-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UPH8BbuE3Nn4K2NM3C8sfI/PYxVDq98pVsAc8mQNqP2lAA8kNjMluJ6YVt5Iqsh/ IuV5lNb0fB77N9pF+BcnWA== /in/edgar/work/20001103/0000912057-00-047100/0000912057-00-047100.txt : 20001106 0000912057-00-047100.hdr.sgml : 20001106 ACCESSION NUMBER: 0000912057-00-047100 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20001103 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BLUESTONE SOFTWARE INC CENTRAL INDEX KEY: 0001039242 STANDARD INDUSTRIAL CLASSIFICATION: [7372 ] IRS NUMBER: 222964141 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-57703 FILM NUMBER: 752675 BUSINESS ADDRESS: STREET 1: 1000 BRIGGS RD CITY: MT LAUREL STATE: NJ ZIP: 08054 BUSINESS PHONE: 6097274600 MAIL ADDRESS: STREET 1: 1000 BRIGGS ROAD CITY: MT LAUREL STATE: NJ ZIP: 08054 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HEWLETT PACKARD CO CENTRAL INDEX KEY: 0000047217 STANDARD INDUSTRIAL CLASSIFICATION: [3570 ] IRS NUMBER: 941081436 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 3000 HANOVER ST CITY: PALO ALTO STATE: CA ZIP: 94304 BUSINESS PHONE: 4158571501 MAIL ADDRESS: STREET 1: 3000 HANOVER ST STREET 2: MS 20BL CITY: PALO ALTO STATE: CA ZIP: 94304 SC 13D 1 a2029284zsc13d.txt SC 13D - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 13D (RULE 13d-101) BLUESTONE SOFTWARE, INC. ---------------------------------------------------------------------- (Name of Issuer) COMMON STOCK, PAR VALUE $.001 PER SHARE - -------------------------------------------------------------------------------- (Title of Class of Securities) 09623P102 - -------------------------------------------------------------------------------- (CUSIP Number) CHARLES N. CHARNAS ASSISTANT SECRETARY AND SENIOR MANAGING COUNSEL HEWLETT-PACKARD COMPANY 3000 HANOVER STREET, MS20-BQ PALO ALTO, CALIFORNIA 94304 TELEPHONE: (650) 857-1501 COPY TO: KENTON J. KING, ESQ. SKADDEN, ARPS, SLATE, MEAGHER, & FLOM LLP 525 UNIVERSITY AVE PALO ALTO, CA 94301 TELEPHONE: (650) 470-4500 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) OCTOBER 24, 2000 - -------------------------------------------------------------------------------- (Date of Event Which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box / /. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended (the "Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- CUSIP NO. 09623P102 13D PAGE 2 OF 10 PAGES
1. NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) HEWLETT-PACKARD COMPANY (I.R.S. IDENTIFICATION NO. 94-1081436) 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / / (b) / / 3. SEC USE ONLY 4. SOURCE OF FUNDS WC 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) / / 6. CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE
7. SOLE VOTING POWER NUMBER OF SHARES 4,058,494 shares of Common Stock (1) BENEFICIALLY 8. SHARED VOTING POWER OWNED BY 6,691,024 shares of Common Stock (2) EACH REPORTING 9. SOLE DISPOSITIVE POWER PERSON 4,058,494 shares of Common Stock (1) WITH 10. SHARED DISPOSITIVE POWER -0-
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 10,749,518 shares of Common Stock (1)(2) 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES / / 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 43.2%(3) 14. TYPE OF REPORTING PERSON CO
2 (1) 4,058,494 shares of common stock, par value, $.001 per share (the "Bluestone Common Stock"), of Bluestone Software, Inc., a Delaware corporation ("Bluestone") are subject to a stock option agreement, dated October 24, 2000, between Hewlett-Packard Company, a Delaware corporation ("Hewlett-Packard") and Bluestone (the "Option Agreement"). The stock option under the Option Agreement would become exercisable by Hewlett-Packard upon the occurrence of any event that, upon termination of the Merger Agreement (defined below) would also allow Hewlett-Packard to collect a termination fee under the Merger Agreement, whether or not the Merger Agreement has been terminated. The option may be exercised only upon the occurrence of certain events, none of which has occurred as of the date hereof. Hewlett-Packard expressly disclaims beneficial ownership of the shares of Common Stock which are purchasable by Hewlett-Packard upon exercise of the option issued under the Option Agreement. (2) 6,691,024 shares of Bluestone Common Stock are subject to voting agreements entered into by Hewlett-Packard, Bluestone and certain stockholders of Bluestone (the "Voting Agreements") (discussed in Items 3 and 4 below). Hewlett-Packard expressly disclaims beneficial ownership of any of the shares of Bluestone Common Stock covered by the Voting Agreements. Based on the number of shares of Bluestone Common Stock outstanding as of October 24, 2000 (as represented by Bluestone in the Merger Agreement discussed in Items 3 and 4), the number of shares of Bluestone Common Stock covered by the Voting Agreements represents approximately 32.1% of the outstanding Bluestone Common Stock. (3) After giving effect to the exercise of the option as described herein. ITEM 1. SECURITY AND ISSUER. The class of securities to which this Schedule relates is the common stock, par value $.001 per share of Bluestone Software, Inc., a Delaware corporation, whose principal executive offices are located at 300 Stevens Drive, Philadelphia, Pennsylvania 19113-1597. ITEM 2. IDENTITY AND BACKGROUND. (a) Hewlett-Packard Company, a Delaware corporation. (b) Hewlett-Packard principal executive offices are located at 3000 Hanover Street, Palo Alto, California 94304. (c) Hewlett-Packard - a leading global provider of computing and imaging solutions and services - is focused on making technology and its benefits accessible to individuals and businesses through simple appliances, useful e-services and an Internet infrastructure that is always on. Hewlett-Packard's major businesses include Imaging and Printing Systems, Computing Systems and Information Technology Services ("IT Services"): Imaging and Printing Systems provides laser and inkjet printers (both monochrome and color), mopiers, scanners, all-in-one devices, personal color copiers and faxes, digital senders, wide- and large-format printers, print servers, networking-management software, networking solutions, digital photography products, imaging and printing supplies, imaging and software solutions, and related professional and consulting services. Computing Systems provides a broad range of computing systems for the enterprise, commercial and consumer markets. The products and solutions range from mission-critical systems and software to personal computers for the business and home. Major product lines include UNIX (registered trademark) and PC servers, desktop and mobile personal computers, workstations, software solutions and storage solutions. 3 IT Services provides consulting, education, design and installation services, ongoing support and maintenance, proactive services like mission-critical support, outsourcing and utility-computing capabilities. Financing capabilities include leasing, automatic technology-refreshment services, solution financing and venture financing. The name, business address, present principal occupation or employment, the name and principal business of any corporation or other organization in which such employment is conducted and the citizenship of each director and executive officer of Hewlett-Packard is set forth in Annex A hereto and is incorporated herein by reference. (d) During the last five years, neither Hewlett-Packard, nor to the best of Hewlett-Packard's knowledge, any of the other entities or individuals referred to in Annex A has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) During the last five years, neither Hewlett-Packard nor, to the best of Hewlett-Packard's knowledge, any of the other entities or individuals referred to in Annex A was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Hewlett-Packard is a Delaware corporation. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Hewlett-Packard, Bluestone and Beta Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of Hewlett-Packard ("Merger Sub"), entered into an Agreement and Plan of Merger Agreement dated as of October 24, 2000 (the "Merger Agreement"). Pursuant to the Merger Agreement, Merger Sub will merge with and into Bluestone, with Bluestone continuing as the surviving corporation (the "Merger"), such that Bluestone will become a wholly owned subsidiary of Hewlett-Packard. Pursuant to the terms of the Merger Agreement (i) each issued and outstanding share of Bluestone Common Stock will be exchanged for .2433 (the "Exchange Ratio") of a share of Hewlett-Packard common stock, par value $0.01 ("Hewlett-Packard Common Stock"); and (ii) each outstanding option to purchase Bluestone Common Stock that was granted under the Company Option Plans (as defined in the Merger Agreement) and the stock option agreements executed pursuant thereto will be converted automatically into an option to purchase shares of Hewlett-Packard Common Stock in accordance with the same terms as under the applicable option plan and agreement, except that each such option will be exercisable (A) for the number of shares of Hewlett-Packard Common Stock (rounded down to the nearest whole share) equal to the Exchange Ratio multiplied by the number of shares of Bluestone Common Stock subject to such option immediately prior to the effective time of the Merger and (B) at an exercise price equal to the exercise price per share of Bluestone Common Stock subject to such option immediately prior to the effective time of the Merger divided by the Exchange Ration (rounded up to the nearest whole cent). The Merger is subject to customary closing conditions, including the approval of the Merger by Bluestone's stockholders, the termination or expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the receipt of certain tax opinions, the receipt of any other required governmental regulatory approvals, and the satisfaction or waiver of certain other conditions as more fully described in the Merger Agreement. There can be no assurance that the required approvals will be obtained in a timely fashion, if at all, or, in the case of regulatory approvals, if obtained, will not contain certain conditions. In order to facilitate the consummation of the transactions contemplated by the Merger Agreement and in consideration thereof, Hewlett-Packard entered into the Option Agreement, dated as 4 of October 24, 2000, with Bluestone. Pursuant to the Option Agreement, Bluestone granted to Hewlett-Packard an option (the "Option") to purchase 4,058,494 shares of Bluestone Common Stock, subject to adjustment as described below, at a purchase price per share equal to $21.51 per share, subject to adjustment for certain changes in Bluestone's capitalization. The number of shares of Bluestone Common Stock subject to the Option will automatically adjust so as not to exceed 19.9% of the total number of shares of the Bluestone Common Stock issued and outstanding. The Option is not currently exercisable and may only be exercised under certain circumstances described in the Option Agreement and outlined in this Schedule 13D. If the Option were to become exercisable, the purchase price required to purchase all shares of Bluestone Common Stock subject to the Option would be approximately $87,298,205. Hewlett-Packard anticipates that any funds to be paid by it upon exercise of the Option would be provided from cash on hand. Hewlett-Packard did not pay additional consideration to Bluestone in connection with Bluestone's entering into the Option Agreement and granting the Option. At any time during which the Option is exercisable, upon demand by Hewlett-Packard, Hewlett-Packard would have the right to sell to Bluestone and Bluestone would be obligated to repurchase from Hewlett-Packard, and upon demand by Bluestone, Bluestone would have the right to purchase from Hewlett-Packard and Hewlett-Packard shall be obligated to sell to Bluestone, all or any portion of the Option (each, an "Option Repurchase Right"). If an Option Repurchase Right is exercised, the Option would be sold and purchased at a price equal to the amount the Market/Tender Offer Price (as defined in the Option Agreement) exceeds the Exercise Price (as defined in the Option Agreement) multiplied by the number of shares of Bluestone Common Stock purchasable pursuant to the Option. In addition, the Option Agreement grants certain registration rights to Hewlett-Packard with respect to the shares of Bluestone Common Stock issued pursuant to the Option. Pursuant to the Voting Agreement, certain holders of Bluestone Common Stock have agreed, severally and not jointly, to grant an irrevocable proxy to vote their shares of Bluestone Common Stock (plus any additional shares of Bluestone Common Stock or other voting or equity securities of Bluestone) beneficially owned by each such stockholder at every Bluestone stockholders meeting and every written consent in lieu of such a meeting in favor of adoption of the Merger Agreement and the approval of other actions contemplated by the Merger Agreement. The Voting Agreement terminates upon the earlier to occur of (i) the termination of the Merger Agreement or (ii) the consummation of the Merger. Hewlett-Packard did not pay additional consideration to any such stockholder in connection with the execution and delivery of the Voting Agreement. References to, and descriptions of, the Merger Agreement, the Option Agreement and the Voting Agreement as set forth above in this Item 3 are qualified in their entirety by reference to the copies of the Merger Agreement, the Option Agreement and the Voting Agreement listed as Exhibits 1, 2 and 3 respectively, to this Schedule 13D, and are incorporated in this Item 3 in their entirety where such references and descriptions appear. ITEM 4. PURPOSE OF TRANSACTION. The information set forth or incorporated by reference in Item 3 is hereby incorporated herein by reference. Pursuant to the terms and subject to the conditions set forth in the Option Agreement, Hewlett-Packard may exercise the Option, in whole or in part, and from time to time, if, but only if, an event occurs that, under the Merger Agreement, would entitle Hewlett-Packard to receive payment of the Termination Fee from Bluestone pursuant to Section 9.1(b) of the Merger Agreement upon the termination of the Merger Agreement (a "Triggering Event"), whether or not the Merger Agreement has been terminated, on or prior to the last date of the six-month period following such Triggering Event (the "Option Expiration Date"). 5 The Option Agreement will terminate (the "Option Termination Date") on the first day after the earliest to occur of the following dates: (i) the date on which the Effective Time of the Merger occurs; or (ii) the date of the termination of the Merger Agreement, provided that a Triggering Event (as defined in Section 2(c) of the Option Agreement) has not occurred prior to or in connection with such termination of the Merger Agreement; PROVIDED, HOWEVER, that, if the Option cannot be exercised as of any such date by reason of any applicable judgment, decree, law, regulation or order (each, an "Impediment"), or by reason of the waiting period under the HSR Act, not having expired, then the Option Termination Event shall be delayed until the date which is thirty (30) days after such Impediment has been removed or such waiting period has expired. Notwithstanding termination of the Option, Hewlett-Packard is entitled to purchase those shares subject to the Option with respect to which it may have exercised the Option by delivery of a written notice of exercise prior to the Option Termination Date, and the termination of the Option will not affect any rights under the Option Agreement which their terms do not terminate or expire prior to or at the Option Expiration Date. References to, and descriptions of, the Merger Agreement, the Option Agreement and the Voting Agreement as set forth above in this Item 4 are qualified in their entirety by reference to the copies of the Merger Agreement, the Option Agreement and the Voting Agreement listed as Exhibits 1, 2 and 3, respectively, to this Schedule 13D, and are incorporated in this Item 3 in their entirety where such references and descriptions appear. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. The information set forth or incorporated by reference in Items 3 and 4 is hereby incorporated herein by reference. The number of shares of Bluestone Common Stock covered by the Option is 4,058,494 (representing approximately 19.9% of the shares of Bluestone Common Stock issued and outstanding as of October 24, 2000, as represented by Bluestone in the Merger Agreement). In the event that Hewlett-Packard exercises the option it would have the sole power to vote the shares and would then be entitled to all rights as a stockholder of Hewlett-Packard as to the shares. The Option is not currently exercisable, and until the Option becomes exercisable and is exercised, Hewlett-Packard does not have any right to vote (or to direct the vote of) or dispose (or to direct the disposition of) any shares of Bluestone Common Stock that may be purchased upon exercise of the Option. Accordingly, Hewlett-Packard expressly disclaims beneficial ownership of all such shares. As a result of the Voting Agreement, Hewlett-Packard may be deemed to be the beneficial owner of at least 6,132,296 shares of Bluestone Common Stock which constitutes approximately 29.5% of the issued and outstanding shares of Bluestone Common Stock based on the number of shares of Bluestone Common Stock outstanding as of October 24, 2000, (as represented by Bluestone in the Merger Agreement). While Hewlett-Packard may be deemed to have the shared power to vote these shares of Bluestone Common Stock with respect to those matters described in Item 3, however, Hewlett-Packard (i) is not entitled to any rights as a stockholder of Bluestone as to the above mentioned shares and (ii) disclaims any beneficial ownership of the shares of Bluestone Common Stock which are covered by the Voting Agreement. Set forth in Annex B are the names of the stockholders of Bluestone that have entered into the Voting Agreement with Hewlett-Packard and their present principal occupation or employment, including the name, principal business and address of any corporation or other organization in which such employment is conducted, to Hewlett-Packard's knowledge. Other than as set forth in this Schedule 13D, as of the date hereof (i) neither Hewlett-Packard nor any subsidiary of Hewlett-Packard nor, to the best of Hewlett-Packard's knowledge, any of Hewlett- 6 Packard's executive officers, directors or other affiliates beneficially owns any shares of Bluestone Common Stock, and (ii) there have been no transactions in shares of Bluestone Common Stock effected during the past 60 days by Hewlett-Packard or by any subsidiary of Hewlett-Packard or, to the best of Hewlett-Packard's knowledge, by any of Hewlett-Packard's executive officers, directors or other affiliates. No other person is known by Hewlett-Packard to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Bluestone Common Stock obtainable by Hewlett-Packard upon exercise of the Option. References to, and descriptions of, the Merger Agreement, the Option Agreement and the Voting Agreement as set forth above in this Item 5 are qualified in their entirety by reference to the copies of the Merger Agreement, the Option Agreement and the Voting Agreement listed as Exhibits 1, 2 and 3 respectively, to this Schedule 13D, and are incorporated in this Item 3 in their entirety where such references and descriptions appear. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. The information set forth, or incorporated by reference, in Items 3 through 5 is hereby incorporated hereby by reference. References to, and descriptions of, the Merger Agreement, the Option Agreement and the Voting Agreement as set forth above in this Item 6 are qualified in their entirety by reference to the copies of the Merger Agreement, the Option Agreement and the Voting Agreement listed as Exhibits 1, 2 and 3 respectively, to this Schedule 13D, and are incorporated in this Item 3 in their entirety where such references and descriptions appear. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit Description 1. Agreement and Plan of Merger, dated as of October 24, 2000, by and among Hewlett-Packard Company, Beta Acquisition Corporation and Bluestone Software, Inc. 2. Stock Option Agreement, dated as of October 24, 2000, between Hewlett-Packard Company and Bluestone Software, Inc. 3. Voting Agreement, dated as of October 24, 2000, among certain stockholders of Bluestone Software, Inc., Bluestone Software, Inc. and Hewlett-Packard Company. 7 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: November 3, 2000 HEWLETT-PACKARD COMPANY By: /s/ CHARLES N. CHARNAS -------------------------------------- Name: Charles N. Charnas Title: Assistant Secretary and Senior Managing Counsel 8 ANNEX A The name and present principal occupation or employment, and the name, principal business and address of any corporation or other organization in which such employment is conducted, of each executive officer and director of Hewlett-Packard Company are set forth below. Unless otherwise indicated, each individual's business address is the address of Hewlett-Packard Company, 3000 Hanover Street, MS20-BT, Palo Alto, California 94304, and each individual is a United States citizen.
