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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) June 28, 1996
-------------------------------
VSI Enterprises, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-10927 84-1104448
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
5801 Goshen Springs Road, Norcross, Georgia 30071
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 242-7566
------------------------------
Not applicable
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 28, 1996, VSI Enterprises, Inc., a Delaware corporation (the
"Company"), consummated the acquisition of Integrated Network Services, Inc., a
Georgia corporation ("INS"). Pursuant to the Merger Agreement, dated as of June
25, 1996, by and among the Company, INS, INS Acquisition Co., a Delaware
corporation and wholly-owned subsidiary of the Company ("INS Acquisition"), and
Peter Clarke, Rod Hollenbeck, Mark Putnam, Diane Rogers and John Sable, the
principal shareholders of INS (collectively the "Principal Shareholders"), INS
was merged with and into INS Acquisition, whereby INS became a wholly-owned
subsidiary of the Company. Pursuant to the Merger Agreement, the shareholders
of INS received an aggregate of 500,000 shares of common stock of the Company.
Based on the closing price of the Company's common stock as reported on the
Nasdaq SmallCap Market on June 28, 1996, the consideration paid by the Company
had a total value of approximately $1,500,000, excluding acquisition costs.
INS is an integration firm specializing in the connectivity of
multi-protocol environments, ranging from small local area networks to large,
enterprise wide networks employing WAN Technologies to connect multiple sites.
The Company is engaged in the business of designing, manufacturing and
marketing turnkey interactive video conferencing systems.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired:
At the present time, it is impractical to provide the required financial
statements for INS as required by this Item 7 of Form 8-K. The Company will
file such required financial statements under cover of Form 8-K/A as soon as
practicable, but not later than September 13, 1996 (60 days after this Report is
required to be filed).
(b) Pro Forma Financial Information:
At the present time, it is impractical to provide the pro forma financial
information relative to the INS acquisition as required by Article 11 of
Regulation S-X and this Item 7 of Form 8-K. The Company will file such pro
forma financial information under cover of Form 8-K/A as soon as practicable,
but not later than September 13, 1996 (60 days after this Report is required to
be filed).
(c) Exhibits:
2.1 - Merger Agreement, dated as of June 25, 1996, by and among VSI
Enterprises, Inc., INS Acquisition Co., Integrated Network
Services, Inc. and Peter Clarke, Rod Hollenbeck, Mark Putnam,
Diane Rogers and John Sable.
-1-
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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.
VSI ENTERPRISES, INC.
By: /s/ B. R. Brewer
------------------------------------------
B. R. Brewer
Vice President-Finance, Administration and
Chief Financial Officer
Dated: July 3, 1996
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EXHIBIT 2.1
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================================================================================
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
VSI ENTERPRISES, INC., a Delaware corporation,
INS ACQUISITION CO., a Delaware corporation,
INTEGRATED NETWORK SERVICES, INC., a Georgia corporation,
and
PETER CLARKE, ROD HOLLENBECK, MARK PUTNAM, DIANE ROGERS AND JOHN SABLE,
PRINCIPAL SHAREHOLDERS OF INTEGRATED NETWORK SERVICES, INC.
-------------------------
Dated as of June 25, 1996
-------------------------
================================================================================
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TABLE OF CONTENTS
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SECTION 1. DESCRIPTION OF TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Merger of INS into the Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effect of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Closing; Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Articles of Incorporation and Bylaws; Directors and Officers . . . . . . . . . . . . . . . . . . . . 2
1.5 Conversion of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Closing of INS's Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.9 Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.10 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2. REPRESENTATIONS AND WARRANTIES OF INS AND THE PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . 4
2.1 Due Organization; No Subsidiaries; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Articles of Incorporation and Bylaws; Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Capitalization, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.5 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.6 Title to Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.7 Bank Accounts; Receivables; Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.8 Equipment; Leasehold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.9 Proprietary Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.10 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.11 Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.12 Compliance with Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.13 Governmental Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.14 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.15 Employee and Labor Matters; Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.17 Sale of Products; Performance of Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.19 Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.20 Legal Proceedings; Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.21 Authority; Binding Nature of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.22 Non-Contravention; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.23 Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.24 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3. REPRESENTATIONS AND WARRANTIES OF VSI AND THE SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . . 22
3.1 SEC Filings; Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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3.2 Authority; Binding Nature of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.3 Valid Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.4 Independent Investment Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 4. CERTAIN COVENANTS OF INS AND THE PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . 23
4.1 Access and Investigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.2 Operation of INS's Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.3 Notification; Updates to Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.4 No Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1 Filings and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.2 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.3 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.4 Employment and Noncompetition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.5 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.6 FIRPTA Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.7 Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.8 Limited Independence of Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.9 Certain Severance Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.10 Payments to Diane Rogers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.11 Information Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.12 INS Shareholder Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.13 Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF VSI AND THE SUBSIDIARY. . . . . . . . . . . . . . . . . . . . 29
6.1 Accuracy of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.2 Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.4 Agreements and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.5 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.6 FIRPTA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.7 Rule 505. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.8 No Restraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.9 No Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.10 Completion of Due Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.11 Shareholder Investment Certifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.12 Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.13 Affiliate Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF INS AND THE PRINCIPAL SHAREHOLDERS . . . . . . . . . . . 31
7.1 Accuracy of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2 Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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7.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.4 Agreements and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.5 No Restraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.6 Release of Personal Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 8. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.1 Termination Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.2 Termination Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 9. INDEMNIFICATION, ETC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.2 Principal Shareholders' Indemnity Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.3 Indemnity Agreement of VSI and the Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . 34
9.4 Indemnification Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.5 Limitations on Liability of Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 10. REGISTRATION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.3 Preparation; Reasonable Investigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.4 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 11. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.2 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.3 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
11.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
11.5 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.6 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.9 Governing Law; Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
11.10 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.11 Remedies Cumulative; Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.12 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.13 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.15 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.16 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
11.17 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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EXHIBITS
Exhibit A - Shareholders
Exhibit B - Certain definitions
Exhibit C - Directors and officers of Surviving Corporation
Exhibit D - Forms of Employment Agreement and Noncompetition
Agreement
Exhibit E - Form of Release
Exhibit F - Persons to execute estoppel certificates
Exhibit G - Form of Shareholder Investment Certification
Exhibit H - Form of Affiliate Letter
** Exhibits and Schedules are not included with this filing. A copy of any
omitted exhibit or schedule will be furnished supplementally to the
Commission upon request.**
v
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AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
made and entered into as of June 25, 1996, by and among: VSI ENTERPRISES, INC.,
a Delaware corporation ("VSI"); INS ACQUISITION CO., a Delaware corporation and
a wholly owned subsidiary of VSI (the "Subsidiary"); INTEGRATED NETWORK
SERVICES, INC., a Georgia corporation ("INS"); and Peter Clarke, Rod Hollenbeck,
Mark Putnam, Diane Rogers and John Sable, the shareholders of INS (the
"Principal Shareholders"). Certain capitalized terms used in this Agreement are
defined in Exhibit B.
RECITALS
A. VSI, INS and the Subsidiary intend to effect a merger of INS into
the Subsidiary in accordance with this Agreement, the Delaware General
Corporation Law and the Georgia Business Corporation Code (the "Merger"). Upon
consummation of the Merger, INS will cease to exist, and the Subsidiary will
continue to exist as the surviving corporation of the Merger.
B. It is intended that the Merger quality as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
C. This Agreement has been adopted and approved by the respective
boards of directors of VSI, INS and the Subsidiary.
D. The capitalization of INS consists of 70,923 shares of the voting
common stock, $.001 par value per share, representing 100% of the issued and
outstanding stock of INS (the "INS Common Stock"), the holders of which are
identified on Exhibit A (the "Shareholders").
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF INS INTO THE SUBSIDIARY. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), INS shall be merged with and into the Subsidiary, and the separate
existence of INS shall cease. The Subsidiary will continue as the surviving
corporation in the Merger (the "Surviving Corporation").
1.2 EFFECT OF MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Delaware General
Corporation Law and the Georgia Business Corporation Code.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Smith, Gambrell & Russell, 3343
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Peachtree Road, Suite 1800, Atlanta, Georgia 30326, at 10:00 a.m. local time on
June 28, 1996, or at such other time and date during the period from June 29,
1996 through July 31, 1996, as the parties shall designate (the "Scheduled
Closing Time"). (The date on which the Closing actually takes place is referred
to in this Agreement as the "Closing Date.") Contemporaneously with or as
promptly as practicable after the Closing, a properly executed certificate of
merger for the merger of INS into the Subsidiary, conforming to the requirements
of the Delaware General Corporation Law (the "Delaware Certificate of Merger")
shall be filed with the Secretary of State of the State of Delaware, and a
properly executed certificate of merger for the merger of INS into the
Subsidiary, conforming to the requirements of the Georgia Business Corporation
Code (the "Georgia Certificate of Merger"), shall be filed with the Secretary of
State of the State of Georgia. The Merger shall take effect at the time the
Delaware Certificate of Merger is filed with the Secretary of State of the State
of Delaware and the Georgia Certificate of Merger is filed with the Secretary of
State of the State of Georgia (the "Effective Time").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS.
Unless the parties agree otherwise prior to the Effective Time:
(a) the Articles of Incorporation of the Subsidiary shall
continue as the Articles of Incorporation of the Surviving Corporation;
(b) the Bylaws of the Subsidiary shall continue as the Bylaws
of the Surviving Corporation;
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals identified on
Exhibit C.
1.5 CONVERSION OF SHARES.
(a) Subject to Section 1.7(b), at the Effective Time, by virtue
of the Merger and without any further action on the part of VSI, INS, the
Subsidiary or any Shareholder, each share of INS Common Stock outstanding
immediately prior to the Effective Time shall be canceled and retired and
converted into the right to receive a pro rata share of the aggregate Merger
Consideration described in Section 1.8.
(b) If any shares of INS 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 restricted stock purchase
agreement or other agreement with INS, then the shares of VSI Common Stock
issued in exchange for such shares of INS Common Stock will be unvested and
subject to the same repurchase option, risk of forfeiture or other condition,
and the certificates representing such shares of VSI Common Stock may
accordingly be marked with appropriate legends.
1.6 CLOSING OF INS'S TRANSFER BOOKS. At the Effective Time, the
holders of certificates representing shares of INS Common Stock that were
outstanding immediately prior to the Effective
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Time shall cease to have any rights as Shareholders of INS, and the stock
transfer books of INS shall be closed with respect to all shares of such INS
Common Stock outstanding immediately prior to the Effective Time. No further
transfer of any such shares of INS's capital 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 INS Common Stock (an
"INS Stock Certificate") is presented to VSI, such INS Stock Certificate shall
be canceled and shall be exchanged as provided in Section 1.7.
1.7 EXCHANGE OF CERTIFICATES.
(a) At or immediately after the Closing, each Shareholder shall
surrender its respective INS Stock Certificate(s) to the Surviving Corporation,
together with such transmittal documents as the Surviving Corporation may
reasonably require, and the Surviving Corporation shall deliver to such
Shareholder such Shareholder's pro rata share of the aggregate Merger
Consideration to be paid at Closing pursuant to Section 1.8.
(b) No fractional shares of VSI Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any Shareholder who would
otherwise be entitled to receive a fraction of a share of VSI Common Stock
(after aggregating all fractional shares of VSI Common Stock issuable to such
holder) shall, upon surrender of such Shareholder's INS Stock Certificate(s), be
paid in cash at a rate of $3.00 per share in lieu of such fractional shares.
(c) Until surrendered as contemplated by this Section 1.7, each
INS Stock Certificate shall be deemed, from and after the Effective Time, to
represent only the right to receive a pro rata share of the Merger
Consideration. If any INS Stock Certificate shall have been lost, stolen or
destroyed, VSI may, in its discretion and as a condition precedent to the
issuance of any certificate representing VSI Common Stock, require the owner of
such lost, stolen or destroyed INS Stock Certificate to provide an appropriate
affidavit and to deliver a bond (in such sum as VSI may reasonably direct) as
indemnity against any claim that may be made against VSI with respect to such
INS Stock Certificate.
