employees of the Company as of
the date of this Agreement, and correctly reflects, in all
material respects, their salaries, any other compensation payable
to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of
employment and their positions. The Company is not a party to
any collective bargaining contract or other Contract with a labor
union involving any of its employees. All of the employees of
the Company are "at will" employees.
(m) Part 2.16(m) of the Company Disclosure Schedule
identifies each Employee who is not fully available to perform
work because of disability or other leave and sets forth the
basis of such leave and the anticipated date of return to full
service.
(n) The Company does not have any knowledge of any
facts indicating that (i) the consummation of the Merger or any
of the other transactions contemplated by this Agreement will
have a Material Adverse Effect on the labor relations of the
Company, or (ii) any of the employees of the Company intends to
terminate his or her employment with the Company, except for such
terminations that either individually or taken together with all
other such terminations, would not have a Material Adverse Effect
on the Company.
2.17 Environmental Matters. The Company is in compliance
in all material respects with all applicable Environmental Laws,
which compliance includes the possession by the Company of all
permits and other Governmental Authorizations required under
applicable Environmental Laws, and compliance with the terms and
conditions thereof. The Company has not received any notice from
a Governmental Body, that alleges that the Company is not in
compliance with any Environmental Law, and, to the knowledge of
the Company, there are no circumstances that may prevent or
interfere with the compliance by the Company with any
Environmental Law in the future. To the knowledge of the
Company, no current or prior owner of any property leased or
controlled by the Company has received any notice from a
Government Body that alleges that such current or prior owner or
the Company is not in compliance with any Environmental Law. To
the knowledge of the Company, all property that is leased to,
controlled by or used by the Company, and all surface water,
20
groundwater and soil associated with or adjacent to such property
is in clean and healthful condition and is free of any material
environmental contamination of any nature. (For purposes of this
Section 2.17: (i) "Environmental Law" means any federal, state,
local or foreign Legal Requirement relating to pollution or
protection of human health or the environment (including ambient
air, surface water, ground water, land surface or subsurface
strata), including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern; and
(ii) "Materials of Environmental Concern" include chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is now or
hereafter regulated by any Environmental Law or that is otherwise
a danger to health, reproduction or the environment.)
2.18 Insurance. The Company has made available to Parent
a copy of all material insurance policies relating to the
business, assets and operations of the Company. Each of such
insurance policies is in full force and effect. Since
December 31, 1996, the Company has not received any notice or
other communication regarding any actual or possible (a)
cancellation or invalidation of any insurance policy, (b) refusal
of any coverage or rejection of any material claim under any
insurance policy, or (c) material adjustment in the amount of the
premiums payable with respect to any insurance policy. Except as
set forth in Part 2.18 of the Company Disclosure Schedule, there
is no pending claim (including any workers' compensation claim)
under or based upon any insurance policy of the Company.
2.19 Transactions with Affiliates. Except as set forth in
the Company SEC Documents and Part 2.19 of the Company Disclosure
Schedule, since the date of the Company's last proxy statement
filed with the SEC, no event has occurred that would be required
to be reported by the Company pursuant to Item 404 of Regulation
S-K promulgated by the SEC. Part 2.19 of the Company Disclosure
Schedule identifies each person who is an "affiliate" (as that
term is used in Rule 145 under the Securities Act) of the Company
as of the date of this Agreement.
2.20 Legal Proceedings; Orders.
(a) There is no pending Legal Proceeding, and (to the
knowledge of the Company) no Person has threatened to commence
any Legal Proceeding: (i) that involves the Company or any of
the assets owned or used by the Company which alone or in the
aggregate has had or would have a Material Adverse Effect on the
Company; or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering
with, the Merger or any of the other transactions contemplated by
this Agreement. To the knowledge of the Company, no event has
occurred, and no claim, dispute or other condition or
circumstance exists, that could reasonably be expected to, give
rise to or serve as a basis for the commencement of any such
Legal Proceeding that would have a Material Adverse Effect on the
Company.
(b) There is no material order, writ, injunction,
judgment or decree to which the Company, or any of the assets
owned or used by the Company, is subject. To the knowledge of
the Company, no officer or key employee of the Company is subject
to any order, writ, injunction, judgment or decree that prohibits
21
such officer or other employee from engaging in or continuing any
conduct, activity or practice relating to the business of the
Company.
2.21 Authority; Binding Nature of Agreement. The Company
has the requisite corporate power and authority to enter into and
to perform its obligations under this Agreement, subject to the
approval of this Agreement by the Required Company Stockholder
Vote. The Board of Directors of the Company (at a meeting duly
called and held) has (a) unanimously determined that the Merger
is advisable and fair and in the best interests of the Company
and its stockholders, (b) unanimously authorized and approved the
execution, delivery and performance of this Agreement by the
Company and unanimously approved the Merger, and (c) unanimously
recommended the approval of this Agreement and the Merger by the
holders of Company Common Stock and directed that this Agreement
and the Merger be submitted for consideration by the Company's
stockholders at the Company Stockholders' Meeting (as defined in
Section 5.2). This Agreement constitutes the legal, valid and
binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
2.22 No Existing Discussions. During the period between
August 26, 1997, the date on which the parties entered into a
non-solicitation agreement, and the date of this Agreement,
neither the Company nor any Representative of the Company, is or
was engaged, directly or indirectly, in any discussions or
negotiations with any other Person relating to any Acquisition
Proposal.
2.23 Accounting Matters. To the knowledge of the Company,
neither the Company nor any affiliate (as that term is used in
Rule 145 under the Securities Act) of the Company has taken or
agreed to take, or plans to take, any action that could prevent
Parent from accounting for the Merger as a "pooling of
interests." Ernst & Young LLP has confirmed orally to the
Company, Parent, and Price Waterhouse LLP, that, after having
reviewed the transactions contemplated by this Agreement and
having conducted a reasonable investigation of the Company, Ernst
& Young LLP is not aware of any fact concerning the Company that
could preclude Parent from accounting for the Merger as a
"pooling of interests."
2.24 Vote Required. The affirmative vote of the holders
of a majority of the shares of Company Common Stock outstanding
on the record date for the Company Stockholders' Meeting (the
"Required Company Stockholder Vote") is the only vote of the
holders of any class or series of the Company's capital stock
necessary to approve this Agreement, the Merger and the other
transactions contemplated by this Agreement.
2.25 Non-Contravention; Consents. Neither (1) the
execution, delivery or performance of this Agreement or any of
the other agreements referred to in this Agreement, nor (2) the
consummation of the Merger or any of the other transactions
contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a
violation of (i) any of the provisions of the certificate of
incorporation, bylaws or other charter or organizational
22
documents of the Company, as amended, or (ii) any resolution
adopted by the stockholders, the Board of Directors or any
committee of the Board of Directors of the Company;
(b) contravene, conflict with or result in a
violation of, or give any Governmental Body or other Person the
right to challenge the Merger or any of the other transactions
contemplated by this Agreement or to exercise any remedy or
obtain any relief under, any Legal Requirement or any order,
writ, injunction, judgment or decree to which the Company, or any
of the assets owned or used by the Company, is subject;
(c) contravene, conflict with or result in a
violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Governmental Authorization that is held
by the Company or that otherwise relates to the business of the
Company or to any of the assets owned or used by the Company;
(d) contravene, conflict with or result in a
violation or breach of, or result in a default under (or an event
which with notice or lapse of time or both would become a
default), any provision of any Material Contract, or give any
Person the right to (i) declare a default or exercise any remedy
under any such Material Contract, (ii) a rebate, chargeback,
penalty or change in delivery schedule under any such Material
Contract, (iii) accelerate the maturity or performance of any
such Material Contract, or (iv) cancel, terminate or modify any
term of such Material Contract;
(e) result in the imposition or creation of any
Encumbrance upon or with respect to any asset owned or used by
the Company (except for liens that will not, in any case or in
the aggregate, have a Material Adverse Effect on the Company); or
(f) result in, or increase the likelihood of, the
disclosure or delivery to any escrowholder or other Person of the
source code, or any portion or aspect of the source code, or any
proprietary information or algorithm contained in or relating to
any source code, of any material Company Proprietary Asset, or
the transfer of any material asset of the Company to any Person
pursuant to any Escrow Contract.
Except as may be required by the Exchange Act, the DGCL, and the
NASD Bylaws (as they relate to the Form S-4 Registration
Statement and the Joint Proxy Statement) the Company has not
been, is not or will not be required to make any filing with or
give any notice to, or to obtain any Consent from, any Person in
connection with (i) the execution, delivery or performance of
this Agreement or any of the other agreements referred to in this
Agreement, or (ii) the consummation of the Merger or any of the
other transactions contemplated by this Agreement.
2.26 Fairness Opinion. The Company's Board of Directors
has received the written opinion of CIBC Wood Gundy, financial
advisor to the Company, dated the date of this Agreement, to the
effect that the consideration to be received by the stockholders
of the Company in the Merger is fair to the stockholders of the
Company from a financial point of view. The Company has
furnished an accurate and complete copy of said written opinion
to Parent.
23
2.27 Financial Advisor. Except for CIBC Wood Gundy, no
broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger
or any of the other transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. The
fees and expenses of all accountants, brokers, financial
advisors, legal counsel and other Persons retained by the Company
in connection with the negotiation and effectuation of this
Agreement and the transactions contemplated hereby incurred or to
be incurred by the Company will not exceed $500,000 in the
aggregate. The Company has furnished to Parent accurate and
complete copies of all agreements under which any such fees,
commissions or other amounts have been paid or may become payable
and all indemnification and other agreements related to the
engagement of CIBC Wood Gundy.
2.28 Section 203 of the DGCL Not Applicable. As of the
date hereof and at all times on or prior to the Effective Time,
the restrictions applicable to business combinations contained in
Section 203 of the DGCL are, and will be, inapplicable to the
execution, delivery and performance of this Agreement and to the
consummation of the Merger and the other transactions
contemplated by this Agreement. Prior to the execution of those
Voting Agreements, in the form of Exhibit G, of even date
herewith between Parent and each of the individuals identified on
Exhibit H, the Board of Directors of the Company approved said
Voting Agreements and the transactions contemplated thereby.
Representations and Warranties of Parent and Merger Sub
Parent and Merger Sub represent and warrant to the Company
that, except as set forth in the Parent SEC Documents (as defined
in Section 3.4(a)) or in the Parent Disclosure Schedule:
3.1 Organization, Standing and Power. Parent and Merger
Sub are corporations 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 Parent and Merger Sub.
3.2 Certificate of Incorporation and Bylaws. Parent has
delivered to the Company accurate and complete copies of the
certificate of incorporation, bylaws and other charter and
organizational documents of Parent and the Merger Sub, in each
case as amended as of the date hereof.
3.3 Capitalization, Etc.
(a) The authorized capital stock of Parent consists
of: (i) 25,000,000 shares of Parent Common Stock, of which
6,474,096 shares have been issued and are outstanding and of
which no shares are held by Parent in its treasury as of the date
of this Agreement; and (ii) 5,000,000 shares of Parent Preferred
Stock, $0.001 par value per share, of which no shares are
outstanding or are held by the Company in its treasury. All of
24
the outstanding shares of Parent Common Stock have been duly
authorized and validly issued, and are fully paid and
nonassessable. Except as set forth in Part 3.3(a)(i) of the
Parent Disclosure Schedule: (i) none of the outstanding shares of
Parent Common Stock is entitled or subject to any preemptive
right, right of participation, right of maintenance or any
similar right; (ii) none of the outstanding shares of Parent
Common Stock is subject to any right of first refusal in favor of
Parent; and (iii) there is no Parent Contract relating to the
voting or registration of, or restricting any Person from
purchasing, selling, pledging or otherwise disposing of (or
granting any option or similar right with respect to), any shares
of Parent Common Stock. Parent is not under any obligation, nor
is bound by any Contract pursuant to which it may become
obligated, to repurchase, redeem or otherwise acquire any
outstanding shares of Parent Common Stock.
(b) At the close of business on September 25, 1997:
(i) 316,707 shares of Parent Common Stock were subject to
issuance pursuant to outstanding options to purchase Parent
Common Stock under Parent's 1987 Stock Option Plan; (ii) 352,068
shares of Parent Common Stock were subject to issuance pursuant
to outstanding options to purchase Parent Common Stock under
Parent's 1995 Stock Option Plan; (iii) 62,500 shares of Parent
Common Stock were subject to issuance pursuant to outstanding
options to purchase Parent Common Stock under Parent's 1995 Non-
Employee Director's Stock Option Plan; (iv) 110,302 shares of
Parent Common Stock were subject to issuance pursuant to rights
to purchase Parent Common Stock under Parent's 1995 Employee
Stock Purchase Plan; and (v) 26,587 shares of Parent Common Stock
were subject to issuance pursuant to outstanding options granted
outside of any Parent stock option plan. (Stock options granted
by Parent pursuant to the 1995 Stock Option Plan, pursuant to the
1995 Non-Employee Director's Stock Option Plan, pursuant to the
1987 Stock Option Plan and outside of any stock option plan are
referred to in this Agreement as "Parent Options." The 1995
Stock Option Plan, the 1987 Stock Option Plan, and the 1995 Non-
Employee Director's Stock Option Plan are collectively referred
to as "Parent's Stock Plans.") Part 3.3(b) of the Parent
Disclosure Schedule sets forth the following information with
respect to each Parent Option outstanding as of September 25,
1997, (i) the particular plan pursuant to which such Parent
Option was granted; (ii) the name of the optionee; (iii) the
number of shares of Parent Common Stock subject to such Parent
Option; (iv) the exercise price of such Parent Option; (v) the
date on which such Parent Option was granted; (vi) the applicable
vesting schedules, and the extent to which such Parent Option is
vested and exercisable as of September 25, 1997, and (vii) the
date on which such Parent Option expires.
(c) Except for shares to be issued pursuant to rights
to purchase Parent Common Stock under Parent's 1995 Employee
Stock Purchase Plan and Parent Options, there is no: (i)
outstanding subscription, option, call, warrant or right (whether
or not currently exercisable) to acquire any shares of the
capital stock or other securities of Parent; (ii) outstanding
security, instrument or obligation that is or may become
convertible into or exchangeable for any shares of the capital
stock or other securities of Parent; (iii) stockholder rights
plan (or similar plan commonly referred to as a "poison pill") or
Contract under which Parent is or may become obligated to sell or
otherwise issue any shares of its capital stock or any other
securities; or (iv) condition or circumstance that may give rise
to or provide a basis for the assertion of a claim by any Person
to the effect that such Person is entitled to acquire or receive
any shares of capital stock or other securities of Parent.
25
(d) All outstanding shares of Parent Common Stock,
all outstanding Parent Options, and all outstanding warrants to
purchase Parent Common Stock have been issued and granted in
compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set
forth in applicable Contracts.
3.4 SEC Filings; Financial Statements.
(a) Parent has delivered to the Company accurate and
complete copies of all registration statements, proxy statements,
and other statements, reports, schedules, forms and other
documents filed by the Company with the SEC since December 31,
1996 (the "Parent SEC Documents") including the Company's
registration statement on Form S-1 filed with the SEC on November
1995. All statements, reports, schedules, forms and other
documents required to be filed by Parent with the SEC have been
so filed. As of the time it was filed with the SEC (or, if
amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) each of the
Parent SEC Documents complied in all material respects with the
applicable requirements of the Securities Act or the Exchange Act
(as the case may be); and (ii) none of the Parent SEC Documents
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) The consolidated financial statements contained
in the Parent SEC Documents ("Parent Financial Statements"): (i)
complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods
covered (except as may be indicated in the notes to such
financial statements and, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC, and except that unaudited
financial statements may not contain footnotes and are subject to
year-end audit adjustments); and (iii) fairly present the
consolidated financial position of Parent and its Subsidiaries as
of the respective dates thereof and the consolidated results of
operations of Parent and its Subsidiaries for the periods covered
thereby.
(c) Parent has delivered to the Company an unaudited
consolidated balance sheet of Parent as of June 30, 1997 (the
"Parent Unaudited Interim Balance Sheet"), and the related
unaudited consolidated statement of operations, statement of
stockholders' equity and statement of cash flows of Parent for
the quarter then ended. The financial statements referred to in
this Section 3.4(c): (i) were prepared in accordance with
generally accepted accounting principles applied on a basis
consistent with the basis on which the financial statements
referred to in Section 3.4(b) were prepared (except that such
financial statements do not contain footnotes and are subject to
normal and recurring year-end adjustments which will not,
individually or in the aggregate, be material in amount), and
(ii) fairly present the consolidated financial position of Parent
as of June 30, 1997 thereof and the consolidated results of
operations and cash flows of Parent for the six months ended June
30, 1997.
3.5 Absence of Certain Changes or Events. Except as
disclosed in the Parent SEC Documents, since June 30, 1997:
26
(a) there has not been any Material Adverse Effect on
Parent;
(b) Parent has not declared, accrued, set aside or
paid any dividend;
(c) Parent has not amended or waived any of its
rights under, or permitted the acceleration of vesting under, (i)
any provision of any of the Parent's Stock Plans, (ii) any
provision of any agreement evidencing any outstanding Parent
Option, (iii) or any restricted stock purchase agreement;
(d) except in the ordinary course of business and
consistent with past practices, Parent has not (i) entered into
or permitted any of the assets owned or used by it to become
bound by any Material Contract (as defined in Section 3.10), or
(ii) amended or terminated, or waived any material right or
remedy under, any Material Contract;
(e) Parent has not (i) acquired, leased or licensed
any material right or other material asset from any other Person,
(ii) sold or otherwise disposed of, or leased or licensed, any
material right or other material asset to any other Person, or
(iii) waived or relinquished any right, except for rights or
other assets acquired, leased, licensed or disposed of in the
ordinary course of business and consistent with past practices;
(f) Parent has not made any pledge of any of its
assets or otherwise permitted any of its assets to become subject
to any Encumbrance, except for pledges of immaterial assets made
in the ordinary course of business and consistent with past
practices;
(g) Parent has not changed any of its methods of
accounting or accounting practices (i) having a Material Adverse
Effect on Parent or (ii) that may have an effect on rules and
regulations related to pooling of interests accounting, except
insofar as such change is required by a change in generally
accepted accounting principles;
(h) Parent has not made any Tax election that could
have a Material Adverse Effect on Parent;
(i) Parent has not entered into any material
transaction or taken any other material action outside the
ordinary course of business or inconsistent with past practices;
and
(j) Parent has not agreed or committed to take any of
the actions referred to in clauses "(c)" through "(i)" above.
3.6 Title to Assets. Parent owns, and has good, valid and
marketable title to, all assets purported to be owned by it,
including: (a) all assets reflected on the Parent Financial
Documents; and (b) all other assets reflected in the books and
records of Parent as being owned by Parent. All of said assets
are owned by Parent free and clear of any Encumbrances, except
for (i) any lien for current taxes not yet due and payable, (ii)
liens that have arisen in the ordinary course of business and
27
that do not (in any case or in the aggregate) materially detract
from the value of the assets subject thereto or materially impair
the operations of Parent, and (iii) liens described in Part 3.6
of the Parent Disclosure Schedule.
3.7 Receivables. All existing accounts receivable of
Parent (a) represent valid obligations of customers of Parent
arising from bona fide transactions entered into in the ordinary
course of business, (b) are current and, to Parent's knowledge
will be collected in full when due, without any counterclaim or
set off (net of an allowance for doubtful accounts not to exceed
$316,000 in the aggregate).
3.8 Real Property; Equipment; Leasehold. Parent does not
own any real property or any interest in real property, except
for the leasehold created under the real property lease listed on
Part 3.8(a) of the Parent Disclosure Schedule.
28
3.9 Proprietary Assets.
(a) Parent, directly or indirectly, owns or is
licensed or otherwise possesses legally enforceable rights to use
all Proprietary Assets that are material to the business of
Parent as currently conducted or as proposed to be conducted by
Parent ("Parent Proprietary Assets").
(b) Parent has taken reasonable measures and
precautions to protect and maintain the confidentiality, secrecy
and value of all Material Parent Proprietary Assets (except
Parent Proprietary Assets whose value would be unimpaired by
disclosure). No current or former employee, officer, director,
stockholder, consultant or independent contractor has any valid
right, claim or interest in or with respect to any Parent
Proprietary Asset.
(c) Except as set forth in Part 3.9(c) of the Parent
Disclosure Schedule: (i) all trademarks, service marks,
copyrights, and to the knowledge of Parent, patents, held by
Parent are valid, enforceable and subsisting; (ii) none of the
Parent Proprietary Assets and no Proprietary Asset that is
currently being developed by Parent (either by itself or with any
other Person) infringes, misappropriates or conflicts with any
Proprietary Asset owned or used by any other Person; (iii) none
of the products that are or have been designed, created,
developed, assembled, manufactured or sold by Parent is
infringing, misappropriating or making any unlawful or
unauthorized use of any Proprietary Asset owned or used by any
other Person, and none of such products has at any time
infringed, misappropriated or made any unlawful or unauthorized
use of, and Parent has not received any notice or other
communication (in writing or otherwise) of any actual, alleged,
possible or potential infringement, misappropriation or unlawful
or unauthorized use of, any Proprietary Asset owned or used by
any other Person; and (iv) no other Person is infringing,
misappropriating or making any unlawful or unauthorized use of,
and no Proprietary Asset owned or used by any other Person
infringes or conflicts with, any material Parent Proprietary
Asset.
(d) Parent has not (i) licensed any of the material
Parent Proprietary Assets to any Person on an exclusive basis, or
(ii) entered into any covenant not to compete or Contract
limiting its ability to exploit fully any material Parent
Proprietary Assets or to transact business in any market or
geographical area or with any Person.
(e) Except as set forth in Part 3.9(e) of the Parent
Disclosure Schedule, Parent has not disclosed or delivered to any
Person, or permitted the disclosure or delivery to any escrow
agent or other Person, of the source code, or any portion or
aspect of the source code, or any proprietary information or
algorithm contained in any source code, of any Parent Proprietary
Asset. To Parent's knowledge, no event has occurred, and no
circumstance or condition exists, that (with or without notice or
lapse of time) will, or could reasonably be expected to, result
in the disclosure or delivery to any Person of the source code,
or any portion or aspect of the source code, or any proprietary
information or algorithm contained in any source code, of any
material Parent Proprietary Asset pursuant to a Contract.