NAME AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION CITIZENSHIP - ---------------- ---------------------------- ----------- Susan D. Bowick.................. Vice President, Human Resources Raymond W. Cookingham............ Vice President and Corporate Controller Debra L. Dunn.................... Vice President, Strategy and Corporate Operations Carleton S. Fiorina*............. Chairman, President and Chief Executive Officer Ann M. Livermore................. President, Business Customer Organization Carolyn M. Ticknor............... President, Imaging and Printing Systems and Vice President Robert P. Wayman*................ Executive Vice President, Finance and Administration and Chief Financial Officer Duane E. Zitzner................. President, Computing Systems and Vice President Philip M. Condit*................ Chairman and Chief Executive Officer of The Boeing Company, P.O. Box 3707--M/S 10-10, Seattle, Washington 98124-2207 Patricia C. Dunn*................ Chairman and Chief Executive Officer of Barclays Global Investors, 45 Fremont Street, San Francisco, California, 94105 Sam Ginn*........................ Chairman of Vodafone Air Touch PLC, 1 California Street, 30th Floor, San Francisco, California, 94111 Richard A. Hackborn*............. 2895 Los Altos Drive, Meridian, ID 83642 Walter B. Hewlett*............... Independent Software Developer, 945 Addison Avenue, Palo Alto, California, 94301 Dr. George A. Keyworth II*....... Chairman and Senior Fellow, The Progress and Freedom Foundation, a public policy research institute, 41 Avenida de las Casas, Santa Fe, New Mexico, 87501 Robert E. Knowling, Jr.*......... Chairman, President and Chief Executive Officer of Covad Communications, 2330 Central Expressway, Santa Clara, California, 95050 Susan Packard Orr*............... President, the Technology Resource Assistance Center, a provider of computer consulting and software development services to non-profit organizations, 610 Cowper Street, Palo Alto, California, 94301
- ------------------------ * Director of Hewlett-Packard Company. A-1 ANNEX B Set forth below is the name, current business address, the present principal occupation or employment of each Bluestone Software, Inc. stockholder that entered into a voting agreement with Hewlett-Packard Company and Bluestone Software, Inc. Except as indicated below, the business address of each such person is c/o Bluestone Software, Inc., 300 Stevens Drive, Philadelphia, Pennsylvania, 19113-1597.
NAME AND BUSINESS ADDRESS SHARES BENEFICIALLY OWNED - ------------------------- -------------------------- PATRICOF & CO. VENTURES, INC. FUNDS APA Excelsior IV, L.P..................................... 2,632,540 APA Excelsior IV/Offshore, L.P............................ 464,567 Patricof Private Investment Club, L.P..................... 50,361 P/A Fund, L.P............................................. 1,376,528 Paul Melan Baiada........................................... 1,448,334 Trust dated 11/18/98 (Diane Baiada & J. Mark Baiada, Trustees)................... 159,966 Trust dated 3/3/98 (Paul Melan Baiada, Trustee)................................ 24,962 Trust dated 11/18/98 (Paul Melan Baiada, Trustee)................................ 533,766 TOTAL....................................................... 6,691,024
B-1 EXHIBIT INDEX 1. Agreement and Plan of Merger, dated as of October 24, 2000, by and among Hewlett-Packard Company, Beta Acquisition Corporation and Bluestone Software, Inc. 2. Stock Option Agreement, dated October 24, 2000 between Bluestone Software, Inc. and Hewlett-Packard Company. 3. Voting Agreement, dated as of October 24, 2000, among certain stockholders of Bluestone Software, Inc., Bluestone Software, Inc. and Hewlett-Packard Company. EX-1 2 a2029284zex-1.txt EX 1 EXHIBIT 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AGREEMENT AND PLAN OF MERGER BY AND AMONG HEWLETT-PACKARD COMPANY, BETA ACQUISITION CORPORATION AND BLUESTONE SOFTWARE, INC. DATED AS OF OCTOBER 24, 2000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS ARTICLE I MERGER.................................................... 1 Section 1.1 THE MERGER.................................... 1 Section 1.2 EFFECTIVE TIME................................ 2 Section 1.3 CLOSING....................................... 2 Section 1.4 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION............................................. 2 ARTICLE II STOCKHOLDER APPROVAL...................................... 2 Section 2.1 STOCKHOLDERS' MEETING......................... 2 Section 2.2 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT............................................... 2 Section 2.3 NO FALSE OR MISLEADING STATEMENTS............. 3 ARTICLE III CONVERSION OF SHARES...................................... 3 Section 3.1 CONVERSION OF SHARES.......................... 3 Section 3.2 SURRENDER OF CERTIFICATES..................... 4 Section 3.3 NO FRACTIONAL SHARES.......................... 4 Section 3.4 NO DIVIDENDS.................................. 5 Section 3.5 RETURN TO PARENT.............................. 5 Section 3.6 STOCK OPTIONS; EMPLOYEE STOCK PURCHASE PLAN... 5 Section 3.7 EMPLOYEE STOCK PURCHASE PLAN.................. 6 Section 3.8 STOCK TRANSFER BOOKS.......................... 6 Section 3.9 CERTAIN ADJUSTMENTS........................... 6 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY............. 7 Section 4.1 ORGANIZATION.................................. 7 Section 4.2 CAPITALIZATION................................ 7 Section 4.3 CORPORATE AUTHORIZATION; VALIDITY OF AGREEMENT; COMPANY ACTION............................... 8 Section 4.4 CONSENTS AND APPROVALS; NO VIOLATIONS......... 8 Section 4.5 SEC REPORTS AND FINANCIAL STATEMENTS.......... 9 Section 4.6 ABSENCE OF CERTAIN CHANGES.................... 9 Section 4.7 NO UNDISCLOSED LIABILITIES.................... 9 Section 4.8 INFORMATION IN PROXY STATEMENT/PROSPECTUS..... 10 Section 4.9 EMPLOYEE BENEFIT PLANS; ERISA................. 10 Section 4.10 LITIGATION; COMPLIANCE WITH LAW.............. 12 Section 4.11 NO DEFAULT................................... 12 Section 4.12 TAXES........................................ 12 Section 4.13 CONTRACTS.................................... 14 Section 4.14 ASSETS; REAL PROPERTY........................ 14 Section 4.15 ENVIRONMENTAL MATTERS........................ 14
i Section 4.16 TRANSACTIONS WITH AFFILIATES................. 15 Section 4.17 OPINION OF FINANCIAL ADVISOR; BROKERS........ 15 Section 4.18 INTELLECTUAL PROPERTY........................ 15 Section 4.19 REORGANIZATION............................... 17 Section 4.20 INSURANCE.................................... 17 Section 4.21 ACCOUNTS RECEIVABLE.......................... 18 Section 4.22 SUPPLIERS AND CUSTOMERS...................... 18 Section 4.23 LABOR MATTERS................................ 18 Section 4.24 FULL DISCLOSURE.............................. 19 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.......... 20 Section 5.1 ORGANIZATION.................................. 20 Section 5.2 CAPITALIZATION................................ 20 Section 5.3 AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION........................................ 20 Section 5.4 CONSENTS AND APPROVALS; NO VIOLATIONS......... 20 Section 5.5 INFORMATION IN PROXY STATEMENT/PROSPECTUS..... 21 Section 5.6 SEC REPORTS AND FINANCIAL STATEMENTS.......... 21 Section 5.7 ABSENCE OF CERTAIN CHANGES.................... 21 ARTICLE VI COVENANTS................................................. 22 Section 6.1 INTERIM OPERATIONS OF THE COMPANY............. 22 Section 6.2 INTERIM OPERATIONS OF PARENT.................. 23 Section 6.3 ACCESS TO INFORMATION......................... 24 Section 6.4 HSR ACT FILINGS............................... 24 Section 6.5 OTHER CONSENTS AND APPROVALS.................. 25 Section 6.6 NO SOLICITATION............................... 25 Section 6.7 ADDITIONAL AGREEMENTS......................... 27 Section 6.8 PUBLICITY..................................... 27 Section 6.9 NOTIFICATION OF CERTAIN MATTERS............... 27 Section 6.10 DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION......................................... 27 Section 6.11 COOPERATION.................................. 28 Section 6.12 CONSENTS OF ACCOUNTANTS...................... 28 Section 6.13 SUBSEQUENT FINANCIAL STATEMENTS.............. 28 Section 6.14 TAX TREATMENT................................ 28 ARTICLE VII CONDITIONS................................................ 29 Section 7.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY... 29 Section 7.2 CONDITIONS TO THE OBLIGATIONS OF PARENT AND SUB..................................................... 29 Section 7.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY................................................. 30
ii ARTICLE VIII TERMINATION............................................... 31 Section 8.1 TERMINATION................................... 31 Section 8.2 EFFECT OF TERMINATION......................... 32 ARTICLE IX MISCELLANEOUS............................................. 32 Section 9.1 FEES AND EXPENSES............................. 32 Section 9.2 AMENDMENT AND MODIFICATION.................... 32 Section 9.3 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.............................................. 32 Section 9.4 NOTICES....................................... 32 Section 9.5 INTERPRETATION................................ 33 Section 9.6 COUNTERPARTS.................................. 34 Section 9.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF OWNERSHIP...................... 34 Section 9.8 SEVERABILITY.................................. 34 Section 9.9 GOVERNING LAW................................. 34 Section 9.10 ASSIGNMENT................................... 34 EXHIBITS Exhibit A Form of Option Agreement Exhibit B Form of Voting Agreement
iii AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of October 24, 2000, by and among Hewlett-Packard Company, a Delaware corporation ("PARENT"), Beta Acquisition Corporation, a Delaware corporation and a direct wholly owned subsidiary of Parent ("SUB"), and Bluestone Software, Inc., a Delaware corporation (the "COMPANY"). WITNESSETH: WHEREAS, the Boards of Directors of Parent and Sub have approved, and deem it advisable and in the best interests of their respective stockholders to consummate, a strategic business combination between the Company and Parent upon the terms and subject to the conditions set forth herein; WHEREAS, the Board of Directors of the Company, having carefully considered the long-term prospects and interests of the Company and its stockholders and having determined that such strategic business combination is advisable, has approved the transactions contemplated by this Agreement and the Option Agreement (as defined below) in accordance with the provisions of the Delaware General Corporation Law (the "DGCL") and has resolved to recommend to the stockholders of the Company the approval and adoption of this Agreement and the Merger (as defined below) and the consummation of the transactions contemplated hereby and thereby upon the terms and subject to the conditions set forth herein; WHEREAS, as a condition and inducement to Parent and Sub entering into this Agreement and incurring the obligations set forth herein, concurrently with the execution and delivery of this Agreement, (i) Parent and the Company are entering into an Option Agreement, in the form of EXHIBIT A hereto (the "OPTION AGREEMENT"), pursuant to which, among other things, the Company has granted Sub an option to purchase certain newly-issued Shares (as defined in Section 3.1 hereof), subject to certain conditions; (ii) Parent and certain employees of the Company identified in Section 7.2(d) of the Disclosure Schedule (as defined in Section 3.6(a) hereof) are entering into offer letters, the effectiveness of which offer letters is conditioned upon the consummation of the transactions contemplated hereby (the "OFFER LETTERS"); and (iii) Parent and certain stockholders of the Company are entering into Voting Agreements, each in the form of EXHIBIT B hereto (the "VOTING AGREEMENTS"), pursuant to which, among other things, such stockholders are agreeing to vote in favor of approval and adoption of this Agreement and the transactions contemplated hereby and against approval of any competing transaction; WHEREAS, the Board of Directors of the Company has approved the transactions contemplated by this Agreement and the Option Agreement in accordance with the provisions of Section 251 of the DGCL; and WHEREAS, for United States federal income tax purposes, it is intended that the Merger shall qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder (the "CODE"), and this Agreement is intended to be and is adopted as a plan of reorganization within the meaning of Section 368 of the Code. NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein and in the Option Agreement, the parties hereto agree as follows: ARTICLE I MERGER Section 1.1 THE MERGER. Subject to the terms and conditions of this Agreement and the provisions of the DGCL, at the Effective Time (as defined in Section 1.2 hereof), the Company and Sub shall consummate a merger (the "MERGER") pursuant to which: (a) Sub shall be merged with and into the Company and the separate corporate existence of Sub shall thereupon cease; (b) the Company shall be the successor or surviving corporation in the Merger and shall continue to be governed by the laws of the State of Delaware; and (c) the separate corporate existence of the Company, with all its rights, privileges, immunities, powers and franchises, shall continue unaffected by the Merger. Pursuant to the Merger, (x) the certificate of incorporation of Sub, as in effect immediately prior to the Effective Time, shall be the certificate of incorporation (the "CERTIFICATE OF INCORPORATION") of the Surviving Corporation (as defined below) until thereafter amended as provided by law and the Certificate of Incorporation and (y) the bylaws of Sub, as in effect immediately prior to the Effective Time, shall be the bylaws (the "BYLAWS") of the Surviving Corporation until thereafter amended as provided by law, the Certificate of Incorporation and the Bylaws. The corporation surviving the Merger is sometimes hereinafter referred to as the "SURVIVING CORPORATION". The Merger shall have the effects set forth in Section 259 and in the other relevant provisions of the DGCL. Section 1.2 EFFECTIVE TIME. Parent, Sub and the Company will cause a certificate of merger (the "CERTIFICATE OF MERGER") to be executed and filed on the date of the Closing (as defined in Section 1.3 hereof) (or on such other date as Parent and the Company may agree) with the Secretary of State of the State of Delaware (the "SECRETARY OF STATE") as provided by the DGCL. The Merger shall become effective on the date on which the Certificate of Merger has been duly filed with the Secretary of State at such time specified therein or such other later date as the Company and Sub shall agree and specify in the Certificate of Merger, and such time is hereinafter referred to as the "EFFECTIVE TIME". Section 1.3 CLOSING. The closing of the Merger (the "CLOSING") will take place at 8:00 a.m., Palo Alto, California time, on a date to be specified by Sub, which may be on but shall be no later than the first business day after satisfaction or waiver of all of the conditions set forth in Article VII hereof (the "CLOSING DATE"), at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 525 University Avenue, Palo Alto, California, unless another date or place is agreed to in writing by the parties hereto. Section 1.4 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The directors and officers of Sub at the Effective Time shall, from and after the Effective Time, be the directors and officers, respectively, of the Surviving Corporation until their successors shall have been duly elected or appointed or qualified or until their earlier death, resignation or removal in accordance with the Certificate of Incorporation and Bylaws. ARTICLE II STOCKHOLDER APPROVAL Section 2.1 STOCKHOLDERS' MEETING. In order to consummate the Merger, the Company, acting through its Board of Directors, shall, in accordance with applicable law, duly call, give notice of, convene and hold a special meeting of its stockholders (the "SPECIAL MEETING"), as soon as practicable after the Registration Statement (as defined in Section 2.2 hereof) is declared effective, for the purpose of considering and taking action upon this Agreement and the transactions contemplated hereby. Subject to Section 6.6 hereof, the Company shall include in the Proxy Statement/Prospectus (as defined in Section 2.2 hereof) the recommendation of the Board of Directors of the Company that stockholders of the Company vote in favor of the approval of the Merger and the adoption of this Agreement. Section 2.2 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. In connection with the solicitation of approval of this Agreement and the Merger by the Company's stockholders, the Company shall prepare and file with the Securities and Exchange Commission (the "SEC") a preliminary proxy statement relating to the Merger and this Agreement and use its best efforts to obtain and furnish the information required to be included by the SEC in the Proxy Statement/Prospectus (as hereinafter defined) and, after consultation with Parent, to respond promptly to any comments made by the SEC with respect to the preliminary proxy statement and cause a definitive proxy statement to be mailed to its stockholders. Such definitive proxy statement shall also constitute a prospectus of Parent with 2 respect to the common stock, par value $.01 per share, of Parent ("PARENT COMMON STOCK") to be issued in the Merger (such proxy statement and prospectus are hereinafter referred to as the "PROXY STATEMENT/PROSPECTUS") and shall be filed by Parent with the SEC as part of a registration statement on Form S-4 (the "REGISTRATION STATEMENT") filed by Parent with the SEC for the purpose of registering such shares of Parent Common Stock under the Securities Act of 1933, as amended (the "SECURITIES ACT"). The Company and Parent shall cooperate to file promptly the Registration Statement and shall use their commercially reasonable efforts to have the Registration Statement declared effective by the SEC. The Company shall use its commercially reasonable efforts to obtain the necessary approvals of the Merger and this Agreement by its stockholders. Section 2.3 NO FALSE OR MISLEADING STATEMENTS. The information provided and to be provided by each of Parent, Sub and the Company specifically for use in the Registration Statement shall not, with respect to the information supplied by such party, in the case of the Registration Statement, on the date the Registration Statement becomes effective and, in the case of the Proxy Statement/Prospectus, on the date upon which the Proxy Statement/Prospectus is mailed to the stockholders of the Company or on the date upon which approval of the Merger by the stockholders of the Company is obtained, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of Parent, Sub and the Company agrees to correct promptly any such information provided by it that shall have become false or misleading in any material respect and to take all steps necessary to file with the SEC and have declared effective or cleared by the SEC any amendment or supplement to the Registration Statement or the Proxy Statement/Prospectus so as to correct the same and to cause the Proxy Statement/Prospectus as so corrected to be disseminated to the Company's stockholders to the extent required by applicable law. The Registration Statement and the Proxy Statement/Prospectus shall comply as to form in all material respects with the provisions of the Securities Act, the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and other applicable law. ARTICLE III CONVERSION OF SHARES Section 3.1 CONVERSION OF SHARES. (a) Each share of common stock, $.001 par value per share, of the Company (the "COMPANY COMMON STOCK" or the "SHARES") issued and outstanding immediately prior to the Effective Time (other than Shares to be cancelled pursuant to Section 3.1(c) hereof) shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive .2433 (the "EXCHANGE RATIO"), of a fully paid and nonassessable share of Parent Common Stock (the "MERGER CONSIDERATION"). (b) Each share of Common Stock, par value $.001 per share, of Sub (the "SUB COMMON STOCK"), issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of Parent or Sub, be converted into one fully paid and nonassessable share of common stock, $.001 par value per share, of the Surviving Corporation. (c) At the Effective Time, all shares of Company Common Stock that are owned by the Company as treasury stock and any shares of Company Common Stock owned by Parent, Sub or any other wholly owned Subsidiary (as defined in Section 4.1 hereof) of Parent shall be cancelled and retired and shall cease to exist and no Parent Common Stock or other consideration shall be delivered in exchange therefor. (d) On and after the Effective Time, holders of certificates which immediately prior to the Effective Time represented outstanding Shares (the "CERTIFICATES") shall cease to have any rights as stockholders of the Company, except the right to receive the Merger Consideration for each Share represented by such Certificates and held by such holders. 3 Section 3.2 SURRENDER OF CERTIFICATES. At or promptly after the Effective Time, Parent shall make available to a bank or trust company reasonably acceptable to the Company (the "EXCHANGE AGENT"), in trust for the benefit of the holders of Shares for exchange in accordance with this Article III, certificates representing the aggregate number of shares of Parent Common Stock issuable pursuant to Section 3.1 hereof. Promptly after the Effective Time, the Exchange Agent shall mail to each holder of record of a Certificate, a letter of transmittal and instructions for use in effecting the surrender of the Certificates in exchange for certificates representing Parent Common Stock and cash in lieu of fractional shares pursuant to Section 3.3 hereof, if applicable. Upon surrender of a Certificate to the Exchange Agent, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each Share formerly represented by such Certificate, and the Certificate so surrendered shall forthwith be cancelled. Until surrendered as contemplated by this Article III, from and after the Effective Time each Certificate shall be deemed to represent only the right to receive the Merger Consideration for each Share formerly represented by such Certificate, and shall not evidence any interest in, or any right to exercise the rights of a stockholder of Parent. If a certificate representing Parent Common Stock is to be issued or a cash payment in lieu of fractional share interests pursuant to Section 3.3 hereof is to be made to a person other than the one in whose name the Certificate surrendered in exchange therefor is registered, it shall be a condition to such issuance or payment that such Certificate be properly endorsed (or accompanied by an appropriate instrument of transfer) and accompanied by evidence that any applicable stock transfer taxes have been paid or provided for as specified in such letter of transmittal. Section 3.3 NO FRACTIONAL SHARES. (a) No certificate or scrip representing fractional shares of Parent Common Stock shall be issued upon the surrender for exchange of Certificates, and such fractional share interests will not entitle the owner thereof to vote or to any rights of a stockholder of Parent. (b) As promptly as practicable following the Effective Time, the Exchange Agent shall determine the excess of (x) the number of full shares of Parent Common Stock delivered to the Exchange Agent by Parent pursuant to Section 3.2 hereof over (y) the aggregate number of full shares of Parent Common Stock to be distributed to holders of Shares pursuant to Section 3.1 hereof (such excess being herein called the "EXCESS SHARES"). As soon after the Effective Time as practicable, the Exchange Agent, as agent for the holders of Shares, shall sell the Excess Shares at then prevailing prices on the New York Stock Exchange, Inc. (the "NYSE"), all in the manner provided in paragraph (c) of this Section 3.3. (c) The sale of the Excess Shares by the Exchange Agent shall be executed on the NYSE through one or more member firms of the NYSE and shall be executed in round lots to the extent practicable. Until the net proceeds of such sale or sales have been distributed to the holders of Shares, the Exchange Agent will hold such proceeds in trust for the holders of Shares (the "SHARES TRUST"). All commissions, transfer taxes and other out-of-pocket transaction costs, including the expenses and compensation of the Exchange Agent, incurred in connection with such sale of the Excess Shares shall be paid out of proceeds from the sale of such Excess Shares. The Exchange Agent shall determine the portion of the Shares Trust to which each holder of Shares shall be entitled, if any, by multiplying the amount of the aggregate net proceeds comprising the Shares Trust by a fraction the numerator of which is the amount of the fractional share interest to which such holder of Shares is entitled and the denominator of which is the aggregate amount of fractional share interests to which all holders of Shares are entitled. (d) As soon as practicable after the determination of the amount of cash, if any, to be paid to holders of Shares in lieu of any fractional share interests, the Exchange Agent shall make available such amount to such holders of Shares. 