(d) The shares of VSI Common Stock to be issued in the Merger
shall be characterized as "restricted securities" for purposes of Rule 144 under
the Securities Act, and 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 SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL
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SATISFACTORY TO THE COMPANY AND ITS COUNSELTHAT SUCH REGISTRATION
IS NOT REQUIRED.
(e) VSI shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable to any holder or former holder of
INS Common Stock pursuant to this Agreement such amounts as VSI may be required
to deduct or withhold therefrom under the Code or under any provision of state,
local or foreign tax law. 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) VSI shall not be liable to any holder or former holder of
INS Common Stock for any shares of VSI 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, escheat or
similar law.
1.8 MERGER CONSIDERATION
The aggregate merger consideration to be paid by VSI to the
Shareholders in consideration of the Merger ("Merger Consideration") shall be
500,000 shares of VSI Common Stock, which shares will be delivered to the
Shareholders upon the surrender of their respective INS Stock Certificate(s) in
accordance with Section 1.7.
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 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by VSI to be necessary or desirable to carry out
the purposes of this Agreement or to vest VSI with full right, title and
possession of and to all rights and property of INS, the officers and directors
of VSI shall be fully authorized (in the name of INS and otherwise) to take such
action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF INS AND THE PRINCIPAL
SHAREHOLDERS
INS and the Principal Shareholders jointly and severally represent
and warrant, to and for the benefit of VSI and the Subsidiary, as follows as of
the date hereof and as of the Closing Date:
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC.
(a) INS is a corporation duly organized, validly existing and
in good standing under the laws of the State of Georgia and has all necessary
power and authority: (i) to conduct its business in the manner in which
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its business is currently being conducted and in the manner in which its
business is proposed to be conducted; (ii) to own and use its assets in the
manner in which its assets are currently owned and used and in the manner in
which its assets are proposed to be owned and used; and (iii) to perform its
obligations under all Contracts by which it is bound.
(b) INS 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(b) of the
Disclosure Schedule.
(c) INS is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 2.1(c) of the
Disclosure Schedule, except where the failure to be so qualified, authorized,
registered or licensed has not had and will not have a Material Adverse Effect
on INS. INS is in good standing as a foreign corporation in each of the
jurisdictions identified in Part 2.1(c) of the Disclosure Schedule.
(d) Part 2.1(d) of the Disclosure Schedule accurately sets
forth (i) the names of the members of the INS's board of directors, (ii) the
names of the members of each committee of INS's board of directors, and (iii)
the names and titles of INS's officers.
(e) INS has no subsidiaries, and has never owned, beneficially
or otherwise, any shares or other securities of, or any direct or indirect
interest of any nature in, any other Entity.
2.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. INS has delivered
to VSI accurate and complete copies of: (i) INS's articles of incorporation and
bylaws, including all amendments thereto; (ii) the stock records of INS; and
(iii) the minutes and other records of the meetings and other proceedings
(including any actions taken by written consent or otherwise without a meeting)
of the shareholders of INS, the board of directors of INS and all committees of
the board of directors of INS. There have been no meetings or other proceedings
or actions of the shareholders of INS, the board of directors of INS or any
committee of the board of directors of INS, in which transactions of a material
nature were acted upon, that are not fully reflected in such minutes or other
records. There has not been any violation of any of the provisions of INS's
articles of incorporation or bylaws or of any resolution adopted by INS's
shareholders, INS's board of directors or any committee of INS's board of
directors. The books of account, stock records, minute books and other records
of INS are accurate, up-to-date and complete in all material respects, and have
been maintained in accordance with prudent business practices and all applicable
Legal Requirements.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of INS consists of 11,000,000
shares of common stock, of which 70,923 shares have been issued and are
outstanding and 1,000,000 shares of preferred stock, none of which are
outstanding. There are no shares of capital stock held in INS's treasury. Part
2.3(a) of the Disclosure Schedule sets forth the names of INS's shareholders and
the number of shares of INS common stock owned of record by each of such
shareholders. All of the outstanding shares of INS common stock have been duly
authorized and validly issued, and are fully
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paid and non-assessable, and none of such shares is subject to any repurchase
option or restriction on transfer.
(b) There is no: (i) outstanding subscription, option, call,
warrant or right (whether or not currently exercisable) to acquire, or otherwise
relating to, any shares of the capital stock or other securities of INS; (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
INS; (iii) Contract under which INS 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 INS.
Except as set forth in Part 2.3(c) of the Disclosure Schedule, INS has never
issued or granted any option, call, warrant or right to acquire, or otherwise
relating to, any shares of its capital stock or other securities.
(c) All outstanding shares of INS Common Stock have been issued
in compliance with (i) all applicable securities laws and other applicable Legal
Requirements, and (ii) all requirements set forth in applicable Contracts.
(d) Except as set forth in Part 2.3(d) of the Disclosure
Schedule, INS has never repurchased, redeemed or otherwise reacquired any shares
of capital stock or other securities. All securities so reacquired by INS were
reacquired in compliance with (i) the applicable provisions of the Georgia
Business Corporation Code and all other applicable Legal Requirements, and (ii)
any requirements set forth in applicable Contracts.
2.4 FINANCIAL STATEMENTS.
(a) INS has delivered to VSI the following financial statements
and notes (collectively, the "Company Financial Statements"):
(i) audited balance sheets of INS as of December 31,
1995 and 1994 and the related statements of income of INS for the
years then ended and the accompanying report of Tiller Stewart &
Company, LLC, independent certified public accountants to INS; and
(ii) unaudited balance sheets of INS as of March 31, 1995
and March 31, 1996 (the unaudited balance sheet as of March 31,
1996 is hereinafter referred to as the "Unaudited Balance Sheet"),
and the related unaudited statements of income, statements of
shareholders' equity and statements of cash flows of INS for the
three-month periods then ended.
(b) The Company Financial Statements are accurate and complete
in all material respects and present fairly the financial position of INS as of
the respective dates thereof and the results of operations and cash flows of INS
for the periods covered thereby. The Company Financial Statements have been
prepared in accordance with generally accepted accounting principles applied
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on a consistent basis throughout the periods covered except that the unaudited
Company Financial Statements referred to in Section 2.4(a)(ii) do not contain
footnotes and are subject to normal and recurring year-end audit adjustments,
which will not, individually or in the aggregate, be material in magnitude).
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the
Disclosure Schedule, since March 31, 1996:
(a) there has not been any material adverse change in INS's
business, condition, assets, liabilities, operations, financial performance or
prospects, and no event has occurred that will, or could reasonably be expected
to, have a Material Adverse Effect on INS;
(b) there has not been any material loss, damage or destruction
to, or any material interruption in the use of, any of INS's assets (whether or
not covered by insurance);
(c) INS has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) INS has not sold, issued or authorized the issuance of (i)
any capital stock or other security, (ii) any option, call, warrant or right to
acquire, or otherwise relating to, any capital stock or any other security, or
(iii) any instrument convertible into or exchangeable for any capital stock or
other security;
(e) there has been no amendment to INS's articles of
incorporation or bylaws, and INS has not effected or been a party to any
Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(f) INS has not formed any subsidiary or acquired any equity
interest or other interest in any other Entity;
(g) INS has not made any capital expenditure which, when added
to all other capital expenditures made by INS since March 31, 1996, exceeds
$15,000 in the aggregate;
(h) INS 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(a)), or (ii) amended or prematurely terminated, or waived any
material right or remedy under, any Material Contract to which it is or was
party or under which it has or has had any rights or obligations;
(i) INS has not (i) acquired, leased or licensed any right or
other asset from any other Person, (ii) sold or otherwise disposed of, or leased
or licensed, any right or other asset to any other Person, or (iii) waived or
relinquished any right, except for immaterial rights or other immaterial assets
acquired, leased, licensed or disposed of in the ordinary course of business and
consistent with INS's past practices;
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(j) INS has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness;
(k) INS 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 INS's past practices;
(l) INS has not (i) lent money to any Person, or (ii) incurred
or guaranteed any indebtedness for borrowed money;
(m) INS has not (i) established, adopted or amended any
Employee Benefit Plan, (ii) paid any bonus or made any profit-sharing or similar
payment to, or 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 (iii) hired any new employee;
(n) INS has not changed any of its methods of accounting or
accounting practices in any respect;
(o) INS has not made any Tax election;
(p) INS has not commenced or settled any Legal Proceeding;
(q) INS has not entered into any material transaction or taken
any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(r) INS has not agreed or committed to take any of the actions
referred to in clauses "(c)" through "(q)" above.
2.6 TITLE TO ASSETS.
(a) INS owns, and has good, valid and marketable title to, all
assets purported to be owned by it, including: (i) all assets reflected on the
Unaudited Balance Sheet; (ii) all assets referred to in Parts 2.7(b), 2.8 and
2.9 of the Disclosure Schedule and all of INS's rights under the Contracts
identified in Part 2.10(a) of the Disclosure Schedule; and (iii) all other
assets reflected in INS's books and records as being owned by INS. Except as
set forth in Part 2.6(a) of the Disclosure Schedule, all of said assets are
owned by INS free and clear of any liens or other 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 (in any case or
in the aggregate) materially detract from the value of the assets subject
thereto or materially impair the operations of INS.
(b) Part 2.6(b) of the Disclosure Schedule identifies all
assets that are being leased or licensed to INS.
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2.7 BANK ACCOUNTS; RECEIVABLES; CUSTOMERS.
(a) Part 2.7(a) of the Disclosure Schedule provides accurate
and complete information with respect to each account maintained by or for the
benefit of INS at any bank or other financial institution.
(b) Part 2.7(b) of the Disclosure Schedule provides an accurate
and complete breakdown and aging of all accounts receivable, notes receivable
and other receivables of INS as of March 31, 1996. Except as set forth in Part
2.7(b) of the Disclosure Schedule, all existing accounts receivable of INS
(including those accounts receivable reflected on the Unaudited Balance Sheet
that have not yet been collected and those accounts receivable that have arisen
since March 31, 1996 and have not yet been collected) (i) represent valid
obligations of customers of INS arising from bona fide transactions entered into
in the ordinary course of business, and (ii) are current and will be collected
in full, without any counterclaim or set off, when due net of an allowance for
doubtful accounts not to exceed $50,000 in the aggregate.
(c) Part 2.7(c) of the Disclosure Schedule accurately
identifies, and provides an accurate and complete breakdown of the revenues
received from, each customer or other Person that (together with such Person's
affiliates) accounted for more than $50,000 of the net revenues of INS in 1995
or 1996. INS has not received any notice or other communication indicating that
any customer or other Person identified in Part 2.7(c) of the Disclosure
Schedule intends or expects to cease dealing with INS or to reduce the volume of
business transacted by such Person with INS below historical levels.
(d) Part 2.7(d) of the Disclosure Schedule provides an accurate
and complete breakdown of all pending and unfilled orders received by INS for
products, systems and services.
2.8 EQUIPMENT; LEASEHOLD.
(a) Part 2.8 of the Disclosure Schedule provides accurate and
complete information with respect to all material items of equipment, fixtures,
leasehold improvements and other tangible assets owned by or leased to INS. The
assets identified in Part 2.8 of the Disclosure Schedule are adequate for the
uses to which they are being put, are in good condition and repair (ordinary
wear and tear excepted) and are adequate for the conduct of INS's business in
the manner in which such business is currently being conducted and in the manner
in which such business is proposed to be conducted.
(b) INS does not own any real property or any interest in real
property, except for the leasehold(s) created under the real property lease(s)
identified in Part 2.10(a) of the Disclosure Schedule.