29
3.10 Contracts.
(a) Part 3.10 of the Parent Disclosure Schedule
identifies each Parent Contract that constitutes a "Parent
Material Contract" that has not already been disclosed in the
Parent SEC Documents. (For purposes of this Agreement, each of
the following and each of the Contracts filed as part of the
Parent SEC Documents shall be deemed to constitute a "Parent
Material Contract"):
(i) any Contract relating to the employment of,
or the performance of services by, any employee or consultant,
and any Contract pursuant to which Parent is or may become
obligated to make any severance, termination, bonus or relocation
payment or any other payment (other than payments in respect of
salary) in excess of $60,000, to any current or former employee
or director;
(ii) any Contract (A) relating to the
acquisition, transfer, development, sharing or license of any
Proprietary Asset (except for any Contract pursuant to which (1)
any Proprietary Asset is licensed to Parent under any third party
software license generally available to the public, or (2) any
Proprietary Asset is licensed by Parent to any Person on a non-
exclusive basis); or (B) of the type referred to in Section
3.9(e);
(iii) any Contract which provides for
indemnification of any officer, director, employee or agent;
(iv) any Contract imposing any material
restriction on the right or ability of Parent (A) to engage in
any line of business or to compete with any Person or grant any
exclusive distribution rights, (B) to acquire any product or
other asset or any services from any other Person, to sell any
product or other asset to or perform any services for any other
Person or to transact business or deal in any other manner with
any other Person, or (C) develop or distribute any technology;
(v) any Contract (A) relating to the
acquisition, issuance, voting, registration, sale or transfer of
any securities, (B) providing any Person with any preemptive
right, right of participation, right of maintenance or any
similar right with respect to any securities, or (C) providing
Parent with any right of first refusal with respect to, or right
to repurchase or redeem, any securities;
(vi) any Contract requiring that Parent give any
notice or provide any information to any Person prior to
accepting any Acquisition Proposal;
(vii) any Contract (excluding Parent's non-
exclusive license agreements of its products entered into in the
ordinary course of Parent's business) that has a term of more
than 60 days and that may not be terminated by Parent (without
penalty) within 60 days after the delivery of a termination
notice by Parent;
30
(viii) any Contract that contemplates or
involves (A) the payment or delivery of cash or other
consideration on or after the date hereof having a value in
excess of $60,000 in the aggregate or (B) the performance of
services on or after the date hereof having a value in excess of
$60,000 in the aggregate;
(ix) any Contract to which any Governmental Body
is a party or under which any Governmental Body has any rights or
obligations; and
(x) any other Contract, not otherwise identified
in clauses "(i)" through "(ix)", if Parent's performance or
breach of such Contract could reasonably be expected to have a
Material Adverse Effect on Parent.
(b) To Parent's knowledge, each Parent Contract that
constitutes a Parent Material Contract is valid and in full force
and effect, and is enforceable in accordance with its terms,
subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules
of law governing specific performance, injunctive relief and
other equitable remedies.
(c) Except as set forth in Part 3.10 of the Parent
Disclosure Schedule: (i) Parent has not violated or breached, or
committed any default under, any Parent Material Contract, and,
to the knowledge of Parent, no other Person has violated or
breached, or committed any default under, any Parent Material
Contract; (ii) to the knowledge of Parent, no event has occurred,
and no circumstance or condition exists, that (with or without
notice or lapse of time) could reasonably be expected to
(A) result in a violation or breach of any of the provisions of
any Parent Material Contract, (B) give any Person the right to
declare a default or exercise any remedy under any Parent
Material Contract, (C) give any Person the right to a rebate,
chargeback, penalty or change in delivery schedule under any
Parent Material Contract, (D) give any Person the right to
accelerate the maturity or performance of any Parent Material
Contract, or (E) give any Person the right to cancel, terminate
or modify any Parent Material Contract; (iii) since June 30,
1997, Parent has not received any notice or other communication
regarding any actual or possible violation or breach of, or
default under, any Parent Material Contract; and (iv) Parent has
not waived any of its material rights under any Parent Material
Contract.
(d) Parent is not currently renegotiating, any amount
paid or payable to Parent under any Parent Material Contract, or
any other material term or provision of any Material Contract.
3.11 Liabilities. As of the date of this Agreement,
except as set forth in the Parent SEC Documents, Parent does not
have any accrued, contingent or other liabilities of any nature,
either matured or unmatured except for: (a) liabilities that
would be required under generally accepted accounting principles
to be disclosed on a balance sheet of Parent, and (b) recurring
liabilities that have been incurred by Parent in the ordinary
course of business and consistent with past practices.
31
3.12 Compliance with Legal Requirements. Parent is, and
has at all times since inception been, in compliance with all
applicable Legal Requirements, except where the failure to comply
with such Legal Requirements has not had and could not reasonably
be expected to have a Material Adverse Effect on Parent.
3.13 Certain Business Practices. Neither Parent nor any
director, officer, agent or employee of Parent has (i) used any
funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any
unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or (iii) made any other
unlawful payment.
3.14 Governmental Authorizations. Parent holds all
material Governmental Authorizations necessary to enable Parent
to conduct its business in the manner in which such business is
currently being conducted. All such Governmental Authorizations
are valid and in full force and effect. Parent is, and at all
times since inception has been, in substantial compliance with
the terms and requirements of such Governmental Authorizations.
3.15 Tax Matters.
(a) All Tax Returns required to be filed by or on
behalf of Parent with any Governmental Body with respect to any
taxable period ending on or before the Closing Date (the "Parent
Returns") (i) have been or will be filed on or before the
applicable due date (including any extensions of such due date),
and (ii) have been, or will be when filed, prepared in all
material respects in compliance with all applicable Legal
Requirements. All amounts shown on the Parent Returns to be due
on or before the Closing Date have been or will be paid on or
before the Closing Date.
(b) The Parent Financial Statements fully accrue all
actual and contingent liabilities for Taxes with respect to all
periods through the dates thereof in accordance with generally
accepted accounting principles.
(c) No Parent Return has ever been examined or
audited by any Governmental Body. No extension or waiver of the
limitation period applicable to the Parent Returns has been
granted (by Parent or any other Person), and no such extension or
waiver has been requested from Parent.
(d) No claim or Legal Proceeding is pending or, to
the knowledge of Parent, has been threatened against or with
respect to Parent, in respect of any material Tax. There are no
unsatisfied liabilities for material Taxes (including liabilities
for interest, additions to tax and penalties thereon and related
expenses) with respect to any notice of deficiency or similar
document received by Parent with respect to any material Tax
(other than liabilities for Taxes asserted under any such notice
of deficiency or similar document which is being contested in
good faith by Parent and with respect to which adequate reserves
for payment have been established). There are no liens for
32
material Taxes upon any of the assets of Parent except liens for
current Taxes not yet due and payable.
3.16 Employee and Labor Matters; Benefit Plans.
(a) Except with respect to Parent's wholly owned
subsidiary, Parent is not, nor has ever been required to be
treated as a single employer with any other Person under
Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or (o) of
the Code. Parent has never been a member of an "affiliated
service group" within the meaning of Section 414(m) of the Code.
Parent has never made a complete or partial withdrawal from a
multiemployer plan, as such term is defined in Section 3(37) of
ERISA, resulting in "withdrawal liability," as such term is
defined in Section 4201 of ERISA (without regard to subsequent
reduction or waiver of such liability under either Section 4207
or 4208 of ERISA).
(b) Each of the Plans of Parent has been operated and
administered in all material respects in accordance with
applicable Legal Requirements, including but not limited to ERISA
and the Code.
(c) Each of the Plans of Parent intended to be
qualified under Section 401(a) of the Code has received a
favorable determination from the Internal Revenue Service, and
Parent is not aware of any reason why any such determination
letter should be revoked.
(d) Parent is in compliance in all material respects
with all applicable Legal Requirements and Contracts relating to
employment, employment practices, wages, bonuses and terms and
conditions of employment, including employee compensation
matters.
(e) Parent does not have any knowledge of any facts
indicating that the consummation of the Merger or any of the
other transactions contemplated by this Agreement will have a
Material Adverse Effect on the labor relations of Parent.
3.17 Environmental Matters. Parent is in compliance in
all material respects with all applicable Environmental Laws,
which compliance includes the possession by Parent of all permits
and other Governmental Authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions
thereof. Parent has not received any notice from a Governmental
Body that alleges that Parent is not in compliance with any
Environmental Law, and, to the knowledge of Parent, there are no
circumstances that may prevent or interfere with the compliance
by Parent with any Environmental Law in the future. To the
knowledge of Parent, no current or prior owner of any property
leased or controlled by Parent has received any notice from a
Government Body that alleges that such current or prior owner or
Parent is not in compliance with any Environmental Law. To the
knowledge of Parent, all property that is leased to, controlled
by or used by Parent, and all surface water, groundwater and soil
associated with or adjacent to such property is in clean and
healthful condition and is free of any material environmental
contamination of any nature. (For purposes of this Section 3.17:
(i) "Environmental Law" means any federal, state, local or
foreign Legal Requirement relating to pollution or protection of
human health or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata),
33
including any law or regulation relating to emissions,
discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern; and
(ii) "Materials of Environmental Concern" include chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is now or
hereafter regulated by any Environmental Law or that is otherwise
a danger to health, reproduction or the environment.)
3.18 Insurance. Since December 31, 1996, Parent has not
received any notice or other communication regarding any actual
or possible (a) cancellation or invalidation of any insurance
policy, (b) refusal of any coverage or rejection of any material
claim under any insurance policy, or (c) material adjustment in
the amount of the premiums payable with respect to any insurance
policy.
3.19 Transactions with Affiliates. Except as set forth in
the Parent SEC Reports, since the date of Parent's last proxy
statement filed with the SEC, no event has occurred that would be
required to be reported by the Company pursuant to Item 404 of
Regulation S-K promulgated by the SEC. Part 3.19 of the Parent
Disclosure Schedule identifies each person who is an "affiliate"
(as that term is used in Rule 145 under the Securities Act) of
Parent as of the date of this Agreement.
3.20 Legal Proceedings; Orders.
(a) There is no pending Legal Proceeding, and (to the
knowledge of Parent) no Person has threatened to commence any
Legal Proceeding: (i) that involves Parent or any of the assets
owned or used by Parent which, alone or in the aggregate, has had
or would have a Material Adverse Effect on Parent; or (ii) that
challenges, or that may have the effect of preventing, delaying,
making illegal or otherwise interfering with, the Merger or any
of the other transactions contemplated by this Agreement. To the
knowledge of Parent, no event has occurred, and no claim, dispute
or other condition or circumstance exists, that could reasonably
be expected to, give rise to or serve as a basis for the
commencement of any such Legal Proceeding that would have a
Material Adverse Effect on Parent.
(b) There is no material order, writ, injunction,
judgment or decree to which Parent, or any of the assets owned or
used by Parent, is subject. To the knowledge of Parent, no
officer or key employee of Parent is subject to any order, writ,
injunction, judgment or decree that prohibits such officer or
other employee from engaging in or continuing any conduct,
activity or practice relating to the business of Parent.
3.21 Authority; Binding Nature of Agreement. Parent and
Merger Sub have the requisite corporate power and authority to
enter into and to perform their obligations under this Agreement,
subject to the approval of the issuance of Parent Common Stock in
the Merger by the Required Parent Stockholder Vote. The Board of
Directors of Parent (at a meeting duly called and held) has
(a) unanimously determined that the issuance of Parent Common
Stock in the Merger is advisable and fair and in the best
interests of Parent and its stockholders, (b)
34
unanimously authorized and approved the execution, delivery and
performance of this Agreement by Parent and unanimously approved
the issuance of Parent Common Stock in connection with the Merger
and (c) unanimously recommended the approval of the issuance of
Parent Common Stock in connection with the Merger by Parent's
stockholders at the Parent Stockholders' Meeting (as defined in
Section 5.3). This Agreement constitutes the legal, valid and
binding obligation of Parent and Merger Sub, enforceable against
them in accordance with its terms, subject to (a) laws of general
application relating to bankruptcy, insolvency and the relief of
debtors, and (b) rules of law governing specific performance,
injunctive relief and other equitable remedies.
3.22 Vote Required. The only vote of Parent's
stockholders required to approve the issuance of Parent Common
Stock in the Merger is the vote prescribed by the NASD Rules (the
"Required Parent Stockholder Vote").
3.23 Non-Contravention; Consents. Neither the execution
and delivery of this Agreement by Parent and Merger Sub nor the
consummation by Parent and Merger Sub of the Merger will (a)
conflict with or result in any breach of any provision of the
certificate of incorporation or bylaws of Parent or the
certificate of incorporation or bylaws of Merger Sub, (b) result
in a default by Parent or Merger Sub under any Parent Material
Contract to which Parent or Merger Sub is a party, except for any
default which has not had and will not have a Material Adverse
Effect on Parent, or (c) result in a violation by Parent or
Merger Sub of any order, writ, injunction, judgment or decree to
which Parent or Merger Sub is subject, except for any violation
which has not had and will not have a Material Adverse Effect on
Parent.
3.24 No Existing Discussions. During the period between
August 26, 1997, the date on which the parties entered into a
non-solicitation agreement, and the date of this Agreement,
neither Parent nor any Representative of Parent, is or was
engaged, directly or indirectly, in any discussions or
negotiations with any other Person relating to any Acquisition
Proposal with respect to Parent.
3.25 Accounting Matters. To the knowledge of Parent,
neither Parent nor any affiliate (as that term is used in Rule
145 under the Securities Act) of Parent has taken or agreed to
take, or plans to take, any action that could prevent Parent from
accounting for the Merger as a "pooling of interests." Price
Waterhouse LLP has confirmed orally to the Company, Parent, and
Ernst & Young LLP, that, after having reviewed the transactions
contemplated by this Agreement and having conducted a reasonable
investigation of Parent, Price Waterhouse LLP is not aware of any
fact concerning Parent that could preclude Parent from accounting
for the Merger as a "pooling of interests."
3.26 Financial Advisor. Except for Hambrecht & Quist LLC,
no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with
the Merger or the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent.
35
3.27 Fairness Opinion. Parent's Board of Directors has
received the written opinion of Hambrecht & Quist LLC, financial
advisor to Parent, dated the date of this Agreement, to the
effect that the Exchange Ratio is fair to Parent and its
stockholders from a financial point of view.
3.28 Valid Issuance. The Parent Common Stock to be issued
in the Merger will, when issued in accordance with the provisions
of this Agreement, be validly issued, fully paid and
nonassessable.
4. Certain Covenants of the Parties
4.1 Access and Investigation. During the period from the
date of this Agreement to the Effective Time (the "Pre-Closing
Period"), each party shall, and shall cause its respective
Representatives to: (a) provide the other party and the other
party's Representatives with reasonable access to such disclosing
party's Representatives, personnel and assets and to all existing
books, records, Tax Returns, work papers and other documents and
information relating to such disclosing party; and (b) provide
the other party and the other party's Representatives with such
copies of the existing books, records, Tax Returns, work papers
and other documents and information relating to such disclosing
party, and with such additional financial, operating and other
data and information regarding such disclosing party, as the
other party may reasonably request. Except as required by law,
each of the parties will hold, and will cause its officers,
employees, accountants, legal counsel, financial advisors and
other Representatives and controlled affiliates to hold, any and
all information received from the other party, directly or
indirectly, in confidence in accordance with the Mutual
Confidential Disclosure Agreement dated March 12, 1997 between
Parent and the Company.
4.2 Operation of the Company's Business.
(a) During the Pre-Closing Period: (i) the Company
shall conduct its business and operations (A) in the ordinary
course and consistent with past practices and (B) in compliance
with all applicable Legal Requirements and the requirements of
the Company's Material Contracts; (ii) to the extent consistent
with the foregoing, the Company shall use commercially reasonable
efforts to preserve intact its current business organization,
keep available the services of its current officers and employees
and maintain its relations and goodwill with all suppliers,
customers, landlords, creditors, licensors, licensees, employees
and other Persons having business relationships with the Company;
(iii) the Company shall keep in full force all insurance policies
referred to in Section 2.18; (iv) the Company shall provide all
notices, assurances and support required by any Company Contract
relating to any Proprietary Asset in order to ensure that no
condition of default or breach under such Company Contract occurs
which could result in, or could increase the likelihood of, (A)
any transfer or disclosure by the Company of any source code
materials or other Proprietary Asset, or (B) a release from any
escrow of any source code material or other Proprietary Asset
which has been deposited or is required to be deposited in escrow
under the terms of such Escrow Contract; and (v) the Company
shall (to the extent requested by Parent) cause its officers to
report regularly to Parent concerning the status of the Company's
business.
36
(b) During the Pre-Closing Period, the Company shall
not (without the prior written consent of Parent, which consent
shall not be unreasonably withheld or delayed):
(i) declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares
of capital stock, or repurchase, redeem or otherwise reacquire
any shares of capital stock or other securities except for
repurchases from employees following their termination pursuant
to the terms of their existing stock option or stock purchase
agreements, which agreements are disclosed on Part 4.2(b)(i) of
the Company Disclosure Schedule;
(ii) sell, issue, grant or authorize the
issuance or grant of (A) any capital stock or other security, (B)
any option, call, warrant or right to acquire any capital stock
or other security, or (C) any instrument convertible into or
exchangeable for any capital stock or other security (except (1)
pursuant to the 1996 Employee Stock Purchase Plan, (2) the
Company may issue Company Common Stock upon the valid exercise of
Company Options outstanding as of the date of this Agreement and
(3) the Company may grant Company Options under the Company Stock
Plans to purchase up to an additional 120,000 shares of Company
Common Stock after the date hereof and may issue Company Common
Stock upon the exercise thereof, which shall have at least
exercise prices equal to the fair market value on the date of the
grant, consistent with past practice);
(iii) amend or waive any of its rights under, or
accelerate the vesting under, any provision of any of the
Company's stock option plans, any provision of any agreement
evidencing any outstanding stock option or any restricted stock
purchase agreement, or otherwise modify any of the terms of any
outstanding option, warrant or other security or any related
Contract;
(iv) amend or permit the adoption of any
amendment to its certificate of incorporation or bylaws or other
charter or organizational documents, or effect or become a party
to any merger, consolidation, share exchange, business
combination, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(v) except as disclosed in Part 2.1(a)(i) of the
Company Disclosure Schedule, form any subsidiary or acquire any
equity interest or other interest in any other Entity;
(vi) make any capital expenditure (except that
the Company may make capital expenditures that, when added to all
other capital expenditures made on behalf of the Company during
the Pre-Closing Period, do not exceed $100,000 in the aggregate;
once the Company has made aggregate capital expenditures that
exceed $100,000, it must seek Parent's consent for any additional
capital expenditures in increments of $25,000);
37
(vii) enter into or become bound by, or permit
any of the assets owned or used by it to become bound by, any
Material Contract, or amend or terminate, or waive or exercise
any material right or remedy under, any Material Contract;
(viii) acquire, lease or license any right or
other asset from any other Person or sell or otherwise dispose
of, or lease or license, any right or other asset to any other
Person (except in each case for immaterial assets acquired,
leased, licensed or disposed of by the Company in the ordinary
course of business and consistent with past practices), or waive
or relinquish any material right;
(ix) lend money to any Person, or incur or
guarantee any indebtedness (except for: (i) advances to
employees (other than to the Company's affiliates as identified
on Part 2.19 of the Company Disclosure Schedule) in each case not
to exceed $1,000 per employee, in the ordinary course of business
and in accordance with past practices and (ii) make borrowings up
to $1,000,000 under that certain credit line of the Company with
Silicon Valley Bank substantially on the terms described in Part
4.2(ix) of the Company Disclosure Schedule; provided, however,
that the Company shall (x) notify Parent prior to entering into
an agreement with Silicon Valley Bank relating to such credit
line, (y) provide Parent with a copy of the Company's executed
agreement with Silicon Valley Bank relating to such credit line
as soon as such an agreement is executed and (z) provide prompt
updates to Parent regarding each drawdown the Company makes under
such credit line, and in any event, to provide such updates no
later than two business days after each such drawdown);
(x) establish, adopt or amend any employee
benefit plan, pay any bonus (other than to non-officer employees
in the aggregate amount not to exceed $35,000) or make any
profit-sharing or similar payment to, or increase the amount of
the wages, salary, commissions, fringe benefits or other
compensation or remuneration payable to, any of its directors,
officers or employees;
(xi) hire any new employee having an annual
salary in excess of $100,000, or engage any consultant or
independent contractor for a period exceeding 30 days;
(xii) change any of its methods of accounting or
accounting practices in any respect, except as required by
generally accepted accounting principles, to the extent
consistent with past practices and after consultation with
Parent;
(xiii) make any Tax election except in the
ordinary course of business consistent with past practice or in
respect of which amounts are reflected or reserved against in the
most recent Company Unaudited Interim Balance Sheet;
(xiv) commence or settle any Legal Proceeding
other than in the ordinary course of business consistent with
past practice or in respect of settlements, to the extent the
38
amount of such settlement has been reflected or reserved against
in the Company Unaudited Interim Balance Sheet;
(xv) enter into any material transaction or take
any other material action outside the ordinary course of business
or inconsistent with past practices; or
(xvi) agree or commit to take any of the actions
described in clauses "(i)" through "(xv)" of this Section 4.2(b).
(c) During the Pre-Closing Period, the Company shall
give prompt notice to Parent of any event or occurrence that has
caused or is reasonably expected to cause any representation or
warranty made by it in this Agreement to become untrue or
inaccurate such that the condition set forth in Section 6.1 would
not be satisfied; provided, however that no such notification
shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of
the parties under this Agreement, except as specifically set
forth in this Agreement.
4.3 Operation of Parent's Business.
(a) During Pre-Closing Period, Parent shall not
(without the prior written consent of the Company, which consent
shall not be unreasonably withheld or delayed):
(i) declare or pay any dividend on or make any
other distribution (whether in cash, stock, equity securities or
property) in respect of any capital stock (other than ordinary
and routine cash dividends to its stockholders in accordance with
past practices), or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for any capital
stock;
(ii) sell, issue, grant or authorize the
issuance or grant of (A) any capital stock or other security, (B)
any option, call, warrant or right to acquire any capital stock
or other security, or (C) any instrument convertible into or
exchangeable for any capital stock or other security (except (1)
pursuant to the 1995 Employee Stock Purchase Plan, (2) Parent may
issue Parent Common Stock upon the valid exercise of Parent
Options outstanding as of the date of this Agreement, and (3)
Parent may grant Parent Options under the Parent Stock Plans to
purchase up to an additional 240,000 shares of Parent Common
Stock after the date hereof and may issue Parent Common Stock
upon the exercise thereof);
(iii) amend or waive any of its rights under, or
accelerate the vesting under, any provision of any of Parent's
stock option plans, any provision of any agreement evidencing any
outstanding stock option or any restricted stock purchase
agreement, or otherwise modify any of the terms of any
outstanding option, warrant or other security or any related
Contract except for amendments to Parent's Stock Plans to
increase the number of shares subject to issuance pursuant to
such Parent's Stock Plans;
39
(iv) amend or permit the adoption of any
amendment to its certificate of incorporation or bylaws or other
charter or organizational documents or effect or become a party
to any merger, consolidation, share exchange, or business
combination;
(v) materially change its accounting methods,
principles or practices, except as required by generally accepted
accounting principles;
(vi) take any action, or permit any action to be
taken, which would result in a failure to maintain the listing
and trading of Parent Common Stock on Nasdaq National Market
System;
(vii) make any Tax election except in the
ordinary course of business consistent with past practice or in
respect of which amounts are reflected or reserved against in the
most recent Parent Unaudited Interim Balance Sheet;
(viii) commence or settle any Legal Proceeding
other than in the ordinary course of business consistent with
past practice or in respect of settlements, to the extent the
amount of such settlement has been reflected or reserved against
in the Parent Unaudited Interim Balance Sheet;
(ix) enter into any material transaction or take
any other material action outside the ordinary course of business
or inconsistent with past practices; or
(x) agree or commit to take any of the actions
described in clauses "(i)" through "(ix)" of this Section 4.3(a).