4 Section 3.4 NO DIVIDENDS. No dividends or other distributions declared or made after the Effective Time with respect to shares of Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to the Parent Common Stock represented thereby until the holder of such Certificate shall surrender such Certificate. Dividends or other distributions with a record date after the Effective Time payable in respect of shares of Parent Common Stock held by the Exchange Agent shall be held in trust for the benefit of such holders of unsurrendered Certificates. Following surrender of any previously unsurrendered Certificate, there shall be paid to the holder of the certificates representing whole shares of Parent Common Stock issued in exchange therefor, without interest, (i) at the time of such surrender, the amount of any dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole shares of Parent Common Stock and (ii) at the date of payment of any dividends or other distributions with a record date after the Effective Time but prior to surrender and a payment date subsequent to surrender, the amount of such dividends or other distributions payable with respect to such whole shares of Parent Common Stock. Section 3.5 RETURN TO PARENT. Any shares of Parent Common Stock made available to the Exchange Agent and any portion of the Shares Trust not exchanged for Certificates within six months after the Effective Time and any dividends and distributions held by the Exchange Agent for payment or delivery to the holders of unsurrendered Certificates representing Shares and unclaimed at the end of such six-month period shall be redelivered or repaid by the Exchange Agent to Parent, after which time any holder of a Certificate who has not theretofore delivered or surrendered such Certificate to the Exchange Agent, subject to applicable law, shall look as a general creditor only to Parent for payment of the Merger Consideration, cash in lieu of fractional share interests to be paid pursuant to Section 3.3 hereof, and any such dividends or distributions. Notwithstanding the foregoing, none of Parent, the Exchange Agent, the Surviving Corporation or any other party shall be liable to a holder of Shares for any Merger Consideration, cash in lieu of fractional share interests to be paid pursuant to Section 3.3 hereof or dividends or distributions delivered to a public official pursuant to applicable escheat laws. Section 3.6 STOCK OPTIONS; EMPLOYEE STOCK PURCHASE PLAN. (a) Unless Parent, Sub and the Company agree otherwise, Parent, Sub and the Company shall take all actions necessary to provide that effective as of the Effective Time, each outstanding option to purchase shares of Company Common Stock (each, a "COMPANY STOCK OPTION," and collectively, the "COMPANY STOCK OPTIONS") granted under the Company's 1996 Incentive and Non-Qualified Stock Option Plan, or any other stock option plan, program or agreement to which the Company or any of its subsidiaries is a party (collectively, the "COMPANY OPTION PLANS") that is outstanding immediately prior to the Effective Time, whether or not then exercisable, shall be cancelled as of the Effective Time. As of the Effective Time, each such Company Stock Option shall cease to represent a right to acquire shares of Company Common Stock and shall be converted automatically into an option to purchase shares of Parent Common Stock under the HP 2000 Stock Plan (collectively, the "NEW PARENT STOCK OPTIONS") in an amount, at an exercise price and subject to such terms and conditions determined as provided below. Each Company Stock Option assumed by Parent shall be subject to, and exercisable upon, the same terms and conditions as under the applicable Company Option Plan and the applicable option agreement issued thereunder, except that (A) each assumed Company Stock Option shall be exercisable for, and represent the right to acquire, that number of shares of Parent Common Stock (rounded down to the nearest whole share) equal to (i) the number of shares of Company Common Stock subject to such Company Stock Option immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio; and (B) the exercise price per share of Parent Common Stock subject to each assumed Company Stock Option shall be an amount equal to (i) the exercise price per share of Company Common Stock subject to such Company Stock Option in effect immediately prior to the Effective Time divided by (ii) the Exchange Ratio (rounded up to the nearest 5 whole cent). A listing of all outstanding Company Options as of October 24, 2000 is set forth in Section 3.6 of the disclosure schedule delivered by the Company to Parent (the "DISCLOSURE SCHEDULE") showing the per share exercise price and the date upon which each Company Option expires. (b) If and to the extent necessary or required by the terms of the Company Option Plans or pursuant to the terms of any Company Stock Option granted thereunder, each of Parent, Sub and the Company shall use its commercially reasonable efforts to obtain the consent of each holder of outstanding Company Stock Options to the foregoing treatment of such Company Stock Options. (c) The Company, Parent and Sub agree that each of the Company Option Plans and agreements shall be amended, to the extent necessary, to reflect the transactions contemplated by this Agreement. (d) Parent, Sub and the Company shall take all such steps as may be required to cause the transactions contemplated by this Section 3.6 and any other dispositions of equity securities of the Company (including derivative securities) or acquisitions of Parent equity securities (including derivative securities) in connection with this Agreement by each individual who (i) is a director or officer of Company or (ii) at the Effective Time, will become a director or officer of Parent, to be exempt under Rule 16b-3 promulgated under the Exchange Act, such steps to be taken in accordance with the No-Action Letter dated January 12, 1999, issued by the SEC to Skadden, Arps, Slate, Meagher & Flom LLP. (e) Parent shall file with the SEC as soon as practicable following the Effective Time a registration statement on Form S-8 under the Securities Act covering, to the extent applicable, the shares of Parent Common Stock to be issued upon the exercise of Company Stock Options assumed by Parent. Section 3.7 EMPLOYEE STOCK PURCHASE PLAN. As of the earlier of December 31, 2000 and the Effective Time (the "TERMINATION DATE"), the Company's 2000 Employee Stock Purchase Plan shall be terminated. If the Termination Date does not coincide with the last day of the offering period then underway, then, pursuant to Section 15 of such plan, payroll deductions (to the extent not yet applied to the purchase of shares under such plan) shall be distributed to the participants. Prior to the Termination Date, the Company shall take all actions (including, if appropriate, amending the terms of such plan) that are necessary to give effect to the transactions contemplated by this Section 3.7. In respect of the foregoing, the Company shall cause written notice to be given to participants in accordance with the terms of the plan and no further offering period shall be created thereunder. Section 3.8 STOCK TRANSFER BOOKS. At the Effective Time, the stock transfer books of the Company shall be closed and no transfer of Shares shall thereafter be made. If, after the Effective Time, any Certificate is presented to the Surviving Corporation, such Certificate shall be cancelled and exchanged for the Merger Consideration. Section 3.9 CERTAIN ADJUSTMENTS. If between the date hereof and the Effective Time, the outstanding shares of Parent Common Stock shall be changed into a different number of shares by reason of any reclassification, recapitalization, stock split, split-up, combination or exchange of shares, or any dividend payable in stock or other securities shall be declared thereon with a record date within such period, the Exchange Ratio shall be adjusted accordingly to provide to the holders of Company Common Stock the same economic effect as contemplated by this Agreement prior to such reclassification, recapitalization, stock split, split-up, combination, exchange or dividend. By way of example, upon the two-for-one stock split of Parent Common Stock effective October 27, 2000, the Exchange Ratio will automatically be adjusted from .2433 to .4866. 6 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Parent and Sub as follows: Section 4.1 ORGANIZATION. Each of the Company and its Subsidiaries (as defined below) is a corporation, partnership or other entity duly organized, validly existing, duly qualified or licensed to do business and in good standing under the laws of the jurisdiction of its incorporation or organization and in each jurisdiction in which the nature of the business conducted by it makes such qualification or licensing necessary, and has all requisite corporate or other power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing or to have such power, authority, and governmental approvals would not have a material adverse effect on the Company and its Subsidiaries, taken as a whole. As used in this Agreement, the word "SUBSIDIARY" means, with respect to any party, any corporation or other organization, whether incorporated or unincorporated, of which (i) such party or any other Subsidiary of such party is a general partner (excluding such partnerships where such party or any Subsidiary of such party does not have a majority of the voting interest in such partnership) or (ii) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries. As used in this Agreement, any reference to any event, change or effect having a "MATERIAL ADVERSE EFFECT" on or with respect to any entity (or group of entities taken as a whole) means such event, change, occurrence or circumstance, individually or in the aggregate with such other events, changes, occurrences or circumstances, which is materially adverse to the business, operations, prospects, properties, financial condition or results of operations of such entity (or, if used with respect thereto, of such group of entities taken as a whole); provided, that none of the following shall be deemed, individually or in the aggregate, in and of itself or by themselves, to constitute a material adverse effect on the Company: (i) any decrease in revenues of the Company, (ii) any decrease in or cancellation of customer orders or (iii) any suit, claim, action or proceeding, in each case directly attributable to the public announcement of the transactions contemplated by this Agreement. Section 4.1 of the Disclosure Schedule sets forth a complete list of the names, jurisdiction of incorporation or other formation and capitalization of each of the Company's Subsidiaries. Section 4.2 CAPITALIZATION. (a) The authorized capital stock of the Company consists of 54,900,000 shares of Company Common Stock. As of the date hereof: (i) 20,812,792 shares of Company Common Stock were issued and outstanding, of which no shares were held by the Company's 2000 Employee Stock Purchase Plan; (ii) 6,906,250 shares of Company Common Stock were reserved for issuance pursuant to the Company Option Plan and all other employee benefit plans of the Company; and (iii) 201,132 shares of Company Common Stock were reserved for issuance upon the exercise of warrants. All of the issued and outstanding shares of Company Common Stock are validly issued, fully paid and nonassessable. (b) Except as disclosed in this Section 4.2 or as set forth in Sections 3.6 or 4.2(b) of the Disclosure Schedule other than pursuant to the Option Agreement: (i) there is no outstanding right, subscription, warrant, call, option or other agreement or arrangement of any kind (collectively, "RIGHTS") to purchase or otherwise to receive from the Company or any of its Subsidiaries any of the outstanding authorized but unissued or treasury shares of the capital stock or any other security of the Company or any of its Subsidiaries; (ii) there is no outstanding security of any kind convertible into or exchangeable for such capital stock; and (iii) there is no voting trust or other agreement or understanding to which the Company or any of its Subsidiaries is a party or is bound with respect to the voting of the capital stock of the Company or any of its Subsidiaries. 7 (c) Since April 19, 2000, the Company has not in any manner modified the terms and conditions applicable to any of the Company Options, whether set forth in the Company Option Plan, in a stock option grant, award or other agreement, or otherwise. Section 4.3 CORPORATE AUTHORIZATION; VALIDITY OF AGREEMENT; COMPANY ACTION. (a) The Company has full corporate power and authority to execute and deliver this Agreement and the Option Agreement and, subject to obtaining any necessary approval of its stockholders as contemplated by Section 2.1 hereof with respect to the Merger, to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by the Company of this Agreement and the Option Agreement, and the consummation by it of the transactions contemplated hereby and thereby, have been duly and validly authorized by its Board of Directors and, except for obtaining any approval of its stockholders as contemplated by Section 2.1 hereof with respect to the Merger, no other corporate action on the part of the Company is necessary to authorize the execution and delivery by the Company of this Agreement and the Option Agreement and the consummation by it of the transactions contemplated hereby and thereby. Each of this Agreement and the Option Agreement have been duly executed and delivered by the Company and, assuming this Agreement constitutes a valid and binding obligation of the other parties hereto, constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency or other similar laws, now or hereafter in effect, affecting creditors' rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. (b) The Board of Directors of the Company has duly and validly approved and taken all corporate action required to be taken by the Board of Directors for the consummation of the transactions contemplated by this Agreement and the Option Agreement, including, but not limited to, all actions necessary to render the provisions of Section 203 of the DGCL inapplicable to such transactions. The affirmative vote of the holders of a majority of the Shares is the only vote of the holders of any class or series of Company capital stock necessary to approve the Merger. To the best of the Company's knowledge, no other state takeover statute or similar statute or regulation applies or purports to apply to the Merger, this Agreement, the Option Agreement or any of the transactions contemplated by this Agreement or the Option Agreement. Section 4.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as disclosed in Section 4.4 of the Disclosure Schedule and for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), and any comparable premerger notification laws, rules or regulations of any applicable foreign jurisdiction, and the Exchange Act, the approval of this Agreement and the Merger by the Company's stockholders and the filing of the Certificate of Merger as required by the DGCL, neither the execution, delivery or performance of this Agreement or the Option Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby or thereby nor compliance by the Company with any of the provisions hereof or thereof will: (i) conflict with or result in any breach of any provision of the certificate of incorporation or bylaws or similar organizational documents of the Company or of any of its Subsidiaries; (ii) require any filing with, or permit, authorization, consent or approval of, any court, arbitral tribunal, administrative agency or commission or other governmental or other regulatory authority or agency (a "GOVERNMENTAL ENTITY"); (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, guarantee, other evidence of indebtedness, lease, license, contract, agreement or other instrument or obligation to which the Company or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound (a "COMPANY AGREEMENT"); or 8 (iv) violates any order, writ, injunction, decree, statute, rule or regulation applicable to the Company, any of its Subsidiaries or any of their properties or assets; except in the case of clause (ii), (iii) or (iv) where the failure to obtain such permits, authorizations, consents or approvals or to make such filings, or where such violations, breaches or defaults would not, individually or in the aggregate, have a material adverse effect on the Company and its Subsidiaries, taken as a whole, and will not materially impair the ability of the Company to consummate the transactions contemplated hereby or by the Option Agreement. Section 4.5 SEC REPORTS AND FINANCIAL STATEMENTS. The Company has filed with the SEC, and has heretofore made available to Parent true and complete copies of, all forms, reports, schedules, statements and other documents required to be filed by it and its Subsidiaries since September 23, 1999 under the Exchange Act and the Securities Act (as such documents have been amended since the time of their filing, collectively, the "COMPANY SEC DOCUMENTS"). As of their respective dates or, if amended, as of the date of the last such amendment, the Company SEC Documents, including, without limitation, any financial statements or schedules included therein (a) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (b) complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder. Each of the consolidated financial statements included in the Company SEC Documents has been prepared from, and is in accordance with, the books and records of the Company and its consolidated Subsidiaries, complies in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, has been prepared in accordance with United States generally accepted accounting principles ("GAAP") applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly presents in all material respects the consolidated financial position and the consolidated results of operations and cash flows of the Company and its consolidated Subsidiaries as at the dates thereof or for the periods presented therein. Section 4.6 ABSENCE OF CERTAIN CHANGES. Except to the extent disclosed in the Company SEC Documents filed prior to the date of this Agreement or in Section 4.6 of the Disclosure Schedule, since June 30, 2000, the Company and its Subsidiaries have conducted their respective businesses and operations consistent with past practice only in the ordinary and usual course. From June 30, 2000 through the date of this Agreement, there has not occurred: (i) any event, change, or effect (including the incurrence of any liabilities of any nature, whether or not accrued, contingent or otherwise) having or, which would be reasonably likely to have, individually or in the aggregate, a material adverse effect on the Company and its Subsidiaries, taken as a whole; (ii) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to the equity interests of the Company or of any of its Subsidiaries; or (iii) any change by the Company or any of its Subsidiaries in accounting principles or methods, except insofar as may be required by a change in GAAP. Except as set forth in Sections 3.6 or 4.6 of the Disclosure Schedule, since June 30, 2000 neither the Company nor any of its Subsidiaries has taken any of the actions prohibited by Section 6.1 hereof. Section 4.7 NO UNDISCLOSED LIABILITIES. Except (a) to the extent disclosed in the Company SEC Documents filed prior to the date of this Agreement or in Section 4.7 of the Disclosure Schedule and (b) for liabilities and obligations incurred in the ordinary course of business and consistent with past practice, since June 30, 2000, neither the Company nor any of its Subsidiaries has incurred any liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that have, or would be reasonably likely to have, a material adverse effect on the Company and its Subsidiaries taken as a whole or would be required to be reflected or reserved against on a consolidated balance sheet of the Company and its Subsidiaries (including the notes thereto) prepared in accordance with GAAP as 9 applied in preparing the consolidated balance sheet of the Company and its Subsidiaries as of June 30, 2000. Section 4.7 of the Disclosure Schedule sets forth the amount of principal and unpaid interest outstanding under each instrument evidencing indebtedness of the Company and its Subsidiaries which will accelerate or become due or result in a right of redemption or repurchase on the part of the holder of such indebtedness (with or without due notice or lapse of time) as a result of this Agreement, the Option Agreement, the Merger or the other transactions contemplated hereby or thereby. Section 4.8 INFORMATION IN PROXY STATEMENT/PROSPECTUS. The Proxy Statement/Prospectus (or any amendment thereof or supplement thereto) will not, at the date mailed to Company stockholders and at the time of the Special Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by the Company with respect to statements made therein based on information supplied by Parent or Sub in writing for inclusion in the Proxy Statement/Prospectus. None of the information supplied by the Company for inclusion or incorporation by reference in the Registration Statement will, at the date it becomes effective and at the time of the Special Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Proxy Statement/Prospectus will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. Section 4.9 EMPLOYEE BENEFIT PLANS; ERISA. (a) Section 4.9 of the Disclosure Schedule contains a true and complete list of each employment, bonus, deferred compensation, incentive compensation, stock purchase, stock option, stock appreciation right or other equity-based incentive, severance or termination pay, hospitalization or other medical, life, disability or other insurance, supplemental unemployment benefits, profit-sharing, savings, pension, or retirement plan, program, agreement