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2.9 PROPRIETARY ASSETS.
(a) Part 2.9(a)(1) of the Disclosure Schedule sets forth, with
respect to each Company Proprietary Asset that has been registered, recorded or
filed with any Governmental Body or with respect to which an application has
been filed with any Governmental Body, (i) a brief description of such Company
Proprietary Asset, and (ii) the names of the jurisdictions covered by the
applicable registration, recordation, filing or application. Part 2.9(a)(2) of
the Disclosure Schedule identifies and provides a brief description of all other
Company Proprietary Assets owned by INS. Part 2.9(a)(3) of the Disclosure
Schedule identifies and provides a brief description of each Company Proprietary
Asset that is owned by any other Person and that is licensed to or used by INS
(except for any Company Proprietary Asset that is licensed to INS under any
third party software license generally available to the public at a cost of less
than $500), and identifies the license agreement or other agreement under which
such Company Proprietary Asset is being licensed to or used by INS. Except as
set forth in Part 2.9(a)(4) of the Disclosure Schedule, INS has good, valid and
marketable title to all of the Proprietary Assets identified in Parts 2.9(a)(1)
and 2.9(a)(2) of the Disclosure Schedule, free and clear of all liens and other
Encumbrances, and has a valid right to use all Proprietary Assets identified in
Part 2.9(a)(3) of the Disclosure Schedule. Except as set forth in Part
2.9(a)(5) of the Disclosure Schedule, INS is not obligated to make any payment
to any Person for the use of any Company Proprietary Asset. Except as set forth
in Part 2.9(a)(6) of the Disclosure Schedule, INS is free to use, modify, copy,
distribute, sell, license or otherwise exploit each of the Company Proprietary
Assets on an exclusive basis.
(b) INS has taken all commercially reasonable measures and
precautions necessary to protect and maintain the confidentiality and secrecy of
all Company Proprietary Assets (except Company Proprietary Assets whose value
would be unimpaired by public disclosure) and otherwise to maintain and protect
the value of all Company Proprietary Assets. Except as set forth in Part 2.9(b)
of the Disclosure Schedule, INS has not disclosed or delivered or permitted to
be disclosed or delivered to any Person, and no Person (other than INS) has
access to or has any rights with respect to, the source code, or any portion or
aspect of the source code, of any Company Proprietary Asset.
(c) None of INS's Proprietary Assets infringes or conflicts
with any Proprietary Asset owned or used by any other Person. INS is not
infringing, misappropriating or making any unlawful use of, and INS has not at
any time infringed, misappropriated or made any unlawful use of, or received any
notice or other communication of any actual, alleged, possible or potential
infringement, misappropriation or unlawful use of, any Proprietary Asset owned
or used by any other Person. To the best of the knowledge of INS and the
Principal Shareholders, no other Person is infringing, misappropriating or
making any unlawful use of, and no Proprietary Asset owned or used by any other
Person infringes or conflicts with, any Company Proprietary Asset.
(d) Except as set forth in Part 2.9(d) of the Disclosure
Schedule: (i) each Company Proprietary Asset conforms in all material respects
with any specification, documentation, performance standard, representation or
statement made or provided with respect thereto by or on behalf of INS; and (ii)
there has not been any material claim by any customer or other Person
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alleging that any Company Proprietary Asset does not conform in all material
respects with any specification, documentation, performance standard,
representation or statement made or provided by or on behalf of INS, and, to the
best of the knowledge of INS and the Principal Shareholders, there is no basis
for any such claim. INS has established adequate reserves on the Unaudited
Balance Sheet to cover all costs associated with any obligations that INS may
have with respect to the correction or repair of programming errors or other
defects in the Company Proprietary Assets.
(e) The Company Proprietary Assets constitute all the
Proprietary Assets necessary to enable INS to conduct its business in the manner
in which such business has been conducted and in the manner in which such
business is proposed to be conducted. Except as set forth in Part 2.9(e) of the
Disclosure Schedule, (i) INS has not licensed any of the Company Proprietary
Assets to any Person on an exclusive basis, and (ii) INS has not entered into
any covenant not to compete or Contract limiting its ability to exploit fully
any of its Proprietary Assets or to transact business in any market or
geographical area or with any Person.
(f) Except as set forth in Part 2.9(f) of the Disclosure
Schedule, all current and former employees of INS have executed and delivered to
INS written agreements (containing no exceptions to or exclusions from the scope
of their coverage) that are substantially identical to the form of
[Non-Disclosure and Work for Hire Agreements] attached to the Disclosure
Schedule as Appendices 2.9(1) and 2.9(2). INS has never engaged or received
services from any consultant or independent contractor in connection with the
design or development of any Proprietary Asset.
2.10 CONTRACTS.
(a) Part 2.10(a) of the Disclosure Schedule identifies each
Company Contract that constitutes a "Material Contract." For purposes of this
Agreement, each of the following shall be deemed to constitute a "Material
Contract":
(i) any Contract relating to the employment or engagement of,
or the performance of services by, any employee, consultant or
independent contractor;
(ii) any Contract relating to the acquisition, transfer, use,
development, sharing or license of any technology or any Proprietary
Asset;
(iii) any Contract imposing any restriction on INS's right or
ability (A) to compete with any other Person, (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) to develop or distribute any technology;
(iv) any Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;
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(v) any Contract relating to the acquisition, issuance
or transfer of any securities;
(vi) any Contract creating or relating to the creation of
any Encumbrance with respect to any asset owned or used by INS;
(vii) any Contract involving or incorporating any
guaranty, any pledge, any performance or completion bond, any
indemnity, any right of contribution or any surety arrangement;
(viii) any Contract creating or relating to any partnership
or joint venture or any sharing of revenues, profits, losses,
costs or liabilities;
(ix) any Contract relating to the purchase or sale of any
product or other asset by or to, or the performance of any
services by or for, any Related Party (as defined in Section
2.19);
(x) any Contract to which any Governmental Body is a
party or under which any Governmental Body has any rights or
obligations, or involving or directly or indirectly benefiting any
Governmental Body (including any subcontract or other Contract
between INS and any contractor or subcontractor to any
Governmental Body);
(xi) any Contract entered into outside the ordinary
course of business or inconsistent with INS's past practices;
(xii) any Contract that has a term of more than 60 days
and that may not be terminated by INS (without penalty) within 60
days after the delivery of a termination notice by the Subject
Business; and
(xiii) any Contract that contemplates or involves (A) the
payment or delivery of cash or other consideration in an amount or
having a value in excess of $5,000 in the aggregate, or (B) the
performance of services having a value in excess of $5,000 in the
aggregate.
(b) INS has delivered to VSI accurate and complete copies of
all Contracts identified in Part 2.10(a) of the Disclosure Schedule, including
all amendments thereto. Each Contract identified in Part 2.10(a) of the
Disclosure Schedule is valid and in full force and effect, and is enforceable by
INS 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(c) of the Disclosure
Schedule:
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(i) INS has not violated or breached, or committed any
default under, any Company Contract, and, to the best of the
knowledge of INS and the Principal Shareholders, no other Person
has violated or breached, or committed any default under, any
Company Contract;
(ii) to the best of the knowledge of INS and the
Principal Shareholders, 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, (A) result in a
violation or breach of any of the provisions of any Company
Contract, (B) give any Person the right to declare a default or
exercise any remedy under any Company Contract, (C) give any
Person the right to accelerate the maturity or performance of any
Company Contract, or (D) give any Person the right to cancel,
terminate or modify any Company Contract;
(iii) since January 1, 1990, INS has not received any
notice or other communication regarding (A) any actual or possible
violation or breach of, or default under, any Company Contract, or
(B) any actual or possible termination of any Company Contract;
and
(iv) INS has not waived any of its material rights under
any Contract.
(d) No Person is renegotiating, or has the right to
renegotiate, any amount paid or payable to INS under any Company Contract or any
other term or provision of any Company Contract.
(e) The Contracts identified in Part 2.10(a) of the Disclosure
Schedule collectively constitute all of the Material Contracts necessary to
enable INS to conduct its business in the manner in which its business is
currently being conducted and in the manner in which its business is proposed to
be conducted.
(f) Part 2.10(f) of the Disclosure Schedule identifies and
provides a brief description of each proposed Contract as to which any pending
bid, offer or proposal has been submitted or received by INS.
2.11 LIABILITIES.
(a) INS has no accrued, contingent or other liabilities of any
nature, either matured or unmatured (whether or not required to be reflected in
financial statements in accordance with generally accepted accounting
principles, and whether due or to become due), except for: (i) liabilities
identified as such in the "liabilities" column of the Unaudited Balance Sheet;
(ii) accounts payable or accrued salaries that have been incurred by INS since
March 31, 1996, in the ordinary course of business and consistent with INS's
past practices; and (iii) the liabilities identified in Part 2.11(a) of the
Disclosure Schedule.
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(b) Part 2.11(b) of the Disclosure Schedule provides an
accurate and complete breakdown of INS's "deferred support revenue" and all
related obligations and other liabilities of INS.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. INS is, and has at all
times since January 1, 1990 been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had and will not have in any individual case or in the aggregate, a
Material Adverse Effect on INS. Except as set forth in Part 2.12 of the
Disclosure Schedule, since January 1, 1990, INS has not received any notice or
other communication from any Governmental Body regarding any actual or possible
violation of, or failure to comply with, any Legal Requirement.
2.13 GOVERNMENTAL AUTHORIZATIONS. Part 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization held by INS, and INS has
delivered to VSI accurate and complete copies of all Governmental Authorizations
identified in Part 2.13 of the Disclosure Schedule. The Governmental
Authorizations identified in Part 2.13 of the Disclosure Schedule are valid and
in full force and effect, and collectively constitute all Governmental
Authorizations necessary to enable INS to conduct its business in the manner in
which its business is currently being conducted and in the manner in which its
business is proposed to be conducted. INS is, and at all times since January 1,
1990 has been, in compliance with the material terms and requirements of the
respective Governmental Authorizations identified in Part 2.13 of the Disclosure
Schedule. Since January 1, 1990, INS has not received any notice or other
communication from any Governmental Body regarding (i) any actual or possible
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (ii) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
Governmental Authorization.
2.14 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of INS
with any Governmental Body with respect to any transaction occurring or any
taxable period ending on or before the Closing Date (the "Company Returns") (i)
have been or will be filed when due, and (ii) have been, or will be when filed,
accurately and completely prepared 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. INS
has delivered to VSI accurate and complete copies of all Company Returns filed
since January 1, 1990.
(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. INS
will establish, in the ordinary course of business and consistent with its past
practices, reserves adequate for the payment of all Taxes for the period from
January 1, 1990 through the Closing Date, and INS will disclose the dollar
amount of such reserves to VSI on or prior to the Closing Date.
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(c) Each Company Return relating to income Taxes that has been
filed with respect to any period ended on or prior to January 1, 1990 has either
(i) been examined and audited by all relevant Governmental Bodies, or (ii) by
virtue of the expiration of the limitation period under applicable Legal
Requirements, is no longer subject to examination or audit by any Governmental
Body. Except as set forth in Part 2.14(c) of the Disclosure Schedule, there has
been no examination or audit of any Company Return, and no such examination or
audit has been proposed or scheduled by any Governmental Body. INS has
delivered to VSI accurate and complete copies of all audit reports and similar
documents (to which INS has access) relating to the Company Returns. Except as
set forth in Part 2.14(c) of the Disclosure Schedule, no extension or waiver of
the limitation period applicable to any of the Company Returns has been granted
(by INS or any other Person), and no such extension or waiver has been requested
from INS.