(b) During the Pre-Closing Period, Parent shall give
prompt notice to the Company of any event or occurrence that has
caused or is reasonably expected to cause any representation or
warranty made by it in this Agreement to become untrue or
inaccurate such that the condition set forth in Section 7.1 would
not be satisfied; provided, however that no such notification
shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
4.4 No Solicitation.
(a) The Company shall not directly or indirectly, and
shall not authorize or permit any Representative of the Company
directly or indirectly to, (i) solicit, initiate, encourage or
induce the making, submission or announcement of any Acquisition
Proposal or take any action that could reasonably be expected to
lead to an Acquisition Proposal, (ii) furnish any information
regarding the Company to any Person in connection with or in
response to an Acquisition Proposal, (iii) engage in discussions
or negotiations with any Person with respect to any Acquisition
Proposal, (iv) approve, endorse or recommend any Acquisition
Proposal or (v) enter into any letter of intent or similar
document or any Contract contemplating or otherwise relating to
any Acquisition Transaction; provided, however, prior to the
40
approval and adoption of this Agreement and approval of the
Merger by the Required Company Stockholder Vote, no provision of
this Agreement shall prohibit the Company from furnishing
nonpublic information regarding the Company to, or entering into
discussions and participating in negotiations with, any Person in
response to an Acquisition Proposal that is submitted by such
Person (and not then withdrawn) if (A) neither the Company nor
any of the Representatives of the Company shall have violated any
of the restrictions set forth in this Section 4.4, (B) the Board
of Directors of the Company concludes in good faith, after
consultation with outside legal counsel, that such action is
required in order for the Board of Directors of the Company to
comply with its fiduciary obligations to the Company's
stockholders under applicable law, (C) concurrently with
furnishing any such nonpublic information to, or entering into
discussions or negotiations with, such Person, the Company gives
Parent written notice of the identity of such Person and of the
Company's intention to furnish nonpublic information to, or enter
into discussions or negotiations with, such Person, and the
Company receives from such Person an executed confidentiality
agreement containing customary and reasonable limitations on the
use and disclosure of all nonpublic written and oral information
furnished to such Person by or on behalf of the Company and (D)
concurrently with furnishing any such nonpublic information to
such Person, the Company furnishes such nonpublic information to
Parent (to the extent such nonpublic information has not been
previously furnished by the Company to Parent). Without limiting
the generality of the foregoing, the Company acknowledges and
agrees that any violation of any of the restrictions set forth in
the preceding sentence by any Representative of the Company,
whether or not such Representative is purporting to act on behalf
of the Company, shall be deemed to constitute a breach of this
Section 4.4 by the Company.
(b) The Company shall promptly advise Parent orally
and in writing of any Acquisition Proposal (including the
identity of the Person making or submitting such Acquisition
Proposal and the terms thereof) that is made or submitted by any
Person during the Pre-Closing Period. The Company shall keep
Parent fully informed with respect to the status of any such
Acquisition Proposal and any modification or proposed
modification thereto.
5. Additional Covenants of the Parties
5.1 Registration Statement; Joint Proxy Statement.
(a) As promptly as practicable after the date of this
Agreement, Parent and the Company shall prepare and cause to be
filed with the SEC the Joint Proxy Statement and Parent shall
prepare and cause to be filed with the SEC the Form S-4
Registration Statement, in which the Joint Proxy Statement will
be included as a prospectus. Each of Parent and the Company
shall use all reasonable efforts to cause the Form S-4
Registration Statement and the Joint Proxy Statement to comply
with the rules and regulations promulgated by the SEC, to respond
promptly to any comments of the SEC or its staff and to have the
Form S-4 Registration Statement declared effective under the
Securities Act as promptly as practicable after it is filed with
the SEC. Parent will use all reasonable efforts to cause the
Joint Proxy Statement to be mailed to Parent's stockholders, and
the Company will use all reasonable efforts to cause the Joint
Proxy Statement to be mailed to the Company's stockholders, as
promptly as practicable after the Form S-4 Registration Statement
is declared effective under the Securities Act. The parties
41
shall promptly furnish to the other party all information
concerning itself, its stockholders and its affiliates that may
be required or reasonably requested in connection with any action
contemplated by this Section 5.1. If any event relating to the
Company occurs, or if the Company becomes aware of any
information, that should be disclosed in an amendment or
supplement to the Form S-4 Registration Statement or the Joint
Proxy Statement, then the Company shall promptly inform Parent
thereof and shall cooperate with Parent in filing such amendment
or supplement with the SEC and, if appropriate, in mailing such
amendment or supplement to the stockholders of the Company.
(b) Prior to the Effective Time, Parent shall use
reasonable efforts to obtain all regulatory approvals needed to
ensure that the Parent Common Stock to be issued in the Merger:
(i) will be registered or qualified under the securities law of
every jurisdiction of the United States in which any registered
holder of Company Common Stock has an address of record on the
record date for determining the stockholders entitled to notice
of and to vote at the Company Stockholders' Meeting, and (ii)
will be approved for quotation at the Effective Time on the
Nasdaq National Market; provided, however, that Parent shall not
be required (A) to qualify to do business as a foreign
corporation in any jurisdiction in which it is not now qualified
or (B) to file a general consent to service of process in any
jurisdiction.
(c) None of the information to be supplied by or on
behalf of the parties for inclusion in the Form S-4 Registration
Statement will, at the time the Form S-4 Registration Statement
becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which
they are made, not misleading. None of the information to be
supplied by or on behalf of the parties for inclusion in the
Joint Proxy Statement will, at the time the Joint Proxy Statement
is mailed to the stockholders of the Company, at the time of the
Company Stockholders' Meeting or as of the Effective Time,
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. The
Joint Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules
and regulations promulgated by the SEC thereunder, except that no
representation or warranty is made by Parent with respect to
statements made or incorporated by reference therein based on
information supplied by the Company for inclusion or
incorporation by reference in the Joint Proxy Statement and no
representation or warranty is made by the Company with respect to
statements made or incorporated by reference therein based on
information supplied by Parent for inclusion or incorporation by
reference in the Joint Proxy Statement.
5.2 Company Stockholders' Meeting.
(a) The Company shall take all action necessary under
all applicable Legal Requirements to call, give notice of,
convene and hold a meeting of the holders of Company Common Stock
to consider, act upon and vote upon the approval of this
Agreement and of the Merger (the "Company Stockholders'
Meeting"). The Company Stockholders' Meeting will be held as
promptly as practicable and in any event within 45 days after the
Form S-4 Registration Statement is declared effective under the
Securities Act. The Company shall ensure that the Company
42
Stockholders' Meeting is called, noticed, convened, held and
conducted, and that all proxies solicited in connection with the
Company Stockholders' Meeting are solicited, in compliance with
all applicable Legal Requirements.
(b) Subject to Section 5.2(c): (i) the Board of
Directors of the Company shall unanimously recommend that the
Company's stockholders vote in favor of and approve and adopt
this Agreement and approve the Merger at the Company
Stockholders' Meeting; (ii) the Joint Proxy Statement shall
include a statement to the effect that the Board of Directors of
the Company has unanimously recommended that the Company's
stockholders vote in favor of and approve and adopt this
Agreement and approve the Merger at the Company Stockholders'
Meeting; and (iii) neither the Board of Directors of the Company
nor any committee thereof shall withdraw, amend or modify, or
propose or resolve to withdraw, amend or modify, in a manner
adverse to Parent, the unanimous recommendation of the Board of
Directors of the Company that the Company's stockholders vote in
favor of and approve and adopt this Agreement and approve the
Merger. For purposes of this Agreement, said recommendation of
the Board of Directors of the Company shall be deemed to have
been modified in a manner adverse to Parent if said
recommendation shall no longer be unanimous.
(c) Notwithstanding any other provision in this
Agreement, prior to the approval of this Agreement by the
Required Company Stockholder Vote, if a Superior Offer is made to
the Company and is not withdrawn, the Board of Directors of the
Company may, in light of the Superior Offer, to the extent it
determines in good faith, after consultation with outside legal
counsel, that it is required to do so in order to comply with its
fiduciary duties to the Company's stockholders under applicable
law, withdraw or modify its approval or recommendation of this
Agreement and the Merger or approve or recommend such Superior
Offer; provided that, in so withdrawing or modifying its approval
or recommendation of this Agreement and the Merger and/or
recommending or approving a Superior Offer, neither the Company
nor its Representatives shall have breached Section 4.4,
provided, further, that the Company may refrain from soliciting
proxies from its stockholders with respect to this Agreement and
the Merger, in which event, however, the Company shall, subject
to compliance with applicable law: (i) immediately deliver a
copy of a complete, accurate and current list of the Company's
stockholders to Parent; and (ii) upon the request of Parent,
include in the materials mailed by the Company to the Company's
stockholders with respect to calling and giving notice of the
Company Stockholders' Meeting, proxy solicitation materials that
have been prepared by Parent in accordance with the Exchange Act.
To the extent that there is no temporary restraining order,
preliminary or permanent injunction or other final and
nonappealable order, decree or ruling issued by any court of
competent jurisdiction which remains in effect and which has the
effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, the Company shall remain obligated and
nothing shall limit the Company's obligation under Section 5.2(a)
to call, give notice of, include Parent's proxy solicitation
materials in the notice materials mailed by the Company to the
Company's stockholders, convene and hold the Company
Stockholders' Meeting and to cause the Company's stockholders to
take a final vote on this Agreement and the Merger (regardless of
whether the unanimous recommendation of the Board of Directors of
the Company shall have been withdrawn, amended or modified).
43
5.3 Parent Stockholders' Meeting.
(a) Parent shall take all action necessary under all
applicable Legal Requirements to call, give notice of, convene
and hold a meeting of the holders of Company Common Stock to
consider and vote upon the issuance of Parent Common Stock in the
Merger (the "Parent Stockholders' Meeting"). The Parent
Stockholders' Meeting will be held as promptly as practicable and
in any event within 45 days after the Form S-4 Registration
Statement is declared effective under the Securities Act;
provided, however, that notwithstanding the foregoing, nothing in
this Section 5.3 shall obligate Parent to call, give notice of,
convene or hold a Parent Stockholders' Meeting (i) if the holders
of the Company Common Stock do not approve and adopt this
Agreement and approve the Merger or (ii) if, prior to the time
the Parent Stockholders' Meeting is scheduled to be held, there
is a Material Adverse Effect on the Company that arose from
(A) the Company's breach of or failure to perform its covenants
as set forth in Sections 4 and 5 hereof, or (B) the Company's
breach of or inaccuracy of any of its representations and
warranties as set forth in Section 2 that resulted from facts,
circumstances, events or conditions which existed at any time
prior to and through the date of this Agreement.
(b) (i) The Board of Directors of Parent shall
unanimously recommend that Parent's stockholders vote in favor of
the issuance of Parent Common Stock in the Merger; (ii) the Joint
Proxy Statement shall include a statement to the effect that the
Board of Directors of Parent has unanimously recommended that
Parent's stockholders vote in favor of the issuance of Parent
Common Stock in the Merger; and (iii) neither the Board of
Directors of Parent nor any committee thereof shall withdraw,
amend or modify, or propose or resolve to withdraw, amend or
modify, in a manner adverse to the Company, the unanimous
recommendation of the Board of Directors of Parent that Parent's
stockholders vote in favor of the issuance of Parent Common Stock
in the Merger. For purposes of this Agreement, said
recommendation of Parent's Board of Directors shall be deemed to
have been modified in a manner adverse to the Company if said
recommendation shall no longer be unanimous.
5.4 Regulatory Approvals. The Company and Parent shall
use all reasonable efforts to file, as soon as practicable after
the date of this Agreement, all notices, reports and other
documents required to be filed with any Governmental Body with
respect to the Merger and the other transactions contemplated by
this Agreement, and to submit promptly any additional information
requested by any such Governmental Body.
44
5.5 Stock Options, Warrants, and Employee Stock Purchase
Plans.
(a) Subject to Section 5.5(b), at the Effective Time
by virtue of the Merger and without the need for any further
corporate action, all rights with respect to Company Common Stock
under each Company Option then outstanding shall be converted
into and become rights with respect to Parent Common Stock, and
Parent shall assume each such Company Option in accordance with
the terms of the stock option plan (as in effect as of the date
of this Agreement) under which it was issued and the stock option
agreement by which it is evidenced. From and after the Effective
Time, (i) each Company Option assumed by Parent may be exercised
solely for shares of Parent Common Stock, (ii) the number of
shares of Parent Common Stock subject to each such Company Option
shall be equal to the number of shares of Company Common Stock
subject to such Company Option immediately prior to the Effective
Time multiplied by the Exchange Ratio, rounding down to the
nearest whole share (with cash, less the applicable exercise
price, being payable for any fraction of a share), (iii) the per
share exercise price under each such Company Option shall be
adjusted by dividing the per share exercise price under such
Company Option by the Exchange Ratio and rounding up to the
nearest cent and (iv) any restriction on the exercise of any such
Company Option shall continue in full force and effect and the
term, exercisability, vesting schedule and other provisions of
such Company Option shall otherwise remain unchanged; provided,
however, that each Company Option assumed by Parent in accordance
with this Section 5.5(a) shall, in accordance with its terms, be
subject to further adjustment as appropriate to reflect any stock
split, stock dividend, reverse stock split, reclassification,
recapitalization or other similar transaction subsequent to the
Effective Time. Parent shall file with the SEC, no later than 5
days after the Effective Time, a registration statement on Form
S-8 relating to the shares of Parent Common Stock issuable with
respect to the Company Options assumed by Parent in accordance
with this Section 5.5(a). The adjustments provided herein with
respect to any Company Option that are "incentive stock options"
as defined in Section 422 of the Code shall be and are intended
to be effected in a manner which is consistent with Section
424(a) of the Code.
(b) Notwithstanding anything to the contrary
contained in this Section 5.5, in lieu of assuming outstanding
Company Options in accordance with Section 5.5(a), Parent may, at
its election, cause such outstanding Company Options to be
replaced by issuing reasonably equivalent replacement stock
options in substitution therefor.
(c) The Company shall take all action that may be
necessary (under the plans pursuant to which Company Options are
outstanding and otherwise) to effectuate the provisions of this
Section 5.5 and to ensure that, from and after the Effective
Time, holders of Company Options have no rights with respect
thereto other than those specifically provided in this Section
5.5. As soon as practicable after the Effective Time, Parent
shall deliver to the participants in the Company Stock Plans
appropriate notice setting forth such participants' rights
pursuant thereto and the assumption of such Company Stock Plans
by Parent as described in Section 5.5(a).
(d) At the Effective Time, all rights with respect to
the Company Warrants that are then outstanding shall be converted
into and become rights with respect to Parent Common Stock, and
Parent shall assume each Company Warrant in accordance with the
terms (as in effect as of the date hereof) of such Company
Warrants. From and after the Effective Time, (i) each Company
45
Warrant assumed by Parent may be exercised solely for shares of
Parent Common Stock, (ii) the number of shares of Parent Common
Stock subject to each such Company Warrant shall be equal to the
number of shares of Company Common Stock subject to such Company
Warrant immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounding down to the nearest whole share (with
cash, less the applicable exercise price, being payable for any
fraction of a share), (iii) the per share exercise price under
each such Company Warrant shall be adjusted by dividing the per
share exercise price under such Company Warrant by the Exchange
Ratio and rounding up to the nearest cent and (iv) any
restriction on the exercise of any such Company Warrant shall
continue in full force and effect and the term, exercisability,
vesting schedule and other provisions of such Company Warrant
shall otherwise remain unchanged; provided, however, that each
Company Warrant assumed by Parent in accordance with this Section
5.5(d) shall, in accordance with its terms, be subject to further
adjustment as appropriate to reflect any stock split, stock
dividend, reverse stock split, reclassification, recapitalization
or other similar transaction subsequent to the Effective Time.
The Company shall take all action that may be necessary (under
the Company Warrants and otherwise) to effectuate the provisions
of this Section 5.5(d) and to ensure that, from and after the
Effective Time, holders of Company Warrants have no rights with
respect thereto other than those specifically provided herein.
As soon as practicable after the Effective Time, Parent shall
deliver to the Company Warrant holders appropriate notice setting
forth such holders' rights pursuant thereto and the assumption of
such Company Warrants by Parent as described in this Section
5.5(d).
(e) The Company shall terminate the Company's 1996
Employee Stock Purchase Plan ("ESPP") by having its Board of
Directors amend the ESPP as necessary to provide that: (i) any
shares of Company Common Stock shall be purchased under the ESPP
on a new "Exercise Date" (as such term is defined in the ESPP)
set by the Board of Directors of the Company, which new Exercise
Date shall be on the last trading day immediately prior to the
Effective Time, or such earlier time as the Board of Directors of
the Company shall specify and (ii) immediately following such
purchase of shares of Company Common Stock on the new Exercise
Date, the ESPP shall terminate.
(f) Parent shall assume all Stock Purchase Agreements
and the Company shall assign its repurchase rights under such
Stock Purchase Agreements to Parent pursuant to Section 10 of the
Stock Purchase Agreements. The Stock Purchase Agreements so
assumed by Parent under this Agreement will continue to have, and
be subject to, the same terms and conditions set forth in the
applicable Stock Purchase Agreement by which it is evidenced
(including, without limitation, any repurchase rights)
immediately prior to the Effective Time, except that (i) the
Stock Purchase Agreement will be for that number of whole shares
(and no fractional shares) of Parent Common Stock equal to the
product of the number of shares of Company Common Stock that have
not vested 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 (ii) the per share repurchase
price for the unvested shares of Parent Common Stock subject to
the repurchase right will be equal to the quotient determined by
dividing the purchase price per share of Company Common Stock at
which such Company Common Stock was purchased under the Stock
Purchase Agreement by the Exchange Ratio, rounded up to the
nearest whole cent.
46
5.6 Indemnification of Officers and Directors.
(a) From the Effective Time, Parent will, and will
cause the Surviving Corporation to, fulfill and honor in all
respects the obligations of the Company pursuant to (i) each
indemnification agreement in effect at such time between the
Company and each person who is or was a director or officer of
the Company at or prior to the Effective Time and (ii) any
indemnification provisions under the Company's Restated
Certificate of Incorporation or Bylaws as each is in effect on
the date hereof (the persons to be indemnified pursuant to the
agreements or provisions referred to in clauses (i) and (ii) of
this Section 5.6 shall be referred to as, individually, the
"Indemnified Party.") The Certificate of Incorporation and
Bylaws of the Surviving Corporation shall contain the provisions
with respect to indemnification and exculpation from liability
set forth in the Company's Certificate of Incorporation and
Bylaws on the date of this Agreement which provisions shall not
be amended, repealed or otherwise modified for a period of six
years after the Effective Time in any manner that would adversely
affect the rights thereunder of any Indemnified Party, unless
required by applicable law. In addition, the terms of the
existing indemnification agreements entered into by the Company
and its officers and directors as of the date of this Agreement
shall not be terminated by Parent or the Surviving Corporation
for a period of six years after the Effective Time, unless
required by applicable law.
(b) From the Effective Time until the third
anniversary of the Effective Time, the Surviving Corporation
shall maintain in effect, for the benefit of the current
directors and officers of the Company with respect to acts or
omissions occurring prior to the Effective Time, the existing
policy of directors' and officers' liability insurance maintained
by the Company as of the date of this Agreement (the "Existing
Policy"); provided, however, that (i) the Surviving Corporation
may substitute for the Existing Policy a policy or policies of
comparable coverage, and (ii) the Surviving Corporation shall not
be required to pay an annual premium for the Existing Policy (or
for any substitute policies) in excess of $150,000. In the event
any future annual premium for the Existing Policy (or any
substitute policies) exceeds $150,000, the Surviving Corporation
shall be entitled to reduce the amount of coverage of the
Existing Policy (or any substitute policies) to the amount of
coverage that can be obtained for a premium equal to $150,000.
(c) This Section 5.6 shall survive the consummation
of the Merger at the Effective Time and is intended to be for the
benefit of the Company, Parent, the Surviving Corporation and
each Indemnified Party and such Indemnified Party's heirs and
representatives and shall be binding on all successors and
assigns of Parent and the Surviving Corporation.
5.7 Pooling of Interests. Each of the Company and Parent
agrees (a) not to take any action during the Pre-Closing Period
that would adversely affect the ability of Parent to account for
the Merger as a "pooling of interests," and (b) to use all
reasonable efforts to attempt to ensure that none of its
"affiliates" (as that term is used in Rule 145 under the
Securities Act) takes any action that could adversely affect the
ability of Parent to account for the Merger as a "pooling of
interests."
5.8 Additional Agreements.
47
(a) Subject to Section 5.8(b), Parent and the Company
shall use all reasonable efforts to take, or cause to be taken,
all actions necessary to consummate the Merger and make effective
the other transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, but subject to Section
5.8(b), each party to this Agreement (i) shall make all filings
(if any) and give all notices (if any) required to be made and
given by such party in connection with the Merger and the other
transactions contemplated by this Agreement, (ii) shall use all
reasonable efforts to obtain each Consent (if any) required to be
obtained (pursuant to any applicable Legal Requirement or
Contract, or otherwise) by such party in connection with the
Merger or any of the other transactions contemplated by this
Agreement, (iii) shall use all reasonable efforts to lift any
restraint, injunction or other legal bar to the Merger, (iv)
shall execute and deliver any additional instruments, documents,
certificates or agreements necessary to consummate the Merger and
the other transactions contemplated by this Agreement and to
carry out the purposes and intent of this Agreement, and (v)
shall fulfill their respective obligations under Sections 6 and
7. Each of the Company and Parent shall promptly deliver to the
other party a copy of each such filing made, each such notice
given and each such Consent obtained by the other party during
the Pre-Closing Period.
(b) Notwithstanding anything to the contrary
contained in this Agreement, Parent shall not have any obligation
under this Section 5.8: (i) to dispose or cause any of its
Subsidiaries to dispose of any assets, or to commit to cause the
Company to dispose of any assets; (ii) to discontinue or cause
any of its Subsidiaries to discontinue offering any product, or
to commit to cause the Company to discontinue offering any
product; (iii) to license or otherwise make available, or cause
any of its Subsidiaries to license or otherwise make available,
to any Person, any technology, software or other Proprietary
Asset, or to commit to cause the Company to license or otherwise
make available to any Person any technology, software or other
Proprietary Asset the Company is not already required to license
or otherwise make available under Contracts existing as of the
date of this Agreement and identified on Part 2.9 of the Company
Disclosure Schedule; or (iv) to hold separate or cause any of its
Subsidiaries to hold separate any assets or operations (either
before or after the Closing Date), or to commit to cause the
Company to hold separate any assets or operations.
5.9 Disclosure. Parent and the Company shall consult with
each other before issuing any press release or otherwise making
any public statement with respect to the Merger or any of the
other transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, neither the Company nor
Parent shall, nor shall either of them permit any of their
respective Representatives to, make any disclosure regarding the
Merger or any of the other transactions contemplated by this
Agreement unless (a) the other party shall have approved such
disclosure or (b) the disclosing party shall have been advised in
writing by its outside legal counsel that such disclosure is
required by applicable law.
5.10 Affiliate Agreements. The Company shall use all
reasonable efforts to cause each Person identified in Part 2.19
of the Company Disclosure Schedule and each other Person who is
or becomes an "affiliate" (as that term is used in Rule 145 under
the Securities Act) of the Company to execute and deliver to
Parent, prior to the date of the mailing of the Joint Proxy
Statement to the Company's stockholders, an Affiliate Agreement
in the form of Exhibit C.