or arrangement, and each other employee benefit plan, program, agreement or arrangement, sponsored, maintained or contributed to or required to be contributed to by the Company or by any trade or business, whether or not incorporated (an "ERISA AFFILIATE"), that together with the Company would be deemed a "single employer" within the meaning of Section 4001(b)(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), for the benefit of any current or former employee or director of the Company or any ERISA Affiliate (the "PLANS"). (b) With respect to each Plan, the Company has heretofore delivered to Parent true and complete copies of each of the following documents, as applicable: (i) a copy of the Plan (including all amendments thereto) or a written description of any Plan that is not otherwise in writing; (ii) if required under ERISA, a copy of the annual report and actuarial valuation with respect to such Plan for each of the last three plan years; (iii) a copy of the most recent Summary Plan Description required under ERISA with respect thereto, together with all Summaries of Material Modification issued with respect to such Summary Plan Description, and a copy of all other material employee communications relating to the Plan; (iv) if the Plan is funded through a trust or any other funding vehicle, a copy of the trust or other funding agreement (including all amendments thereto) and the latest financial statements thereof; (v) all contracts relating to the Plans with respect to which the Company or any ERISA Affiliate may have any liability, including, without limitation, insurance contracts, investment management agreements, subscription and participation agreements and record keeping agreements; and (vi) the most recent determination letter received from the Internal Revenue Service with respect to each Plan intended to qualify under Section 401(a) of the Code or trust intended to qualify under Section 501(c)(9) of the Code. (c) Neither the Company nor any ERISA Affiliate currently or within the six year period immediately preceding the date hereof, has maintained, sponsored, contributed to or otherwise been 10 obligated or required to make contributions to any plan subject to Title IV of ERISA, including without limitation any "multiemployer plan" as defined in Sections 3(37) and 4001(a)(3) of ERISA or plan described in Section 4063(a) of ERISA. Neither the Company nor any ERISA Affiliate has at any time incurred any liability under Title IV of ERISA in respect of a plan termination or a withdrawal from a multiemployer plan. (d) Neither the Company nor any ERISA Affiliate, nor any Plan, nor any trust created thereunder, nor any trustee or administrator thereof has engaged in a transaction in connection with which the Company or any ERISA Affiliate, any Plan, any such trust, or any trustee or administrator thereof, or any party dealing with any Plan or any such trust could be subject to either a material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code. Full payment has been made, or will be made in accordance with Section 404(a)(6) of the Code, of all amounts which the Company or any ERISA Affiliate is required to pay under the terms of each of the Plans, and all such amounts properly accrued through the Closing Date with respect to the current plan year thereof will be paid by the Company on or prior to the Closing Date or have been properly accrued for in the financial statements of the Company. (e) Each Plan has been operated and administered in accordance with its terms and in all material respects in accordance with applicable law, including but not limited to ERISA and the Code. Each Plan intended to be "qualified" within the meaning of Section 401(a) of the Code is so qualified and the trusts maintained thereunder are exempt from taxation under Section 501(a) of the Code and no circumstances exist which may reasonably affect such qualified status. The Company has timely applied for and received a currently effective determination letter from the Internal Revenue Service with respect to each such Plan. (f) No amounts payable under the Plans or any other agreement or arrangement with respect to which the Company may have any liability could give rise to the payment of any amount that would fail to be deductible for federal income tax purposes by virtue of Section 162(m) or 280G of the Code. (g) No Plan provides benefits, including without limitation death or medical benefits (whether or not insured), with respect to current or former employees, directors or consultants of the Company or any ERISA Affiliate beyond their retirement or other termination of service (other than coverage mandated by applicable law). (h) With respect to each Plan that is funded wholly or partially through an insurance policy, there will be no liability of the Company or any ERISA Affiliate, as of the Closing Date, under any such insurance policy or ancillary agreement with respect to such insurance policy in the nature of a retroactive rate adjustment, loss sharing arrangement or other actual or contingent liability arising wholly or partially out of events occurring prior to the Closing Date. (i) Except as set forth in Sections 3.6 or 4.9 of the Disclosure Schedule, the consummation of the transactions contemplated by this Agreement will not (i) entitle any current or former employee, officer, director, agent or consultant of the Company or any ERISA Affiliate to severance pay, unemployment compensation or any other payment, except as expressly provided in this Agreement or (ii) accelerate the time of payment or vesting, or increase the amount of or otherwise enhance any compensation or other benefit (whether under any Plan or otherwise) to any such employee, officer, director, agent or consultant. (j) There are no pending, threatened or, to the knowledge of the Company, anticipated claims by or on behalf of any Plan, by any employee or beneficiary under any Plan, or otherwise involving the operation or administration of any such Plan (other than routine claims for benefits). 11 Section 4.10 LITIGATION; COMPLIANCE WITH LAW. (a) Except to the extent disclosed in the Company SEC Documents filed prior to the date of this Agreement or in Section 4.10 of the Disclosure Schedule, there is no suit, claim, action, proceeding or investigation pending or, to the best knowledge of the Company, threatened against or affecting, the Company or any of its Subsidiaries which, individually or in the aggregate, is reasonably likely, individually or in the aggregate, to have a material adverse effect on the Company and its Subsidiaries, taken as a whole, or materially impair the ability of the Company to consummate the Merger or the other transactions contemplated hereby or by the Option Agreement. (b) The Company and its Subsidiaries have complied in a timely manner and in all material respects, with all laws, statutes, regulations, rules, ordinances, and judgments, decrees, orders, writs and injunctions, of any court or governmental entity relating to any of the property owned, leased or used by them, or applicable to their business, including, but not limited to, (A) the Foreign Corrupt Practices Act of 1977 and any other laws regarding use of funds for political activity or commercial bribery and (B) except as set forth in Section 4.23 of the Disclosure Schedule, laws relating to equal employment opportunity, discrimination, occupational safety and health, environmental, interstate commerce and antitrust. Section 4.11 NO DEFAULT. The business of the Company and each of its Subsidiaries has not been and is not being conducted in default or violation of any term, condition or provision of: (i) their respective bylaws or similar organizational documents; (ii) any Company Agreement; or (iii) any federal, state, local or foreign law, statute, regulation, rule, ordinance, judgment, decree, order, writ, injunction, concession, grant, franchise, permit or license or other governmental authorization or approval applicable to the Company or any of its Subsidiaries; excluding from the foregoing clauses (ii) and (iii), defaults or violations that would not, individually or in the aggregate, have a material adverse effect on the Company and its Subsidiaries, taken as a whole, or materially impair the ability of the Company to consummate the Merger or the other transactions contemplated hereby or by the Option Agreement. As of the date of this Agreement, no investigation or review by any Governmental Entity or other entity with respect to the Company or any of its Subsidiaries is pending or, to the best knowledge of the Company, threatened, nor has any Governmental Entity or other entity indicated in writing an intention to conduct the same, other than, in each case, those the outcome of which, as far as reasonably can be foreseen, in the future will not, individually or in the aggregate, have a material adverse effect on the Company and its Subsidiaries, taken as a whole. Section 4.12 TAXES. (a) Except as set forth in Section 4.12 of the Disclosure Schedule: (i) each of the Company and its Subsidiaries, including any predecessors thereof, has (A) duly and timely filed (or there have been filed on its behalf) with the appropriate governmental authorities all material Tax Returns required to be filed by it on or prior to the date hereof, and such Tax Returns are true, correct and complete in all material respects, and (B) duly paid in full or made provision in accordance with GAAP (or there has been paid or provision has been made on its behalf) for the payment of all material Taxes for all periods ending through the date hereof; (ii) the Company and its Subsidiaries, including any predecessors thereof, have complied in all material respects with all applicable laws, rules and regulations relating to the payment and withholding of Taxes; (iii) there are no material liens for Taxes upon any property or assets of the Company or any Subsidiary thereof, except for liens for Taxes not yet due and payable; (iv) the unpaid Taxes of the Company and its Subsidiaries (A) did not, as of the most recent financial statements of the Company and its Subsidiaries, exceed to any material extent the 12 reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of such financial statements (rather than in any notes thereto), and (B) do not exceed that reserve as adjusted for the passage of time since the date of such financial statements in accordance with the past custom and practice of the Company and its Subsidiaries in filing their Tax Returns; (v) there are no pending examinations, audits, actions, proceedings, investigations, legal proceedings, disputes or claims with respect to Taxes of the Company or any of its Subsidiaries, including any predecessors thereof ("AUDITS"), and neither the Company nor any of its Subsidiaries has received any written notice of any such Audits; (vi) no issue has been raised in any Audit which, by application of similar principles, could be expected to result in the proposal or assertion of a material Tax deficiency for any other year not so examined; (vii) the federal income Tax Returns of the Company and each of its Subsidiaries, including any predecessors thereof, have been examined by the applicable taxing authorities (or the applicable statutes of limitation for the assessment of federal income Taxes for such periods have expired) for all periods through and including December 31, 1996, and no material deficiencies were asserted as a result of such examinations which have not been resolved and fully paid; (viii) neither the Company nor any of its Subsidiaries has received notice of any claim made by a governmental authority in a jurisdiction where the Company or any of its Subsidiaries, as applicable, does not file a Tax Return, that the Company or such Subsidiary is or may be subject to taxation by that jurisdiction; (ix) there are no outstanding requests, agreements, consents or waivers to extend the statutory period of limitations applicable to the assessment of any Taxes or deficiencies against the Company or any of its Subsidiaries, and no power of attorney granted by either the Company or any of its Subsidiaries with respect to any Taxes is currently in force; (x) neither the Company nor any of its Subsidiaries is a party to any agreement providing for the allocation or sharing of Taxes imposed on or with respect to any individual or other Person, and neither the Company nor any of its Subsidiaries (A) has been a member of an affiliated group (or similar state, local or foreign filing group) filing a consolidated federal income Tax Return (other than the group the common parent of which is the Company) or (B) has any liability for the Taxes of any person (other than the Company or any of its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract, or otherwise; (xi) the Company and each of its Subsidiaries has delivered or made available to Parent complete and accurate copies of: all federal income Tax Returns of the Company or any of its Subsidiaries for taxable years ending December 31, 1997 through December 31, 1999; (xii) neither the Company nor any of its Subsidiaries has filed a consent under Section 341(f) of the Code concerning collapsible corporations; and (xiii) neither the Company nor any of its Subsidiaries has constituted either a "distributing corporation" or a "controlled corporation" (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free treatment under Section 355 of the Code (A) in the two years prior to the date hereof or (B) in a distribution which could otherwise constitute part of a "plan" or "series of related transactions" (within the meaning of Section 355(e) of the Code) in connection with the Merger. 13 (b) As used herein: (i) "TAXES" means any and all federal, state, local, foreign or other taxes of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any governmental authority, including, without limitation, taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, unemployment, social security, workers' compensation, or net worth, and taxes or other charges in the nature of excise, withholding, ad valorem or value added; and (ii) "TAX RETURN" means any return, report or similar statement (including the attached schedules) required to be filed with respect to Taxes, including, without limitation, any information return, claim for refund, amended return, or declaration of estimated Taxes. Section 4.13 CONTRACTS. Each Company Agreement is valid, binding and enforceable and in full force and effect, except where failure to be valid, binding and enforceable and in full force and effect would not have a material adverse effect on the Company and its Subsidiaries, and there are no defaults thereunder, except those defaults that would not have a material adverse effect on the Company and its Subsidiaries, taken as a whole. Section 4.13 of the Disclosure Schedule sets forth a complete list of (i) all material Company Agreements entered into by the Company or any of its Subsidiaries since December 31, 1999 and all amendments to any Company Agreements included as an exhibit to the Company's Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2000 and June 30, 2000 and (ii) all non-competition agreements imposing restrictions on the ability of the Company or any of its Subsidiaries to conduct business in any jurisdiction or territory. Section 4.14 ASSETS; REAL PROPERTY. Neither the Company nor any Subsidiary of the Company owns any real property. (a) Section 4.14(b) of the Disclosure Schedule sets forth all leases, subleases and other agreements (the "REAL PROPERTY LEASES") under which the Company or any of its Subsidiaries uses or occupies or has the right to use or occupy, now or in the future, any real property. The Company has heretofore delivered to Parent true, correct and complete copies of all material Real Property Leases (including all modifications, amendments and supplements hereto). Each Real Property Lease is valid, binding and in full force and effect, all rent and other sums and charges payable by the Company and its Subsidiaries as tenants thereunder are current, no termination event or condition or uncured default of a material nature on the part of the Company or any such Subsidiary or, to the Company's knowledge, the landlord, exists under any Real Property Lease. Each of the Company and its Subsidiaries has a good and valid leasehold interest in each parcel of real property leased by it free and clear of all mortgages, pledges, liens, encumbrances and security interests, except: (i) those reflected or reserved against in the balance sheets of the Company in the Company SEC Documents filed prior to the date of this Agreement; (ii) taxes and general and special assessments not in default and payable without penalty and interest; and (iii) other liens, mortgages, pledges, encumbrances and security interests which do not materially interfere with the Company's use and enjoyment of such real property or materially detract from or diminish the value thereof. Section 4.15 ENVIRONMENTAL MATTERS. (a) The Company and each of its Subsidiaries (i) is and has been in compliance in all material respects with all applicable laws, rules, regulations, common law, ordinances, decrees, orders or other legal or regulatory requirements relating to pollution or the protection of human health or the environment (including without limitation the treatment, storage and disposal of wastes and the remediation of releases and threatened releases of materials of environmental concern) ("ENVIRONMENTAL LAWS"), and there are no outstanding allegations by any person or entity that the Company or any of its Subsidiaries is not or has not been in compliance with any Environmental Laws 14 and (ii) the Company and each of its Subsidiaries currently hold all permits, licenses, registrations and other governmental authorizations (including without limitation exemptions, waivers, and the like) and financial assurance required under any Environmental Laws for the Company and each of its Subsidiaries to operate their business. (b) To the Company's knowledge, except as set forth in Section 4.15(b) of the Disclosure Schedule, (i) there are no asbestos or asbestos-containing materials in or on any real property, buildings, structures or components thereof currently, leased or operated by the Company or any of its Subsidiaries, and (ii) there are and have been no underground or aboveground storage tanks (whether or not required to be registered under any applicable law), dumps, landfills, lagoons, surface impoundments, sumps, injection wells or other disposal or storage sites or locations in or on any property currently leased or operated by the Company or any of its Subsidiaries. (c) Neither the Company nor any of its Subsidiaries have received (x) any written communication from any person stating or alleging that any of them may be a potentially responsible party under any Environmental Law (including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, and any state analog thereto) with respect to any actual or alleged environmental contamination, or (y) any written request for information under any Environmental Law from any governmental agency or authority or any other person or entity with respect to any actual or alleged environmental contamination or violation. None of the Company, its Subsidiaries, any governmental agency or authority, or any other person or entity is conducting or has conducted (or is proposing or threatening to conduct) any environmental remediation or investigation which could result in a material liability of the Company or any of its Subsidiaries under any Environmental Law or otherwise require disclosure under the Securities Act or Exchange Act. Section 4.16 TRANSACTIONS WITH AFFILIATES. Except to the extent disclosed in the Company SEC Documents filed prior to the date of this Agreement or as disclosed in Section 4.16 of the Disclosure Schedule, since January 1, 1997, there have been no transactions, agreements, arrangements or understandings between the Company and its affiliates that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act. Section 4.17 OPINION OF FINANCIAL ADVISOR; BROKERS. The Company has received an opinion from Deutsche Bank Securities, Inc. ("DBAB"), financial advisor to the Company, to the effect that the consideration to be received by the stockholders of the Company pursuant to the Merger is fair to such stockholders from a financial point of view, a copy of which opinion has been provided to Parent. Except for fees payable to DBAB, pursuant to an engagement letter, dated October 13, 2000, a true and complete copy of which has been provided to Parent, no broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company. Section 4.18 INTELLECTUAL PROPERTY. (a) The Company or its Subsidiaries own or have a valid right to use all: trademarks, service marks, trade names, Internet domain names, designs, slogans, and general intangibles of like nature, together with all goodwill related to the foregoing (collectively, "TRADEMARKS"); patents; inventions (whether patented or not); copyrights (including any registrations, renewals and applications for any of the foregoing); Software (as defined below in Section 4.18(x)); technology, trade secrets and other confidential information, know-how, proprietary processes, formulae, algorithms, models, and methodologies (collectively, "TRADE SECRETS," and together with the foregoing, the "INTELLECTUAL PROPERTY") used in or necessary for the conduct of the business of the Company and each of its Subsidiaries' as currently conducted or contemplated to be conducted (collectively "COMPANY INTELLECTUAL PROPERTY"). 