(d) Except as set forth in Part 2.14(d) of the Disclosure
Schedule, no claim or Legal Proceeding is pending or has been threatened against
or with respect to INS in respect of any Tax. There are no unsatisfied
liabilities for 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 INS. There are no liens for Taxes upon any of
the assets of INS, except liens for current Taxes not yet due and payable. INS
has not entered into or become bound by any agreement or consent pursuant to
Section 341(f) of the Code. INS has not been, and INS will not be, required to
include any adjustment in taxable income for any tax period (or portion thereof)
pursuant to Section 481 of 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 INS 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. INS
is not, and has never been, a party to or bound by any tax indemnity agreement,
tax sharing agreement, tax allocation agreement or similar Contract.
2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.15(a) of the Disclosure Schedule contains a list of
all salaried employees of INS as of the date of this Agreement, and correctly
reflects 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. INS is not a
party to any collective bargaining contract or other Contract with a labor union
involving any of its employees.
(b) Part 2.15(b) of the Disclosure Schedule identifies each
employee of INS 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.
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(c) Part 2.15(c) of the Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, medical,
insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (individually referred to as a "Plan" and
collectively referred to as the "Plans") sponsored, maintained, contributed to
or required to be contributed to by INS for the benefit of any current or former
employee of INS.
(d) INS does not maintain, sponsor or contribute to, and, to
the best of the knowledge of INS and the Principal Shareholders, INS has not 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 INS (a "Pension Plan").
(e) INS does not maintain, sponsor or contribute to any
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 employees or former employees of INS (a "Welfare Plan")
except for those Welfare Plans described in Part 2.15(e) of the Disclosure
Schedule, none of which is a multiemployer plan (within the meaning of Section
3(37) of ERISA).
(f) With respect to each Plan, INS has delivered to VSI:
(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 each of 1994 and
1995;
(iii) an accurate and complete copy of (A) the most recent
summary plan description, together with each Summary of Material
Modifications (if required under ERISA) with respect to such Plan, and
(B) each material employee communication relating 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 of 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
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(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).
(g) INS is not required to be, and, to the best of the
knowledge of INS and the Principal Shareholders, INS 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. INS has never been a
member of an "affiliated service group" within the meaning of Section 414(m) of
the Code. To the best of the knowledge of INS and the Principal Shareholders,
INS has never made a complete or partial withdrawal from a "multiemployer plan"
(as defined in Section 3(37) of ERISA) resulting in "withdrawal liability" (as
defined in Section 4201 of ERISA), without regard to subsequent reduction or
waiver of such liability under either Section 4207 or 4208 of ERISA.
(h) INS does not have any plan or commitment to create any
additional Welfare Plan or any Pension Plan, or to modify or change any existing
Welfare Plan or Pension Plan (other than to comply with applicable law).
(i) No Welfare Plan provides death, medical or health benefits
(whether or not insured) with respect to any current or former employee of INS
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 Unaudited Balance Sheet, and (iii) benefits the full cost of
which are borne by current or former employees of INS (or their beneficiaries)).
(j) With respect to each of the Welfare Plans 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.
(k) Each of the Plans has been operated and administered in all
material respects in accordance with applicable Legal Requirements, including
ERISA and the Code.
(l) 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 neither INS, nor any of the Principal Shareholders are
aware of any reason why any such determination letter should be revoked.
(m) Except as set forth in Part 2.15(m) of the Disclosure
Schedule, 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 bonus payment, golden parachute payment,
severance payment or other payment to any current or former employee or director
of INS (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.
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(n) INS is in compliance in all material respects with all
applicable Legal Requirements and Contracts relating to employment, employment
practices, employee compensation, wages, bonuses and terms and conditions of
employment.
(o) INS has good labor relations, and neither INS nor any of
the Principal Shareholders has 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 INS's labor relations, or
(ii) any of INS's employees intends to terminate his or her employment with INS.
2.16 ENVIRONMENTAL MATTERS. INS is and has at all times been in
compliance, in all material respects, with all applicable Environmental Laws.
INS possesses all permits and other Governmental Authorizations required under
applicable Environmental Laws, and INS is and has at all times been in
compliance with the terms and requirements of all such Governmental
Authorizations. INS has not received any notice or other communication (whether
from a Governmental Body, citizens group, employee or otherwise) that alleges
that INS is not in compliance with any Environmental Law, and, to the best of
the knowledge of INS and the Principal Shareholders, there are no circumstances
that could reasonably be expected to prevent or interfere with INS's compliance
with any Environmental Law in the future. To the best of the knowledge of INS
and the Principal Shareholders, no current or prior owner of any property leased
or controlled by INS has received any notice or other communication (whether
from a Governmental Body, citizens group, employee or otherwise) that alleges
that such current or prior owner or INS is not or was not in compliance with any
Environmental Law. All Governmental Authorizations currently held by INS
pursuant to Environmental Laws are identified in Part 2.16 of the Disclosure
Schedule.
2.17 SALE OF PRODUCTS; PERFORMANCE OF SERVICES.
(a) Other than normal returns for refunds in the ordinary
course of business at levels consistent with past experience under INS's
standard return policy, INS will not incur or otherwise become subject to any
material liability arising from (i) any product, system, program, Proprietary
Asset or other asset designed, developed, manufactured, assembled, sold,
supplied, installed, repaired, licensed or made available by INS on or prior to
the Closing Date, or (ii) any consulting services, installation services,
programming services, repair services, maintenance services, training services,
support services or other services performed by INS on or prior to the Closing
Date.
(b) Except as set forth in Part 2.17(b) of the Disclosure
Schedule, no customer or other Person has, at any time since January 1, 1990,
asserted or threatened to assert any claim against INS (other than claims that
have been resolved satisfactorily at no material cost to INS) under or based
upon (i) any warranty provided by or on behalf of INS, or (ii) any services
performed by INS.
2.18 INSURANCE. Part 2.18 of the Disclosure Schedule provides accurate
and complete information with respect to each insurance policy maintained by, at
the expense of or for the benefit
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of INS and with respect to any claims made thereunder. INS has delivered to VSI
accurate and complete copies of the insurance policies identified in Part 2.18
of the Disclosure Schedule. Each of the insurance policies identified in Part
2.18 of the Disclosure Schedule is in full force and effect. Since January 1,
1990, INS 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 claim under any insurance policy, or
(c) material adjustment in the amount of the premiums payable with respect to
any insurance policy.
2.19 RELATED PARTY TRANSACTIONS. Except as set forth in Part 2.19 of
the Disclosure Schedule: (a) no Related Party has, and no Related Party has at
any time since January 1, 1990 had, any direct or indirect interest in any
material asset used in or otherwise relating to the business of INS; (b) no
Related Party is, or has at any time since January 1, 1990 been, indebted to
INS; (c) since January 1, 1990, no Related Party has entered into, or has had
any direct or indirect financial interest in, any material Contract, transaction
or business dealing involving INS; (d) no Related Party is competing, or has at
any time since January 1, 1990 competed, directly or indirectly, with INS; and
(e) no Related Party has any claim or right against INS (other than rights to
receive compensation for services performed as an employee of INS). For
purposes of this Section 2.19, each of the following shall be deemed to be a
"Related Party": (i) each of the Shareholders; (ii) each individual who is, or
who has at any time since January 1, 1990 been, an officer or director of INS;
(iii) each individual who is, or who at any time since January 1, 1990 has been,
a member of the immediate family of any of the individuals referred to in
clauses "(i)" and "(ii)" above; and (iv) any trust or other Entity (other than
INS) in which any one of the individuals referred to in clauses "(i)," "(ii)"
and "(iii)" above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, a material voting, proprietary or
equity interest.
2.20 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.20(a) of the Disclosure
Schedule, there is no pending Legal Proceeding, and, to the best of the
knowledge of INS and the Principal Shareholders, no Person has threatened to
commence any Legal Proceeding: (i) that involves INS or any of the assets owned
or used by INS; 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 best of
the knowledge of INS and the Principal Shareholders, except as set forth in Part
2.20(a) of the Disclosure Schedule, no event has occurred, and no claim, dispute
or other condition or circumstance exists, that will, or that could reasonably
be expected to, give rise to or serve as a basis for the commencement of any
such Legal Proceeding.
(b) Except as set forth in Part 2.20(b) of the Disclosure
Schedule, no Legal Proceeding has ever been commenced by, and no Legal
Proceeding has ever been pending against, INS.
(c) There is no order, writ, injunction, judgment or decree to
which INS, or any of the assets owned or used by INS, are subject. Neither the
Principal Shareholders nor INS is subject to any order, writ, injunction,
judgment or decree that relates to INS's business or to any of
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the assets owned or used by INS. To the best of the knowledge of INS and the
Principal Shareholders, no officer or other employee of INS 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 INS's business.
2.21 AUTHORITY; BINDING NATURE OF AGREEMENT. The Principal
Shareholders and INS have the absolute and unrestricted right, power and
authority to enter into and to perform their respective obligations under this
Agreement; and the execution, delivery and performance by INS of this Agreement
has been duly authorized by all necessary action on the part of INS and its
board of directors and shareholders. This Agreement constitutes the legal,
valid and binding obligation of the Principal Shareholders and INS, enforceable
against the Principal Shareholders and INS 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 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.22 of
the Disclosure Schedule, neither (i) the execution, delivery or performance of
this Agreement or any of the other agreements referred to in this Agreement, nor
(ii) 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 INS's articles of incorporation or bylaws, or (ii) any
resolution adopted by INS's shareholders, INS's board of directors or any
committee of INS's board of directors;
(b) contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
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 INS, or any of the assets owned or used by INS, are 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 INS or that otherwise relates to INS's business or
to any of the assets owned or used by INS;
(d) contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any Company Contract,
or give any Person the right to (i) declare a default or exercise any remedy
under any Company Contract, (ii) accelerate the maturity or performance of any
Company Contract, or (iii) cancel, terminate or modify any Company Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by INS (except for
minor liens that will not, in any case or
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in the aggregate, materially detract from the value of the assets subject
thereto or materially impair the operations of INS).
Except as set forth in Part 2.22 of the Disclosure Schedule, INS is not and will
not be required to make any filing with or given any notice to, or to obtain any
Consent from, any Person in connection with (x) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, or (y) the consummation of the Merger or any of the other
transactions contemplated by this Agreement.
2.23 SOFTWARE. Part 2.23 of the Disclosure Schedule contains a
complete list of all computer software which is material to INS's business and
which has been designed specifically for use or sale by INS or as to which INS
claims any proprietary rights (the "Software"). Part 2.23 of the Disclosure
Schedule lists all employees and independent contractors who participated
materially in the creation or material modification of the Software. Except as
described in Part 2.23 of the Disclosure Schedule, INS is the exclusive owner of
all patents, copyrights, trademarks, intellectual property rights, trade secrets
and other proprietary information, processes, and formulae used in connection
with the Software. All development or other work performed by employees,
independent contractors or others in connection with the Software on behalf of
INS has been either (i) pursuant to a "work-for-hire" arrangement or agreement
with INS in accordance with applicable state and federal law, that has accorded
INS full, effective, exclusive and original ownership of all tangible and
intangible property arising thereby or (ii) subject to an executed instrument of
assignment in favor of INS that has conveyed to INS full, effective and
exclusive ownership of all tangible and intangible property arising in
connection with the work performed. INS has exclusive ownership, possession and
control of all source codes, object codes, system documentation, statements of
principles of operation, and schematics for all the Software that may be
necessary to render such materials understandable and usable by a trained
computer programmer. The Software is not in the public domain. INS has taken
adequate measures consistent with industry practice to safeguard the
confidentiality of any confidential information or trade secrets relating to the
Software. There are no licenses, covenants not to compete or other agreements
or arrangements which restrict in any way INS's right to further develop,
market, license and use the Software. The Software performs in accordance with
the documentation and other written material used in connection with the
Software and is free from material defects in programming or operation. To the
knowledge of INS and the Principal Shareholders, INS is not infringing or
otherwise acting adversely to the right of any party under or in respect to the
Software. There is no claim for damages or any proceeding pending, or to the
knowledge of INS and the Principal Shareholders threatened, with respect
thereto, and INS and Principal Shareholders have no knowledge that any third
party is infringing or otherwise acting adversely to the right of INS under or
in respect to any Software owned by INS. All Software owned or developed by INS
that is licensed to third parties has been distributed pursuant to license
agreements, the form of which is attached on Part 2.23 of the Disclosure
Schedule, and no person has been given or permitted to use any such Software
unless such persons have executed a license agreement in the form attached on
Part 2.23 of the Disclosure Schedule.