48
5.11 Tax Matters. At or prior to the Closing, the Company
and Parent shall execute and deliver to Cooley Godward llp and
Wilson Sonsini Goodrich & Rosati, a Professional Corporation tax
representation letters in customary form. In addition, the
Company shall use all reasonable efforts to obtain and deliver to
Parent, as soon as practicable after the date of this Agreement,
Continuity of Interest Certificates in the form of Exhibit D,
signed by Phillip Lamoreaux. Parent and the Company shall use
all reasonable efforts prior to the Effective Time to cause the
Merger to qualify as a tax free reorganization under Section
368(a)(1) of the Code and each shall use reasonable efforts to
obtain the opinions of counsel referred to in Sections 6.5(e) and
7.5(a) hereof.
5.12 Comfort Letters. The Company shall use all
reasonable efforts to cause Ernst & Young LLP, certified public
accountants to the Company, to provide comfort letters dated the
date on which the Form S-4 Registration Statement shall become
effective and reasonably acceptable in form and substance to
Parent, relating to the performance of Ernst & Young LLP of
customary procedures, including a review of interim financial
statement information as described in SAS No. 71, with respect to
the financial statements of the Company contained in or
incorporated by reference in the Form S-4 Registration Statement.
Parent shall use all reasonable efforts to cause Price
Waterhouse LLP, certified public accountants to Parent, to
provide comfort letters dated the date on which the Form S-4
Registration Statement shall become effective and reasonably
acceptable in form and substance to the Company, relating to the
performance of Price Waterhouse LLP of customary procedures,
including a review of interim financial statement information as
described in SAS No. 71, with respect to the financial statements
of Parent contained in or incorporated by reference in the Form
S-4 Registration Statement.
5.13 Resignation of Officers and Directors. The Company
shall use all reasonable efforts to obtain and deliver to Parent
prior to the Closing the resignation of each officer and director
of the Company.
5.14 Appointment of Additional Directors. As of the
Effective Time, the Board of Directors of Parent shall have taken
appropriate action to cause the number of directors comprising
the full Board of Directors of Parent to be increased to seven
(7) persons, and Dr. Phillip Berman and Dr. David Lapan to be
appointed as of the Effective Time as new members of the Board of
Directors, each to serve until their respective successors are
duly elected, appointed and qualified.
5.15 Consents. As soon as practicable after the date
hereof, the Company will use its best efforts to obtain all
material Consents, waivers and approvals required to be obtained
in connection with the Merger and the other transactions
contemplated by this Agreement (including the Consents identified
in Part 5.15 of the Company Disclosure Schedule).
5.16 Financial Information and Reporting. During the Pre-
Closing Period, each of Parent and the Company will furnish to
the other, as soon as practicable after the end of such party's
monthly accounting periods, and in any event within 21 days
thereafter, a consolidated balance sheet of such party, as of the
end of each such monthly period, and a consolidated statement of
income and a consolidated statement of cash flows of such party,
49
for such period and for the current fiscal year to date, prepared
in accordance with generally accepted accounting principles, with
the exception that no notes need be attached to such statements.
6. Conditions Precedent to Obligations of Parent and Merger Sub
The obligations of Parent and Merger Sub to effect the
Merger and otherwise consummate the transactions contemplated by
this Agreement are subject to the satisfaction, at or prior to
the Closing, of each of the following conditions:
50
6.1 Accuracy of Representations.
The representations and warranties of the Company
contained in this Agreement shall have been accurate in all
respects as of the date of this Agreement and shall be accurate
in all respects as of the Closing Date as if made on and as of
the Closing Date, except that any inaccuracies in such
representations and warranties will be disregarded if the
circumstances giving rise to all such inaccuracies (considered
individually and collectively) do not constitute a Material
Adverse Effect on the Company (it being understood that, for
purposes of determining the accuracy of such representations and
warranties (i) all "Material Adverse Effect" qualifications and
other materiality qualifications contained in such
representations and warranties shall be disregarded and (ii) any
update of or modification of the Company Disclosure Schedule made
or purported to have been made after the date of this Agreement
shall be disregarded).
6.2 Performance of Covenants. Each covenant or obligation
that the Company is required to comply with or to perform at or
prior to the Closing shall have been complied with and performed
in all material respects.
6.3 Effectiveness of Registration Statement. The Form S-4
Registration Statement shall have become effective in accordance
with the provisions of the Securities Act, and no stop order
shall have been issued by the SEC with respect to the Form S-4
Registration Statement.
6.4 Stockholder Approval. This Agreement shall have been
duly adopted and approved by the Required Company Stockholder
Vote, the Merger shall have been duly approved by the Required
Company Stockholder Vote and the issuance of Parent Common Stock
in the Merger shall have been duly approved by the required
Parent Stockholder Vote.
6.5 Agreements and Documents. Parent and the Company
shall have received the following agreements and documents, each
of which shall be in full force and effect:
(a) Affiliate Agreements in the form of Exhibit C,
executed by each Person who could reasonably be deemed to be an
"affiliate" of the Company (as that term is used in Rule 145
under the Securities Act ), which Affiliate Agreement shall also
contain customary continuity of interest representations;
(b) Accepted employment letters in the form of
Exhibit E, executed by the individuals identified on Exhibit F;
and none of the individuals identified on Exhibit F shall have
expressed an intention to terminate his employment with the
Company or to decline to accept employment with Parent;
(c) a letter from Ernst & Young llp, dated as of the
Closing Date and addressed to Parent, the Company and Price
Waterhouse llp, reasonably satisfactory in form and substance to
Parent and Price Waterhouse llp, to the effect that, after
reasonable investigation, Ernst & Young LLP is not aware of any
fact concerning the Company or any of the Company's stockholders
or affiliates that could preclude Parent from accounting for the
51
Merger as a "pooling of interests" in accordance with generally
accepted accounting principles, Accounting Principles Board
Opinion No. 16 and all published rules, regulations and policies
of the SEC;
(d) a letter from Price Waterhouse llp, dated as of
the Closing Date and addressed to Parent, reasonably satisfactory
in form and substance to Parent, to the effect that Parent may
account for the Merger as a "pooling of interests" in accordance
with generally accepted accounting principles, Accounting
Principles Board Opinion No. 16 and all published rules,
regulations and policies of the SEC;
(e) a legal opinion of Cooley Godward llp, dated as
of the Closing Date and addressed to Parent, to the effect that
the Merger will constitute a reorganization within the meaning of
Section 368 of the Code (it being understood that, in rendering
such opinion, Cooley Godward llp may rely upon the continuity of
interest representations and tax representation letters referred
to in this Agreement), provided, however, that if Cooley Godward
llp does not render such opinion or withdraws or modifies such
opinion, this condition shall nonetheless be deemed to be
satisfied if counsel to the Company renders such opinion to
Parent;
(f) a certificate executed on behalf of the Company
by its Chief Executive Officer confirming that the conditions set
forth in Sections 6.1, 6.2, 6.4 (as to the Required Company
Stockholder Vote only), 6.6, 6.8, and 6.9 have been duly
satisfied; and
(g) the written resignations of all officers and
directors of the Company, effective as of the Effective Time;
provided further that (i) the written resignations of Phillip
Berman, Cary Cole, and Henky Wibowo (the "Executives") shall also
contain provisions providing for the release by the Executives of
the Company's obligations under the Executives' existing
employment agreements with the Company and (ii) a voluntary
termination by the Executives of such employment agreements.
6.6 No Material Adverse Effect. No Material Adverse
Effect with respect to the Company shall have occurred since the
date of this Agreement (except for any Material Adverse Effect
that shall have been cured without such cure resulting or
reasonably being expected to result in a Material Adverse Effect
on the Company).
6.7 Listing. The shares of Parent Common Stock to be
issued in the Merger shall have been approved for listing
(subject to notice of issuance) on the Nasdaq National Market.
6.8 No Restraints. No temporary restraining order,
preliminary or permanent injunction or other order preventing the
consummation of the Merger shall have been issued by any court of
competent jurisdiction and remain in effect, and there shall not
be any Legal Requirement enacted or deemed applicable to the
Merger that makes consummation of the Merger illegal.
6.9 No Governmental Litigation. There shall not be
pending or threatened any Legal Proceeding in which a
Governmental Body is or has threatened to become a party or is
otherwise involved: (a) challenging or seeking to restrain or
52
prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement; (b) seeking to
prohibit or limit in any material respect Parent's ability to
vote, receive dividends with respect to or otherwise exercise
ownership rights with respect to the stock of the Surviving
Corporation; or (c) which would materially and adversely affect
the right of Parent, the Surviving Corporation or any Subsidiary
of Parent to own the assets or operate the business of the
Company.
7. Conditions Precedent to Obligation of the Company
The obligation of the Company to effect the Merger and
otherwise consummate the transactions contemplated by this
Agreement are subject to the satisfaction, at or prior to the
Closing, of the following conditions:
7.1 Accuracy of Representations.
The representations and warranties of Parent contained
in this Agreement shall have been accurate in all respects as of
the date of this Agreement and shall be accurate in all respects
as of the Closing Date as if made on and as of the Closing Date,
except that any inaccuracies in such representations and
warranties will be disregarded if the circumstances giving rise
to all such inaccuracies (considered individually and
collectively) do not constitute a Material Adverse Effect on
Parent (it being understood that, for purposes of determining the
accuracy of such representations and warranties (i) all "Material
Adverse Effect" qualifications and other materiality
qualifications contained in such representations and warranties
shall be disregarded and (ii) any update of or modification of
the Parent Disclosure Schedule made or purported to have been
made after the date of this Agreement shall be disregarded).
7.2 Performance of Covenants. All of the covenants and
obligations that Parent and Merger Sub are required to comply
with or to perform at or prior to the Closing shall have been
complied with and performed in all material respects.
7.3 Effectiveness of Registration Statement. The Form S-4
Registration Statement shall have become effective in accordance
with the provisions of the Securities Act, and no stop order
shall have been issued by the SEC with respect to the Form S-4
Registration Statement.
7.4 Stockholder Approval. This Agreement shall have been
duly approved and adopted by the Required Company Stockholder
Vote, the Merger shall have been duly approved by the Required
Company Stockholder Vote and the issuance of Parent Common Stock
in the Merger shall have been duly approved by the Required
Parent Stockholder Vote.
7.5 Documents. The Company shall have received the
following documents:
(a) a legal opinion of Wilson Sonsini Goodrich &
Rosati, a Professional Corporation dated as of the Closing Date,
to the effect that the Merger will constitute a reorganization
within the meaning of Section 368 of the Code (it being
understood that, in rendering such opinion, Wilson Sonsini
Goodrich & Rosati may rely upon the continuity of interest
53
representations and tax representation letters referred to in
this Agreement), provided, however, that if Wilson Sonsini
Goodrich & Rosati does not render such opinion or withdraws or
modifies such opinion, this condition shall nonetheless be deemed
to be satisfied if counsel to Parent renders such opinion to the
Company;
(b) a certificate executed on behalf of Parent by an
executive officer of Parent, confirming that conditions set forth
in Sections 7.1, 7.2, 7.4 (as to the Required Parent Stockholder
Vote only) 7.6 and 7.8 have been duly satisfied; and
(c) a letter from Price Waterhouse llp, dated as of
the Closing Date and addressed to the Company, Parent and Ernst &
Young llp, reasonably satisfactory in
form and substance to the Company and Ernst & Young llp, to the
effect that, after reasonable investigation, Price Waterhouse llp
is not aware of any fact concerning Parent or any of Parent's
stockholders or affiliates that could preclude Parent from
accounting for the Merger as a "pooling of interests" in
accordance with generally accepted accounting principles,
Accounting Principles Board Opinion No. 16 and all published
rules, regulations and policies of the SEC.
7.6 No Material Adverse Effect. No Material Adverse
Effect with respect to the Parent shall have occurred since the
date of this Agreement (except for any Material Adverse Effect
that shall have been cured without such cure resulting or
reasonably being expected to result in a Material Adverse Effect
on Parent).
7.7 Listing. The shares of Parent Common Stock to be
issued in the Merger shall have been approved for listing
(subject to notice of issuance) on the Nasdaq National Market.
7.8 No Restraints. No temporary restraining order,
preliminary or permanent injunction or other order preventing the
consummation of the Merger by the Company shall have been issued
by any court of competent jurisdiction and remain in effect, and
there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger by
the Company illegal.
8. Termination
8.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned prior to the
Effective Time (unless otherwise indicated below, whether before
or after approval and adoption of this Agreement and approval of
the Merger by the Required Company Stockholder Vote and whether
before or after approval of the issuance of Parent Common Stock
in the Merger by the Required Parent Stockholder Vote):
(a) by mutual written consent of Parent and the
Company;
(b) by either Parent or the Company if the Merger
shall not have been consummated by January 31, 1998, provided,
54
however, that the right to terminate this Agreement under this
Section 8.1(b) shall not be available to any party whose action
or failure to act has been a principal cause of or resulted in
the failure of the Merger to occur on or before such date and
such action or failure to act constitutes a breach of this
Agreement;
(c) by either Parent or the Company if a court of
competent jurisdiction or other Governmental Body shall have
issued a final and nonappealable order, decree or ruling, or
shall have taken any other action, having the effect of
permanently restraining, enjoining or otherwise prohibiting the
Merger;
(d) by either Parent or the Company if (i) the
Company Stockholders' Meeting (including any adjournments or
postponements thereof) shall have been held and completed and the
Company's stockholders shall have taken a final vote on a
proposal to approve and adopt this Agreement and to approve the
Merger and (ii) this Agreement shall not have been adopted and
approved and the Merger shall not have been approved at such
meeting by the Required Company Stockholder Vote (provided,
however, that the right to terminate this Agreement under Section
8.1(d) shall not be available to the Company where the failure to
obtain the Required Company Stockholder Vote shall have been
caused by the action or failure to act of the Company and such
action or failure to act constitutes a material breach by the
Company of this Agreement);
(e) by either Parent or the Company if (i) the Parent
Stockholders' Meeting (including any adjournments or
postponements thereof) shall have been held and completed and
Parent's stockholders shall have taken a final vote on the
issuance of Parent Common Stock in the Merger and (ii) the
issuance of Parent Common Stock in the Merger shall not have been
approved at such meeting by the Required Parent Stockholder Vote
(provided, however, that the right to terminate this Agreement
under Section 8.1(e) shall not be available to Parent where the
failure to obtain the Required Parent Stockholder Vote shall have
been caused by the action or failure to act of Parent and such
action or failure to act constitutes a material breach by Parent
of this Agreement);
(f) by Parent (at any time prior to the approval and
adoption of this Agreement and the approval of the Merger by the
Required Company Stockholder Vote) or by the Company (at any time
after (i) a Company Stockholders' Meeting has been held and
completed, (ii) a final vote on the proposal to approve and adopt
this Agreement and to approve the Merger has been taken at such
Company Stockholders' Meeting and (iii) the Required Company
Stockholder Vote has not been obtained at such Company
Stockholders' Meeting) if a Company Triggering Event shall have
occurred;
(g) by Parent if any of the Company's representations
and warranties contained in this Agreement shall be or shall have
become materially inaccurate, or if any of the Company's
covenants contained in this Agreement shall have been breached in
any material respect, in either case such that the conditions set
forth in Section 6.1, 6.2 or 6.6 would not be satisfied as of the
time such representation or warranty shall have become inaccurate
or as of the time of such breach; provided, however, that if an
inaccuracy in the Company's representations and warranties or a
breach of a covenant by the Company is curable by the Company and
the Company is continuing to exercise all reasonable efforts to
cure such inaccuracy or breach during the 45-day period
55
commencing upon delivery by Parent of a written notice to the
Company describing such inaccuracy or breach, then Parent may not
terminate this Agreement under this Section 8.1(g) on account of
such inaccuracy or breach until the end of such cure period (if
such inaccuracy or breach then remains uncured), and provided
further that Parent may not terminate this Agreement pursuant to
this Section 8.1(g) if it shall have materially breached this
Agreement (it being understood that (i) the cure period described
in this Section 8.1(g) shall in no event extend beyond January
31, 1998, and (ii) that any such cure shall not individually or
in the aggregate have or reasonably be expected to have a
Material Adverse Effect on the Company);
(h) by the Company if any of Parent's representations
and warranties contained in this Agreement shall be or shall have
become materially inaccurate, or if any of Parent's covenants
contained in this Agreement shall have been breached in any
material respect, in either case such that the conditions set
forth in Section 7.1, 7.2 or 7.6 would not be satisfied as of the
time such representation or warranty shall have become inaccurate
or as of the time of such breach; provided, however, that if an
inaccuracy in Parent's representations and warranties or a breach
of a covenant by Parent is curable by Parent and Parent is
continuing to exercise all reasonable efforts to cure such
inaccuracy or breach during the 45-day period commencing upon
delivery by the Company of a written notice to Parent describing
such inaccuracy or breach, then the Company may not terminate
this Agreement under this Section 8.1(h) on account of such
inaccuracy or breach until the end of such cure period (if such
inaccuracy or breach then remains uncured), and provided further
that the Company may not terminate this Agreement pursuant to
this Section 8.1(h) if it shall have materially breached this
Agreement (it being understood that (i) the cure period described
in this Section 8.1(h) shall in no event extend beyond January
31, 1998 and (ii) that any such cure shall not individually or in
the aggregate have or reasonably be expected to have a Material
Adverse Effect on Parent); or
(i) by Parent, if (i) any Person who has signed a
Voting Agreement in favor of Parent, in the form of Exhibit G,
shall have breached, withdrawn, amended or modified in a manner
adverse to Parent, such Voting Agreement, (ii) if, prior to the
Effective Time, any Person who has signed a Voting Agreement
challenges the validity of such Voting Agreement, (iii) if any
Person who has signed a Voting Agreement in any way disposes of
or encumbers any of the shares of Company Common Stock owned
directly or beneficially by such Person as of the date of this
Agreement, or (iv) if any Person who has signed a Voting
Agreement votes in favor of an Acquisition Proposal.
8.2 Effect of Termination. In the event of the
termination of this Agreement as provided in Section 8.1, this
Agreement shall be of no further force or effect and shall
relieve Parent, Merger Sub and the Company of any liability or
obligation under this Agreement; provided, however, that the
liabilities and obligations under (i) Sections 5.9, 8.2, 8.3 and
9 shall survive the termination of this Agreement and shall
remain in full force and effect, and (ii) the termination of this
Agreement shall not relieve any party from any liability for any
breach of any representation, warranty or covenant contained in
this Agreement.
56
8.3 Expenses; Termination Fees.
(a) Except as set forth in this Section 8.3, all fees
and expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement shall be paid by the
party incurring such expenses, whether or not the Merger is
consummated; provided, however, that Parent and the Company shall
share equally all fees and expenses, other than attorneys' fees,
incurred in connection with the filing, printing and mailing of
the Form S-4 Registration Statement and the Joint Proxy Statement
and any amendments or supplements thereto; and provided further
that to the extent that the aggregate of the fees and expenses
specified in Section 2.27 exceeds $500,000 (the amount of such
excess shall be referred to herein as "Excess Company Merger
Expenses"), the adjustment set forth in Section 1.5(e) shall be
made.
(b) If this Agreement is terminated:
(i) pursuant to Section 8.1(d) by Parent or the
Company (and if by Parent, only if at the time the Company
Stockholders' Meeting was held, there existed a publicly
announced and pending Acquisition Proposal),
(ii) pursuant to Section 8.1(f) by Parent or the
Company (and if by Parent, unless the occurrence of a Company
Triggering Event is attributable to Parent's failure to meet the
condition set forth in Section 7.6 (but only if such failure to
meet the condition set forth in Section 7.6 arose from (A)
Parent's breach of or failure to perform its covenants as set
forth in Sections 4 and 5, or (B) Parent's breach of or
inaccuracy of any of its representations and warranties as set
forth in Section 3 that resulted from facts, circumstances,
events or conditions which existed at any time prior to and
through the date of this Agreement)),
(iii) pursuant to Section 8.1(h) by the Company
(provided that such termination under Section 8.1(h) is not as a
result of (A) Parent's breach of or failure to perform its
covenants as set forth in Sections 4 and 5, or (B) Parent's
breach of or inaccuracy of any of its representations and
warranties as set forth in Section 3 that resulted from facts,
circumstances, events or conditions which existed at any time
prior to and through the date of this Agreement), or
(iv) pursuant to Section 8.1(i),
and if an Acquisition Transaction is consummated within twelve
months from the date this Agreement is terminated, then the
Company shall pay to Parent within two business days following
the consummation of such Acquisition Transaction, the sum of
$1,000,000 by wire transfer of immediately available funds to an
account designated by Parent.
(c) If this Agreement is terminated:
57
(i) pursuant to Section 8.1(b) by Parent (unless
failure to consummate the Merger is attributable to the
restrictions or restraints imposed by any Governmental Body or
because the conditions set forth in Sections 6.3, 6.5(a), 6.5(b),
6.5(c), 6.5(d), (but only if such condition was not met due to a
change in the Company's situation between the date of this
Agreement and the termination date), 6.5(g), and 6.6 (but only if
such Material Adverse Effect arose from (A) the Company's breach
of or failure to perform its covenants as set forth in Sections 4
and 5, or (B) the Company's breach of or inaccuracy of any of its
representations and warranties as set forth in Section 2 that
resulted from facts, circumstances, events or conditions which
existed at any time prior to and through the date of this
Agreement) have not been met),
(ii) pursuant to Section 8.1(e) by either Parent
or the Company (and if by the Company, unless the condition set
forth in Section 6.6 has not been met by the Company at the time
the Parent Stockholders' Meeting, during which the Required
Parent Stockholder Vote was not obtained, is held (but only if
such failure to meet the condition set forth in Section 6.6 arose
from (A) the Company's breach of or failure to perform its
covenants as set forth in Sections 4 and 5, or (B) the Company's
breach of or inaccuracy of any of its representations and
warranties as set forth in Section 2 that resulted from facts,
circumstances, events or conditions which existed at any time
prior to and through the date of this Agreement)),
(iii) pursuant to Section 8.1(g) by Parent
(provided that such termination under Section 8.1(g) is not as a
result of (A) the Company's breach of or failure to perform its
covenants as set forth in Sections 4 and 5, or (B) the Company's
breach of or inaccuracy of any of its representations and
warranties as set forth in Section 2 that resulted from facts,
circumstances, events or conditions which existed at any time
prior to and through the date of this Agreement), or
(iv) pursuant to Section 8.1(h) by the Company
(provided that such termination under Section 8.1(h) is as a
result of (A) Parent's breach of or failure to perform its
covenants as set forth in Sections 4 and 5, or (B) Parent's
breach of or inaccuracy of any of its representations and
warranties as set forth in Section 3 that resulted from facts,
circumstances, events or conditions which existed at any time
prior to and through the date of this Agreement),
then, Parent shall pay to the Company two business days following
the date this Agreement is terminated as described in this
Section 8.3(c), the sum of $1,000,000 by wire transfer of
immediately available funds to an account designated by the
Company.