15 (b) Section 4.18(ii)(a) of the Disclosure Schedule sets forth, a complete and accurate list of all Company Intellectual Property, consisting of all U.S. and foreign (a) patents and patent applications, (b) Trademark registrations (including Internet domain registrations) and applications and material unregistered Trademarks, and (c) copyright registrations and applications, and material unregistered copyrights, including those in Software, indicating for each, the applicable jurisdiction, registration number (or application number), and date issued (or date filed); and a list of all material Trade Secrets. Section 4.18(ii)(b) of the Disclosure Schedule sets forth a complete and accurate list of all Company Intellectual Property not owned by the Company and license agreements granting any right to use or practice any rights under any Company Intellectual Property, whether the Company or any Subsidiary is the licensee or licensor thereunder, and any written settlements relating to any Company Intellectual Property to which the Company or any Subsidiary is a party or otherwise bound (collectively, the "LICENSE AGREEMENTS"), indicating for each the title, the parties, date executed, and the Company Intellectual Property covered thereby. (c) The Company Intellectual Property is free and clear of all Liens, and the Company or a Subsidiary or a third party (as the case may be), as set forth in Section 4.18(iii) of the Disclosure Schedule is listed in the records of the appropriate United States, state, or foreign agency as the sole owner of record for each application and registration listed in Section 4.18(iii) of the Disclosure Schedule. (d) Except as set forth on Section 4.18(iv) of the Disclosure Schedule, the Company Intellectual Property is valid and subsisting, in full force and effect, and has not been cancelled, expired, or abandoned. There is no pending or, to the Company's knowledge, threatened opposition, interference or cancellation proceeding before any court or registration authority in any jurisdiction against the registrations listed in Section 4.18(iv) of the Disclosure Schedule, or against any Company Intellectual Property not owned by the Company or its Subsidiaries. (e) To the knowledge of the Company, the conduct of the business of the Company's and each of its Subsidiaries' as currently conducted or planned to be conducted does not infringe upon any Intellectual Property rights owned or controlled by any third party (either directly or indirectly such as through contributory infringement or inducement to infringe). Except as set forth in Section 4.18(v) of the Disclosure Schedule, there are no claims or suits pending or, to the Company's knowledge, threatened, and neither the Company nor any Subsidiary has received any notice of a third party claim or suit (a) alleging that its activities or the conduct of its businesses infringes upon, violates, or constitutes the unauthorized use of the Intellectual Property rights of any third party or (b) challenging the ownership, use, validity or enforceability of any Company Intellectual Property. (f) Except as set forth in Section 4.18(vi) of the Disclosure Schedule, there are no settlements, forebearances to sue, consents, judgments, or orders or similar obligations which (a) restrict the Company's or its Subsidiaries' rights to use any Company Intellectual Property, (b) restrict the Company's or its Subsidiaries' business in order to accommodate a third party's Intellectual Property rights, or (c) permit third parties to use any Company Intellectual Property owned or controlled by the Company or any Subsidiary. The Company or its Subsidiaries have not licensed or sublicensed their rights in any material Company Intellectual Property other than pursuant to the License Agreements, and no royalties, honoraria or other fees are payable by the Company or its Subsidiaries for the use of or right to use any Company Intellectual Property, except pursuant to the License Agreements. The License Agreements are valid and binding obligations of all parties thereto, enforceable in accordance with their terms (except that (i) such enforcement may be subject to applicable bankruptcy, insolvency or other similar laws, now or hereafter in effect, affecting creditors' rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought) and there exists no event or condition which will result in a 16 violation or breach of, or constitute (with or without due notice or lapse of time or both) a default by any party under any such License Agreement. (g) The Company and each of its Subsidiaries takes commercially reasonable measures to protect the confidentiality of Trade Secrets, including requiring its employees and independent contractors having access thereto to execute written non-disclosure agreements. No Trade Secret has been disclosed or authorized to be disclosed to any third party other than pursuant to a non-disclosure agreement that adequately protects the Company and the applicable Subsidiary's proprietary interests in and to such Trade Secrets. To the knowledge of the Company, no party to any non-disclosure agreement relating to its Trade Secrets is in breach or default thereof. (h) To the knowledge of the Company, no third party is misappropriating, infringing, diluting, or violating any Intellectual Property owned by the Company or any Subsidiary and, except as set forth on Section 4.18(viii) of the Disclosure Schedule, no such claims have been brought against any third party by the Company or any Subsidiary. (i) Except as set forth in Section 4.18(ix) of the Disclosure Schedule, the consummation of the transactions contemplated hereby will not result in the loss or material impairment of the Company or any Subsidiary's right to own or use any of the Company Intellectual Property, nor will require the consent of any governmental authority or third party in respect of any such Intellectual Property. (j) Section 4.18(x) of the Disclosure Schedule lists all Software (other than off-the-shelf software applications programs having an acquisition price of less than $25,000), which are owned, licensed, leased, or otherwise used by the Company or any Subsidiary, and identifies which Software is owned, licensed, leased, or otherwise used, as the case may be. Section 4.18(x) of the Disclosure Schedule lists all Software sold, licensed, leased or otherwise distributed by the Company or any Subsidiary to any third party, and identifies which Software is sold, licensed, leased, or otherwise distributed as the case may be. With respect to the Software set forth in Section 4.18(x) of the Disclosure Schedule which the Company or any Subsidiary purports to own, such Software was either developed (a) by employees of the Company or any Subsidiary within the scope of their employment or (b) by independent contractors who have assigned their rights to the Company or any Subsidiary pursuant to written agreements. For purposes of this Section 4.18, "SOFTWARE" means any and all (v) computer programs, including any and all software implementations of algorithms, models and methodologies, whether in source code or object code, (w) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (x) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing, (y) the technology supporting any Internet site(s) operated by or on behalf of the Company or any Subsidiary, and (z) all documentation, including user manuals and training materials, relating to any of the foregoing. Section 4.19 REORGANIZATION. None of the Company, any of its Subsidiaries or, to the knowledge of the Company, any of their respective directors, officers or stockholders, has taken any action which would prevent the Merger from constituting a reorganization qualifying under the provisions of Section 368(a) of the Code. Section 4.20 INSURANCE. The Company and each of its Subsidiaries has policies of insurance and bonds of the type and in amounts customarily carried by persons conducting businesses or owning assets similar to those of the Company and its Subsidiaries. There is no material claim pending under any of such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. All premiums due and payable under all such policies and bonds have been paid and the Company and its Subsidiaries are otherwise in compliance in all material respects with the terms of such policies and bonds. The Company has no knowledge of any threatened termination of, or material premium increase with respect to, any of such policies. 17 Section 4.21 ACCOUNTS RECEIVABLE. Subject to any reserves set forth in the balance sheet of the Company included in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, as filed with the SEC prior to the date of this Agreement (the "COMPANY BALANCE SHEET"), the accounts receivable shown in the Company Balance Sheet arose in the ordinary course of business; were not, as of the date of the Company Balance Sheet, subject to any material discount, contingency, claim of offset or recoupment or counterclaim; and represented, as of the date of the Company Balance Sheet, bona fide claims against debtors for sales, leases, licenses and other charges. All accounts receivable of the Company and its Subsidiaries arising after the date of the Company Balance Sheet through the date of this Agreement arose in the ordinary course of business and, as of the date of this Agreement, are not subject to any material discount, contingency, claim of offset or recoupment or counterclaim, except for normal reserves consistent with past practice. The amount carried for doubtful accounts and allowances disclosed in the Company Balance Sheet is believed by the Company as of the date of this Agreement to be sufficient to provide for any losses which may be sustained or realization of the accounts receivable shown in the Company Balance Sheet. Section 4.22 SUPPLIERS AND CUSTOMERS. Since December 31, 1999, no material licensor, vendor, supplier, licensee or customer of the Company or any of its Subsidiaries, has cancelled or otherwise modified its relationship with the Company or its Subsidiaries in a manner adverse to the Company and its Subsidiaries, taken as a whole, and, to the Company's knowledge, (i) no such person has any intention to do so, and (ii) the consummation of the transactions contemplated hereby will not adversely affect any of such relationships. Section 4.23 LABOR MATTERS. (a) Except as set forth in Section 4.23 of the Disclosure Schedule: (i) there is no labor strike, dispute, slowdown, stoppage or lockout actually pending, or to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary thereto and during the last three (3) years there has not been any such action; (ii) to the knowledge of the Company, no union claims to represent the employees of the Company or any Subsidiary thereto; (iii) neither the Company nor any Subsidiary thereto is a party to or bound by any collective bargaining or similar agreement with any labor organization, or work rules or practices agreed to with any labor organization or employee association applicable to employees of the Company or any Subsidiary thereto; (iv) none of the employees of the Company or any Subsidiary thereto are represented by any labor organization and the Company has no knowledge of any current union organizing activities among the employees of the Company or any Subsidiary thereto, nor does any question concerning representation exist concerning such employees; (v) there are no written personnel policies, rules or procedures applicable to employees of the Company other than those set forth in Section 4.23 of the Disclosure Schedule, true, correct and complete copies of which have heretofore been delivered to Parent; (vi) the Company and any Subsidiary thereto are, and have at all times been, in material compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment, wages, hours of work, immigration, equal employment opportunity, and occupational safety and health, and are not engaged in any unfair labor practices as defined in the National Labor Relations Act or other applicable law, ordinance or regulation; (vii) the Company has not received written notice of any pending or threatened unfair labor practice charge or complaint against the Company or any Subsidiary thereto before the National Labor Relations Board or any similar state agency; (viii) there is no grievance or arbitration proceeding arising out of any collective bargaining agreement or other grievance procedure relating to the Company or any Subsidiary thereto; (ix) the Company has not received written notice of any charges with respect to or relating to the Company or any Subsidiary thereto are pending before the Equal Employment Opportunity Commission or any other agency responsible for the prevention of unlawful employment practices; (x) the Company has not received written or other notice of the intent of any federal, state, or local agency responsible for the enforcement of labor or employment laws to conduct an investigation with respect to or relating to the 18 Company or any Subsidiary thereto and no such investigation is in progress; and (xi) there are no complaints, controversies, lawsuits or other proceedings pending or, to the knowledge of the Company, threatened to be brought by any applicant for employment of current or former employees, or classes of the foregoing, alleging breach of any express or implied contract for employment, any law or regulation governing employment or the termination thereof or other discriminatory, wrongful or tortious conduct in connection with the employment relationship. Except as set forth in Section 4.23 of the Disclosure Schedule, there are no employment contracts, severance agreements, confidentiality agreements (other than standard employee non-disclosure agreements as contemplated by Section 4.23(vii) hereof) or other agreements (other than any agreements set forth in Section 4.9 of the Disclosure Schedule) with any employees of the Company or any Subsidiary thereto. The execution of this Agreement and the consummation of the transactions contemplated by this Agreement and the Option Agreement will not result in a breach or other violation of any collective bargaining agreement or any other employment contract or agreement to which the Company or any Subsidiary thereto is a party. (b) Since the enactment of Worker Adjustment and Retraining Notification Act of 1988 (the "WARN ACT"), neither the Company nor any Subsidiary thereto has effectuated (i) a "PLANT CLOSING" (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Company or any Subsidiary thereto, or (ii) a "MASS LAYOFF" (as defined in the WARN Act) affecting any site of employment or facility of the Company or any Subsidiary thereto; nor has the Company or any Subsidiary thereto been affected by any transaction or engaged in layoffs or employment terminations sufficient in number to trigger application of any similar state or local law. Except as set forth in Section 4.23 of the Disclosure Schedule, none of the employees of the Company or any Subsidiary thereto has suffered an "EMPLOYMENT LOSS" (as defined in the WARN Act) during the ninety day period prior to the execution of this Agreement. (c) Each of the individuals identified in Section 7.2(e) of the Disclosure Schedule, has executed an Employee Confidentiality Agreement, in substantially the form attached to Section 4.23(c) of the Disclosure Schedule. As of the date of this Agreement, the individuals identified in Section 7.2(e) of the Disclosure Schedule constitute all of the individuals who are engaged in the development of software for or on behalf of the Company. Section 4.24 FULL DISCLOSURE. The Company has not knowingly failed to disclose to Parent any facts material to the Company's business, operations, prospects, properties, financial condition or results of operations. No representation or warranty by the Company in this Agreement and no statement by the Company in any document referred to herein (including the Schedules and Exhibits hereto), contains any untrue statements of a material fact or omits to state any material fact necessary, in order to make the statement made herein or therein, in light of the circumstances under which they were made, not misleading. 19 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB Parent and Sub represent and warrant to the Company as follows: Section 5.1 ORGANIZATION. Each of Parent and Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite corporate or other power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing or to have such power, authority, and governmental approvals would not have a material adverse effect on Parent and its Subsidiaries. Parent and each of its Subsidiaries is duly qualified or licensed to do business and in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing would not, in the aggregate, have a material adverse effect on Parent and its Subsidiaries, taken as a whole. Section 5.2 CAPITALIZATION. As of September 30, 2000, after giving effect to a two-for-one stock split in the form of a stock dividend effective October 27, 2000 for stockholders of record of Parent as of September 27, 2000, the authorized capital stock of Parent consists of 9,600,000,000 shares of Parent Common Stock and 600,000,000 shares of preferred stock, $.01 par value per share (the "PARENT PREFERRED STOCK"). Before giving effect to a two-for-one stock split in the form of a stock dividend effective October 27, 2000 for stockholders of record of Parent as of September 27, 2000, as of the close of business on September 30, 2000, (i) 979,221,142 shares of Parent Common Stock were issued and outstanding and (ii) no shares of Parent Preferred Stock were issued and outstanding. All of the issued and outstanding shares of Parent Common Stock are duly authorized, validly issued, fully paid and nonassessable. Section 5.3 AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION. Each of Parent and Sub has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement and the consummation of the Merger and of the other transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and Sub and no other corporate proceedings on the part of Parent and Sub are necessary to authorize this Agreement or to consummate the transactions so contemplated. This Agreement has been duly executed and delivered by Parent and Sub and, assuming this Agreement constitutes a valid and binding obligation of the other parties hereto, constitutes a valid and binding obligation of each of Parent and Sub, as the case may be, enforceable against them in accordance with its terms, except that (i) such enforcement may be subject to applicable bankruptcy, insolvency or other similar laws, now or hereafter in effect, affecting creditors' rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. When issued in accordance with the terms of this Agreement, the shares of Parent Common Stock to be issued pursuant to the Merger will be duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. Section 5.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the HSR Act and any comparable premerger notification laws, rules or regulations of any applicable foreign jurisdiction, the Exchange Act, the Securities Act, the DGCL, state blue sky laws and any applicable state takeover laws, neither the execution, delivery or performance of this Agreement by Parent and Sub nor the consummation by Parent and Sub of the transactions contemplated hereby nor compliance by Parent and Sub with any of the provisions hereof will (i) conflict with or result in any breach of any 20 provision of the certificate of incorporation or bylaws of Parent or the certificate of incorporation and bylaws of Sub, (ii) require any filing with, or permit, authorization, consent or approval of, any Governmental Entity, (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, any of the terms, conditions or provisions of any material note, bond, mortgage, indenture, license, lease, contract, agreement or other instrument or obligation to which Parent or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Parent, any of its Subsidiaries or any of their properties or assets, except in the case of clauses (ii), (iii) and (iv) where the failure to obtain such permits, authorizations, consents or approvals or to make such filings, or where such violations, breaches or defaults would not, individually or in the aggregate, materially impair the ability of Parent or Sub to consummate the transactions contemplated hereby. Section 5.5 INFORMATION IN PROXY STATEMENT/PROSPECTUS. The Registration Statement (or any amendment thereof or supplement thereto) will not, at the date it becomes effective and at the time of the Special Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by Parent or Sub with respect to statements made therein based on information supplied by the Company in writing for inclusion in the Registration Statement. None of the information supplied by Parent or Sub for inclusion or incorporation by reference in the Proxy Statement/Prospectus, at the date mailed to Company stockholders and at the time of the Special Meeting, will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Registration Statement will comply in all material respects with the provisions of the Securities Act and the rules and regulations thereunder. Section 5.6 SEC REPORTS AND FINANCIAL STATEMENTS. Parent has filed with the SEC, and has heretofore made available to the Company, true and complete copies of, all forms, reports, schedules, statements and other documents required to be filed by it and its Subsidiaries since November 1, 1999 under the Exchange Act or the Securities Act (as such documents have been amended since the time of their filing, collectively, the "PARENT SEC DOCUMENTS"). As of their respective dates or, if amended, as of the date of the last such amendment, the Parent SEC Documents, including, without limitation, any financial statements or schedules included therein (a) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (b) complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder. Each of the consolidated financial statements included in the Parent SEC Documents has been prepared from, and is in accordance with, the books and records of Parent and its consolidated Subsidiaries, complies in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, has been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly presents the consolidated financial position and the consolidated results of operations and cash flows of the Parent and its consolidated Subsidiaries as at the dates thereof or for the periods presented therein. Section 5.7 ABSENCE OF CERTAIN CHANGES. Except to the extent disclosed in the Parent SEC Documents filed prior to the date of this Agreement, since July 31, 2000 through the date of this Agreement, Parent and its Subsidiaries have conducted their respective businesses and operations in all material respects consistent with past practice only in the ordinary and usual course. From July 31, 2000 through the date of this Agreement, there has not occurred: (i) any events, changes, or effects 21 (including the incurrence of any liabilities of any nature, whether or not accrued, contingent or otherwise) having or, which would be reasonably likely to have, individually or in the aggregate, a material adverse effect on Parent and its Subsidiaries; (ii) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to the equity interests of Parent or of any of its Subsidiaries other than (A) regular quarterly cash dividends or dividends paid by wholly owned Subsidiaries and (B) the two-for-one stock split, in the form of a stock dividend, of Parent Common Stock effective October 27, 2000; or (iii) any change by Parent or any of its Subsidiaries in accounting principles or methods, except insofar as may be required by a change in GAAP or applicable law. ARTICLE VI COVENANTS Section 6.1 INTERIM OPERATIONS OF THE COMPANY. The Company covenants and agrees that, except (i) as expressly provided in this Agreement or disclosed in Section 6.1 of the Disclosure Schedule, or (ii) with the prior written consent of Parent, after the date hereof and prior to the Effective Time: (a) the business of the Company and its Subsidiaries shall be conducted only in the ordinary and customary course consistent with past practice, and each of the Company and its Subsidiaries shall use commercially reasonable efforts to preserve its business organization intact and maintain its existing relations with customers, suppliers, employees, creditors and business partners; (b) the Company will not, directly or indirectly, split, combine or reclassify the outstanding Company Common Stock, or any outstanding capital stock of any of the Subsidiaries of the Company; (c) neither the Company nor any of its Subsidiaries shall: (i) amend its certificate of incorporation or bylaws or similar organizational documents; (ii) declare, set aside or pay any dividend or other distribution payable in cash, stock or property with respect to its capital stock; (iii) issue, sell, transfer, pledge, dispose of or encumber any additional shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of capital stock of any class of the Company or its Subsidiaries, other than issuances pursuant to the exercise of Options outstanding on the date hereof; (iv) transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber any material assets other than in the ordinary and usual course of business and consistent with past practice; or (v) redeem, purchase or otherwise acquire directly or indirectly any of its capital stock; (d) neither the Company nor any of its Subsidiaries shall: (i) grant any increase in the compensation payable or to become payable by the Company or any of its Subsidiaries to any of its officers or directors, or, except for planned increases that have been previously disclosed to Parent or increases in accordance with normal past practice, employees, agents or consultants; (ii) adopt or enter into any new plan, policy, agreement or arrangement that would constitute a Plan, or amend or otherwise increase, or accelerate the payment