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2.24 FULL DISCLOSURE. This Agreement (including the Disclosure
Schedule) does not, and Principal Shareholders' Closing Certificate (as defined
in Section 6.4(f)) will not, (i) contain any representation, warranty or
information that is false or misleading with respect to any material fact, or
(ii) omit to state any material fact necessary in order to make the
representations, warranties and information contained and to be contained herein
and therein not false or misleading.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF VSI AND THE SUBSIDIARY
VSI and the Subsidiary, jointly and severally, represent and
warrant to INS and the Principal Shareholders as follows:
3.1 SEC FILINGS; FINANCIAL STATEMENTS.
(a) VSI has delivered to INS accurate and complete copies
(excluding copies of exhibits) of each report, registration statement (on a form
other than Form S-8) and definitive proxy statement filed by VSI with the SEC
between January 1, 1996 and the date of this Agreement (the "VSI SEC
Documents"). 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 VSI 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 VSI 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 VSI
SEC Documents: (i) accurate and complete in all respects and 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 normal and recurring year-end audit adjustments (which will not,
individually or in the aggregate, be material in magnitude); and (iii) fairly
present the consolidated financial position of VSI as of the respective dates
thereof and the consolidated results of operations of VSI for the periods
covered thereby.
3.2 AUTHORITY; BINDING NATURE OF AGREEMENT. VSI and the Subsidiary
each have the absolute and unrestricted right, power and authority to perform
their respective obligations under this Agreement; and the execution, delivery
and performance by VSI and the Subsidiary of this Agreement have been duly
authorized by all necessary action on the part of VSI and the Subsidiary and
their respective boards of directors. This Agreement shall constitute the
legal, valid and binding obligation of VSI and the Subsidiary, enforceable
against each of them 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.
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3.3 VALID ISSUANCE. The VSI Common Stock to be issued as Merger
Consideration will, when issued in accordance with the provisions of this
Agreement, be validly issued, fully paid and nonassessable.
3.4 INDEPENDENT INVESTMENT DECISION. VSI acknowledges that it has had
full access to and the opportunity to review all information regarding INS
referenced in this Agreement, and on the basis of such information has made an
independent review and investigation of the financial merits and risks of the
Merger and through such independent review and investigation has chosen to cause
the Subsidiary to merge with INS, pursuant to the terms and conditions of this
Agreement; provided, however, that this representation shall in no way limit or
mitigate any liability of INS or the Principal Shareholders resulting from the
breach of any representation or warranty contained in Section 2 of this
Agreement or the obligation of INS and the Principal Shareholders to indemnify
VSI pursuant to Section 9 of this Agreement.
SECTION 4. CERTAIN COVENANTS OF INS AND THE PRINCIPAL SHAREHOLDERS
4.1 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), INS shall, and
shall cause its Representatives to: (a) provide VSI and VSI's Representatives
with reasonable access to INS's Representatives, personnel and assets and to all
existing books, records, Tax Returns, work papers and other documents and
information relating to INS; and (b) provide VSI and VSI's Representatives with
such copies of the existing books, records, Tax Returns, work papers and other
documents and information relating to INS, and with such additional financial,
operating and other data and information regarding INS, as VSI may reasonably
request.
4.2 OPERATION OF INS'S BUSINESS. During the Pre-Closing Period,
unless VSI otherwise consents in writing, which consent shall not be
unreasonably withheld or delayed:
(a) INS shall conduct its business and operations in the
ordinary course and in substantially the same manner as such business and
operations have been conducted prior to the date of this Agreement;
(b) INS shall use reasonable efforts to preserve intact its
current business organizations, keep available the services of its current
officers and employees and maintain its relations and goodwill with all
suppliers, customers, landlords, creditors, employees and other Persons having
business relationships with INS;
(c) INS shall keep in full force all insurance policies
identified in Part 2.18 of the Disclosure Schedule;
(d) INS shall cause its officers to report regularly to VSI
concerning the status of INS's business;
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(e) INS shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and shall not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities;
(f) INS shall not sell, issue or authorize the issuance of
(i) any capital stock or other security, (ii) any option, call, warrant or right
to acquire, or relating to, any capital stock or other security, or (iii) any
instrument convertible into or exchangeable for any capital stock or other
security;
(g) neither INS, nor any of the Shareholders shall amend or
permit the adoption of any amendment to INS's articles of incorporation or
bylaws, or effect or permit INS to become a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split, reverse
stock split or similar transaction;
(h) INS shall not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(i) INS shall not make any capital expenditure, except for
capital expenditures that, when added to all other capital expenditures made on
behalf of INS during the Pre-Closing Period, do not exceed $10,000 in the
aggregate;
(j) INS shall not (i) 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 (ii) amend or prematurely terminate, or waive any material right or remedy
under, any Material Contract;
(k) INS shall not, other than in the ordinary course of
business consistent with past practice (i) acquire, lease or license any right
or other asset from any other Person, (ii) sell or otherwise dispose of, or
lease or license, any right or other asset to any other Person, or (iii) waive
or relinquish any right, except for immaterial assets acquired, leased, licensed
or disposed of by INS pursuant to Contracts that are not Material Contracts;
(l) INS shall not (i) lend money to any Person, or (ii) incur
or guarantee any indebtedness, except that INS may make routine borrowings in
the ordinary course of business under its respective existing lines of credit;
(m) INS shall not (i) establish, adopt or amend any Employee
Benefit Plan, (ii) pay any bonus 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, or (iii) hire any new employee whose aggregate annual compensation is
expected to exceed $60,000;
(n) INS shall not change any of its methods of accounting or
accounting practices in any respect;
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(o) INS shall not make any Tax election;
(p) INS shall not commence or settle any Legal Proceeding;
(q) INS shall not enter into any material transaction or take
any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(r) INS shall not agree or commit to take any of the actions
described in clauses "(e)" through "(q)" of this Section 4.2.
4.3 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, INS and the Principal
Shareholders shall promptly notify VSI in writing of:
(i) the discovery by INS or the Principal Shareholders
of any event, condition, fact or circumstance that occurred or existed on
or prior to the date of this Agreement and that caused or constitutes an
inaccuracy in or breach of any representation or warranty made by INS or
any of the Principal Shareholders in this Agreement;
(ii) any event, condition, fact or circumstance that
occurs, arises or exists after the date of this Agreement and that would
cause or constitute an inaccuracy in or breach of any representation or
warranty made by INS or any of the Principal Shareholders in this
Agreement if (A) such representation or warranty had been made as of the
time of the occurrence, existence or discovery of such event, condition,
fact or circumstance, or (B) such event, condition, fact or circumstance
had occurred, arisen or existed on or prior to the date of this
Agreement;
(iii) any breach of any covenant or obligation of INS or
any of the Principal Shareholders; and
(iv) any event, condition, fact or circumstance that
would make the timely satisfaction of any of the conditions set forth in
Section 6 or Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 4.3(a) requires any change in the
Disclosure Schedule, or if any such event, condition, fact or circumstance would
require such a change assuming the Disclosure Schedule were dated as of the date
of the occurrence, existence or discovery of such event, condition, fact or
circumstance, then INS or the Principal Shareholders shall promptly deliver to
VSI an update to the Disclosure Schedule specifying such change. No such update
shall be deemed to supplement or amend the Disclosure Schedule for the purpose
of (i) determining the accuracy of any of the representations and warranties
made by INS or any of the Principal Shareholders in this Agreement, or (ii)
determining whether any of the conditions set forth in Section 6 has been
satisfied.
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4.4 NO NEGOTIATION. During the Pre-Closing Period, neither INS nor
any of the Shareholders shall, directly or indirectly:
(a) solicit or encourage the initiation of any inquiry,
proposal or offer from any Person (other than VSI) relating to a possible
Acquisition Transaction;
(b) participate in any discussions or negotiations or enter
into any agreement with, or provide any non-public information to, any Person
(other than VSI) relating to or in connection with a possible Acquisition
Transaction; or
(c) consider, entertain or accept any proposal or offer from
any Person (other than VSI) relating to a possible Acquisition Transaction.
INS shall promptly notify VSI in writing of any inquiry, proposal or offer
relating to a possible Acquisition Transaction that is received by INS or any of
the Shareholders during the Pre-Closing Period.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 FILINGS AND CONSENTS. As promptly as practicable after the
execution of this Agreement, each party to this Agreement (a) 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, and (b) shall use his, its or their best 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. INS
shall promptly deliver to VSI a copy of each such filing made, each such notice
given and each such Consent obtained by INS during the Pre-Closing Period. VSI
shall promptly deliver to INS a copy of each such filing made, each such notice
given and each such consent obtained by VSI during the Pre-Closing Period.
5.2 PUBLIC ANNOUNCEMENTS. During the Pre-Closing Period, (a) neither
INS nor any of the Shareholders shall (and INS shall not permit any of its
Representatives to) issue any press release or make any public statement
regarding this Agreement or the Merger, or regarding any of the other
transactions contemplated by this Agreement, without VSI's prior written
consent, and (b) VSI will use reasonable efforts to consult with INS prior to
issuing any press release or making any public statement regarding the Merger.
5.3 BEST EFFORTS. During the Pre-Closing Period, (a) INS and the
Principal Shareholders shall use their reasonable best efforts to cause the
conditions set forth in Section 6 to be satisfied on a timely basis, and (b) VSI
shall use its reasonable best efforts to cause the conditions set forth in
Section 7 to be satisfied on a timely basis.
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5.4 EMPLOYMENT AND NONCOMPETITION AGREEMENTS. At the Closing, Rod
Hollenbeck shall execute and deliver to VSI an Employment Agreement in the form
of Exhibit D-1 (the "Employment Agreement") and a Noncompetition Agreement in
the form of Exhibit D-2 (the "Noncompetition Agreement").
5.5 RELEASE. At the Closing, each of the Principal Shareholders shall
execute and deliver to VSI a Release in the form of Exhibit E (the "Release").
5.6 FIRPTA MATTERS. At the Closing, (a) INS shall deliver to VSI a
statement (in such form as may be reasonably requested by counsel to VSI)
conforming to the requirements of Section 1.897-2(h)(1)(i) of the United States
Treasury Regulations, and (b) INS shall deliver to the Internal Revenue Service
the notification required under Section 1.897-2(h)(2) of the United States
Treasury Regulations.
5.7 WORKING CAPITAL. VSI shall have made available to the Surviving
Corporation working capital in an amount of $250,000, which amount has been
loaned to INS by VSI and which may be converted to equity in the Surviving
Corporation after Closing. Subsequent to Closing, VSI will provide working
capital to the Surviving Corporation to support the operations of the Surviving
Corporation on an ongoing basis, as deemed appropriate by VSI management.
5.8 LIMITED INDEPENDENCE OF OPERATION. During the period beginning on
the Closing Date and ending December 31, 1996 (the "Initial Operation Period"),
VSI will cause the Surviving Corporation to be operated in substantially the
same manner as INS and with substantially the same employee work force INS as
existed prior to the Closing. For example, during the Initial Operation Period
VSI will not cause employment of employees of the Surviving Corporation to be
terminated without reasonable cause, as defined below, cause sales persons of
VSI to sell or license the products and services of the Surviving Corporation
(except in cases of co-marketing, as appropriate), and will not unreasonably
interfere with the customer base assumed by the Subsidiary as a consequence of
the Merger. For purposes of this Section, reasonable cause shall mean only a
determination made in good faith by the Board of Directors of the Subsidiary
that employment performance is substantially inadequate. Notwithstanding the
foregoing, the employment of John Sable, Peter Clarke and Rod Hollenbeck may be
terminated as provided in this Agreement or their respective employment
agreements, as the case may be.