58
9. Miscellaneous Provisions
9.1 Amendment. This Agreement may be amended by the
Company and Parent at any time (whether before or after approval
of this Agreement and the Merger by the stockholders of the
Company; and whether before or after approval of the issuance of
Parent Common Stock in the Merger by Parent's stockholders)
provided, however, that (i) after any such approval of this
Agreement and the Merger by the Company's stockholders, no
amendment shall be made which by law requires further approval of
the stockholders of the Company without the further approval of
such stockholders, and (ii) after any such approval of the
issuance of Parent Common Stock in the Merger, no amendment shall
be made which by law or NASD regulation requires further approval
of Parent's stockholders without the further approval of such
stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties
hereto.
9.2 Waiver.
(a) No failure on the part of any party to exercise
any power, right, privilege or remedy under this Agreement, and
no delay on the part of any party in exercising any power, right,
privilege or remedy under this Agreement, shall operate as a
waiver of such power, right, privilege or remedy; and no single
or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any
other power, right, privilege or remedy.
(b) No party shall be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or
remedy under this Agreement, unless the waiver of such claim,
power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of such
party; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
9.3 No Survival of Representations and Warranties. None
of the representations and warranties contained in this Agreement
or in any certificate delivered pursuant to this Agreement shall
survive the Merger.
9.4 Entire Agreement; Counterparts; Applicable Law;
Jurisdiction.
(a) This Agreement and the other agreements referred
to herein between Parent and the Company constitute the entire
agreement and supersede all prior agreements and understandings,
both written and oral, among or between any of the parties with
respect to the subject matter hereof and thereof.
(b) This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all
of which shall constitute one and the same instrument, and shall
be governed in all respects by the laws of the State of Delaware
as applied to contracts entered into and to be performed entirely
within Delaware.
(c) Each of the parties hereto (i) consents to submit
itself to the personal jurisdiction of any court of the United
States located in the State of Delaware or of any Delaware state
59
court in the event any dispute arises out of this Agreement or
the transactions contemplated by this Agreement, (ii) agrees that
it will not attempt to deny or defeat such personal jurisdiction
by motion or other request for leave from any such court and
(iii) agrees that it will not bring any action relating to this
Agreement or the transactions contemplated by this Agreement in
any court other than a court of the United States located in the
State of Delaware or a Delaware state court.
9.5 Attorneys' Fees. In any action at law or suit in
equity to enforce this Agreement or the rights of any of the
parties hereunder, the prevailing party in such action or suit
shall be entitled to receive a reasonable sum for its attorneys'
fees and all other reasonable costs and expenses incurred in such
action or suit.
9.6 Assignability. This Agreement shall be binding upon,
and shall be enforceable by and inure solely to the benefit of,
the parties hereto and their respective successors and assigns;
provided, however, that neither this Agreement nor any of the
Company's rights hereunder may be assigned, by operation of law
or otherwise, in whole or in part by any of the parties without
the prior written consent of the other party, and any attempted
assignment of this Agreement or any of such rights by a party
without such consent shall be void and of no effect. Except as
set forth in Section 5.6 with respect to the current directors
and officers of the Company, nothing in this Agreement, express
or implied, is intended to or shall confer upon any Person any
right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
9.7 Notices. Any notice or other communication required
or permitted to be delivered to any party under this Agreement
shall be in writing and shall be deemed properly delivered, given
and received when delivered (by hand, by registered mail, by
courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name
of such party below (or to such other address or facsimile
telephone number as such party shall have specified in a written
notice given to the other parties hereto):
if to Parent: Lumisys Incorporated
225 Humboldt Court
Sunnyvale, CA 94086
Attn: Stephen J. Weiss
with a copy to: Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attn: Andrei M. Manoliu
if to Merger Sub: SAC Acquisition Corporation
c/o Lumisys Incorporated
225 Humboldt Court
Sunnyvale, CA 94086
Attn: Stephen J. Weiss
60
with a copy to: Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attn: Andrei M. Manoliu
if to the Company:CompuRAD, Inc.
1350 North Kolb Road
Tucson, Arizona 85715
Attn: Dr. Phillip Berman
with a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attn: David J. Segre
9.8 Construction.
(a) For purposes of this Agreement, whenever the
context requires: the singular number shall include the plural,
and vice versa; the masculine gender shall include the feminine
and neuter genders; the feminine gender shall include the
masculine and neuter genders; and the neuter gender shall include
masculine and feminine genders.
(b) The parties hereto agree that any rule of
construction to the effect that ambiguities are to be resolved
against the drafting party shall not be applied in the
construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include"
and "including," and variations thereof, shall not be deemed to
be terms of limitation, but rather shall be deemed to be followed
by the words "without limitation."
(d) Except as otherwise indicated, all references in
this Agreement to "Sections" and "Exhibits" are intended to refer
to Sections of this Agreement and Exhibits to this Agreement.
61
In Witness Whereof, the parties have caused this Agreement
to be executed as of the date first above written.
Lumisys Incorporated
By:/s/Stephen J. Weiss
-------------------
Stehpen J. Weiss
SAC Acquisition Corporation
By:/s/Stephen J. Weiss
--------------------
Stephen J. Weiss
CompuRad, Inc.
By:/s/ Dr. Phillip Berman
----------------------
Dr. Phillip Berman
62
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquisition Proposal. "Acquisition Proposal" shall mean
any offer, proposal or inquiry (other than an offer or proposal
by Parent) contemplating or otherwise relating to any Acquisition
Transaction.
Acquisition Transaction. "Acquisition Transaction" shall
mean any transaction or series of related transactions involving:
(a) other than the transactions contemplated by this
Agreement, any merger, consolidation, share exchange, business
combination, issuance of securities, acquisition of securities,
tender offer, exchange offer or other similar transaction (i) in
which the Company is a constituent corporation, (ii) in which a
Person or "group" (as defined in the Exchange Act and the rules
promulgated thereunder) of Persons directly or indirectly
acquires the Company or more than 50% of the Company's business
or directly or indirectly acquires beneficial or record ownership
of securities representing more than 20% of the outstanding
securities of any class of voting securities of the Company, or
(iii) in which the Company issues securities representing more
than 20% of the outstanding securities of any class of voting
securities of the Company;
(b) any sale, lease, exchange, transfer, license,
acquisition or disposition of more than 50% of the assets of the
Company; or
(c) any liquidation or dissolution of the Company.
Agreement. "Agreement" shall mean the Agreement and Plan
of Merger and Reorganization to which this Exhibit A is attached,
as it may be amended from time to time.
Company Common Stock. "Company Common Stock" shall mean
the Common Stock, $0.01 par value per share, of the Company.
Company Contract. "Company Contract" shall mean any
Contract: (a) to which the Company is a party; (b) by which the
Company or any asset of the Company is or may become bound or
under which the Company has, or may become subject to, any
obligation; or (c) under which the Company has or may acquire any
right or interest.
Company Disclosure Schedule. "Company Disclosure Schedule"
shall mean the disclosure schedule that has been prepared by the
Company and that has been delivered by the Company to Parent on
the date of this Agreement and signed by the President of the
Company.
A-1
Company Proprietary Asset. "Company Proprietary Asset"
shall mean any Proprietary Asset owned by or licensed to the
Company or otherwise used by the Company.
Company Triggering Event. A "Company Triggering Event"
shall be deemed to have occurred if: (i) the Board of Directors
of the Company shall have failed to recommend unanimously, or
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 Merger or approval of this
Agreement; (ii) the Company shall have failed to include in the
Joint Proxy Statement the unanimous recommendation of the Board
of Directors of the Company in favor of approval of this
Agreement and the Merger; (iii) the Board of Directors of the
Company shall have approved, endorsed or recommended any
Acquisition Proposal; (iv) the Company shall have entered into
any letter of intent or similar document or any Contract relating
to any Acquisition Proposal; (v) a tender or exchange offer
relating to securities of the Company shall have been commenced
and the Company shall not have sent to its securityholders,
within ten business days after the commencement of such tender or
exchange offer, a statement disclosing that the Company
recommends rejection of such tender or exchange offer; or (vii)
an Acquisition Proposal is publicly announced, and the Company
fails to issue a press release announcing its opposition to such
Acquisition Proposal within five business days after such
Acquisition Proposal is announced.
Consent. "Consent" shall mean any approval, consent,
ratification, permission, waiver or authorization (including any
Governmental Authorization).
Contract. "Contract" shall mean any written, oral or other
agreement, contract, subcontract, lease, understanding,
instrument, note, option, warranty, purchase order, license,
sublicense, insurance policy, benefit plan or legally binding
commitment or undertaking of any nature.
Encumbrance. "Encumbrance" shall mean any lien, pledge,
hypothecation, charge, mortgage, security interest, encumbrance,
claim, infringement, interference, option, right of first
refusal, preemptive right, community property interest or
restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any
security or other asset, any restriction on the receipt of any
income derived from any asset, any restriction on the use of any
asset and any restriction on the possession, exercise or transfer
of any other attribute of ownership of any asset).
Entity. "Entity" shall mean any corporation (including any
non-profit corporation), general partnership, limited
partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company
or joint stock company), firm or other enterprise, association,
organization or entity.
Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
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Form S-4 Registration Statement. "Form S-4 Registration
Statement" shall mean the registration statement on Form S-4 to
be filed with the SEC by Parent in connection with issuance of
Parent Common Stock in the Merger, as said registration statement
may be amended prior to the time it is declared effective by the
SEC.
Governmental Authorization. "Governmental Authorization"
shall mean any: (a) permit, license, certificate, franchise,
permission, variance, clearance, registration, qualification or
authorization issued, granted, given or otherwise made available
by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any
Governmental Body.
1) nation, state, commonwealth, province, territory,
county, municipality, district or other jurisdiction of any
nature; (b) federal, state, local, municipal, foreign or other
government; or (c) governmental or quasi-governmental authority
of any nature (including any governmental division, department,
agency, commission, instrumentality, official, organization,
unit, body or Entity and any court or other tribunal).
Joint Proxy Statement. "Joint Proxy Statement" shall mean
the joint proxy statement/prospectus to be sent to the Company's
stockholders in connection with the Company Stockholder's Meeting
and to Parent's stockholders in connection with the Parent
Stockholders' Meeting.
Knowledge. A party shall be deemed to have "knowledge" of
a particular fact or other matter if:
(a) an officer or director of such party is actually
aware of such fact or other matter; or
(b) a prudent officer or director of such party could
be expected to discover or otherwise become aware of such fact or
other matter in the course of conducting a reasonably diligent
investigation concerning the truth or existence of such fact or
other matter.
Legal Proceeding. "Legal Proceeding" shall mean any
action, suit, litigation, arbitration, proceeding (including any
civil, criminal, administrative, investigative or appellate
proceeding), hearing, inquiry, audit, examination or
investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental
Body or any arbitrator or arbitration panel.
Legal Requirement. "Legal Requirement" shall mean any
federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance,
code, edict, decree, rule, regulation, ruling or requirement
issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental
Body.
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Material Adverse Effect. One or more events, violations,
inaccuracies, circumstances or other matters will be deemed to
have a "Material Adverse Effect" on a party if such event(s),
violation(s), inaccuracy(ies), circumstance(s) or other matter(s)
would have a material adverse effect on: (i) the business,
condition, capitalization, assets, liabilities, operations or
financial performance of the applicable party and its
Subsidiaries taken as a whole, (ii) the ability of the party to
consummate the Merger or any of the other transactions
contemplated by this Agreement or to perform obligations under
this Agreement, or (iii) Parent's ability to vote, receive
dividends with respect to or otherwise exercise ownership rights
with respect to the stock of the Surviving Corporation except
that any event(s), violation(s), inaccuracy(ies), circumstance(s)
or other matter(s) from the following shall not be taken into
account in determining whether there has been or there is
reasonably expected to be a Material Adverse Effect: (i) general
economic conditions or conditions affecting the party's industry
generally, (ii) the delay or cancellation of orders for the
party's products from customers or distributors (or other
resellers) directly attributable to the announcement of this
Agreement or pendency of the Merger, (iii) the lack of or delay
in availability of components or raw materials from the party's
suppliers directly attributable to the announcement of this
Agreement or pendency of the Merger, and (iv) stockholder
litigation brought or threatened against the party or any member
of the Board of Directors of the party with respect to this
Agreement or pendency of the Merger, provided, however, that in
any dispute, the party asserting that any of the foregoing is
"directly attributable" to or "with respect to" this Agreement or
pendency of the Merger shall have the burden of proof of such
assertion by a preponderance of the evidence.
Parent Common Stock. "Parent Common Stock" shall mean the
Common Stock, $0.001 par value per share, of Parent.
"Parent Disclosure Schedule" shall mean the disclosure
schedule that has been prepared by Parent and that has been
delivered by Parent to the Company on the date of this Agreement
and signed by the President of Parent.
Person. "Person" shall mean any individual, Entity or
Governmental Body.
Proprietary Asset. "Proprietary Asset" shall mean any: (a)
patent, patent application, trademark (whether registered or
unregistered), trademark application, trade name, fictitious
business name, service mark (whether registered or unregistered),
service mark application, copyright (whether registered or
unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise,
system, computer software, computer program, source code,
algorithm, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other
intellectual property right or intangible asset; or (b) right to
use or exploit any of the foregoing.
Representatives. "Representatives" shall mean officers,
directors, employees, agents, attorneys, accountants, advisors
and representatives.
SEC. "SEC" shall mean the United States Securities and
Exchange Commission.
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Securities Act. "Securities Act" shall mean the Securities
Act of 1933, as amended.
Subsidiary. An entity shall be deemed to be a "Subsidiary"
of another Person if such Person directly or indirectly owns,
beneficially or of record, an amount of voting securities of
other interests in such Entity that is sufficient to enable such
Person to elect at leased a majority of the members of such
Entity's Board of Directors or other governing body.
Superior Offer. "Superior Offer" shall mean any bona fide
offer made by a third party to acquire, directly or indirectly
more than 50% of outstanding Company Common Stock on terms that
the Board of Directors of the Company determines in its
reasonable judgment, after consultation with its financial
advisor, to be more favorable to the Company's stockholders than
the terms of the Merger; provided, however, that any such offer
shall not be deemed to be a "Superior Offer" if any financing
required to consummate the transaction contemplated by such offer
is neither committed nor, in the good faith judgment of the Board
of Directors of the Company, reasonably capable of being obtained
by such third party.
Tax. "Tax" shall mean any tax (including any income tax,
franchise tax, capital gains tax, gross receipts tax, value-added
tax, surtax, excise tax, ad valorem tax, transfer tax, stamp tax,
sales tax, use tax, property tax, business tax, withholding tax
or payroll tax), levy, assessment, tariff, duty (including any
customs duty), deficiency or fee, and any related charge or
amount (including any fine, penalty or interest), imposed,
assessed or collected by or under the authority of any
Governmental Body.
Tax Return. "Tax Return" shall mean any return (including
any information return), report, statement, declaration,
estimate, schedule, notice, notification, form, election,
certificate or other document or information filed with or
submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination,
assessment, collection or payment of any Tax or in connection
with the administration, implementation or enforcement of or
compliance with any Legal Requirement relating to any Tax.
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EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
[SURVIVING CORPORATION]
10.
The name of this corporation is [Surviving Corporation].
11.
The address, including street, number, city, and county, of
the registered office of the corporation in the State of Delaware
is 1013 Centre Road, City of Wilmington, 19805, County of New
Castle; and the name of the registered agent of the corporation
in the State of Delaware at such address is Corporation Service
Company.
12.
The purpose of this corporation is to engage in any lawful
act or activity for which a corporation may be organized under
the Delaware General Corporation Law.
13.
1 This corporation is authorized to issue one class of
stock to be designated "Common Stock". The total number of
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shares of Common Stock which the corporation is authorized to
issue is one thousand (1,000) shares each having a par value of
one-tenth of one cent ($0.001).
14.
I.
For the management of the business and for the conduct of
the affairs of the corporation, and in further definition,
limitation and regulation of the powers of the corporation, of
its directors and of its stockholders or any class thereof, as
the case may be, it is further provided that:
1. The management of the business and the conduct of the
affairs of the corporation shall be vested in its Board of
Directors. The number of directors which shall constitute the
whole Board of Directors shall be fixed by the Board of Directors
in the manner provided in the Bylaws.
2. The Board of Directors may from time to time make,
amend, supplement or repeal the Bylaws; provided, however, that
the stockholders may change or repeal any Bylaw adopted by the
Board of Directors by the affirmative vote of the holders of a
majority of the voting power of all of the then outstanding
shares of the capital stock of the corporation (considered for
this purpose as one class); and, provided further, that no
amendment or supplement to the Bylaws adopted by the Board of
Directors shall vary or conflict with any amendment or supplement
thus adopted by the stockholders.
3. The directors of the corporation need not be elected by
written ballot unless the Bylaws so provide.
II.
1. To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as may hereafter be
amended, no director of the corporation shall be personally
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liable to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director.
2. The corporation may indemnify to the fullest extent
permitted by law any person made or threatened to be made a party
to an action or proceeding, whether criminal, civil,
administrative or investigative, by reason of the fact that he,
his testator or intestate is or was a director, officer or
employee of the corporation or any predecessor of the corporation
or serves or served at any other enterprise as a director,
officer or employee at the request of the corporation or any
predecessor to the corporation.
3. Neither any amendment nor repeal of this Article VI,
nor the adoption of any provisions of the Corporation's
Certificate of Incorporation inconsistent with this Article VI,
shall eliminate or reduce the effect on this Article VI, in
respect of any matter occurring, or any action, suite, claim or
proceeding accruing or arising or that, but for this Article VI,
would accrue or arise, prior to such amendment, repeal, or
adoption of an inconsistent provision.
15.
The name and mailing address of the incorporator is as
follows:
Andrei M. Manoliu
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-0663
16.
The corporation is to have perpetual existence.
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17.
The corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon the stockholders herein
are granted subject to this right.
I, the undersigned, being the incorporator hereinbefore named,
for the purpose of forming a corporation pursuant to the Delaware
General Corporation Law, do make this Certificate, hereby
declaring and certifying that this is my act and deed and that
the facts herein stated are true and accordingly have hereunto
set my hand this day of October, 1997.
-----------------------
Andrei M. Manoliu
Sole Incorporator
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EXHIBIT C
FORM OF AFFILIATE AGREEMENT
This Affiliate Agreement (this "Agreement") is being
executed and delivered as of , 1997 by
("Affiliate") in favor of and for the benefit of Lumisys
Incorporated, a Delaware corporation ("Parent").
Recitals
A. Affiliate is a stockholder [and an officer and
director] of CompuRAD, Inc., a Delaware corporation (the
"Company").
B. Parent, the Company and SAC Acquisition Corporation, a
Delaware corporation and a wholly owned subsidiary of Parent
("Merger Sub"), have entered into an Agreement and Plan of Merger
and Reorganization dated as of _________ __, 1997 (the
"Reorganization Agreement"), providing for the merger of Merger
Sub with and into the Company (the "Merger"). The Reorganization
Agreement contemplates that, upon consummation of the Merger, (i)
the Company's stockholders will receive shares of common stock,
par value $.001 per share, of Parent ("Parent Common Stock") in
exchange for their shares of the common stock, par value $.01 per
share, of the Company ("Company Common Stock") and (ii) the
Company will become a wholly owned subsidiary of Parent. It is
accordingly contemplated that Affiliate will receive shares of
Parent Common Stock in the Merger.
C. Affiliate may be deemed to be an "affiliate" of the
Company for purposes of: (i) the restrictions on resale imposed
by the Securities Act of 1933, as amended (the "Act"); and (ii)
determining Parent's eligibility to account for the Merger as a
"pooling of interests" under applicable "pooling of interests"
accounting requirements (including Accounting Principles Board
Opinion No. 16 and Accounting Series Releases 130 and 135, as
amended, of the Securities and Exchange Commission (the "SEC")).
Agreement
18. Representations and Warranties. Affiliate represents
and warrants to Parent as follows:
1. Restrictions as Affiliate.
(a) Affiliate is the holder and beneficial owner
of ( ) shares of Company Common Stock (the
"Company Shares"), and Affiliate has good and valid title to the
Company Shares, free and clear of any liens, pledges, security
interests, adverse claims, equities, options, proxies, charges,
encumbrances or restrictions of any nature.
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(b) Affiliate has carefully read this Agreement,
and has discussed with counsel to the extent Affiliate felt
necessary the limitations imposed on Affiliate's ability to sell,
transfer or otherwise dispose of the Company Shares and the
shares of Parent Common Stock that Affiliate is to receive in the
Merger (the "Parent Shares"). Affiliate fully understands the
limitations this Agreement places upon Affiliate's ability to
sell, transfer or otherwise dispose of the Company Shares and the
Parent Shares.
(c) Affiliate understands that the
representations, warranties and covenants set forth in this
Agreement will be relied upon by Parent and its counsel and
accountants for purposes of determining Parent's eligibility to
account for the Merger as a "pooling of interests," for purposes
of determining whether Parent should proceed with the Merger and
for various other purposes.
2. Continuity of Interest.
(a) Affiliate did not acquire any of the Company
Shares in contemplation of the Merger.
(b) Affiliate has not engaged in a Sale (as
defined below) of any shares of Company Common Stock in
contemplation of the Merger.
(c) Affiliate has no plan or intention to engage
in a sale, exchange, transfer, distribution, redemption or
reduction in any way of Affiliate's risk of ownership (by short
sale or otherwise), or other disposition, directly or indirectly
(such actions being collectively referred to herein as a "Sale")
of more than fifty percent (50%) of the shares of Parent Common
Stock to be received by Affiliate in the Merger. (For purposes
of the preceding sentence, shares of Company Common Stock (or the
portion thereof) (i) with respect to which Affiliate will receive
consideration in the Merger other than shares of Parent Common
Stock (including cash to be received in lieu of fractional shares
of Parent Common Stock) and/or (ii) with respect to which a Sale
(A) occurred in contemplation of the Merger or (B) will occur
prior to the Merger, shall be considered shares of Company Common
Stock exchanged for shares of Parent Common Stock in the Merger
and then disposed of pursuant to a plan).
(d) Affiliate has no plan or intention to
exercise dissenters' rights in connection with the Merger.
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(e) Affiliate is not aware of, or participating
in, any plan or intention on the part of the stockholders of the
Company to engage in a Sale or Sales of more than fifty percent
(50%) of the shares of Parent Common Stock to be received in the
Merger. (For purposes of the preceding sentence, shares of
Company Common Stock (or the portion thereof) (i) with respect to
which a stockholder of the Company receives consideration in the
Merger other than shares of Parent Common Stock (including,
without limitation, cash received pursuant to the exercise of
dissenters' rights or in lieu of a fractional share of Parent
Common Stock) or (ii) with respect to which a Sale occurs prior
to and in contemplation of the Merger, shall be considered shares
of outstanding Company Common Stock exchanged for shares of
Parent Common Stock in the Merger and then disposed of pursuant
to a plan).
(f) Except to the extent written notification to
the contrary is received by Parent and the Company from Affiliate
prior to the consummation of the Merger, the representations,
warranties and certifications contained herein shall be accurate
at all times from the date hereof through the date on which the
Merger is consummated.
(g) Affiliate has consulted with such legal
counsel and financial advisors as he has deemed appropriate in
connection with the execution of this Agreement.
(h) Affiliate understands that Parent, Merger
Sub, the Company, and the Company's stockholders, as well as
legal counsel to Parent, Merger Sub and the Company (in
connection with rendering their opinions that the Merger will be
a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended) will be relying on (a)
the truth and accuracy of the representations, warranties and
certifications contained herein and (b) Affiliate's performance
of the obligations set forth herein.