or vesting of the amounts payable or to become payable under any existing Plan; (iii) grant any Rights, whether or not pursuant to the Company Option Plans; (iv) enter into any, or amend any existing, employment or severance agreement with or, except in accordance with the existing written policies of the Company previously delivered to Parent, grant any severance or termination pay to any officer, director or employee of the Company or any of its Subsidiaries; or (v) make any loans to any of its officers, directors, employees, agents or consultants or make any changes in its existing borrowing or lending arrangements for or on behalf of any of such persons, whether contingent on the Merger or otherwise; (e) neither the Company nor any of its Subsidiaries shall modify, amend or terminate any of the material Company Agreements or waive, release or assign any material rights or claims, except in the ordinary course of business and consistent with past practice; 22 (f) neither the Company nor any of its Subsidiaries shall permit any material insurance policy naming it as a beneficiary or a loss payable payee to be cancelled or terminated without notice to Parent, except in the ordinary course of business and consistent with past practice; (g) neither the Company nor any of its Subsidiaries shall: (i) incur or assume any long-term debt or, except in the ordinary course of business consistent with past practice, incur or assume any short-term indebtedness in amounts not consistent with past practice; (ii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person, except in the ordinary course of business and consistent with past practice; (iii) make any loans, advances or capital contributions to, or investments in, any other person (other than to wholly owned Subsidiaries of the Company or customary advances to employees in accordance with past practice); or (iv) enter into any material commitment or transaction (including, but not limited to, any borrowing, capital expenditure or purchase, sale or lease of assets) other than capital expenditures described in Section 6.1(g) of the Disclosure Schedule; (h) neither the Company nor any of its Subsidiaries shall change any of the accounting principles used by it unless required by GAAP or applicable law; (i) neither the Company nor any of its Subsidiaries shall pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction of any such claims, liabilities or obligations (x) in the ordinary course of business and consistent with past practice, or claims, liabilities or obligations reflected or reserved against in, or contemplated by, the consolidated financial statements (or the notes thereto) of the Company and its consolidated Subsidiaries, (y) incurred in the ordinary course of business and consistent with past practice or (z) which are legally required to be paid, discharged or satisfied (provided that if such claims, liabilities or obligations referred to in this clause (z) are legally required to be paid and are also not otherwise payable in accordance with clauses (x) or (y) above, the Company will notify Parent in writing if such claims, liabilities or obligations exceed, individually or in the aggregate, $250,000 in value, reasonably in advance of their payment); (j) neither the Company nor any of its Subsidiaries will adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its Subsidiaries or any agreement relating to a Takeover Proposal (as defined in Section 6.6(b) hereof) (other than the Merger); (k) neither the Company nor any of its Subsidiaries will take, or agree to commit to take, any action that would make any representation or warranty of the Company contained herein inaccurate in any material respect at, or as of any time prior to, the Effective Time; (l) neither the Company nor any of its Subsidiaries shall voluntarily make or agree to make any changes in federal and state Tax accounting methods, waive or consent to the extension of any statute of limitations with respect to Taxes, or consent to any assessment of any material Taxes, or settle any judicial or administrative proceeding affecting any material Taxes; and (m) neither the Company nor any of its Subsidiaries will enter into an agreement, contract, commitment or arrangement to do any of the foregoing, or to authorize, recommend, propose or announce an intention to do any of the foregoing. Section 6.2 INTERIM OPERATIONS OF PARENT. Each of Parent and Sub covenants and agrees that, except (i) as expressly provided in this Agreement, or (ii) with the prior written consent of the Company, after the date hereof and prior to the Effective Time: (a) Parent will not, directly or indirectly, split, combine or reclassify the outstanding Parent Common Stock (except for the two-for-one stock split, in the form of a stock dividend, of Parent 23 Common Stock effective October 27, 2000 and any other action that would result in an adjustment to the Exchange Ratio pursuant to Section 3.9 hereof); (b) Parent shall not declare, set aside or pay any dividend or other distribution payable in cash (other than regular quarterly dividends), stock or property with respect to its capital stock (except for the two-for-one stock split, in the form of a stock dividend, of Parent Common Stock effective October 27, 2000 and any other action that would result in an adjustment to the Exchange Ratio pursuant to Section 3.9 hereof); (c) neither Parent nor any of its Subsidiaries shall change any of the accounting principles used by it unless required by GAAP; (d) neither Parent nor any of its Subsidiaries will take, or agree to commit to take, any action that would make any representation or warranty of Parent and Sub contained herein inaccurate in any respect at, or as of any time prior to, the Effective Time; and (e) neither Parent nor any of its Subsidiaries will enter into an agreement, contract, commitment or arrangement to do any of the foregoing, or to authorize, recommend, propose or announce an intention to do any of the foregoing. Section 6.3 ACCESS TO INFORMATION. The Company shall (and shall cause each of its Subsidiaries to) afford to the officers, employees, accountants, counsel and other representatives of Parent, access, during normal business hours, during the period prior to the Effective Time, to all of its and its Subsidiaries' properties, books, contracts, commitments and records and, during such period, the Company shall (and shall cause each of its Subsidiaries to) furnish promptly to Parent (a) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal securities laws and (b) all other information concerning its business, properties and personnel as Parent may reasonably request. Unless otherwise required by law or by any listing agreement with a national securities exchange, until the Effective Time, Parent will hold any such information which is nonpublic in confidence in accordance with the provisions of the confidentiality agreement between the Company and Parent, dated October 16, 2000 (the "CONFIDENTIALITY AGREEMENT"). Parent and Sub shall provide to the Company and its representatives access and information reasonably requested by the Company. Section 6.4 HSR ACT FILINGS. (a) Each of Parent and the Company shall: (i) make or cause to be made the filings required of such party or any of its Subsidiaries or affiliates under the HSR Act with respect to the transactions contemplated by this Agreement and the Option Agreement as promptly as practicable and in any event within ten business days after the date of this Agreement; (ii) comply at the earliest practicable date with any request under the HSR Act for additional information, documents, or other materials received by such party or any of its Subsidiaries from the Federal Trade Commission or the Department of Justice (either, an "HSR AUTHORITY") or any other Governmental Entity in respect of such filings or such transactions; and (iii) cooperate with the other party in connection with any such filing, response to a request for additional information, documents or other materials, or other submissions to such Governmental Entity under HSR Act, the Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade Commission Act, as amended, and any other federal, state or foreign statutes, rules, regulations, orders, decrees, administrative or judicial doctrines or other laws that are designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade (collectively, "ANTITRUST LAWS") with respect to any such filing or any such transaction. Each party shall use its commercially reasonable efforts to furnish to each other all information required for any application or another filing to be made pursuant to any applicable law in connection with the Merger and the other transactions contemplated by this Agreement. Each party shall promptly inform the other party of any communication with, and any proposed understanding, 24 undertaking, or agreement with, any Governmental Entity regarding any such filings or any such transaction. (b) Notwithstanding this Section 6.4 or any other provision of this Agreement, neither Parent nor Sub shall be required, whether before or after the Effective Time, to hold separate (including by trust or otherwise) or divest any of its business or assets or any of the businesses or assets of the Company, or enter into any consent decree or other agreement that would restrict Parent or the Company in the conduct of its respective businesses as heretofore conducted. Section 6.5 OTHER CONSENTS AND APPROVALS. Each of the Company, Parent and Sub will take all reasonable actions necessary to comply promptly with all legal requirements which may be imposed on it with respect to this Agreement and the transactions contemplated hereby (which actions shall include, without limitation, furnishing all information in connection with approvals of or filings with any Governmental Entity) and will promptly cooperate with and furnish information to each other in connection with any such requirements imposed upon any of them or any of their Subsidiaries in connection with this Agreement, the Option Agreement and the transactions contemplated hereby and thereby. Each of the Company, Parent and Sub will, and will cause its respective Subsidiaries to, take all reasonable actions necessary to obtain any consent, authorization, order or approval of, or any exemption by, any Governmental Entity or other public or private third party required to be obtained or made by Parent, Sub, the Company or any of their Subsidiaries in connection with the Merger or the taking of any action contemplated thereby or by this Agreement or the Option Agreement. Section 6.6 NO SOLICITATION. (a) The Company (and its Subsidiaries and affiliates) will not, and the Company (and its Subsidiaries and affiliates) will use their best efforts to ensure that their respective officers, directors, employees, investment bankers, attorneys, accountants and other agents do not, directly or indirectly: (i) initiate, solicit or knowingly encourage, or take any action to facilitate the making of, any offer or proposal which constitutes or is reasonably likely to lead to any Takeover Proposal (as defined below) of the Company or any Subsidiary or affiliate of the Company or an inquiry with respect thereto; (ii) enter into any agreement with respect to any Takeover Proposal; or (iii) in the event of an unsolicited written Takeover Proposal for the Company or any Subsidiary or affiliate of the Company, engage in negotiations or discussions with, or provide any information or data to, any corporation, partnership, person or other entity or group (other than Parent, any of its affiliates or representatives) ("PERSON") relating to any Takeover Proposal, or otherwise cooperate in any way with, or assist or participate in, facilitate or knowingly encourage any effort or attempt by any Person to do or seek any of the foregoing; PROVIDED, HOWEVER, that the Company may furnish confidential information in response to an unsolicited written Takeover Proposal and engage in negotiations with a Person relating to such written Takeover Proposal if, but only if, the Company's Board of Directors shall have concluded in good faith and on the basis of advice (x) from financial advisors, that such Takeover Proposal involves consideration to the holders of Company Common Stock that is superior to the consideration offered pursuant to the Merger and is otherwise superior to the Merger and (y) from independent outside counsel that the failure to take such action would constitute a violation of the Board's fiduciary duties under applicable law; and PROVIDED, FURTHER, that the Company shall notify Parent immediately of any inquiries, expressions of interest, proposals or offers received by, the Company or any of the Company's representatives relating to any Takeover Proposal or the possibility or consideration of making a Takeover Proposal ("TAKEOVER PROPOSAL INTEREST") indicating, in connection with such notice, the name of the Person indicating such Takeover Proposal Interest and the terms and conditions of any proposals or offers. The Company agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Takeover Proposal Interest. The Company agrees that it will take the necessary steps promptly to inform the individuals or entities referred to in the first sentence hereof of the obligations undertaken 25 in this Section 6.6. The Company agrees that it shall keep Parent informed, on a current basis, of the status and terms of any Takeover Proposal Interest. (b) As used in this Agreement, "TAKEOVER PROPOSAL" when used in connection with any Person shall mean any tender or exchange offer involving such Person, any proposal for a merger, consolidation or other business combination involving such Person or any Subsidiary of such Person, any proposal or offer to acquire in any manner an interest in excess of 15% of the outstanding equity securities of, or a substantial portion of the business or assets of, such Person or any Subsidiary of such Person, any proposal or offer with respect to any recapitalization or restructuring with respect to such Person or any Subsidiary of such Person or any proposal or offer with respect to any other transaction similar to any of the foregoing with respect to such Person or any Subsidiary of such Person, other than pursuant to the transactions to be effected pursuant to this Agreement. (c) Neither the Board of Directors of the Company nor any committee thereof shall (i) except as expressly permitted by this Section 6.6(c), withdraw, qualify or modify, or propose publicly to withdraw, qualify or modify, in a manner adverse to Parent or Sub, the approval or recommendation by such Board of Directors or such committee of the Merger or this Agreement, or the issuance of Parent Common Stock in connection with the Merger, (ii) approve or recommend, or propose publicly to approve or recommend, any Takeover Proposal, or (iii) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement related to any Takeover Proposal. Notwithstanding the foregoing, in the event that prior to the adoption of this Agreement by the holders of Company Common Stock the Board of Directors of the Company determines in good faith, after it has received a Superior Proposal (as defined below) and after receipt of advice from independent outside counsel that the failure to do so would constitute a violation of the Board's fiduciary duties under applicable law, the Board of Directors of the Company may (subject to this and the following sentences) inform the Company's stockholders that it no longer believes that the Merger or this Agreement is advisable and no longer recommends approval (a "SUBSEQUENT DETERMINATION"), but only at a time that is after the third business day following Parent's receipt of written notice advising Parent that the Board of Directors of the Company has received a Superior Proposal specifying the material terms and conditions of such Superior Proposal, identifying the person making such Superior Proposal and stating that it intends to make a Subsequent Determination. After providing such notice, the Company shall provide a reasonable opportunity to Parent to make such adjustments in the terms and conditions of this Agreement and/or of the Option Agreement as would enable the Company to proceed with its recommendation to stockholders without making a Subsequent Determination; PROVIDED, HOWEVER, that any such adjustments shall be at the discretion of the parties at such time. For purposes of this Agreement, a "Superior Proposal" means any Takeover Proposal (on its most recently amended or modified terms, if amended or modified) made by a Person which the Board of Directors of the Company determines in its good faith judgment (based on the advice of DBAB, or another financial advisor of nationally recognized reputation) to be more favorable to the Company's stockholders than the Merger taking into account all relevant factors (including whether, in the good faith judgment of the Board of Directors of the Company, after obtaining advice from DBAB, or another financial advisor of nationally recognized reputation, the Person is reasonably able to finance the transaction, and any proposed changes to this Agreement and/or the Option Agreement that may be proposed by Parent in response to such Takeover Proposal). Notwithstanding any other provision of this Agreement, the Company shall submit this Agreement to its stockholders whether or not the Board of Directors of the Company makes a Subsequent Determination. 26 (d) Nothing contained in this Section 6.6 shall prohibit the Company (i) from taking and disclosing to its stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act or (ii) from making any disclosure to its stockholders if, in the good faith judgment of the Board of Directors of the Company, after receipt of advice from independent outside counsel, failure so to disclose would constitute a violation of the Board's fiduciary duties under applicable law. Section 6.7 ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein provided, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable, whether under applicable laws and regulations or otherwise, or to remove any injunctions or other impediments or delays, legal or otherwise, to consummate and make effective the Merger and the other transactions contemplated by this Agreement and the Option Agreement. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement or the Option Agreement, the proper officers and directors of the Company and Parent shall use all reasonable efforts to take, or cause to be taken, all such necessary actions. Section 6.8 PUBLICITY. So long as this Agreement is in effect, neither the Company, Parent nor any of their respective affiliates shall issue or cause the publication of any press release or other announcement with respect to the Merger, this Agreement, the Option Agreement, the Employee Agreements, the Voting Agreements or the other transactions contemplated hereby or thereby without the prior consultation of the other party, except as may be required by law or by any listing agreement with a national securities exchange. Section 6.9 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice to Parent and Parent shall give prompt notice to the Company, of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect at or prior to the Effective Time and (ii) any material failure of the Company or Parent, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder or under any Ancillary Agreement; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this Section 6.9 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. Section 6.10 DIRECTORS' AND OFFICERS' INSURANCE AND INDEMNIFICATION. Parent agrees that at all times after the Effective Time, it shall cause the Company (or the Surviving Corporation if after the Effective Time) and its Subsidiaries to, at all times after the Effective Time, indemnify, each person who is now, or has been at any time prior to the date hereof, a director or officer of the Company or of any of the Company's Subsidiaries, successors and assigns (individually an "INDEMNIFIED PARTY" and collectively the "INDEMNIFIED PARTIES"), to the same extent and in the same manner as is now provided in the respective charters or by-laws of the Company and such Subsidiaries or otherwise in effect on the date hereof, with respect to any claim, liability, loss, damage, cost or expense (whenever asserted or claimed) ("INDEMNIFIED LIABILITY") based in whole or in part on, or arising in whole or in part out of, any matter existing or occurring at or prior to the Effective Time. Parent shall, and shall cause the Company (or the Surviving Corporation if after the Effective Time) to, maintain in effect for not less than six years after the Effective Time the current policies of directors' and officers' liability insurance maintained by the Company and its Subsidiaries on the date hereof (provided that Parent may substitute therefor policies having at least the same coverage and containing terms and conditions which are no less advantageous to the persons currently covered by such policies as insured) with respect to matters existing or occurring at or prior to the Effective Time; PROVIDED, HOWEVER, that if the aggregate annual premiums for such insurance at any time during such period shall exceed 150% of the per annum rate of premium currently paid by the Company and its Subsidiaries for such insurance on the date of this Agreement, which amount is set forth in Section 6.10 of the Disclosure Schedule, then Parent shall cause the Company (or the Surviving Corporation if after the Effective Time) to, and the 27 Company (or the Surviving Corporation if after the Effective Time) shall, provide the maximum coverage that shall then be available at an annual premium equal to 150% of such rate. Section 6.11 COOPERATION. Parent and the Company shall together, or pursuant to an allocation of responsibility to be agreed upon between them, coordinate and cooperate (i) in determining whether any action by or in respect of, or filing with, any Governmental Entity is required, or any actions, consents approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by this Agreement and the Option Agreement and (ii) in seeking any such actions, consents, approvals or waivers or making any such filings, furnishing information required in connection therewith and timely seeking to obtain any such actions, consents approvals or waivers. Subject to the terms and conditions of this Agreement, Parent and the Company will each use its commercially reasonable efforts to have the Registration Statement declared effective under the Securities Act as promptly as practicable after the Registration Statement is filed, and Parent and the Company shall, subject to applicable law, confer on a regular and frequent basis with one or more representatives of one another to report operational matters of significance to the Merger and the general status of ongoing operations insofar as relevant to the Merger, provided that the parties will not confer on any matter to the extent inconsistent with law. Section 6.12 CONSENTS OF ACCOUNTANTS. Parent and the Company will each use commercially reasonable efforts to cause to be delivered to each other consents from their respective independent auditors, dated the date on which the Registration Statement shall become effective, in form reasonably satisfactory to the recipient and customary in scope and substance for consents delivered by independent public accountants in connection with registration statements on Form S-4 under the Securities Act. Section 6.13 SUBSEQUENT FINANCIAL STATEMENTS. The Company shall consult with Parent prior to making publicly available its financial results for any period after the date of this Agreement and prior to filing any Company SEC Documents after the date of this Agreement, it being understood that Parent shall have no liability by reason of such consultation. Section 6.14 TAX TREATMENT. Each of Parent, Sub, the Company and their respective Subsidiaries intend that the Merger will qualify as a reorganization with the meaning of Section 368(a) of the Code, and each shall use commercially reasonable efforts to cause the Merger to so qualify. The parties agree and acknowledge that if (i) Parent has, not later than three days prior to the Effective Time, provided written notice to the Company of its intention to merge the Surviving Corporation with and into Parent with Parent surviving the merger (the "Upstream Merger"), and (ii) the Company consents to the Upstream Merger, which consent shall not be unreasonably withheld, then the Upstream Merger shall occur immediately following the Effective Time. Neither Parent nor the Company shall knowingly take any action, or knowingly fail to take any action, that would be reasonably likely to jeopardize the qualification of the Merger as a reorganization within the meaning of Section 368(a) of the Code. Section 6.15 EMPLOYEE BENEFITS. Parent and Sub agree that, effective as of the Effective Time, Parent shall provide, or shall cause Sub to provide, to those persons who, immediately prior to the Effective Time, were employees of the Company and its subsidiaries and who continue in such employment ("Continuing Employees"), with benefits and compensation no less favorable, in the aggregate, to the Continuing Employees than benefits and compensation that are provided to substantially similarly situated employees of the Parent or Sub as of the Effective Time. Section 6.16 401(k) PLAN. The Company shall terminate any and all 401(k) plans of the Company, effective not later than the day immediately preceding the Closing Date, unless Parent, in its sole and absolute discretion, elects to sponsor and maintain such plan or to merge such plan into Parent's 401(k) plan, in which event Parent shall provide the Company with written notice of such election at least three (3) days prior to the Closing Date. Unless Parent provides such notice to the Company, Parent shall receive from the Company evidence that the Company's 401(k) plan(s) have 28 been terminated pursuant to resolution of Company's Board of Directors (the form and substance of such resolutions shall be subject to review and approval by Parent), not later than the day immediately preceding the Closing Date. ARTICLE VII CONDITIONS Section 7.