5.9 CERTAIN SEVERANCE PAYMENTS. In the event that the employment of
either Peter Clarke or John Sable by INS is terminated without cause subsequent
to Closing but prior to the effectiveness of a registration statement filed by
the VSI with the SEC in accordance with Section 10 of this Agreement, the
terminated employee shall receive as severance a lump sum payment of $17,000
(three month's salary).
5.10 PAYMENTS TO DIANE ROGERS. Until August 31, 1996, the Surviving
Corporation shall continue to make payments to Diane Rogers in the amount of
$5,000 per month, in accordance with the past practice of INS.
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5.11 INFORMATION STATEMENT. As promptly as practicable after the
execution of this Agreement, VSI and INS shall jointly prepare an Information
Statement relating to the approval of the Merger by the INS shareholders (the
"Information Statement").
5.12 INS SHAREHOLDER CONSENT. The Principal Shareholders shall, in
accordance with the articles of incorporation and bylaws of INS and the
applicable requirements of the Georgia Business Corporation Code, take action by
written consent as promptly as practicable to approve the Merger and this
Agreement ("INS Shareholders' Consent"). INS shall cause a copy of the
Information Statement to be delivered to each shareholder of INS. As promptly
as practicable after the delivery of copies of the Information Statement to all
shareholders, INS shall use its best efforts to cause each of such shareholders
to execute and deliver to VSI a Shareholder Investment Certification in the form
of Exhibit G.
5.13 ACCOUNTING TREATMENT.
(a) INS and VSI agree to use their respective best efforts to
cause the Merger to be accounted for as a pooling of interests and to use their
respective best efforts to cause their affiliates to take such actions as shall
be necessary to permit the Merger to qualify for such accounting treatment. INS
and VSI each covenant not to take, and each covenant to use its best efforts to
cause its affiliates not to take, prior to the Effective Time, any action that
could in any manner adversely affect such qualification.
(b) VSI and INS shall each use its best efforts to cause each
of its respective affiliates to deliver a written undertaking, in form
reasonably satisfactory to VSI, to the effect that:
(i) During the period from the execution of this
Agreement until thirty (30) days prior to the Effective Time such
affiliate has not and will not transfer or otherwise dispose of
any securities of VSI or INS, as applicable, held by such
affiliates, except for transfers or other dispositions by
operation of law upon the death of such affiliates or by the
estate of such affiliates if necessary to pay estate taxes or
other transfers or dispositions that VSI determines will not
prevent VSI from accounting for the Merger as a pooling of
interests, taking into account the actions of other affiliates.
(ii) From and after thirty (30) days prior to the
Effective Time, such affiliate will not sell, transfer or
otherwise dispose of any securities of VSI or INS, including
shares of VSI Common Stock received by such affiliate in the
Merger, until after such time as financial results covering at
least thirty (30) days of combined operations of VSI and INS have
been published by VSI, in the form of a quarterly earnings report,
an effective registration statement filed with the SEC, a report
to the SEC on Form 10-K, 10-Q or 8-K, or any other public filing
or announcement which includes the combined results of operations
(which publication shall be effected by VSI at the earliest
reasonably practicable opportunity), except for transfers or other
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dispositions that VSI determines, taking into account the actions
of other affiliates, will not prevent VSI from accounting for the
Merger as a pooling of interests.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF VSI AND THE SUBSIDIARY
The obligations of VSI and the Subsidiary 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:
6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by INS and the Principal Shareholders in this Agreement and in
each of the other agreements and instruments delivered to VSI in connection with
the transactions contemplated by 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 Scheduled Closing Time as if made at the Scheduled Closing Time
(without giving effect to any update to the Disclosure Schedule).
6.2 PERFORMANCE OF COVENANTS. Each covenant or obligation that INS or
any of the Shareholders is required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all respects.
6.3 CONSENTS. All Consents required to be obtained in connection with
the Merger and the other transactions contemplated by this Agreement (including
the Consents identified in Part 2.22 of the Disclosure Schedule) shall have been
obtained and shall be in full force and effect.
6.4 AGREEMENTS AND DOCUMENTS. VSI shall have received the following
agreements and documents, each of which shall be in full force and effect:
(a) the Employment Agreement and the Noncompetition Agreement,
executed by Rod Hollenbeck;
(b) a Release, executed by each of the Principal Shareholders;
(c) the statement referred to in Section 5.6, executed by INS;
(d) estoppel certificates, each dated as of a date not more
than five days prior to the Closing Date and satisfactory in form and content to
VSI, executed by the Persons identified on Exhibit G and by such other Persons
as VSI may reasonably specify;
(e) a legal opinion of Schnader, Harrison, Segal & Lewis, dated
as of the Closing Date, satisfactory in form and substance to VSI and its
counsel; and
(f) a certificate executed by INS and the Principal
Shareholders and containing the representation and warranty of INS and each
Principal Shareholder that each of the representations and warranties set forth
in Section 2 is accurate in all material respects as of the
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Closing Date as if made on the Closing Date and that the conditions set forth in
Sections 6.1, 6.2, 6.3, 6.4 and 6.5 have been duly satisfied (the "INS and
Principal Shareholders' Closing Certificate").
6.5 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in INS's business, condition, assets, liabilities, operations,
financial performance or prospects since the date of this Agreement.
6.6 FIRPTA COMPLIANCE. INS shall have filed with the Internal Revenue
Service the notification referred to in Section 5.6.
6.7 RULE 505. All applicable requirements of Rule 505 under the
Securities Act shall have been satisfied.
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 LEGAL PROCEEDINGS. No Person shall have commenced or
threatened to commence any Legal Proceeding challenging or seeking the recovery
of a material amount of damages in connection with the Merger or seeking to
prohibit or limit the exercise by INS of any material right pertaining to its
ownership of stock of the Surviving Corporation.
6.10 COMPLETION OF DUE DILIGENCE. VSI shall have completed its due
diligence investigation of INS and shall have been satisfied with the results
thereof.
6.11 SHAREHOLDER INVESTMENT CERTIFICATIONS. Shareholder Investment
Certifications in the form of Exhibit G executed by each of the Shareholders of
INS shall have been delivered to VSI.
6.12 ACCOUNTING TREATMENT. VSI shall have determined to its
satisfaction that the Merger will be accounted for as a pooling of interests.
6.13 AFFILIATE AGREEMENTS. Affiliate Agreements in the form of Exhibit
H, executed by the Principal Shareholders and by any other person who could
reasonably be deemed to be an "affiliate" of INS for purposes of the Securities
Act, shall have been delivered to VSI.
SECTION 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF INS AND THE PRINCIPAL
SHAREHOLDERS.
The obligations of INS and the Principal Shareholders 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:
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7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by VSI and the Subsidiary in this Agreement and in each of the
other agreements and instruments delivered to INS in connection with the
transactions contemplated by 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 Scheduled Closing Time as if made at the Scheduled Closing Time.
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations
that VSI is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all respects.
7.3 CONSENTS. All Consents required to be obtained in connection with
the merger and the other transactions contemplated by this Agreement shall have
been obtained and shall be in full force and effect.
7.4 AGREEMENTS AND DOCUMENTS.
(a) VSI and the Subsidiary shall have entered into the
Employment Agreement described in Section 6.4(a);
(b) INS shall have received a legal opinion of Smith, Gambrell
& Russell in form and substance satisfactory to INS and its counsel; and
(c) INS shall have received a certificate executed by VSI and
the Subsidiary, and containing the representation and warranty of VSI and the
Subsidiary that each of the representations and warranties set forth in Section
3 are accurate in all material respects as of the Closing Date as if made on the
Closing Date and that the conditions set forth in Sections 7.1, 7.2, 7.3 and 7.4
have been duly satisfied (the "VSI Closing Certificate").
7.5 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger by
INS 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 INS illegal.
7.6 RELEASE OF PERSONAL GUARANTIES. VSI shall use its best efforts to
obtain the release of Peter Clarke, John Sable and Diane Rogers from their
personal guaranty of any outstanding obligations of INS, including their
guaranty of that certain Contracts Financing Agreement, dated May 24, 1996,
between INS and Princeton Capital Finance Company LLC. In the event that VSI is
unable to obtain such release, VSI agrees to indemnify, defend and hold harmless
such guarantors from and against such contingent liability.
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SECTION 8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may be terminated prior to the
Closing:
(a) by VSI if VSI reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of VSI to comply with or
perform any covenant or obligation of VSI set forth in this Agreement);
(b) by INS if INS reasonably determines that the timely
satisfaction of any condition set forth in Section 7 has become impossible
(other than as a result of any failure on the part of INS or any of the
Shareholders to comply with or perform any covenant or obligation set forth in
this Agreement or in any other agreement or instrument delivered to VSI);
(c) by VSI at or after the Scheduled Closing Time if any
condition set forth in Section 6 has not been satisfied by the Scheduled Closing
Time;
(d) by INS at or after the Scheduled Closing Time if any
condition set forth in Section 7 has not been satisfied by the Scheduled Closing
Time;
(e) by VSI if the Closing has not taken place on or before July
31, 1996 (other than as a result of any failure on the part of VSI to comply
with or perform any covenant or obligation of VSI set forth in this Agreement);
(f) by INS if the Closing has not taken place on or before July
31, 1996 (other than as a result of the failure on the part of INS or any of the
Shareholders to comply with or perform any covenant or obligation set forth in
this Agreement or in any other agreement or instrument delivered to VSI); or
(g) by the mutual consent of VSI and INS.
8.2 TERMINATION PROCEDURES. If VSI wishes to terminate this Agreement
pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e), VSI shall deliver
to INS a written notice stating that VSI is terminating this Agreement and
setting forth a brief description of the basis on which VSI is terminating this
Agreement. If INS wishes to terminate this Agreement pursuant to Section 8.1(b),
Section 8.1(d) or Section 8.1(f), INS shall deliver to VSI a written notice
stating that INS is terminating this Agreement and setting forth a brief
description of the basis on which INS is terminating this Agreement.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant
to Section 8.1, all further obligations of the parties under this Agreement
shall terminate; provided, however, that no party shall be relieved of any
obligation or liability arising from any prior breach by such party of any
provision of this Agreement, including that certain promissory note dated June
13, 1996 in the principal amount of $250,000 from INS to VSI, which promissory
note is due on demand by VSI.
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SECTION 9. INDEMNIFICATION, ETC.
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of INS, the Principal Shareholders, VSI and the
Subsidiary contained in this Agreement shall survive the Closing and shall
continue for a period of two years following the Closing Date; except that
representations and warranties contained in Sections 2.6, 2.9, 2.14 and 2.15
shall survive until expiration of the applicable statutes of limitation for
breach of such representations and warranties. The expiration of any
representation or warranty shall not affect any party's right to claim
indemnification for a breach of such representation or warranty, provided such
party gives notice of such claim in accordance with the provisions of this
Section 9 prior to the expiration of such representation or warranty.