19. Prohibitions Against Transfer.
1. Affiliate agrees that during the period from the
date on which the Merger is consummated through the date on which
financial results covering at least thirty (30) days of post-
Merger combined operations of Parent and the Company have been
published by Parent (within the meaning of the applicable
"pooling of interests" accounting requirements), Affiliate agrees
that (i) he shall not sell, transfer or otherwise dispose of, or
reduce his interest in or risk relating to, any shares of Parent
Common Stock (including the Parent Shares), and (ii) he shall
ensure that none of his children sells, transfers or otherwise
disposes of, or reduces his interest in or risk relating to, any
shares of Parent Common Stock received in the Merger.
2. Without limiting the generality of Section 2(a) of
this Agreement, Affiliate shall not effect any sale, transfer or
other disposition of any of the Parent Shares, and Affiliate
shall ensure that none of his children effects any sale, transfer
or other disposition of any shares of Parent Common Stock
received in the Merger; unless:
(a) such sale, transfer or other disposition has
been registered under the Act;
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(b) such sale, transfer or other disposition is
made in conformity with the requirements of Rule 144 under the
Act, as evidenced by a broker's letter and a representation
letter executed by Affiliate (satisfactory in form and content to
Parent) stating that such requirements have been met;
(c) counsel reasonably satisfactory to Parent
shall have advised Parent in a written opinion letter
(satisfactory in form and content to Parent), upon which Parent
may rely, that such sale, transfer or other disposition will be
exempt from registration under the Act; or
(d) an authorized representative of the SEC
shall have rendered written advice to Affiliate to the effect
that the SEC would take no action, or that the staff of the SEC
would not recommend that the SEC take action, with respect to
such sale, transfer or other disposition, and a copy of such
written advice and all other related communications with the SEC
shall have been delivered to Parent.
20. Stop Transfer Instructions; Legend.
Affiliate understands that the Parent Shares will be
characterized as "restricted securities" for purposes of Rule 144
under the Act, and that therefore any sale, transfer or other
disposition of any of the Parent Shares must be made in
conformity with the provisions of said Rule or be registered
under the Act. Affiliate acknowledges and agrees that (i) stop
transfer instructions will be given to Parent's transfer agent
with respect to the Parent Shares, and (ii) each certificate
representing any of such shares shall bear a legend identical or
similar in effect to the following legend (together with any
other legend or legends required by applicable state securities
laws or otherwise):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS REGISTERED UNDER THE ACT
OR UNLESS AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
ACT IS AVAILABLE. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY
ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT
DATED AS OF _________ __, 1997, BETWEEN THE REGISTERED HOLDER
HEREOF AND Lumisys Incorporated, A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICES OF LUMISYS INCORPORATED"
21. Independence of Obligations. The covenants and
obligations of Affiliate set forth in this Agreement shall be
construed as independent of any other agreement or arrangement
between Affiliate, on the one hand, and the Company or Parent, on
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the other. The existence of any claim or cause of action by
Affiliate against the Company or Parent shall not constitute a
defense to the enforcement of any of such covenants or
obligations against Affiliate.
22. Specific Performance. Affiliate agrees that in the
event of any breach or threatened breach by Affiliate of any
covenant, obligation or other provision contained in this
Agreement, Parent shall be entitled (in addition to any other
remedy that may be available to Parent) to: (a) a decree or
order of specific performance or mandamus to enforce the
observance and performance of such covenant, obligation or other
provision; and (b) an injunction restraining such breach or
threatened breach.
23. Indemnification. Without in any way limiting any of
the rights or remedies otherwise available to Parent, Affiliate
shall hold harmless and indemnify Parent from and against, and
shall compensate and reimburse Parent for, any loss, damage,
injury, decline in value, lost opportunity, liability, exposure,
claim, demand, settlement, judgment, award, fine, penalty, tax,
fee, charge, cost or expense of any nature (whether or not
relating to a third party claim) which is directly or indirectly
suffered or incurred at any time by Parent or any of Parent's
affiliates or to which Parent or any of Parent's affiliates
otherwise becomes subject and that arises from any inaccuracy in
or breach of any representation, warranty, covenant or obligation
of Affiliate contained in this Agreement.
24. Other Agreements. Nothing in this Agreement shall
limit any of the rights or remedies of Parent under the
Reorganization Agreement and nothing in the Reorganization
Agreement shall limit any of the rights or remedies of Parent
under this Agreement.
25. Notices. Any notice or other communication required
or permitted to be delivered to Affiliate or Parent under this
Agreement shall be in writing and shall be deemed properly
delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by
facsimile) to the address or facsimile telephone number set forth
beneath the name of such party below (or to such other address or
facsimile telephone number as such party shall have specified in
a written notice given to the other party hereto):
if to Parent: Lumisys Incorporated
225 Humboldt Court
Sunnyvale, CA 94089
Attention: Stephen J. Weiss
with a copy to: Cooley Godward llp
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Andrei M. Manoliu, Esq.
Facsimile No.: (415) 857-0663
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To Affiliate at:
with a copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attention: David J. Segre, Esq.
Facsimile No.: (415) 493-6811
26. Severability. If any provision of this Agreement or
any part of any such provision is held under any circumstances to
be invalid or unenforceable in any jurisdiction, then (a) such
provision or part thereof shall, with respect to such
circumstances and in such jurisdiction, be deemed amended to
conform to applicable laws so as to be valid and enforceable to
the fullest possible extent, (b) the invalidity or
unenforceability of such provision or part thereof under such
circumstances and in such jurisdiction shall not affect the
validity or enforceability of such provision or part thereof
under any other circumstances or in any other jurisdiction, and
(c) the invalidity or unenforceability of such provision or part
thereof shall not affect the validity or enforceability of the
remainder of such provision or the validity or enforceability of
any other provision of this Agreement. Each provision of this
Agreement is separable from every other provision of this
Agreement, and each part of each provision of this Agreement is
separable from every other part of such provision.
27. Governing Law. This Agreement shall be construed in
accordance with, and governed in all respects by, the laws of the
State of California (without giving effect to principles of
conflicts of laws).
28. Waiver. No failure on the part of Parent to exercise
any ower, right, privilege or remedy under this Agreement, and
no delay on the part of Parent in exercising any power, right,
privilege or remedy under this Agreement, shall operate as a
waiver of such power, right, privilege or remedy; and no single
or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any
other power, right, privilege or remedy. Parent shall not be
deemed to have waived any claim arising out of this Agreement, or
any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly
executed and delivered on behalf of Parent; and any such waiver
shall not be applicable or have any effect except in the specific
instance in which it is given.
29. Captions. The captions contained in this Agreement
are for convenience of reference only, shall not be deemed to be
a part of this Agreement and shall not be referred to in
connection with the construction or interpretation of this
Agreement.
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30. Further Assurances. Affiliate shall execute and/or
cause to be delivered to Parent such instruments and other
documents and shall take such other actions as Parent may
reasonably request to effectuate the intent and purposes of this
Agreement.
31. Entire Agreement. This Agreement and the
Reorganization Agreement set forth the entire understanding of
Parent and Affiliate relating to the subject matter hereof and
thereof and supersede all other prior agreements and
understandings between Parent and Affiliate relating to the
subject matter hereof and thereof.
32. Non-Exclusivity. The rights and remedies of Parent
hereunder are not exclusive of or limited by any other rights or
remedies which Parent may have, whether at law, in equity, by
contract or otherwise, all of which shall be cumulative (and not
alternative).
33. Amendments. This Agreement may not be amended,
modified, altered or supplemented other than by means of a
written instrument duly executed and delivered on behalf of
Parent and Affiliate.
34. Assignment. This Agreement and all obligations of
Affiliate hereunder are personal to Affiliate and may not be
transferred or delegated by Affiliate at any time. Parent may
freely assign any or all of its rights under this Agreement
(including its indemnification rights under Section 6), in whole
or in part, to any other person or entity without obtaining the
consent or approval of Affiliate.
35. Binding Nature. Subject to Section 17, this Agreement
will inure to the benefit of Parent and its successors and
assigns and will be binding upon Affiliate and his
representatives, executors, administrators, estate, heirs,
successors and assigns.
36. Attorneys' Fees and Expenses. If any legal action or
other legal proceeding relating to the enforcement of any
provision of this Agreement is brought against Affiliate, the
prevailing party shall be entitled to recover reasonable
attorneys' fees, costs and disbursements (in addition to any
other relief to which the prevailing party may be entitled).
37. Survival. Each of the representations, warranties,
covenants and obligations contained in this Agreement shall
survive the consummation of the Merger.
Affiliate has executed this Agreement on September ,
1997.
Signature:
------------------------
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EXHIBIT D
FORM OF CONTINUITY OF INTEREST CERTIFICATE
("Stockholder") is aware that an Agreement
and Plan of Merger and Reorganization dated as of September ,
1997 (the "Reorganization Agreement") and related Certificate of
Merger (together, the "Agreements") has been made and entered
into by and among Lumisys Incorporated, a Delaware corporation
("Parent"), SAC Acquisition Corporation, a Delaware corporation
and a wholly owned subsidiary of Parent ("Merger Sub") and
CompuRAD, Inc., a Delaware corporation (the "Company") providing
for the merger of Merger Sub with and into the Company (the
"Merger"). The Reorganization Agreement contemplates that, upon
consummation of the Merger, (i) the Company's stockholders will
receive shares of common stock, par value $.001 per share, of
Parent ("Parent Common Stock") in exchange for their shares of
common stock, par value $.01 per share, of the Company ("Company
Common Stock") and (ii) the Company will become a wholly owned
subsidiary of Parent. It is accordingly contemplated that
Stockholder will receive shares of Parent Common Stock in the
Merger.
38. Stockholder represents, warrants and certifies to
Parent, Merger Sub, the Company and the Company's Stockholders as
follows:
1. Stockholder currently is the owner of shares
of Company Common Stock (the "Shares"), and did not acquire any
of the Shares in contemplation of the Merger.
2. Stockholder has not engaged in a Sale (as defined
below) of any shares of Company Common Stock in contemplation of
the Merger.
3. Stockholder has no plan or intention to engage in
a sale, exchange, transfer, distribution, redemption or reduction
in any way of Stockholder's risk of ownership (by short sale or
otherwise), or other disposition, directly or indirectly (such
actions being collectively referred to herein as a "Sale") of
more than [fifty percent (50%)] of the shares of Parent Common
Stock to be received by Stockholder in the Merger. (For purposes
of the preceding sentence, shares of Company Common Stock (or the
portion thereof) (i) with respect to which Stockholder will
receive consideration in the Merger other than shares of Parent
Common Stock (including cash to be received in lieu of fractional
shares of Parent Common Stock) and/or (ii) with respect to which
a Sale (A) occurred in contemplation of the Merger or (B) will
occur prior to the Merger, shall be considered shares of Company
Common Stock exchanged for shares of Parent Common Stock in the
Merger and then disposed of pursuant to a plan).
4. Stockholder has no plan or intention to exercise
dissenters' rights in connection with the Merger.
5. Stockholder is not aware of, or participating in,
any plan or intention on the part of the stockholders of the
Company to engage in a Sale or Sales of more than fifty percent
(50%) of the shares of Parent Common Stock to be received in the
Merger. (For purposes of the preceding sentence, shares of
A-1
Company Common Stock (or the portion thereof) (i) with respect to
which a stockholder of the Company receives consideration in the
Merger other than shares of Parent Common Stock (including,
without limitation, cash received pursuant to the exercise of
dissenters' rights or in lieu of a fractional share of Parent
Common Stock) or (ii) with respect to which a Sale occurs prior
to and in contemplation of the Merger, shall be considered shares
of outstanding Company Common Stock exchanged for shares of
Parent Common Stock in the Merger and then disposed of pursuant
to a plan).
6. Except to the extent written notification to the
contrary is received by Parent and the Company from Stockholder
prior to the consummation of the Merger, the representations,
warranties and certifications contained herein shall be accurate
at all times from the date hereof through the date on which the
Merger is consummated.
7. Stockholder has consulted with such legal counsel
and financial advisors as he has deemed appropriate in connection
with the execution of this Certificate.
39. Stockholder understands that Parent, Merger Sub, the
Company, and the Company's stockholders, as well as legal counsel
to Parent, Merger Sub and the Company (in connection with
rendering their opinions that the Merger will be a
"reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended) will be relying on (a)
the truth and accuracy of the representations, warranties and
certifications contained herein and (b) the Stockholder's
performance of the obligations set forth herein.
Stockholder has executed this Certificate on 1997.
---------------------------
A-2
EXHIBIT E
LUMISYS INCORPORATED
- - --------------------
- - --------------------
- - --------------------
- - --------------------
Re: Employment Terms
Dear :
Lumisys Incorporated (the "Company") is pleased to offer you the
position of President, effective upon the closing of the
acquisition of CompuRAD, Inc. by the Company (the "Closing"), on
the following terms, which terms shall be effective only upon the
Closing.
1. Reporting Duties
You will be responsible for all functional areas of the combined
company, including duties customarily associated with the
position and other duties as assigned by me. You will work at
our facility located in Tucson, Arizona. Of course, the Company
may change your position, duties, and work location from time to
time as it deems necessary; provided that no such change shall
occur prior to September 1998.
2. Compensation
Your compensation will be $ per month, less payroll
deductions and all required withholdings. You will be paid bi-
weekly (26 payment periods per year) and you will be eligible for
the following standard Company benefits: group medical, dental
and life insurance, vacation and participation in the Company's
401(k) and employee stock purchase plan. Details about these
benefit plans are available for your review. The Company may
modify compensation and benefits from time to time as it deems
necessary.
3. Bonus
You will also be eligible annually for a discretionary year-end
bonus, in an amount to be determined by the Company's Board of
Directors (the "Board") in its sole discretion. You will earn
this bonus if all of the following criteria are met: (i) the
Company must meet or exceed its planned revenue and profit
objectives for the bonus year, as determined by the Board; (ii)
your performance must meet or exceed expectations for your
position, as determined by the Board; and (iii) you must remain
an active employee through the end of the bonus year. If your
employment terminates for any reason before the end of the bonus
year, you will not receive this bonus; no prorated bonus can be
earned, provided however, that if you are terminated at any time
in 1998 (unless you are terminated for "cause" as defined in
Paragraph 8 below), you will receive a pro-rated bonus for the
A-1
year 1998. In addition, if the Closing occurs after January 1,
1998, any bonus for the year 1998 will be calculated to cover the
period from January 1, 1998 as if you had been employed during
that period. It is currently expected that you will not receive
a bonus from the Company for the services you performed during
the year 1997.
4. Relocation Expenses
You will receive relocation benefits for your move from Arizona
to California from the date of this Agreement to December 31,
1998, under the terms of the Relocation Benefits Agreement,
attached hereto as Exhibit B, up to a maximum reimbursement
amount to be mutually agreed upon by the parties.
5. Company Policies regarding Confidential Information and Other
Matters
As a Company employee, you will be expected to abide by Company
rules and regulations, acknowledge in writing that you have read
the Company's Employee Handbook, and sign and comply with the
Proprietary Information and Inventions Agreement, attached hereto
as Exhibit A, which prohibits unauthorized use or disclosure of
Company proprietary information. As required by law, this offer
is subject to satisfactory proof of your right to work in the
United States.
Normal working hours are from 8:00 a.m. to 5:00 p.m., Monday
through Friday. As an exempt salaried employee, you will be
expected to work additional hours as required by the nature of
your work assignments. Except with the prior written consent of
the Board, you will not during the term of your employment with
the Company undertake or engage in any other employment,
occupation or business enterprise. You may engage in civic and
not-for-profit activities so long as such activities do not
materially interfere with the performance of your duties
hereunder.
6. Restrictive Covenant
During the term of your employment, except as permitted by this
paragraph, you agree not to acquire, assume or participate in,
directly or indirectly, any position, investment or interest
known by you to be adverse or antagonistic to the Company, its
business or prospects, financial or otherwise. During the term
of your employment by the Company, including any period of salary
continuation following your termination, as described below, you
will not directly or indirectly, whether as an officer, director,
stockholder, partner, proprietor, associate, representative,
consultant, or in any capacity whatsoever engage in, become
financially interested in, be employed by or have any business
connection with any other person, corporation, firm, partnership
or other entity whatsoever which competes with the Company,
throughout the world, in any line of business engaged in (or
planned to be engaged in) by the Company. Notwithstanding the
above, however, you may own, as a passive investor, securities of
any competitor corporation, so long as your and your family's
aggregate holdings in any one such corporation do not constitute
more than 1% of the voting stock of such corporation.
A-2
7. Non-Solicitation
While employed by the Company, and for one (1) year thereafter,
you agree not to interfere with the business of the Company by:
(i) soliciting, attempting to solicit, inducing, or otherwise
causing any employee of the Company to terminate his or her
employment with the Company; or (ii) directly or indirectly
soliciting the business of any customer of the Company which at
the time of termination or one year immediately prior thereto was
listed on the Company's customer list.
8. Termination
You may terminate your employment with the Company at any time
and for any reason whatsoever simply by notifying the Company.
Likewise, the Company may terminate your employment at any time
and for any reason whatsoever, with or without cause or advance
notice. This at-will employment relationship cannot be changed
except in a writing signed by a Company officer. Notwithstanding
the foregoing, in the event before the second anniversary of
Closing the Company terminates your employment without "cause" or
you terminate your employment for "good reason," the Company will
continue, as severance, your base salary at its then current rate
for a period of twelve (12) months following such termination.
For the purposes of the foregoing, "cause" means misconduct,
including: (i) the current use of illegal drugs; (ii) indictment
for any crime involving moral turpitude, fraud or
misrepresentation; (iii) commission of any act which would
constitute a felony and which would adversely impact the business
or reputation of the Company; (iv) fraud; (v) misappropriation or
embezzlement of Company funds or property; (vi) willful conduct
which is materially injurious to the reputation, business or
business relationships of the Company; (viii) your failure to
perform your responsibilities and/or duties provided that you
have thirty days (from the date that the Company delivers a
written notice to you describing your failure to perform) to cure
any failure to perform; or (ix) a material violation of any of
the provisions of this employment offer letter or of the attached
Proprietary Information and Inventions Agreement. For purposes
of the foregoing, "good reason" means: (i) material diminution in
your duties or salary (except in connection with a fairly
administered across the board salary reduction plan adopted by
the Board) or (ii) relocation outside of the San Francisco Bay
Area (other than back to the Tucson area if the Company provides
relocation expenses for such relocation).
9. Entire Agreement
This letter, including Exhibits A, B, and C, constitutes the
complete, final and exclusive embodiment of the entire agreement
between you and the Company with respect to the terms and
conditions of your employment. This letter agreement is entered
into without reliance on any promise or representation, written
or oral, other than those expressly contained herein. It may not
be modified except in a writing signed by you and a duly
authorized officer of the Company.
The employment terms in this letter supersede any other
agreements or promises made to you by anyone, whether oral or
written. In addition, all employment contracts, terms of
employment, offer letters or similar agreements, arrangements or
understandings between you and CompuRAD, Inc. terminate as of the
Closing.
A-3
In consideration of the terms of the Closing and this offer
letter, you hereby agree to release and hold harmless CompuRAD,
Inc., the Company and their officers, directors and agents for
any and all acts or omissions relating to your employment with
CompuRAD, Inc. prior to the Closing and do so by executing the
Release attached hereto as Exhibit C.
Please sign and date this letter, and return it to me, if you
wish to accept employment at the Company under the terms
described above.
We look forward to your favorable reply and to a productive and
enjoyable work relationship.
Sincerely,
- - ------------------------------
Stephen J. Weiss
Accepted:
- - ------------------------------
Phillip Berman
- - ------------------------------
Date
Attachment:
Exhibit A: Proprietary Information and Inventions Agreement
Exhibit B: Relocation Benefits Agreement
Exhibit C: Release
A-4
EXHIBIT A
LUMISYS INCORPORATED
PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
In consideration of my employment or continued employment
by Lumisys Incorporated (the "Company"), and the compensation now
and hereafter paid to me, I hereby agree as follows:
40. Recognition of Company's Rights; Nondisclosure. At
all times during the term of my employment and thereafter, I will
hold in strictest confidence and will not disclose, use, lecture
upon or publish any of the Company's Proprietary Information
(defined below), except as such disclosure, use or publication
may be required in connection with my work for the Company, or
unless an officer of the Company expressly authorizes such in
writing. I hereby assign to the Company any rights I may have or
acquire in such Proprietary Information and recognize that all
Proprietary Information shall be the sole property of the Company
and its assigns and the Company and its assigns shall be the sole
owner of all trade secret rights, patent rights, copyrights, mask
work rights and all other rights throughout the world
(collectively, "Proprietary Rights") in connection therewith.
The term "Proprietary Information" shall mean trade
secrets, confidential knowledge, data or any other proprietary
information of the Company. By way of illustration but not
limitation, "Proprietary Information" includes (a) trade secrets,
inventions, mask works, ideas, processes, formulas, source and
object codes, data, programs, other works of authorship, know-
how, improvements, discoveries, developments, designs and
techniques (hereinafter collectively referred to as
"Inventions"); and (b) information regarding plans for research,
development, new products, marketing and selling, business plans,
budgets and unpublished financial statements, licenses, prices
and costs, suppliers and customers; and information regarding the
skills and compensation of other employees of the Company.
41. Third Party Information. I understand, in addition,
that the Company has received and in the future will receive from
third parties confidential or proprietary information ("Third
Party Information") subject to a duty on the Company's part to
maintain the confidentiality of such information and to use it
only for certain limited purposes. During the term of my
employment and thereafter, I will hold Third Party Information in
the strictest confidence and will not disclose (to anyone other
than Company personnel who need to know such information in
connection with their work for the Company) or use, except in
connection with my work for the Company, Third Party Information
unless expressly authorized by an officer of the Company in
writing.
42. Assignment of Inventions.
42.1 Assignment. I hereby assign to the Company all
my right, title and interest in and to any and all Inventions
(and all Proprietary Rights with respect thereto) whether or not
patentable or registrable under copyright or similar statutes,
made or conceived or reduced to practice or learned by me, either
alone or jointly with others, during the period of my employment
with the Company. Inventions assigned to or as directed by the
Company by this paragraph 3 are hereinafter referred to as
"Company Inventions." I recognize that this Agreement does not
require assignment of any invention which qualifies fully for
protection under Section 2870 of the California Labor Code
(hereinafter "Section 2870"), which provides as follows:
(a) Any provision in an employment agreement
which provides that an employee shall assign, or offer to assign,
any of his or her rights in an invention to his or her employer
shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information
except for those inventions that either:
(i) Relate at the time of conception or
reduction to practice of the invention to the employer's
business, or actual or demonstrably anticipated research or
development of the employer.
(ii) Result from any work performed by the
employee for the employer.
(b) To the extent a provision in an employment
agreement purports to require an employee to assign an invention
otherwise excluded from being required to be assigned under
subdivision (i), the provision is against the public policy of
this state and is unenforceable.
42.2 Government. I also assign to or as directed by
the Company all my right, title and interest in and to any and
all Inventions, full title to which is required to be in the
United States by a contract between the Company and the United
States or any of its agencies.
42.3 Works for Hire. I acknowledge that all original
works of authorship which are made by me (solely or jointly with
others) within the scope of my employment and which are
protectable by copyright are "works made for hire," as that term
is defined in the United States Copyright Act (17 U.S.C.,
Section 101).