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of the Company, on the one hand, and Parent and Sub, on the other hand, to consummate the Merger are subject to the satisfaction (or, if permissible, waiver by the party for whose benefit such conditions exist) of the following conditions: (a) any waiting period applicable to the consummation of the Merger under the HSR Act and any comparable premerger notification laws, rules or regulations of any applicable foreign jurisdiction shall have expired or been terminated, and no action shall have been instituted by an HSR Authority challenging or seeking to enjoin the consummation of this transaction, which action shall have not been withdrawn or terminated; (b) this Agreement shall have been adopted and approved by the stockholders of the Company in accordance with the DGCL; (c) the shares of Parent Common Stock to be issued pursuant to the Merger shall have been authorized for listing on the NYSE, upon official notice of issuance; (d) no court, arbitrator or governmental body, agency or official shall have issued any order, and there shall not be any statute, rule or regulation, restraining or prohibiting the consummation of the Merger or the effective operation of the business of the Company and its respective Subsidiaries after the Effective Time; (e) all actions by or in respect of or filings with any governmental body, agency official, or authority required to permit the consummation of the Merger shall have been obtained but excluding any consent, approval, clearance or confirmation the failure to obtain which would not have a material adverse effect on Parent, Sub, the Company or, after the Effective Time, the Surviving Corporation; and (f) the Registration Statement shall have become effective under the Securities Act and no stop order suspending effectiveness of the Registration Statement shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the SEC. Section 7.2 CONDITIONS TO THE OBLIGATIONS OF PARENT AND SUB. The obligations of Parent and Sub to consummate the Merger are subject to the satisfaction (or waiver by Parent) of the following further conditions: (a) the representations and warranties of the Company shall have been true and accurate both when made and (except for those representations and warranties that address matters only as of a particular date which need only be true and accurate as of such date) as of the Effective Time as if made at and as of such time, except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to "materiality" or "material adverse effect" set forth therein), does not have, and is not likely to have, individually or in the aggregate, a material adverse effect on the Company and its Subsidiaries, taken as a whole, PROVIDED, that the representations and warranties set forth in Sections 4.2 and 4.3 shall be true and correct in all respects; (b) the Company shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Effective Time; 29 (c) the Company shall have obtained, and there shall be in full force and effect, the consents described in Section 7.2(c) of the Disclosure Schedule; (d) the Offer Letters shall be valid, in full force and effect and complied with in all material respects by the employee signatory thereto; (e) at least forty (40) of the individuals identified in Section 7.2(e) of the Disclosure Schedule shall have countersigned an offer letter, in substantially the form attached as Schedule 7.2(e) of the Disclosure Schedule, and each of such offer letters shall be valid, in full force and effect and complied with in all material respects by the employee signatory thereto; (f) since the date of this Agreement, there shall not have occurred any event, change or effect having, or which would be reasonably likely to have, individually or in the aggregate, a material adverse effect on the Company and its Subsidiaries, taken as a whole; (g) Parent shall have received an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Parent, dated as of the Effective Time, to the effect that the Merger (taking into account the effect of the Upstream Merger, if applicable) will qualify as a reorganization within the meaning of Section 368(a) of the Code. The issuance of such opinion shall be conditioned upon the receipt by such counsel of customary representation letters from each of Parent, Sub and the Company, in each case, in form and substance reasonably satisfactory to each counsel. Each such representation letter shall be dated on or before the date of such opinion and shall not have been withdrawn or modified in any material respect. The opinion condition referred to in this Section 7.2(g) shall not be waivable after receipt of the stockholder approval referred to in Section 7.1(b), unless further stockholder approval is obtained with appropriate disclosure; and (h) the Company shall have furnished Parent with a certificate dated the Closing Date signed on behalf of it by the President or any Vice President of the Company to the effect that the conditions set forth in Sections 7.2(a) through (f) have been satisfied. Section 7.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of the Company to consummate the Merger are subject to the satisfaction (or waiver by the Company) of the following further conditions: (a) the representations and warranties of Parent and Sub shall have been true and accurate both when made and (except for those representations and warranties that address matters only as of a particular date which need only be true and accurate as of such date) as of the Effective Time as if made at and as of such time, except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to "materiality" or "material adverse effect" set forth therein), does not have, and is not likely to have, individually or in the aggregate, a material adverse effect on Parent and its Subsidiaries, taken as a whole, PROVIDED, that the representations and warranties set forth in Sections 5.2 and 5.3 shall be true and correct in all respects; (b) Each of Parent and Sub shall have performed in all material respects all of the respective obligations hereunder required to be performed by Parent or Sub, as the case may be, at or prior to the Effective Time; (c) The Company shall have received an opinion of Pepper Hamilton LLP, counsel to the Company, dated as of the Effective Time, to the effect that the Merger (taking into account the effect of the Upstream Merger, if applicable) will qualify as a reorganization within the meaning of Section 368(a) of the Code. The issuance of such opinion shall be conditioned upon the receipt by such counsel of customary representation letters from each of Parent, Sub and the Company, in each case, in form and substance reasonably satisfactory to such counsel. Each such representation letter shall be dated on or before the date of such opinion and shall not have been withdrawn or modified in any material respect. The opinion condition referred to in this Section 7.3(c) shall not be waivable after 30 receipt of the stockholder approval referred to in Section 7.1(b), unless further stockholder approval is obtained with appropriate disclosure; and (d) Parent shall have furnished the Company with a certificate dated the Closing Date signed on behalf of it by the President or any Vice President to the effect that the conditions set forth in Sections 7.3(a) and (b) have been satisfied. ARTICLE VIII TERMINATION Section 8.1 TERMINATION. Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated and the Merger contemplated herein may be abandoned at any time prior to the Effective Time, whether before or after approval thereof by the Company's stockholders (and regardless of any time that may have elapsed since the event giving rise to the right to terminate hereunder): (a) By the mutual consent of the Board of Directors of Parent and the Board of Directors of the Company. (b) By either of the Board of Directors of the Company or the Board of Directors of Parent: (i) if the Merger shall not have occurred on or prior to March 31, 2001; PROVIDED, HOWEVER, that the right to terminate this Agreement under this Section 8.1(b)(i) shall not be available to any party whose willful and material breach of this Agreement has been the cause of, or resulted in, the failure of the Merger to occur on or prior to such date; (ii) if any Governmental Entity shall have issued an order, decree or ruling or taken any other action, in each case permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and non-appealable; or (iii) if the approval of the stockholders of the Company contemplated by this Agreement shall not have been obtained by reason of the failure to obtain the required vote at a duly held meeting of stockholders or any adjournment thereof. (c) By the Board of Directors of the Company if Parent or Sub breaches or fails in any material respect to perform or comply with any of its material covenants and agreements contained herein or breaches its representations and warranties in any material respect, which breach or failure is incapable of being cured or is not cured within ten (10) business days of written notice thereof; or (d) By the Board of Directors of Parent: (i) if the Company breaches or fails in any material respect to perform or comply with any of its material covenants and agreements contained herein or breaches its representations and warranties in any material respect, which breach or failure is incapable of being cured or is not cured within ten (10) business days of written notice thereof; or (ii) if (a) the Board of Directors of the Company shall have failed to recommend adoption and approval of this Agreement and the Merger by the Company's stockholders or the Board of Directors of the Company shall have withdrawn or modified such recommendation; (b) the Board of Directors of the Company shall have recommended to the stockholders of the Company a Takeover Proposal other than Merger; (c) a Takeover Proposal other than the Merger shall have been announced or otherwise publicly known and the Board of Directors of the Company shall have failed to recommend against acceptance of such Takeover Proposal by its stockholders within ten (10) business days of its receipt or, if sooner, the date its existence first becomes publicly known; or (d) a tender offer or exchange offer for 15% or more of the outstanding shares of the Company Common Stock is 31 commenced (other than by Parent or an affiliate of Parent) and the Board of Directors of the Company recommends that the stockholders of the Company tender their shares in such tender or exchange offer or, within ten (10) days after such tender or exchange offer, fails to recommend against acceptance of such offer or takes no position with respect to the acceptance thereof; or (e) any Person (other than Parent or any of its Subsidiaries or affiliates) becomes a beneficial owner of more than 15% of the outstanding Shares. Section 8.2 EFFECT OF TERMINATION. In the event of the termination of this Agreement as provided in Section 8.1, written notice thereof shall forthwith be given to the other party or parties specifying the provision hereof pursuant to which such termination is made, and this Agreement shall forthwith become null and void, and there shall be no liability on the part of the Parent, Sub or the Company except (A) for fraud or for material breach of this Agreement and (B) as set forth in Section 9.1 hereof. ARTICLE IX MISCELLANEOUS Section 9.1 FEES AND EXPENSES. (a) Except as contemplated by this Agreement, including Sections 9.1(b) and 9.1(c) hereof, all costs and expenses incurred in connection with this Agreement, the Option Agreement and the consummation of the transactions contemplated hereby and thereby shall be paid by the party incurring such expenses, except that those costs and expenses incurred in connection with filing, printing and mailing the Registration Statement and the Proxy Statement/Prospectus (including filing fees related thereto) shall be shared equally by Parent and the Company. (b) If (x) the Board of Directors of Parent shall terminate this Agreement pursuant to Section 8.1(d) hereof, or (y) the Board of Directors of Parent or the Board of Directors of the Company shall terminate this Agreement pursuant to Section 8.1(b)(iii) hereof, then in any such case as described in clause (x) or (y) (each such case of termination being referred to as a "TRIGGER EVENT"), the Company shall pay to Parent (not later than simultaneously with any such Trigger Event) an amount equal to $19 million (the "TERMINATION FEE"). (c) Notwithstanding anything to the contrary in this Section 9.1, the payments provided for in this Section 9.1 shall not be deemed to be Parent's or Sub's exclusive remedy, and Parent and Sub shall have the right to pursue any remedies available to them at law or in equity; provided, however, that in the event of a termination of this Agreement pursuant to Section 8.1(d)(i) hereof as a result of a breach (other than a willful breach) of any of the Company's representations and warranties, the payments provided for in this Section 9.1 shall be Parent's or Sub's sole and exclusive remedy. Section 9.2 AMENDMENT AND MODIFICATION. Subject to applicable law, this Agreement may be amended, modified and supplemented in any and all respects, whether before or after any vote of the stockholders of the Company contemplated hereby, by written agreement of the parties hereto, by action taken by their respective Boards of Directors, at any time prior to the Closing Date with respect to any of the terms contained herein. Section 9.3 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the representations and warranties in this Agreement or in any schedule, certificate, instrument or other document delivered pursuant to this Agreement shall survive the Effective Time. Section 9.4 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed) or sent by an overnight 32 courier service, such as FedEx, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent or Sub, to: Hewlett-Packard Company 3000 Hanover Street Mail Stop 20-BQ Palo Alto, CA 94304 Attention: General Counsel Telephone: (650) 857-1501 Facsimile: (650) 857-4392 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 525 University Avenue -- Suite 220 Palo Alto, CA 91301 Attention: Kenton J. King, Esq. Telephone: (650) 470-4500 Facsimile: (650) 470-4570 and (b) if to the Company, to: Bluestone Software, Inc. 300 Stevens Drive Philadelphia, PA 19113-1597 Attention: Paul T. Porrini, Esq. Telephone: (610) 915-5005 Facsimile: (610) 915-5010 with a copy to: Pepper Hamilton LLP 1235 Westlakes Drive Berwyn, Pennsylvania 19312 Attention: Michael P. Gallagher, Esq. Telephone: (610) 640-7807 Facsimile: (610) 640-7835 Section 9.5 INTERPRETATION. When a reference is made in this Agreement to Sections, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words "INCLUDE", "INCLUDES" or "INCLUDING" are used in this Agreement they shall be deemed to be followed by the words "without limitation". The phrase "MADE AVAILABLE" in this Agreement shall mean that the information referred to has been made available if requested by the party to whom such information is to be made available. The phrases "THE DATE OF THIS AGREEMENT", "THE DATE HEREOF", and terms of similar import, unless the context otherwise requires, shall be deemed to refer to October 24, 2000. As used in this Agreement, the term "AFFILIATE(S)" shall have the meaning set forth in Rule 12b-2 of the Exchange Act. 33 Section 9.6 COUNTERPARTS. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Section 9.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF OWNERSHIP. This Agreement and the Confidentiality Agreement (including the documents and the instruments referred to herein and therein): (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and (b) except as provided in Section 6.11 hereof, are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. Section 9.8 SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Section 9.9 GOVERNING LAW. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware without giving effect to the principles of conflicts of law thereof. Section 9.10 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties, except that Sub may assign, in its sole discretion, any or all of its rights, interests and obligations hereunder to Parent or to any direct or indirect wholly owned Subsidiary of Parent. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. 34 IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above. HEWLETT-PACKARD COMPANY By: -------------------------------------- Name: -------------------------------------- Title: -------------------------------------- BETA ACQUISITION CORPORATION By: -------------------------------------- Name: -------------------------------------- Title: -------------------------------------- BLUESTONE SOFTWARE, INC. By: -------------------------------------- Name: -------------------------------------- Title: --------------------------------------
35 EX-2 3 a2029284zex-2.txt EX 2 EXHIBIT 2 STOCK OPTION AGREEMENT STOCK OPTION AGREEMENT (this "AGREEMENT"), dated October 24, 2000 between Bluestone Software, Inc., a Delaware corporation ("Issuer"), and Hewlett-Packard Company, a Delaware corporation ("Grantee"). WITNESSETH: WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of Merger, dated as of October 24, 2000 (the "Merger Agreement"), which provides, among other things, for the merger of Sub with and into Issuer with Issuer continuing as the surviving corporation upon the terms and subject to the conditions set forth in the Merger Agreement (capitalized terms used herein without definition shall have the respective meanings specified in the Merger Agreement); and WHEREAS, as a condition to Grantee's entering into the Merger Agreement and in consideration therefor, Issuer has agreed to grant Grantee the Option (as hereinafter defined). NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements set forth herein and in the Merger Agreement, and intending to be legally bound hereby, the parties hereto agree as follows: 1. GRANT OF OPTION. Issuer hereby grants to Grantee an unconditional, irrevocable option (the "Option") to purchase, subject to the terms hereof, 4,058,494 shares of fully paid and nonassessable common stock of the Issuer, par value $.001 per share ("Common Stock"), equal to and in no event exceeding nineteen and nine-tenths percent (19.9%) of the shares of Common Stock outstanding as of the date hereof, at a purchase price of $21.51 per share of Common Stock as adjusted in accordance with the provisions of Section 6 of this Agreement (such price, as adjusted if applicable, the "Option Price"). 