9.2 PRINCIPAL SHAREHOLDERS' INDEMNITY AGREEMENT. Subject to the
provisions of Section 9.5 hereof, the Principal Shareholders, jointly and
severally, shall defend, indemnify and hold harmless VSI and the Surviving
Corporation (and their respective directors, officers, employees, agents,
affiliates, successors and assigns) from and against any and all direct or
indirect requests, demands, claims, payments, defenses, obligations, recoveries,
deficiencies, fines, penalties, interest, assessments, actions, liens, causes of
action, suits, proceedings, judgments, losses, Damages (including without
limitation punitive, exemplary or consequential damages, lost income and
profits, interruptions of business and diminution in the value of the Stock),
liabilities, costs, and expenses of any kind (including without limitation (i)
interest, penalties and reasonable attorneys' fees and expenses, (ii) attorneys'
fees and expenses necessary to enforce their rights to indemnification
hereunder, and (iii) consultants' fees and other costs of defending or
investigating any claim hereunder), and interest on any amount payable as a
result of the foregoing, whether accrued, absolute, contingent, known, unknown,
or otherwise as of the Closing Date or thereafter asserted against, imposed upon
or incurred by VSI, the Surviving Corporation or any of their respective
directors, officers, employees, agents, affiliates, successors or assigns (a
"Loss of VSI") by reason of, resulting from, arising out of, based upon, awarded
or asserted against or otherwise in respect of:
(a) any period or periods of INS ending prior to the Closing
and which involve any claims against VSI, INS, the Surviving Corporation or
their respective properties or assets, relating to actions or inactions of INS
or its respective officers, directors, shareholders, employees or agents prior
to Closing, or the operation of the business of INS prior to the Closing unless
such liability was disclosed on the Financial Statements and adequate reserves
were established therefor;
(b) any breach of any representation and warranty contained in
this Agreement or any misrepresentation in or omission on the part of INS or the
Principal Shareholders contained in any certificate furnished or to be furnished
to Buyer by Seller pursuant to this Agreement;
(c) any breach or nonfulfillment on the Part of INS or the
Principal Shareholders of any covenant contained in this Agreement;
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(d) the failure of INS or the Principal Shareholders to obtain,
prior to the Closing Date, any consents, approvals and waivers of governmental
agencies or entities, lessors, landlords, suppliers, and other third parties as
may be necessary to permit the consummation of the Merger and to permit the
Surviving Corporation to continue to operate the business of INS in the manner
presently conducted after the Closing Date;
(e) the failure of the Surviving Corporation to collect any
accounts receivable of the INS existing on the Closing Date, net of reserve for
bad debts set forth in the Financial Statements, within 180 days following the
Closing Date; provided however, that upon receipt of full payment from Principal
Shareholders, the Surviving Corporation shall reassign to the Principal
Shareholders any such account receivable;
(f) any federal, state, local or foreign taxes, including any
interest and penalties thereon, due from INS or the Principal Shareholders with
respect to any period prior to the Closing Date, other than amounts accrued
therefor on the Financial Statements.
9.3 INDEMNITY AGREEMENT OF VSI AND THE SURVIVING CORPORATION. VSI and
the Surviving Corporation shall indemnify and hold harmless the Principal
Shareholders (and their respective successors and assigns) from and against any
and all direct or indirect requests, demands, claims, payments, defenses,
obligations, recoveries, deficiencies, fines, penalties, interest, assessments,
actions, liens, causes of action, suits, proceedings, judgments, losses, Damages
(including without limitation punitive, exemplary or consequential damages and
lost income and profits and interruptions of business), liabilities, costs, and
expenses of any kind (including without limitation (i) interest, penalties and
reasonable attorneys' fees and expenses, (ii) attorneys' fees and expenses
necessary to enforce their rights to indemnification hereunder, and (iii)
consultants' fees and other costs of defending or investigating any claim
hereunder, and interest on any amount payable as a result of the foregoing)
whether accrued, absolute, contingent, known, unknown or otherwise as of the
Closing Date or thereafter asserted against, imposed upon or incurred by
Principal Shareholders or its respective representatives or assigns, (a "Loss of
Principal Shareholders") by reason of, resulting from, arising out of, based
upon, awarded or asserted against in respect of or otherwise in respect of:
(a) any period or periods of the Surviving Corporation
beginning after the Closing and which involve any claims against the Principal
Shareholders or their respective assets relating to actions or inactions of VSI
or the Surviving Corporation or their respective officers, directors,
shareholders, employees or agents after the Closing, or the operation of the
Surviving Corporation after the Closing (except to the extent any of the
foregoing arise from the acts or omissions of the Principal Shareholders); and
(b) any breach of any representation and warranty or
nonfulfillment of any covenant or agreement on the part of VSI or the Subsidiary
contained in this Agreement, or any misrepresentation in or omission from or
nonfulfillment of any covenant on the part of the VSI or the Subsidiary
contained in any certificate furnished or to be furnished to the Principal
Shareholders by VSI or the Subsidiary pursuant to this Agreement.
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9.4 INDEMNIFICATION PROCEDURE.
(a) Upon obtaining knowledge thereof, the party to be
indemnified hereunder (the "Indemnitee") shall promptly notify the indemnifying
party hereunder (the "Indemnitor") in writing of any damage, claim, loss,
liability or expense or other matter which the Indemnitee has determined has
given or could give rise to a claim for which indemnification rights are granted
hereunder (such written notice referred to as the "Notice of Claim"). The
Notice of Claim shall specify, in all reasonable detail, the nature and
estimated amount of any such claim giving rise to a right of indemnification, to
the extent the same can reasonably be estimated. Any failure on the part of an
Indemnitee to give timely notice to the Indemnitor of a claim shall not affect
the right of the Indemnitee to obtain indemnification from the Indemnitor with
respect to such claim unless the Indemnitor is actually harmed by such failure
to notify, and only to the extent of such actual harm.
(b) With respect to any matter set forth in a Notice of Claim
relating to a third party claim the Indemnitor shall defend, in good faith and
at its expense, any such claim or demand, and the Indemnitee, at its expense,
shall have the right to participate in the defense of any such third party
claim. So long as Indemnitor is defending, in good faith, any such third party
claim, the Indemnitee shall not settle or compromise such third party claim. The
Indemnitee shall make available to the Indemnitor or its representatives all
records and other materials reasonably required by them for use in contesting
any third party claim and shall cooperate fully with the Indemnitor in the
defense of all such claims. If the Indemnitor does not defend any such third
party claim or if the Indemnitor does not provide the Indemnitee with prompt and
reasonable assurances that the Indemnitor will satisfy the third party claim,
the Indemnitee may, at its option, elect to defend any such third party claim,
at the Indemnitor's expense. An Indemnitor may not settle or compromise any
claim without obtaining a full and unconditional release of the Indemnitee,
unless the Indemnitee consents in writing to such settlement or compromise.
Notwithstanding the foregoing, if there is a reasonable probability that a third
party claim for which the Buyer has indemnification rights against Seller
hereunder will materially and adversely affect Buyer or the Company other than
as a result of money damages or other payments, Buyer shall be entitled to
conduct the defense of such claim at Sellers' expense.
9.5 LIMITATIONS ON LIABILITY OF PRINCIPAL SHAREHOLDERS. Principal
Shareholders shall have no liability with respect to Losses of Buyer arising
under subparagraphs (a), (b), or (d) of Section 9.2 until the total of all
Losses of Buyer with respect thereto exceeds $100,000. If the aggregate Losses
of Buyer exceed such $100,000 threshold, the Seller and Principals shall be
liable for all Losses of Buyer to the extent (and only to the extent) Losses of
Buyer exceed such $100,000 threshold.
SECTION 10. REGISTRATION OF SHARES
10.1 REGISTRATION. VSI will use its best efforts to effect the
registration under the Securities Act of the VSI Common Stock constituting the
Merger Consideration (the "Registrable Securities") promptly after the Closing
Date. In that regard, VSI will:
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(a) prepare and file with the SEC a registration statement on
any form that VSI is eligible to use, such form to be selected by VSI after
consultation with counsel, with respect to such Registrable Securities and use
its best efforts to cause such registration statement to become effective on or
before November 1, 1996. If, for any reason, VSI fails to file a registration
statement with the SEC on or before November 1, 1996, the Principal Shareholders
shall have the right to demand registration of their respective Registrable
Securities. Upon receipt of such demand, VSI shall, as promptly as practicable
prepare and file with the SEC a registration statement sufficient to permit the
public offering of the Registrable Securities and will use its best efforts
through its officers, directors, auditors, and counsel, in all matters necessary
or advisable, to cause such registration statement to become effective as
promptly as practicable; provided, however, VSI shall only be obligated to file
one such registration for all of the Registrable Securities.
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities and other securities covered by such
registration statement until the earlier of such time as all of such Registrable
Securities and securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in such
registration statement or the expiration of ninety (90) days after such
registration statement becomes effective; and will furnish, upon request, to
each such seller prior to the filing thereof a copy of any amendment or
supplement to such registration statement or prospectus and shall not file any
such amendment or supplement to which any such seller shall have reasonably
objected on the grounds that such amendment or supplement does not comply in all
material respects with the requirements of the Securities Act or of the rules or
regulations thereunder;
(c) furnish to each seller of such Registrable Securities and
such number of conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits), such
number of copies of the prospectus included in such registration statement
(including each preliminary prospectus and any summary prospectus), in
conformity with the requirements of the Securities Act, such documents, if any,
incorporated by reference in such registration statement or prospectus, and such
other documents, as such seller may reasonably request;
(d) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement under
such other securities or blue sky laws of the states of the United States as
each seller shall reasonably request, to keep such registration or qualification
in effect for so long as such registration statement remains in effect, and do
any and all other acts and things which may be necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of its
Registrable Securities covered by such registration statement, except that VSI
shall not for any such purpose be required to qualify generally to do business
as a foreign corporation in any jurisdiction wherein it would not but for the
requirements
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<PAGE> 43
of this subsection (d) be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction, or to consent general service of process in
any such jurisdiction;
(e) upon request, furnish to each seller of Registrable
Securities a signed counterpart, addressed to such seller, of (i) an opinion of
counsel for VSI, dated the effective date of such registration statement, and
(ii) a "comfort" letter, dated the effective date of such registration
statement, signed by the independent public accountants who have certified VSI's
financial statements included in such registration statement, covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities;
(f) immediately notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which, the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing, which untrue statement or omission
requires amendment of the registration statement or supplementation of the
prospectus, and at the request of any such seller, prepare and furnish to such
seller a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing; provided, however, that each
holder of Registrable Securities registered pursuant to such registration
statement agrees that he or it will not sell any Registrable Securities pursuant
to such registration statement during the time that VSI is preparing and filing
with the SEC a supplement to or an amendment of such prospectus or registration
statement.
(g) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
securities holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, but not more than eighteen
(18) months, begging with the first month of the first fiscal quarter after the
effective date of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act;
(h) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such registration
statement; and
(i) use its best efforts to list all Common Stock covered by
such registration statement on each securities exchange on which any of the VSI
Common Stock is then listed or, if VSI Common Stock is not then quoted on NASDAQ
or listed on any national securities exchange,
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<PAGE> 44
use its best efforts to have such VSI Common Stock covered by such registration
statement quoted on NASDAQ or, at the option of VSI, listed on a national
securities exchange.
VSI may require each seller of Registrable Securities as to which any
registration is being effected to furnish VSI such information regarding such
seller and the distribution of such securities as VSI may from time to time
reasonably request in writing and as shall be required by law or by the SEC in
connection therewith.
10.2 EXPENSES. Except as otherwise required by applicable law, VSI
will pay all registration expenses in connection with the registration of the
Registrable Securities pursuant to Section 10.1.
10.3 PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of the registration statement registering Registrable
Securities under the Securities Act, VSI will give the holders of Registrable
Securities on whose behalf such Registrable Securities are to be so registered,
and their respective counsel and accountants, the opportunity to participate in
the preparation of such registration statement, each prospectus included therein
or filed with the SEC and each amendment thereof or supplement thereto, and will
give each of them such access to its books and records and such opportunities to
discuss the business of VSI with its officers and the independent public
accountants who have certified its financial statements as shall be necessary in
the opinion of such holders and such underwriters or their respective counsel,
to conduct a reasonable investigation within the meaning of the Securities Act.