43. Enforcement of Proprietary Rights. I will assist the
Company in every proper way to obtain and from time to time
enforce United States and foreign Proprietary Rights relating to
Company Inventions in any and all countries. To that end I will
execute, verify and deliver such documents and perform such other
acts (including appearances as a witness) as the Company may
reasonably request for use in applying for, obtaining,
perfecting, evidencing, sustaining and enforcing such Proprietary
Rights and the assignment thereof. In addition, I will execute,
verify and deliver assignments of such Proprietary Rights to the
Company or its designee. My obligation to assist the Company
with respect to Proprietary Rights relating to such Company
Inventions in any and all countries shall continue beyond the
termination of my employment, but the Company shall compensate me
at a reasonable rate after my termination for the time actually
spent by me at the Company's request on such assistance.
In the event the Company is unable for any reason,
after reasonable effort, to secure my signature on any document
needed in connection with the actions specified in the preceding
paragraph, I hereby irrevocably designate and appoint the Company
and its duly authorized officers and agents as my agent and
attorney in fact, which appointment is coupled with an interest,
to act for and in my behalf to execute, verify and file any such
documents and to do all other lawfully permitted acts to further
the purposes of the preceding paragraph with the same legal force
and effect as if executed by me. I hereby waive and quitclaim to
the Company any and all claims, of any nature whatsoever, which I
now or may hereafter have for infringement of any Proprietary
Rights assigned hereunder to the Company.
44. Obligation to the Company After Termination. I agree
to keep and maintain adequate and current records (in the form of
notes, sketches, drawings and in any other form that may be
required by the Company) of all Proprietary Information developed
by me and all Inventions made by me during the period of my
employment at the Company, which records shall be available to
and remain the sole property of the Company at all times.
45. Prior Inventions. Inventions, if any, patented or
unpatented, which I made prior to the commencement of my
employment with the Company are excluded from the scope of this
Agreement. To preclude any possible uncertainty, I have set
forth on Attachment 1 attached hereto a complete list of all
Inventions that I have, alone or jointly with others, conceived,
developed or reduced to practice or caused to be conceived,
developed or reduced to practice prior to the commencement of my
employment with the Company, that I consider to be my property or
the property of third parties and that I wish to have excluded
from the scope of this Agreement. If disclosure of any such
Invention on Attachment 1 would cause me to violate any prior
confidentiality agreement, I understand that I am not to list
such Inventions in Attachment 1 but am to inform the Company that
all such Inventions have not been listed for that reason.
46. No Improper Use of Materials. During my employment by
the Company I will not improperly use or disclose any
confidential information or trade secrets, if any, of any former
employer or any other person to whom I have an obligation of
confidentiality, and I will not bring onto the premises of the
Company any unpublished documents or any property belonging to
any former employer or any other person to whom I have an
obligation of confidentiality unless consented to in writing by
that former employer or person. I will use in the performance of
my duties only information which is generally known and used by
persons with training and experience comparable to my own, which
is common knowledge in the industry or otherwise legally in the
public domain, or which is otherwise provided or developed by the
Company.
47. No Conflicting Obligation. I represent that my
performance of all the terms of this Agreement and as an employee
of the Company does not and will not breach any agreement to keep
in confidence information acquired by me in confidence or in
trust prior to my employment by the Company. I have not entered
into, and I agree I will not enter into, any agreement either
written or oral in conflict herewith.
48. Return of Company Documents. When I leave the employ
of the Company, I will deliver to the Company any and all
drawings, notes, memoranda, specifications, devices, formulas,
and documents, together with all copies thereof, and any other
material containing or disclosing any Company Inventions, Third
Party Information or Proprietary Information of the Company. I
further agree that any property situated on the Company's
premises and owned by the Company, including disks and other
storage media, filing cabinets or other work areas, is subject to
inspection by Company personnel at any time with or without
notice. Prior to leaving, I will cooperate with the Company in
completing and signing the Company's termination statement for
technical and management personnel.
49. Legal and Equitable Remedies. Because my services are
personal and unique and because I may have access to and become
acquainted with the Proprietary Information of the Company, the
Company shall have the right to enforce this Agreement and any of
its provisions by injunction, specific performance or other
equitable relief, without bond and without prejudice to any other
rights and remedies that the Company may have for a breach of
this Agreement.
50. Notices. Any notices required or permitted hereunder
shall be given to the appropriate party at the address specified
below or at such other address as the party shall specify in
writing. Such notice shall be deemed given upon personal
delivery to the appropriate address or if sent by certified or
registered mail, three days after the date of mailing.
51. General Provisions.
51.1 Governing Law. This Agreement will be governed
by and construed according to the laws of the State of
California.
51.2 Entire Agreement. This Agreement is the final,
complete and exclusive agreement of the parties with respect to
the subject matter hereof and supersedes and merges all prior
discussions between us. No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement,
will be effective unless in writing and signed by the party to be
charged. Any subsequent change or changes in my duties, salary
or compensation will not affect the validity or scope of this
Agreement. As used in this Agreement, the period of my
employment includes any time during which I may be retained by
the Company as a consultant.
51.3 Severability. If one or more of the provisions
in this Agreement are deemed unenforceable by law, then such
provision will be deemed stricken from this Agreement and the
remaining provisions will continue in full force and effect.
51.4 Successors and Assigns. This Agreement will be
binding upon my heirs, executors, administrators and other legal
representatives and will be for the benefit of the Company, its
successors, and its assigns.
51.5 Survival. The provisions of this Agreement
shall survive the termination of my employment and the assignment
of this Agreement by the Company to any successor in interest or
other assignee.
51.6 Employment. I agree and understand that nothing
in this Agreement shall confer any right with respect to
continuation of employment by the Company, nor shall it interfere
in any way with my right or the Company's right to terminate my
employment at any time, with or without cause.
51.7 Waiver. No waiver by the Company of any breach
of this Agreement shall be a waiver of any preceding or
succeeding breach. No waiver by the Company of any right under
this Agreement shall be construed as a waiver of any other right.
The Company shall not be required to give notice to enforce
strict adherence to all terms of this Agreement.
This Agreement shall be effective as of the first day of my
employment with the Company, namely: , 19 .
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I
HAVE COMPLETELY FILLED OUT ATTACHMENT 1 TO THIS AGREEMENT.
Dated:
-------------------- ----------------------------
Signature
----------------------------
(Printed Name)
----------------------------
(Address)
----------------------------
----------------------------
ACCEPTED AND AGREED TO:
LUMISYS INCORPORATED
By:
------------------------
Title:
------------------------
ATTACHMENT 1
MEMORANDUM
TO: LUMISYS INCORPORATED
FROM:
-----------------------
DATE:
-----------------------
RE: Inventions
1. The following is a complete list of all inventions or
improvements relevant to the subject matter of my employment by
Lumisys Incorporated (the "Company") that have been made or
conceived or first reduced to practice by me alone or jointly
with others prior to my engagement by the Company:
[ ] No inventions or improvements.
[ ] See below:
- - ----------------------------------------------------------------
- - ----------------------------------------------------------------
- - ----------------------------------------------------------------
[ ] Due to confidentiality agreements with prior employer,
I cannot disclose certain inventions that would otherwise be
included on the above-described list.
[ ] Additional sheets attached.
2. I propose to bring to my employment the following devices,
materials and documents of a former employer or other person to
whom I have an obligation of confidentiality that are not
generally available to the public, which materials and documents
may be used in my employment pursuant to the express written
authorization of my former employer or such other person (a copy
of which is attached hereto):
[ ] No material.
[ ] See below:
- - ----------------------------------------------------------------
- - ----------------------------------------------------------------
- - ----------------------------------------------------------------
- - ----------------------------------------------------------------
[ ] Additional sheets attached.
Date:
--------------- -----------------------------
Employee
EXHIBIT B
Relocation Benefits Agreement
Effective on 1997 (the "Effective Date"),
----------------
(Start Date)
I,
----------------------------------------
(Name)
hereby agree to the following terms and conditions with respect
to all relocation costs paid to me or on my behalf by Lumisys
Incorporated (the "Company"), whether by reimbursement to me or
by direct payment to third parties, in connection with my
relocation from Arizona to my new home in ,
California (the "Relocation Costs"):
1. If I remain a President of the Company for 12 months from the
Effective Date, I shall have no obligation to repay any of the
Relocation Costs.
2. If my employment terminates for "cause" or without "good
reason" within one year from the effective date, I agree to repay
to the Company a portion of the Relocation Costs, including tax
assistance payments or other amounts paid to federal or state tax
agencies as withholding or other credit against taxes, to be
calculated as follows:
For each full month of full-time employment, the Company will
forgive 1/12 of my Relocation Costs. The remaining unforgiven
Relocation Costs are due and payable to the Company on demand.
3. I understand that all reimbursements and allowances paid to
me or on my behalf as Relocation Costs, including tax assistance
payments and amounts withheld as payroll deductions, in
connection with my relocation must be included as a part of my
gross income and therefore may be subject to tax. If I am
required under paragraph 2 of this agreement to repay Relocation
Costs to the Company, I will repay the entire amount determined
under paragraph 2, including tax assistance payments and amounts
withheld as payroll deductions.
I also understand that my ability to deduct a portion of my
Relocation Costs is subject to specific limits and other IRS
requirements, including the requirement that I must be able to
substantiate my expenses by keeping copies of my receipts. I
UNDERSTAND THAT IF I AM AUDITED BY THE IRS OR ANY STATE TAX
AGENCY, I ALONE AND NOT THE COMPANY WILL BE LIABLE FOR ANY TAXES,
INTEREST OR PENALTIES DUE IF ANY CLAIMED DEDUCTIONS ARE DENIED
FOR ANY REASON, INCLUDING IF I FAIL TO KEEP COPIES OF RECEIPTS.
I understand that I cannot rely on the Company or any officer or
employee of the Company for advice regarding the proper tax
treatment of my Relocation Costs, and that I am responsible for
obtaining independent advice from my own personal tax advisor.
4. I understand that nothing in this agreement assures me of a
continuing position with the Company, or in any way changes the
Company's right to end the employment relationship as it deems
necessary.
5. If I am obligated under this agreement to repay the Company
for Relocation Costs, I hereby authorize the Company to deduct
the entire amount due from my final paycheck, including from any
vacation pay due.
6. Before submitting expenses for reimbursement as Relocation
Costs, I will inform the Company whether my spouse is eligible
for relocation benefits from another employer, and if so, the
terms of those benefits. If my spouse is eligible for any of the
same relocation benefits which the Company has offered me, I will
only receive one-half of any such benefits from the Company.
- - ----------------------------- -------------------
Employee signature Date
Exhibit C
RELEASE
Except as otherwise set forth in this Release, I hereby
release, acquit and forever discharge CompuRAD, Inc. (the
"Company"), its parents and subsidiaries, and their officers,
directors, agents, servants, employees, attorneys, shareholders,
successors, assigns and affiliates, of and from any and all
claims, liabilities, demands, causes of action, costs, expenses,
attorneys fees, damages, indemnities and obligations of every
kind and nature, in law, equity, or otherwise, known and unknown,
suspected and unsuspected, disclosed and undisclosed, arising out
of or in any way related to agreements, events, acts or conduct
at any time prior to and including the execution date of this
Release, including but not limited to: all such claims and
demands directly or indirectly arising out of or in any way
connected with my employment with the Company or the termination
of that employment; claims or demands related to salary, bonuses,
commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense
reimbursements, severance pay, or any other form of compensation;
claims pursuant to any federal, state or local law, statute, or
cause of action including, but not limited to, the federal Civil
Rights Act of 1964, as amended; the federal Americans with
Disabilities Act of 1990; the federal Age Discrimination in
Employment Act of 1967, as amended ("ADEA"); the California Fair
Employment and Housing Act, as amended; the Arizona Civil Rights
Act, as amended; tort law; contract law; wrongful discharge;
discrimination; harassment; fraud; defamation; emotional
distress; and breach of the implied covenant of good faith and
fair dealing.
I acknowledge that I am knowingly and voluntarily waiving
and releasing any rights I may have under the ADEA, as amended.
I also acknowledge that the consideration given for the waiver
and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. I further
acknowledge that I have been advised by this writing, as required
by the ADEA, that: (a) my waiver and release do not apply to any
rights or claims that may arise after the execution date of this
Release; (b) I have been advised hereby that I have the right to
consult with an attorney prior to executing this Release; (c) I
have twenty-one (21) days to consider this Release (although I
may choose to voluntarily execute this Release earlier); (d) I
have seven (7) days following the execution of this Release by
the parties to revoke the Release; and (e) this Release shall not
be effective until the date upon which the revocation period has
expired, which shall be the eighth day after this Release is
executed by me, provided that the Company has also executed this
Release by that date ("Effective Date").
In giving this release, which includes claims which may be
unknown to me at present, I acknowledge that I have read and
understand Section 1542 of the California Civil Code which reads
as follows: "A general release does not extend to claims which
the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must
have materially affected his settlement with the debtor." I
hereby expressly waive and relinquish all rights and benefits
under that section and any law of any jurisdiction of similar
effect with respect to my release of any claims I may have
against the Company.
By:
----------------------------
Date:
--------------------------
EXHIBIT F
INDIVIDUALS TO EXECUTE EMPLOYMENT OFFER LETTERS
1. Phillip Berman, M.D.
2. Cary Cole
3. Henky Wibowo
EXHIBIT G
VOTING AGREEMENT
This Voting Agreement is entered into as of September 28,
1997 by and between Lumisys Incorporated, a Delaware corporation
("Parent"), and ("Stockholder").
Recitals
52. Parent, SAC Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger
Sub"), and CompuRAD, Inc., a Delaware corporation (the
"Company"), are entering into an Agreement and Plan of Merger and
Reorganization of even date herewith (as amended from time to
time, the "Reorganization Agreement"; capitalized terms used but
not otherwise defined in this Voting Agreement have the meanings
assigned to such terms in the Reorganization Agreement), which
provides (subject to the conditions set forth therein) for the
merger of Merger Sub with and into the Company (the "Merger").
53. As of the date hereof, Stockholder owns the number of
shares of Company Common Stock set forth below Stockholder's name
on the signature page hereto (all such shares, together with any
shares of Company Common Stock or other shares of capital stock
of the Company that may hereafter be acquired by Stockholder,
being referred to herein as the "Subject Shares").
54. As a condition to the willingness of Parent and Merger
Sub to enter into the Reorganization Agreement, Parent and Merger
Sub have required that Stockholder agree, and in order to induce
Parent and Merger Sub to enter into the Reorganization Agreement
Stockholder has agreed, to enter into this Voting Agreement.
Agreement
The parties to this Voting Agreement, intending to be
legally bound, agree as follows:
55. Transfer of Subject Shares
55.1 Transfer of Voting Rights. Stockholder covenants and
agrees that, prior to the earlier to occur of: (i) the Effective
Time, or (ii) the valid termination of the Reorganization
agreement (the "Expiration Date"), and except as otherwise
contemplated hereby, Stockholder will not deposit any of the
Subject Shares into a voting trust or grant a proxy or enter into
a voting agreement or similar agreement with respect to any of
the Subject Shares.
55.2 Obligations of Transferees. Each transferee or any
subsequent transferee of the Subject Shares or any interest in
such Subject Shares, shall hold such Subject Shares or interest
in the Subject Shares subject to all the provisions of this
Voting Agreement. Each transferee shall sign a counterpart of
this Agreement, agreeing to be bound by the terms and conditions
hereof, prior to receipt of any Subject Shares.
56. Voting of Subject Shares
56.1 Pre-Termination Voting Agreement. Without in any way
limiting the Stockholder's right to vote the Subject Shares in
his sole discretion on any other matters that may be submitted to
a stockholder vote, consent or other approval (including by
written consent), at any meeting of the stockholders of the
Company called to vote upon the Merger and the Reorganization
Agreement or at any adjournment thereof or in any other
circumstances upon which a vote, consent or other approval
(including by written consent) with respect to the Merger and the
Reorganization Agreement is sought, the Stockholder hereby agrees
that, prior to the Expiration Date, at any meeting of the
stockholders of the Company, however called, and in any written
action by consent of stockholders of the Company, Stockholder
shall vote the Subject Shares in favor of: (i) the Merger, (ii)
the execution and delivery by the Company of the Reorganization
Agreement, (iii) the adoption and approval of the terms thereof
and (iv) in favor of each of the other actions contemplated by
the Reorganization Agreement and any action required in
furtherance hereof or thereof.
Prior to the Expiration Date, Stockholder shall not enter into
any agreement or understanding with any Person to vote or give
instructions with respect to the Subject Shares regarding the
Merger and the Reorganization Agreement, other than any agreement
or understanding to vote or give instructions in favor of the
Merger and the Reorganization Agreement.
56.2 Proxy; Further Assurances. Contemporaneously with
the execution of this Voting Agreement, Stockholder shall deliver
to Parent a proxy in the form attached hereto as Exhibit A, which
shall be irrevocable to the fullest extent permitted by law, with
respect to the Subject Shares (the "Proxy").
57. Waiver of Appraisal Rights.
Stockholder hereby waives any rights of appraisal and any
dissenters' rights that Stockholder may have in connection with
the Merger.
58. No Solicitation
(i) solicit, initiate, encourage or induce the making,
submission or announcement of any Acquisition Proposal or take
any action that could reasonably be expected to lead to an
Acquisition Proposal; (ii) furnish any information regarding the
Company to any Person in connection with or in response to an
Acquisition Proposal or potential Acquisition Proposal; (iii)
engage in discussions with any Person with respect to any
Acquisition Proposal; (iv) approve, endorse or recommend any
Acquisition Proposal; or (v) enter into any letter of intent or
other similar document or any Contract contemplating or otherwise
relating to any Acquisition Proposal. Stockholder shall
immediately cease any existing discussions with any Person that
relate to any Acquisition Proposal. Notwithstanding the
foregoing, Stockholder shall not be prevented from taking any
action that is not prohibited under Section 4.4 of the
Reorganization Agreement, whether he is acting in his capacity as
a Stockholder of the Company or as an officer or director of the
Company; provided that nothing herein shall be deemed to excuse
Stockholder's performance of his voting obligations hereunder.
59. Representations and Warranties of Stockholder
Stockholder hereby represents and warrants to Parent as
follows:
59.1 Authorization, etc. Stockholder has all requisite
power and capacity to execute and deliver this Voting Agreement
and to perform his obligations hereunder. This Voting Agreement
has been duly executed and delivered by Stockholder and
constitutes a legal, valid and binding obligation of Stockholder,
enforceable against Stockholder in accordance with its terms,
subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules
of law governing specific performance, injunctive relief and
other equitable remedies.
59.2 No Conflicts, Required Filings and Consents.
(a) The execution and delivery of this Voting
Agreement by Stockholder do not, and the performance of this
Voting Agreement by Stockholder will not: (i) conflict with or
violate any Legal Requirement, order, decree or judgment
applicable to Stockholder or by which he or any of his properties
is bound or affected; or (ii) result in any breach of or
constitute a default (with notice or lapse of time, or both)
under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of an
Encumbrance on the Subject Shares pursuant to, any Contract to
which Stockholder is a party or by which Stockholder or any of
his properties is bound or affected.
(b) The execution and delivery of this Voting
Agreement by Stockholder do not, and the performance of this
Voting Agreement by Stockholder will not, require any Consent of
any Person.
59.3 Title to Subject Shares. Stockholder owns of record
and beneficially the Subject Shares set forth under Stockholder's
name on the signature page hereof and does not directly or
indirectly own, either beneficially or of record, any shares of
capital stock of the Company, or rights to acquire any shares of
capital stock of the Company, other than the Subject Shares set
forth below Stockholder's name on the signature page hereof.
59.4 Accuracy of Representations. The representations and
warranties contained in this Voting Agreement are accurate in all
respects as of the date of this Voting Agreement, will be
accurate in all respects at all times through the Expiration Date
and will be accurate in all respects as of the date of the
consummation of the Merger as if made on that date.
60. Covenants of Stockholder
60.1 Further Assurances. From time to time and without
additional consideration, Stockholder will execute and deliver,
or cause to be executed and delivered, such additional or further
transfers, assignments, endorsements, proxies, consents and other
instruments as Parent may reasonably request for the purpose of
effectively carrying out and furthering the intent of this Voting
Agreement.
60.2 Legend. Promptly after the date of this Voting
Agreement, and in any event, no later than two business days
following the date of this Voting Agreement, Stockholder shall
instruct the Company to cause each certificate of Stockholder
evidencing the Subject Shares to bear a legend in the following
form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE VOTING AGREEMENT
DATED AS OF SEPTEMBER 28, 1997, AS IT MAY BE AMENDED, BETWEEN THE
ISSUER AND THE REGISTERED HOLDER OF THIS CERTIFICATE, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE
ISSUER.
61. Miscellaneous
61.1 Survival of Representations, Warranties and
Agreements. This Voting Agreement shall terminate, and the
provisions hereof shall be of no further force or effect upon the
Expiration Date.
61.2 Indemnification. Without in any way limiting any of
the rights or remedies otherwise available to Parent, Stockholder
shall hold harmless and indemnify Parent from and against, and
shall compensate and reimburse Parent for, any Damages
(regardless of whether or not such Damages relate to a third-
party claim) which are directly or indirectly suffered or
incurred at any time by Parent, or to which Parent otherwise
becomes subject, and that arise from or are directly or
indirectly connected with any breach of any representation,
warranty, covenant or obligation of Stockholder contained herein.
61.3 Expenses. All costs and expenses incurred in
connection with the transactions contemplated by this Voting
Agreement shall be paid by the party incurring such costs and
expenses.
61.4 Notices. Any notice or other communication required
or permitted to be delivered to either party under this Voting
Agreement shall be in writing and shall be deemed properly
delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by
facsimile) to the address or facsimile telephone number set forth
beneath the name of such party below (or to such other address or
facsimile telephone number as such party shall have specified in
a written notice given to the other party hereto):
if to Stockholder:
at the address set forth below Stockholder's
signature on the signature page hereto;
with a copy to:
Wilson Sonsini Goodrich & Rosati,
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94306
Attention: David J. Segre
if to Parent:
Lumisys Incorporated
225 Humboldt Court
Sunnyvale, CA 94086
Attention: Stephen J. Weiss
with a copy to:
Cooley Godward llp
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attention: Andrei M. Manoliu
61.5 Severability. Any term or provision of this Voting
Agreement which is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Voting
Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Voting Agreement in any other
jurisdiction. If any provision of this Voting Agreement is so
broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
61.6 Entire Agreement. This Voting Agreement and any
documents delivered by the parties in connection herewith
constitute the entire agreement between the parties with respect
to the subject matter hereof and thereof and supersede all prior
agreements and understandings between the parties with respect
thereto. No addition to or modification of any provision of this
Voting Agreement shall be binding upon either party hereto unless
made in writing and signed by both parties hereto. The parties
hereto waive trial by jury in any action at law or suit in equity
based upon, or arising out of, this Voting Agreement or the
subject matter hereof.