To minimize disruption and expense to VSI during the course of the registration
process, sellers of Registrable Securities to be covered by any such
registration statement shall coordinate their investigation and due diligence
efforts hereunder and, to the extent practicable, will act through a single set
of counsel and a single set of accountants.
10.4 INDEMNIFICATION.
(a) Indemnification by VSI. VSI will, and hereby does,
indemnify and hold harmless in the case of any registration statement filed
pursuant to Section 10.1, the seller of any Registrable Securities covered by
such registration statement, its directors, trustees and officers, against any
losses, claims, damages, liabilities or expenses, joint or several, to which
such seller or any such director or officer may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions or proceedings in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any document incorporated by reference therein, or (ii)
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
VSI will reimburse such seller, and each such director, trustee and officer, for
any legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding, provided that VSI shall not be liable in any such case to the extent
that any such loss,
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<PAGE> 45
claim, damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to VSI through an instrument duly executed by such seller or any such director,
trustee or officer, specifically stating that it is for use in the preparation
thereof. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director, trustee
or officer, and shall survive the transfer of such securities by such seller.
VSI shall agree to make provision for contribution relating to such indemnity as
shall be reasonably requested by any seller of Registrable Securities.
(b) Indemnification by the Sellers. VSI may require, as a
condition to including any Registrable Securities in any registration statement
filed pursuant to Section 10.1, that VSI shall have received an undertaking
satisfactory to it from the prospective seller of such securities, to indemnify
and hold harmless (in the same manner and to the same extent as set forth in
subdivision (a) of this section 10.4) VSI, each director of VSI, each officer of
VSI who shall sign such registration statement and each other person, if any,
who controls VSI within the meaning of the Securities Act, with respect to any
statement in or omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus included therein, or any
amendment or supplement thereto, if such statement or omission was made in
reliance upon and in conformity with written information furnished to VSI
through an instrument only executed by such seller specifically stating that it
is for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of VSI or any such director, officer or controlling person
and shall survive the transfer of such securities by such seller.
(c) Notice of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this section
10.4, such indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under the preceding subdivisions of this Section 10.4. In case
any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that it may wish, with counsel reasonable satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement
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which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding subdivisions of this Section 10.4 (with appropriate
modifications) shall be given by VSI and each seller of Registrable Securities
with respect to any required registration or other qualification of such
Registrable Securities under any federal or state law or regulation of
governmental authority other than the Securities Act.
(e) Indemnification Payments. The indemnification required by
this section 10.4 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
SECTION 11. MISCELLANEOUS PROVISIONS
11.1 FURTHER ASSURANCES. Each party hereto shall execute and cause to
be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the transactions contemplated by this Agreement.
11.2 FEES AND EXPENSES. Subject to Section 9, all fees, costs and
expenses (including legal fees and accounting fees) that have been incurred or
that are incurred in the future by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) any
investigation and review conducted by such party of the other parties' business
(and the furnishing of information in connection with such investigation and
review), (b) the negotiation, preparation and review of this Agreement
(including the Disclosure Schedule) and all agreements, certificates, opinions
and other instruments and documents delivered or to be delivered in connection
with the transactions contemplated by this Agreement, (c) the preparation and
submission of any filing or notice required to be made or given in connection
with any of the transactions contemplated by this Agreement, and the obtaining
of any Consent required to be obtained in connection with any of such
transactions, and (d) the consummation of the Merger shall be paid: (i) by VSI,
if incurred by VSI or the Subsidiary; and (ii) by the Principal Shareholders, if
incurred by INS or the Principal Shareholders; provided, however that VSI will
pay up to $15,000 of such fees, costs and expenses incurred by INS.
11.3 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, 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).
11.4 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
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<PAGE> 47
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 VSI:
VSI Enterprises, Inc.
5801 Goshen Springs Road
Norcross, Georgia 30071
Attn: B.R. Brewer, Vice President - Finance
and Administration
Facsimile: (770) 441-1823
with a copy to:
Smith, Gambrell & Russell
3343 Peachtree Road, N.E.
Suite 1800
Atlanta, Georgia 30326-1010
Attn: William L. Meyer, Esq.
Facsimile: (404) 264-2652
if to INS:
Integrated Network Services, Inc.
1325 Northmeadow Parkway
Suite 110
Roswell, Georgia 30076
Attention: President
Facsimile: (770) 751-0301
with a copy to:
Schnader, Harrison, Segal & Lewis
Suite 2800
One Peachtree Center
303 Peachtree Street, N.E.
Atlanta, Georgia 30308-3252
Attention: David S. Cooper, Esq.
Facsimile: (404) 415-8132
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if to any of the Principal Shareholders:
Peter Clarke
2954 Cynthia Ct.
Marietta, Georgia 30062
Rod Hollenbeck
5906 Webb Bridge Ct.
Alpharetta, Georgia 30201
Mark Putnam
3417 Havalyn Drive
Doraville, Georgia 30340
Diane Rogers
7205 Timber Trial
Cumming, Georgia 30131
Jack Sable
489 Edward Ct.
Marietta, Georgia 30066
11.5 CONFIDENTIALITY. On and at all times after the Closing Date, INS
and each Shareholder shall keep confidential, and shall not use or disclose to
any other Person, any non-public document or other non-public information in
INS's or such Shareholder's possession that relates to the business of INS or
the Subsidiary.
11.6 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
11.7 HEADINGS. The bold-faced Section headings 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.
11.8 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
11.9 GOVERNING LAW; VENUE.
(a) This Agreement shall be construed in accordance with, and
governed in all respects by, the internal laws of the State of Georgia (without
giving effect to principles of conflicts of laws).
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(b) Any legal action or other legal proceeding relating to this
Agreement or the enforcement of any provision of this Agreement may be brought
to or otherwise commenced in any state or federal court located in Gwinnett
County, Georgia. Each party to this Agreement:
(i) expressly and irrevocably consents and submits to
the jurisdiction of each state and federal court located in Gwinnett
County, Georgia (and each appellate court located in the State of
Georgia) in connection with any such legal proceeding;
(ii) agrees that each state and federal court located in
Gwinnett County, Georgia shall be deemed to be a convenient forum; and
(iii) agrees not to assert (by way of motion, as a defense
or otherwise), in any such legal proceeding commenced in any state or
federal court located in Gwinnett County, Georgia, any claim that such
party is not subject personally to the jurisdiction of such court, that
such legal proceeding has been brought in an inconvenient forum, that the
venue of such proceeding is improper or that this Agreement or the
subject matter of this Agreement may not be enforced in or by such court.
11.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon: INS
and its successors and assigns (if any); the Principal Shareholders and their
respective personal representatives, executors, administrators, estates, heirs,
successors and assigns (if any); VSI and its successors and assigns (if any).
This Agreement shall inure to the benefit of INS, the Principal Shareholders,
VSI, and the respective successors, heirs personal representatives and assigns
(if any) of the foregoing. Following the Merger, VSI may freely assign any or
all of its rights under this Agreement (including its indemnification rights
under Section 9), in whole or in part, to any other Person without obtaining the
consent or approval of any other party hereto or of any other Person.
11.11 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and
remedies of the parties hereto shall be cumulative (and not alternative). The
parties to this Agreement agree that, in the event of any breach or threatened
breach by any party to this Agreement of any covenant, obligation or other
provision set forth in this Agreement for the benefit of any other party to this
Agreement, such other party shall be entitled (in addition to any other remedy
that may be available to it) 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.
11.12 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.
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(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.
11.13 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 all of the parties hereto.
11.14 SEVERABILITY. In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
11.15 PARTIES IN INTEREST. Except for the provisions of Section 9, none
of the provisions of this Agreement is intended to provide any rights or
remedies to any Person other than the parties hereto and their respective
successors, heirs, personal representatives and assigns (if any).
11.16 ENTIRE AGREEMENT. This Agreement and the other agreements
referred to herein set forth the entire understanding of the parties hereto
relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating to
the subject matter hereof and thereof.
11.17 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 the 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.
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<PAGE> 51
The parties hereto have caused this Agreement to be executed and
delivered as of the date first above written.
"VSI"
VSI ENTERPRISES, INC.,
a Delaware corporation
By: /s/ Richard K. Snelling
----------------------------------------
Its: Chairman of the Board
----------------------------------------
"SUBSIDIARY"
INS ACQUISITION CO.,
a Delaware corporation
By: /s/ B.R. Brewer
----------------------------------------
Title: President
--------------------------------------
"INS"
INTEGRATED NETWORK SYSTEMS, INC.
a Georgia corporation
By: /s/ Rod Hollenbeck
----------------------------------------
Its: President
----------------------------------------
"THE PRINCIPAL SHAREHOLDERS"
/s/ Peter Clarke (SEAL)
--------------------------------------
Peter Clarke
/s/ Rod Hollenbeck (SEAL)
--------------------------------------
Rod Hollenbeck
/s/ Mark Putnam (SEAL)
--------------------------------------
Mark Putnam
/s/ Diane Rogers (SEAL)
--------------------------------------
Diane Rogers
/s/ John Sable (SEAL)
--------------------------------------
John Sable
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<PAGE> 52
EXHIBIT B
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit B):
ACQUISITION TRANSACTION. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a
material portion of INS's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital
stock or other equity security of INS or VSI, as the case may be; (ii)
any option, call, warrant or right (whether or not immediately
exercisable) to acquire, or otherwise relating to, any capital stock or
other equity security of INS or VSI, as the case may be; or (iii) any
security, instrument or obligation that is or may become convertible into
or exchangeable for any capital stock or other equity security of INS or
VSI, as the case may be; or
(c) any merger, consolidation, business combination, share
exchange, reorganization or similar transaction involving INS or VSI, as
the case may be.
AGREEMENT. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit B is attached (including the Disclosure
Schedule), as it may be amended from time to time.
COMPANY CONTRACT. "Company Contract" shall mean any Contract: (a) to
which INS is a party; (b) by which INS or any of its assets are or may become
bound or under which INS has, or may become subject to, any obligation; or (c)
under which INS has or may acquire any right or interest.
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to INS or otherwise used by INS.
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, warranty,
insurance policy, benefit plan, or legally binding commitment or undertaking of
any nature.
DAMAGES. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
B-1
<PAGE> 53
DISCLOSURE SCHEDULE. "Disclosure Schedule" shall mean the schedule
(dated as of the date of the Agreement) delivered to VSI on behalf of INS and
the Principal Shareholders.
EMPLOYEE BENEFIT PLAN. "Employee Benefit Plan" shall have the meaning
specified in Section 3(3) of ERISA.
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 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.
ENVIRONMENTAL LAW. "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.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, 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.
GOVERNMENTAL BODY. "Governmental Body" shall mean any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city, local or other political subdivision.
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
B-2
<PAGE> 54
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, constitute, 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.
MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed to
have a "Material Adverse Effect" on INS if such violation or other matter
(considered together with all other matters that would constitute exceptions to
the representations and warranties set forth in the Agreement or in the
Principal Shareholders' Closing Certificate but for the presence of "Material
Adverse Effect" or other materiality qualifications, or any similar
qualifications, in such representations and warranties) would have a material
adverse effect on INS's business, condition, assets, liabilities, operations,
financial performance or prospects.
MATERIALS OF ENVIRONMENTAL CONCERN. "Materials of Environmental Concern"
include chemicals, pollutants, contaminants, wastes, toxic substances, asbestos,
PCBs, petroleum and petroleum products and any other substance that is now or in
the future regulated by any Environmental Law or that is otherwise a danger to
health, reproduction or the environment.)
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, source code, computer program, 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, accounts, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933,
as amended.
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
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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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