61.7 Assignment; Binding Effect. Except as provided
herein, neither this Voting Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either of
the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other party, except that
Parent may assign all or any of its rights hereunder to any
affiliate of Parent. Subject to the preceding sentence, this
Voting Agreement shall be binding upon and shall inure to the
benefit of (i) Stockholder and his heirs, successors and assigns
and (ii) Parent and its successors and assigns. Notwithstanding
anything contained in this Voting Agreement to the contrary,
nothing in this Voting Agreement, expressed or implied, is
intended to confer on any Person other than the parties hereto or
their respective heirs, successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this
Voting Agreement.
61.8 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the
provisions of this Voting Agreement was not performed in
accordance with its specific terms or was otherwise breached. It
is accordingly agreed that Parent shall be entitled to an
injunction or injunctions to prevent breaches of this Voting
Agreement and to enforce specifically the terms and provisions
hereof in any Delaware court or other court of proper
jurisdiction, this being in addition to any other remedy to which
Parent is entitled at law or in equity.
61.9 Other Agreements. Nothing in this Voting Agreement
shall limit any of the rights or remedies of Parent or any of the
obligations of Stockholder under any Affiliate Agreement between
Parent and Stockholder or any other agreement.
61.10 Governing Law. This Voting Agreement shall be
governed in all respects by the laws of the State of Delaware, as
applied to contracts entered into and to be performed entirely
within the State of Delaware.
61.11 Counterparts. This Voting Agreement may be executed
by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same
instrument.
61.12 Construction.
(a) Headings of the Sections of this Voting Agreement
are for the convenience of the parties only, and shall be given
no substantive or interpretive effect whatsoever.
(b) For purposes of this Voting Agreement, whenever
the context requires: the singular number shall include the
plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; the feminine gender shall include
the masculine and neuter genders; and the neuter gender shall
include masculine and feminine genders.
(c) The parties hereto agree that any rule of
construction to the effect that ambiguities are to be resolved
against the drafting party shall not be applied in the
construction or interpretation of this Voting Agreement.
(d) As used in this Voting Agreement, the words
"include" and "including," and variations thereof, shall not be
deemed to be terms of limitation, but rather shall be deemed to
be followed by the words "without limitation."
(e) Except as otherwise indicated, all references in
this Voting Agreement to "Sections" and "Exhibits" are intended
to refer to Sections of this Voting Agreement and Exhibits to
this Voting Agreement.
In Witness Whereof, Parent and Stockholder have caused this
Voting Agreement to be executed as of the date first written
above.
Lumisys Incorporated
By:
----------------------
Name:
----------------------
Title:
----------------------
Stockholder
--------------------------------
Name:
----------------------
Address:
----------------------
----------------------
Facsimile:
----------------------
Number of Shares of Company
Common Stock owned of record as of
the date of this Voting Agreement:
---------------------------------
Exhibit A
Irrevocable Proxy
The undersigned stockholder of CompuRAD, Inc., a Delaware
corporation (the "Company"), hereby irrevocably (to the fullest
extent permitted by law) appoints and constitutes ,
and Lumisys, Incorporated, a Delaware
corporation ("Parent"), and each of them, the attorneys and
proxies of the undersigned with full power of substitution and
resubstitution, to the full extent of the undersigned's rights
with respect to (i) the shares of capital stock of the Company
owned by the undersigned as of the date of this proxy, which
shares are specified on the final page of this proxy and (ii) any
and all other shares of capital stock of the Company which the
undersigned may acquire after the date hereof. (The shares of
the capital stock of the Company referred to in clauses (i) and
(ii) of the immediately preceding sentence are collectively
referred to as the "Shares.") Upon the execution hereof, all
prior proxies given by the undersigned with respect to any of the
Shares are hereby revoked, and no subsequent proxies will be
given with respect to any of the Shares.
This proxy is irrevocable and is coupled with an interest.
This proxy is granted in connection with the Voting Agreement of
even date herewith between Parent and the undersigned (the
"Voting Agreement") and in consideration of Parent entering into
the Agreement and Plan of Merger and Reorganization of even date
herewith among Parent, SAC Acquisition Corporation, a Delaware
corporation and wholly owned subsidiary of Parent, and the
Company (the "Reorganization Agreement"). Capitalized terms used
but not otherwise defined in this proxy have the meanings
assigned to such terms in the Reorganization Agreement.
The attorneys and proxies named above will be empowered,
and may exercise this proxy, to vote the Shares at any time at
any meeting of the stockholders of the Company, however called,
or in any written action by consent of stockholders of the
Company, until the earlier to occur of the valid termination of
the Reorganization Agreement or the Effective Time, as follows:
(i) in favor of the Merger, (ii) in favor of the execution and
delivery by the Company of the Reorganization Agreement and the
adoption and approval of the terms thereof and (iii) in favor of
each of the other actions contemplated by the Reorganization
Agreement and any action required in furtherance hereof or
thereof.
This proxy shall be binding upon the heirs, successors and
assigns of the undersigned (including any transferee of any of
the Shares).
Dated: September 28, 1997
----------------------------
Name:
-----------------------
Number of Shares of Company
Common Stock:
---------------
EXHIBIT H
INDIVIDUALS TO EXECUTE THE VOTING AGREEMENT
1. Phillip Berman, M.D.
2. Cary Cole
3. Henky Wibowo
4. Kevin Donovan
(..continued)
Lumisys to Acquire CompuRAD
Transaction to create a leading supplier of Medical Image
Management components
Sunnyvale, California (September 29, 1997) - Lumisys, Inc.
(NASDAQ:LUMI) and CompuRAD, Inc. (NASDAQ:COMD) today announced
that they have entered into a definitive agreement for Lumisys to
acquire CompuRAD, a leading provider of Teleradiology and PACS
software in a stock for stock merger. The combined company will
focus on offering both hardware and software components to Medical
Image Management system suppliers, OEMs and VARs.
This acquisition is expected to qualify as a tax free
reorganization, and is expected to be accounted for as a pooling
of interests. The consummation of the acquisition is subject to
certain conditions, including stockholder approval for both
companies. The transaction is anticipated to close during the
first quarter of 1998. Under the terms of the agreement, CompuRAD
stockholders will receive .928 shares of Lumisys common stock for
each share of common stock of CompuRAD. Dr. Phillip Berman,
Chairman of the Board, President and Chief Executive Officer of
CompuRAD, and David Lapan, MD, CompuRAD Board of Directors member,
will join the Lumisys Board of Directors. Dr. Phillip Berman will
serve as President and Stephen Weiss, Chief Executive Officer of
Lumisys, will serve as the Chief Executive Officer of the combined
company.
"In bringing together these two companies, we will be able to
offer more products to our customers and increase long-term
opportunities for employees," said Stephen Weiss. Weiss added,
"By increasing the software capabilities of our core products, we
also will be able to offer our customers a new generation of
'intelligent' medical imaging appliances."
"We believe the combined companies will be able to deliver
customers a unique combination of hardware, software, services
and, ultimately, appliances" said Dr. Berman. Dr. Berman added
"this combination will also allow us to leverage the growing
opportunities in the closely-related nuclear medicine, cardiology
and clinical information market segments."
Lumisys designs, manufactures and markets a family of precision
digitizers that convert medical images on film or video into
digital format. The Company's digitizers process images from all
commercially available medical imaging modalities, including x-
ray, CT, MRI, ultrasound and nuclear medicine. Lumisys' video
digitization and compression products also have applications in
scientific and industrial inspection, broadcast video and
multimedia imaging. Additional information on Lumisys is
available at www.lumisys.com.
CompuRAD is a leading provider of Teleradiology and PACS software
products designed to capture, distribute, manage, store and view
radiology images to enable faster patient diagnosis and treatment.
CompuRAD also offers an innovative Clinical Data Repository and
Access product called ClinicalWare which combines
Internet/Intranet and Object technologies. Additional information
on CompuRAD is available at www.compurad.com.
This press release contains forward looking statements that
involve risks and uncertainties, including those relating to the
possible inability to complete the acquisition as scheduled, or at
all. Assuming completion of the acquisition, such risks and
uncertainties include risks that integration of operations,
technologies and products of the combining companies might not
occur as anticipated; that management's attention might be
diverted from day to day business activities; and that greater
than normal employee turnover might occur. In addition, there are
normal risks and uncertainties associated with Lumisys' and
CompuRAD's business, including the timely development, acceptance
and pricing of new products and the impact of competitive
conditions as well as the other risks detailed from time to time
in the SEC reports of Lumisys and CompuRAD, including the report
on Form 10-Q for the quarter ended June 30, 1997 for Lumisys and
the report on Form 10-Q for the quarter ended June 30, 1997 for
CompuRAD.
(..continued)
EXHIBIT G
VOTING AGREEMENT
This Voting Agreement is entered into as of September 28,
1997 by and between Lumisys Incorporated, a Delaware corporation
("Parent"), and ___________________
("Stockholder").
Recitals
A. Parent, SAC Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger
Sub"), and CompuRAD, Inc., a Delaware corporation (the
"Company"), are entering into an Agreement and Plan of Merger and
Reorganization of even date herewith (as amended from time to
time, the "Reorganization Agreement"; capitalized terms used but
not otherwise defined in this Voting Agreement have the meanings
assigned to such terms in the Reorganization Agreement), which
provides (subject to the conditions set forth therein) for the
merger of Merger Sub with and into the Company (the "Merger").
B. As of the date hereof, Stockholder owns the number of
shares of Company Common Stock set forth below Stockholder's name
on the signature page hereto (all such shares, together with any
shares of Company Common Stock or other shares of capital stock
of the Company that may hereafter be acquired by Stockholder,
being referred to herein as the "Subject Shares").
C. As a condition to the willingness of Parent and Merger
Sub to enter into the Reorganization Agreement, Parent and Merger
Sub have required that Stockholder agree, and in order to induce
Parent and Merger Sub to enter into the Reorganization Agreement
Stockholder has agreed, to enter into this Voting Agreement.
Agreement
The parties to this Voting Agreement, intending to be legally
bound, agree as follows:
1. Transfer of Subject Shares
1.1. Transfer of Voting Rights. Stockholder covenants and agrees
that, prior to the earlier to occur of: (i) the Effective Time, or
(ii) the valid termination of the Reorganization agreement (the
"Expiration Date"), and except as otherwise contemplated hereby,
Stockholder will not deposit any of the Subject Shares into a
voting trust or grant a proxy or enter into a voting agreement or
similar agreement with respect to any of the Subject Shares.
1.2. Obligations of Transferees. Each transferee or any
subsequent transferee of the Subject Shares or any interest in
such Subject Shares, shall hold such Subject Shares or interest in
the Subject Shares subject to all the provisions of this Voting
Agreement. Each transferee shall sign a counterpart of this
Agreement, agreeing to be bound by the terms and conditions
hereof, prior to receipt of any Subject Shares.
2. Voting of Subject Shares
2.1. Pre-Termination Voting Agreement. Without in any way
limiting the Stockholder's right to vote the Subject Shares in his
sole discretion on any other matters that may be submitted to a
stockholder vote, consent or other approval (including by written
consent), at any meeting of the stockholders of the Company called
to vote upon the Merger and the Reorganization Agreement or at any
adjournment thereof or in any other circumstances upon which a
vote, consent or other approval (including by written consent)
with respect to the Merger and the Reorganization Agreement is
sought, the Stockholder hereby agrees that, prior to the
Expiration Date, at any meeting of the stockholders of the
Company, however called, and in any written action by consent of
stockholders of the Company, Stockholder shall vote the Subject
Shares in favor of: (i) the Merger, (ii) the execution and
delivery by the Company of the Reorganization Agreement, (iii) the
adoption and approval of the terms thereof and (iv) in favor of
each of the other actions contemplated by the Reorganization
Agreement and any action required in furtherance hereof or
thereof.
Prior to the Expiration Date, Stockholder shall not enter into any
agreement or understanding with any Person to vote or give
instructions with respect to the Subject Shares regarding the
Merger and the Reorganization Agreement, other than any agreement
or understanding to vote or give instructions in favor of the
Merger and the Reorganization Agreement.
2.2. Proxy; Further Assurances. Contemporaneously with the
execution of this Voting Agreement, Stockholder shall deliver to
Parent a proxy in the form attached hereto as Exhibit A, which
shall be irrevocable to the fullest extent permitted by law, with
respect to the Subject Shares (the "Proxy").
3. Waiver of Appraisal Rights.
Stockholder hereby waives any rights of appraisal and any
dissenters' rights that Stockholder may have in connection with
the Merger.
4. No Solicitation
Stockholder covenants and agrees that, during the period
commencing on the date of this Voting Agreement and ending on the
Expiration Date, Stockholder shall not, directly or indirectly,
and shall not authorize or permit any Representative of
Stockholder, directly or indirectly, to: (i) solicit, initiate,
encourage or induce the making, submission or announcement of any
Acquisition Proposal or take any action that could reasonably be
expected to lead to an Acquisition Proposal; (ii) furnish any
information regarding the Company to any Person in connection
with or in response to an Acquisition Proposal or potential
Acquisition Proposal; (iii) engage in discussions with any Person
with respect to any Acquisition Proposal; (iv) approve, endorse
or recommend any Acquisition Proposal; or (v) enter into any
letter of intent or other similar document or any Contract
contemplating or otherwise relating to any Acquisition Proposal.
Stockholder shall immediately cease any existing discussions
with any Person that relate to any Acquisition Proposal.
Notwithstanding the foregoing, Stockholder shall not be prevented
from taking any action that is not prohibited under Section 4.4
of the Reorganization Agreement, whether he is acting in his
capacity as a Stockholder of the Company or as an officer or
director of the Company; provided that nothing herein shall be
deemed to excuse Stockholder's performance of his voting
obligations hereunder.
5. Representations and Warranties of Stockholder
Stockholder hereby represents and warrants to Parent as
follows:
5.1. Authorization, etc. Stockholder has all requisite power and
capacity to execute and deliver this Voting Agreement and to
perform his obligations hereunder. This Voting Agreement has been
duly executed and delivered by Stockholder and constitutes a
legal, valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms, subject to (i)
laws of general application relating to bankruptcy, insolvency and
the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
5.2. No Conflicts, Required Filings and Consents.
(a) The execution and delivery of this Voting Agreement by
Stockholder do not, and the performance of this Voting Agreement
by Stockholder will not: (i) conflict with or violate any Legal
Requirement, order, decree or judgment applicable to Stockholder
or by which he or any of his properties is bound or affected; or
(ii) result in any breach of or constitute a default (with notice
or lapse of time, or both) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result
in the creation of an Encumbrance on the Subject Shares pursuant
to, any Contract to which Stockholder is a party or by which
Stockholder or any of his properties is bound or affected.
(b) The execution and delivery of this Voting Agreement by
Stockholder do not, and the performance of this Voting Agreement
by Stockholder will not, require any Consent of any Person.
5.3. Title to Subject Shares. Stockholder owns of record and
beneficially the Subject Shares set forth under Stockholder's name
on the signature page hereof and does not directly or indirectly
own, either beneficially or of record, any shares of capital stock
of the Company, or rights to acquire any shares of capital stock
of the Company, other than the Subject Shares set forth below
Stockholder's name on the signature page hereof.
5.4. Accuracy of Representations. The representations and
warranties contained in this Voting Agreement are accurate in all
respects as of the date of this Voting Agreement, will be accurate
in all respects at all times through the Expiration Date and will
be accurate in all respects as of the date of the consummation of
the Merger as if made on that date.
6. Covenants of Stockholder
6.1. Further Assurances. From time to time and without
additional consideration, Stockholder will execute and deliver, or cause
to be executed and delivered, such additional or further transfers,
assignments, endorsements, proxies, consents and other instruments
as Parent may reasonably request for the purpose of effectively
carrying out and furthering the intent of this Voting Agreement.
6.2. Legend. Promptly after the date of this Voting Agreement,
and in any event, no later than two business days following the
date of this Voting Agreement, Stockholder shall instruct the
Company to cause each certificate of Stockholder evidencing the
Subject Shares to bear a legend in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE VOTING AGREEMENT
DATED AS OF SEPTEMBER 28, 1997, AS IT MAY BE AMENDED, BETWEEN THE
ISSUER AND THE REGISTERED HOLDER OF THIS CERTIFICATE, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER.
7. Miscellaneous
7.1. Survival of Representations, Warranties and Agreements.
This Voting Agreement shall terminate, and the provisions hereof shall
be of no further force or effect upon the Expiration Date.
7.2. Indemnification. Without in any way limiting any of the
rights or remedies otherwise available to Parent, Stockholder
shall hold harmless and indemnify Parent from and against, and
shall compensate and reimburse Parent for, any Damages (regardless
of whether or not such Damages relate to a third-party claim)
which are directly or indirectly suffered or incurred at any time
by Parent, or to which Parent otherwise becomes subject, and that
arise from or are directly or indirectly connected with any breach
of any representation, warranty, covenant or obligation of
Stockholder contained herein.
7.3. Expenses. All costs and expenses incurred in connection with
the transactions contemplated by this Voting Agreement shall be
paid by the party incurring such costs and expenses.
7.4. Notices. Any notice or other communication required or
permitted to be delivered to either party under this Voting
Agreement shall be in writing and shall be deemed properly
delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by
facsimile) to the address or facsimile telephone number set forth
beneath the name of such party below (or to such other address or
facsimile telephone number as such party shall have specified in a
written notice given to the other party hereto):
if to Stockholder:
at the address set forth below Stockholder's
signature on the signature page hereto;
with a copy to:
Wilson Sonsini Goodrich & Rosati, Professional
Corporation
650 Page Mill Road
Palo Alto, CA 94306
Attention: David J. Segre
if to Parent:
Lumisys Incorporated
225 Humboldt Court
Sunnyvale, CA 94086
Attention: Stephen J. Weiss
with a copy to:
Cooley Godward llp
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attention: Andrei M. Manoliu
7.5. Severability. Any term or provision of this Voting Agreement
which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Voting Agreement or
affecting the validity or enforceability of any of the terms or
provisions of this Voting Agreement in any other jurisdiction. If
any provision of this Voting Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
7.6. Entire Agreement. This Voting Agreement and any documents
delivered by the parties in connection herewith constitute the
entire agreement between the parties with respect to the subject
matter hereof and thereof and supersede all prior agreements and
understandings between the parties with respect thereto. No
addition to or modification of any provision of this Voting
Agreement shall be binding upon either party hereto unless made in
writing and signed by both parties hereto. The parties hereto
waive trial by jury in any action at law or suit in equity based
upon, or arising out of, this Voting Agreement or the subject
matter hereof.
7.7. Assignment; Binding Effect. Except as provided herein,
neither this Voting Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by either of the parties
hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Parent may
assign all or any of its rights hereunder to any affiliate of
Parent. Subject to the preceding sentence, this Voting Agreement
shall be binding upon and shall inure to the benefit of (i)
Stockholder and his heirs, successors and assigns and (ii) Parent
and its successors and assigns. Notwithstanding anything
contained in this Voting Agreement to the contrary, nothing in
this Voting Agreement, expressed or implied, is intended to confer
on any Person other than the parties hereto or their respective
heirs, successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Voting Agreement.
7.8. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the
provisions of this Voting Agreement was not performed in
accordance with its specific terms or was otherwise breached. It
is accordingly agreed that Parent shall be entitled to an
injunction or injunctions to prevent breaches of this Voting
Agreement and to enforce specifically the terms and provisions
hereof in any Delaware court or other court of proper
jurisdiction, this being in addition to any other remedy to which
Parent is entitled at law or in equity.
7.9. Other Agreements. Nothing in this Voting Agreement shall
limit any of the rights or remedies of Parent or any of the
obligations of Stockholder under any Affiliate Agreement between
Parent and Stockholder or any other agreement.
7.10. Governing Law. This Voting Agreement shall be governed in
all respects by the laws of the State of Delaware, as applied to
contracts entered into and to be performed entirely within the
State of Delaware.
7.11. Counterparts. This Voting Agreement may be executed by the
parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such
counterparts shall together constitute one and the same
instrument.
7.12. Construction.
(a) Headings of the Sections of this Voting Agreement are
for the convenience of the parties only, and shall be given no
substantive or interpretive effect whatsoever.
(b) For purposes of this Voting Agreement, whenever the
context requires: the singular number shall include the plural, and vice
versa; the masculine gender shall include the feminine and neuter
genders; the feminine gender shall include the masculine and
neuter genders; and the neuter gender shall include masculine and
feminine genders.
(c) The parties hereto agree that any rule of construction
to the effect that ambiguities are to be resolved against the drafting
party shall not be applied in the construction or interpretation
of this Voting Agreement.
(d) As used in this Voting Agreement, the words "include"
and "including," and variations thereof, shall not be deemed to be
terms of limitation, but rather shall be deemed to be followed by
the words "without limitation."
(e) Except as otherwise indicated, all references in this
Voting Agreement to "Sections" and "Exhibits" are intended to refer to
Sections of this Voting Agreement and Exhibits to this Voting
Agreement.
In Witness Whereof, Parent and Stockholder have caused this
Voting Agreement to be executed as of the date first written
above.
Lumisys Incorporated
By:__________________________
Name:_________________________
Title:________________________
Stockholder
______________________________
Name:_________________________
Address:______________________
______________________
Facsimile:____________________
Number of Shares of Company
Common Stock owned of record
as of the date of this Voting
Agreement:____________________
Exhibit A
Irrevocable Proxy
The undersigned stockholder of CompuRAD, Inc., a Delaware
corporation (the "Company"), hereby irrevocably (to the fullest
extent permitted by law) appoints and constitutes ___________________,
_________________ and Lumisys, Incorporated, a Delaware corporation
("Parent"), and each of them, the attorneys and proxies of the
undersigned with full power of substitution and resubstitution, to the
full extent of the undersigned's rights with respect to (i) the shares
of capital stock of the Company owned by the undersigned as of the date
of this proxy, which shares are specified on the final page of this
proxy and (ii) any and all other shares of capital stock of the Company
which the undersigned may acquire after the date hereof. (The shares of
the capital stock of the Company referred to in clauses (i) and (ii)
of the immediately preceding sentence are collectively referred to as
the "Shares.") Upon the execution hereof, all prior proxies given by
the undersigned with respect to any of the Shares are hereby revoked,
and no subsequent proxies will be given with respect to any of the
Shares.
This proxy is irrevocable and is coupled with an interest.
This proxy is granted in connection with the Voting Agreement of
even date herewith between Parent and the undersigned (the "Voting
Agreement") and in consideration of Parent entering into the
Agreement and Plan of Merger and Reorganization of even date
herewith among Parent, SAC Acquisition Corporation, a Delaware
corporation and wholly owned subsidiary of Parent, and the Company
(the "Reorganization Agreement"). Capitalized terms used but not
otherwise defined in this proxy have the meanings assigned to such
terms in the Reorganization Agreement.
The attorneys and proxies named above will be empowered, and
may exercise this proxy, to vote the Shares at any time at any
meeting of the stockholders of the Company, however called, or in
any written action by consent of stockholders of the Company,
until the earlier to occur of the valid termination of the
Reorganization Agreement or the Effective Time, as follows: (i) in
favor of the Merger, (ii) in favor of the execution and delivery
by the Company of the Reorganization Agreement and the adoption
and approval of the terms thereof and (iii) in favor of each of
the other actions contemplated by the Reorganization Agreement and
any action required in furtherance hereof or thereof.
This proxy shall be binding upon the heirs, successors and
assigns of the undersigned (including any transferee of any of the
Shares).
Dated: September 28, 1997
______________________________
Name:_________________________
Number of Shares of Company
Common Stock:_________________