2. EXERCISE OF OPTION. (a) Grantee may exercise the Option, in whole or part, and from time to time, if, but only if, a Triggering Event (as hereinafter defined) shall have occurred prior to the occurrence of an Option Termination Event (as hereinafter defined), provided that Grantee shall have sent the written notice of such exercise (as provided in subsection (e) of this Section 2) on or prior to the last date of the six (6) month period following such Triggering Event (the "Option Expiration Date"). (b) The term "Option Termination Event" shall mean the first day after the earliest to occur of the following dates: (i) the date on which the Effective Time of the Merger occurs; or (ii) the date of the termination of the Merger Agreement, provided that a Triggering Event has not occurred prior to or in connection with such termination of the Merger Agreement; PROVIDED, HOWEVER, that if the Option cannot be exercised as of any such date by reason of any applicable judgment, decree, law, regulation or order (each, an "Impediment"), or by reason of the waiting period under the HSR Act, then the Option Termination Event shall be delayed until the date which is thirty (30) days after such Impediment has been removed or such waiting period has expired. (c) TRIGGERING EVENT. The term "Triggering Event" shall mean any event under the Merger Agreement that, upon termination of the Merger Agreement, would entitle Grantee to receive payment of the Termination Fee from Issuer pursuant to Section 9.1(b) of the Merger Agreement, whether or not the Merger Agreement has been terminated. (d) NOTICE OF TRIGGERING EVENT. Issuer shall notify Grantee promptly in writing of the occurrence of any Triggering Event, and in any event within twenty-four (24) hours, it being 1 understood that the giving of such notice by Issuer shall not be a condition to the right of Grantee to exercise the Option or for a Triggering Event to have occurred. (e) NOTICE OF EXERCISE; CLOSING. In the event Grantee is entitled to and wishes to exercise the Option, it shall send to Issuer a written notice (the date of which being herein referred to as the "Notice Date") specifying (i) the total number of shares it will purchase pursuant to such exercise and (ii) a place and date which shall be a business day not earlier than three (3) business days nor later than sixty (60) business days from the Notice Date for the closing of such purchase (the "Closing Date"); PROVIDED, that if the closing of the purchase and sale pursuant to the Option (the "Closing") cannot be consummated, in the reasonable opinion of Grantee, by reason of any applicable judgment, decree, order, law or regulation, the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which such restriction on consummation has expired or been terminated; and provided further, without limiting the foregoing, that if, in the reasonable opinion of Grantee, prior notification to or approval of any regulatory agency is required in connection with such purchase, Grantee shall promptly file the required notice or application for approval and shall expeditiously process the same and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which any required notification periods have expired or been terminated or such approvals have been obtained and any requisite waiting period or periods shall have passed. Any exercise of the Option shall be deemed to occur on the Closing Date relating thereto. (f) PURCHASE PRICE. At the Closing referred to in subsection (e) of this Section 2, Grantee shall pay to Issuer the aggregate purchase price for the shares of Common Stock purchased pursuant to the exercise of the Option in immediately available funds by wire transfer to a bank account designated by Issuer, provided that failure or refusal of Issuer to designate such a bank account shall not preclude Grantee from exercising the Option. (g) ISSUANCE OF COMMON STOCK. At such Closing, simultaneously with the delivery of immediately available funds as provided in subsection (f) of this Section 2, Issuer shall deliver to Grantee a certificate or certificates representing the number of shares of Common Stock purchased by the Grantee and, if the Option should be exercised in part only, a new Option evidencing the rights of Grantee thereof to purchase the balance of the shares purchasable hereunder, and the Grantee shall deliver to Issuer this Agreement and a letter agreeing that Grantee will not offer to sell or otherwise dispose of such shares in violation of applicable law or the provisions of this Agreement. (h) LEGEND. Certificates for Common Stock delivered at a Closing hereunder may be endorsed with a restrictive legend that shall read substantially as follows: "THE TRANSFER AND VOTING OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO CERTAIN PROVISIONS OF AN AGREEMENT BETWEEN THE REGISTERED HOLDER HEREOF AND ISSUER AND TO RESALE RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF ISSUER AND WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY ISSUER OF A WRITTEN REQUEST THEREFOR." It is understood and agreed that: (i) the reference to the resale restrictions of the Securities Act of 1933, as amended (the "Securities Act"), in the above legend shall be removed by delivery of substitute certificate(s) without such reference if Grantee shall have delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel, in form and substance reasonably satisfactory to Issuer, to the effect that such legend is not required for purposes of the Securities Act; (ii) the reference to the provisions of this Agreement in the above legend shall be removed by delivery of substitute certificate(s) without such reference if the shares have been sold or transferred in compliance with the provisions of this Agreement and under circumstances that do not require the retention of such reference; and (iii) the legend shall be removed in its entirety if the conditions in the preceding clauses 2 (i) and (ii) and both satisfied. In addition, such certificates shall bear any other legend as may be required by law. (i) RECORD HOLDER; EXPENSES. Upon the Closing, Grantee shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of Issuer shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to Grantee or the Issuer shall have failed or refused to designate the bank account described in subsection (f) of this Section 2. Issuer shall pay all expenses, and any and all United States federal, state and local taxes and other charges that may be payable in connection with the preparation, issuance and delivery of stock certificates under this Section 2 in the name of Grantee or its assignee, transferee or designee. 3. CONDITIONS TO DELIVERY OF OPTION SHARES. The obligation of Issuer to deliver Option Shares upon any exercise of the Option is subject to the satisfaction of the following conditions: (a) All waiting periods, if any, under the HSR Act applicable to the issuance of Option Shares hereunder shall have expired or been terminated; and (b) There shall be no preliminary or permanent injunction or other order issued by any court of competent jurisdiction preventing or prohibiting such exercise of the Option or the delivery of the Option Shares in respect of such exercise. 4. RESERVATION OF SHARES. Issuer agrees: (i) that it shall at all times maintain, free from preemptive rights, sufficient authorized but unissued or treasury shares of Common Stock (and other securities issuable pursuant to Section 6) so that the Option may be exercised without additional authorization of Common Stock (or such other securities) after giving effect to all other options, warrants, convertible securities and other rights to purchase Common Stock (or such other securities); (ii) that it will not, by charter amendment or through reorganization, consolidation, merger, dissolution or sale of assets, or by any other voluntary act avoid or seek to avoid the observance or performance of any of the covenants, stipulations or conditions to be observed or performed hereunder by Issuer; (iii) promptly to take all action as may from time to time be required (including without limitation complying with all premerger notification, reporting and waiting periods in the HSR Act and the rules and regulations thereunder) in order to permit Grantee to exercise the Option and the Issuer duly and effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly to take all action provided herein to protect the rights of Grantee against dilution. 5. LOST OPTIONS. Upon receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Agreement, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like tenor and date. 6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. The number of shares of Common Stock purchasable upon the exercise of the Option shall be subject to adjustment from time to time as provided in this Section 6. (a) In the event of any change in Common Stock by reason of stock dividends, other dividends on the Common Stock payable in securities or other property (other than regular cash dividends), stock splits, merger, recapitalization, combinations, subdivisions, conversions, exchanges of shares or other similar transactions, then the type and number of shares of Common Stock purchasable upon exercise hereof shall be appropriately adjusted, and proper provision will be made in the agreements governing such transaction so that Grantee shall receive upon exercise of the Option and payment of the aggregate Option Price hereunder the number and class of shares or other securities or property that Grantee would have received in respect of Common Stock if the Option had been exercised in full immediately prior to such event, or the record date therefor, as applicable. 3 (b) Whenever the number of shares of outstanding Common Stock changes after the date hereof as a result of the events described in clause (b) hereof (but not the events described in clause (a) hereof), the Option Price shall be adjusted by multiplying the Option Price by a fraction the numerator of which shall be equal to the aggregate number of shares of Common Stock purchasable prior to the adjustment and the denominator of which shall be equal to the aggregate number of shares of Common Stock purchasable immediately after the adjustment. (c) No adjustment made in accordance with this Section 6 shall constitute or be deemed a waiver of any breach of any of Issuer's representations, warranties, covenants, agreements or obligations contained in the Merger Agreement. 7. REGISTRATION RIGHTS. (a) As used in this Agreement, "Registrable Securities" means each of the Option Shares issued to Grantee hereunder and any other securities issued in exchange for, or issued as dividends or otherwise on or in respect of, any of such Option Shares. (b) At any time or from time to time within two (2) years of the first Closing, Grantee may make a written request to Issuer for registration under and in accordance with the provisions of the Securities Act with respect to all or any part of the Registrable Securities (a "Demand Registration"). A Demand Registration may be, at the option of Grantee, a shelf registration or a registration involving an underwritten offering. As soon as reasonably practicable after Grantee's request for a Demand Registration, Issuer shall file one or more registration statements on any appropriate form with respect to all of the Registrable Securities requested to be so registered; provided that Issuer will not be required to file any such registration statement during any period of time (not to exceed sixty (60) days after such request in the case of clause (i) below or ninety (90) days in the case of clauses (ii) or (iii) below) when (i) Issuer is in possession of material non-public information which it reasonably believes would be detrimental to be disclosed at such time, (ii) Issuer is required under the Securities Act to include audited financial statements for any period in such registration statement that are not yet available for inclusion therein, or (iii) Issuer determines, in its reasonable judgment, that such registration would interfere with any financing, acquisition or other material transaction involving Issuer or any of its affiliates. Issuer shall use its best efforts to have the Demand Registration declared effective as soon as reasonably practicable after such filing and to keep the Demand Registration continuously effective for a period of at least sixty (60) days following the date on which the Demand Registration is declared effective, in the case of an underwritten offering, or at least one hundred twenty (120) days following the date on which the Demand Registration is declared effective, in the case of a shelf registration; provided that, if for any reason the effectiveness of any Demand Registration is suspended, the required period of effectiveness shall be extended by the aggregate number of days of each such suspension; and provided, further, that the effectiveness of any Demand Registration may be terminated if and when all of the Registrable Securities covered thereby shall have been sold. Grantee shall be entitled to two (2) Demand Registrations; provided, that only requests relating to a registration statement that has become effective under the Securities Act shall be counted for purposes of determining the number of Demand Registrations made. If any Demand Registration involves an underwritten offering, (i) Issuer shall have the right to select the managing underwriter, which shall be reasonably acceptable to Grantee and (ii) Issuer shall enter into an underwriting agreement in customary form. (c) If at any time within two (2) years of the first Closing, Issuer proposes to file a registration statement under the Securities Act with respect to any shares of any class of its equity securities to be sold for the account of Issuer (other than a registration statement on Form S-4 or Form S-8 or any successor form), and the registration form to be used may be used for the registration of Registrable Securities, then Issuer shall in each case give written notice of such proposed filing to Grantee at least twenty (20) days before the anticipated filing date, and Grantee shall have the right to 4 include in such registration such number of Registrable Securities as Grantee may request (such request to be made by written notice to Issuer within fifteen (15) days following Grantee's receipt from Issuer of such notice of proposed filing) (an "Incidental Registration"). Issuer shall use its commercially reasonable efforts to cause the managing underwriter of any proposed underwritten offering to permit Grantee to include in such offering all Registrable Securities requested by Grantee to be included in the registration for such offering on the same terms and conditions as any similar securities of Issuer included therein. Notwithstanding the foregoing, if the managing underwriter of such offering advises Grantee that, in the reasonable opinion of such underwriter, the amount of Registrable Securities which Grantee requests to be included in such offering would materially and adversely affect the success of such offering, then the amount of Registrable Securities to be offered shall be reduced to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such underwriter; provided that if the amount of Registrable Securities shall be so reduced, Issuer shall include in such offering (i) first all shares proposed to be included therein by the Issuer and any holder's exercising demand registration rights and (ii) second the shares requested to be included therein by Grantee pro rata with the shares intended to be included therein by any other stockholder of the Issuer. Participation by Grantee in any Incidental registration shall not affect the obligation of the Company to effect Demand Registrations under this Section 4.1. The issuer may withdraw any registration under the Securities Act that gives rise to an Incidental Registration without consent of Grantee. (d) In the event that Registrable Securities are included in a "piggyback" registration statement pursuant to Section 7(c) hereof, Grantee agrees not to effect any public sale or distribution of the issue being registered or a similar security of Issuer, or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act, during the ten (10) business days prior to, and during the ninety (90)-day period beginning on, the effective date of such registration statement (except as part of such registration), if and to the extent timely notified in writing by Issuer, in the case of a non-underwritten public offering, or by the managing underwriter, in the case of an underwritten public offering. In the event that Grantee requests a Demand Registration or if Registrable Securities are included in a "piggyback" registration pursuant to Section 7(c) hereof, Issuer agrees not to effect any public sale or distribution of the issue being registered or a similar security of Issuer, or any securities convertible into or exchangeable or exercisable for such securities, during the period from such request until ninety (90) days after the effective date of such registration statement (except as part of such registration or pursuant to a registration of securities on Form S-4 or Form S-8 or any successor form). (e) Notwithstanding anything to the contrary contained herein, in the event that Grantee requests a Demand Registration or a "piggyback" registration of Registrable Securities pursuant to Section 7(b) or 7(c) hereof, respectively, Issuer shall have the right to purchase all, but not less than all, of the Registrable Securities requested to be so registered, upon the terms and subject to the conditions set forth in this Section 7(e). If Issuer wishes to exercise such purchase right, then within two (2) business days following receipt of a request for a Demand Registration or a "piggyback" registration, Issuer shall send a written notice (a "Repurchase Notice") to Grantee specifying that Issuer wishes to exercise such purchase right, a date for the closing of such purchase, which shall not be more than ten (10) business days after delivery of such Repurchase Notice, and a place for the closing of such purchase (a "Repurchase Closing"). Upon delivery of a Repurchase Notice subject to applicable Delaware law, a binding agreement shall be deemed to exist between Grantee and Issuer providing for the purchase by Issuer of the Registrable Securities requested to be registered by Grantee, upon the terms and subject to the conditions set forth in this Section 7(e). The purchase price per share or other unit of Registrable Securities (the "Repurchase Price") shall equal the average per share or per unit closing price as quoted on the Nasdaq (or if not then quoted thereon, on such other exchange or quotation system on which the Registrable Securities are quoted) for the period of five (5) trading days ending on the trading day immediately prior to the day on which Grantee requests a 5 Demand Registration or a "piggyback" registration of the Registrable Securities which Issuer subsequently elects to purchase. Grantee's obligation to deliver any Registrable Securities at a Repurchase Closing shall be subject to the condition that, at such Repurchase Closing, Issuer shall have delivered to Grantee a certificate signed on behalf of Issuer by Issuer's chief executive officer and chief financial officer, which certificate shall be satisfactory in form and substance to Grantee, to the effect that the purchase by Issuer of such Registrable Securities (i) is permitted under applicable Delaware corporate law and under the fraudulent conveyance provisions of the federal bankruptcy code and (ii) does not violate any material agreement to which Issuer or any of its subsidiaries is a party or by which any of their properties or assets is bound. At any Repurchase Closing, Issuer shall pay to Grantee the aggregate Repurchase Price for the Registrable Securities being purchased by wire transfer of immediately available funds or by delivering to Grantee a certified or bank check payable to or on the order of Grantee in an amount equal to such aggregate Repurchase Price, and Grantee will surrender to Issuer a certificate or certificates evidencing such Registrable Securities. A purchase of Registrable Securities by Issuer pursuant to this Section 7(e) shall be considered a Demand Registration for purposes of Section 7(b) hereof. (f) The registrations effected under this Section 7 shall be effected at Issuer's expense except for underwriting commissions allocable to the Registrable Securities. Issuer shall indemnify and hold harmless Grantee, its affiliates and controlling persons and their respective officers, directors, agents and representatives from and against any and all losses, claims, damages, liabilities and expenses (including, without limitation, all out-of-pocket expenses, investigation expenses, expenses incurred with respect to any judgment and fees and disbursements of counsel and accountants) arising out of or based upon any statements contained in, or omissions or alleged omissions from, each registration statement (and related prospectus) filed pursuant to this Section 7; PROVIDED, HOWEVER, that Issuer shall not be liable in any such case to Grantee or any affiliate or controlling person of Grantee or any of their respective officers, directors, agents or representatives to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or omission or alleged omission made in such registration statement or prospectus in reliance upon, and in conformity with, written information furnished to Issuer specifically for use in the preparation thereof by Grantee such affiliate, controlling person, officer, director, agent or representative, as the case may be. 8. PUT AND CALL. (a) EXERCISE. At any time during which the Option is exercisable pursuant to Section 2 (the "Repurchase Period"), upon demand by Grantee, Grantee shall have the right to sell to Issuer (or any successor entity thereof), and Issuer (or such successor entity) shall be obligated to repurchase from Grantee (the "Put"), and upon demand by Issuer, Issuer (or any successor entity thereof) shall have the right to purchase from Grantee and Grantee shall be obligated to sell to Issuer (or any successor entity) (the "Call"), all or any portion of the Option, to the extent not previously exercised, at the price set forth in subparagraph (i) below, or all or any portion of the shares purchased by Parent pursuant thereto, at a price set forth in subparagraph (ii) below: (i) The difference between the "Market/Tender Offer Price" for shares of Common Stock as of the date (the "Notice Date") notice of exercise of the Put or Call, as the case may be, is given to the other party (defined as the higher of (A) the price per share offered as of the Notice Date pursuant to any tender or exchange offer or other Takeover Proposal which was made prior to the Notice Date and not terminated or withdrawn as of the Notice Date (the "Tender Price") or (B) the average of the closing prices of shares of Common Stock on the Nasdaq National Market for the ten trading days immediately preceding the Notice Date (the "Market Price")), and the Exercise Price, multiplied by the number of shares purchasable pursuant to the Option (or portion thereof with respect to which Grantee is exercising its rights under this Section 8), but only if the Market/Tender Offer Price is greater than the Exercise Price. 6 (ii) The Exercise Price paid by Parent for the shares acquired pursuant to the Option plus the difference between the Market/Tender Offer Price and the Exercise Price, but only if the Market/Tender Offer Price is greater than the Exercise Price, multiplied by the number of shares so purchased. (b) TENDER PRICE. For purposes of Section 8(a), the Tender Price shall be the highest price per share offered pursuant to a tender or exchange offer or other Takeover Proposal during the Repurchase Period. (c) PAYMENT AND REDELIVERY OF OPTION OR SHARES. In the event Parent or Company exercises its rights under this Section 8, Issuer shall, within ten business days of the Notice Date, pay the required amount to Grantee in immediately available funds and Grantee shall surrender to Issuer the Option or the certificates evidencing the shares purchased by Grantee pursuant thereto, and Grantee shall warrant that it owns such shares and that such shares are then free and clear of all liens, claims, charges and encumbrances of any kind or nature whatsoever. 9. REPRESENTATIONS AND WARRANTIES OF THE ISSUER. Issuer hereby represents and warrants to Grantee as follows: (a) Issuer has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Issuer and no other corporate proceedings on the part of Issuer are necessary to authorize this Agreement or to consummate the transactions so contemplated. This Agreement has been duly and validly executed and delivered by Issuer. This Agreement is the valid and legally binding obligation of Issuer, enforceable against Issuer in accordance with its terms. (b) Issuer has taken all necessary corporate action to authorize and reserve and to permit it to issue, and at all times from the date hereof through the termination of this Agreement in accordance with its terms will have reserved for issuance upon the exercise of the Option, that number of shares of Common Stock equal to the maximum number of shares of Common Stock at any time and from time to time issuable hereunder, and all such shares, upon issuance pursuant hereto, will be duly authorized, validly issued, fully paid, nonassessable, and will be delivered free and clear of all claims, liens, encumbrance and security interests and not subject to any preemptive rights. (c) The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not (i) conflict with, or result in any violation or breach of any provision of the Certificate of Incorporation, as amended to date, or Bylaws, as amended to date, of Issuer, (ii) result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any benefit) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, contract or other agreement, instrument or obligation to which the Issuer or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound, or (iii) conflict or violate any permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Issuer or any of its Subsidiaries or any of its or their properties or assets, except in the case of (ii) and (iii) for any such violations, breaches, defaults, terminations, cancellations, accelerations or conflicts which could not, individually or in the aggregate, have a material adverse effect (as defined in the Merger Agreement) on Issuer and its Subsidiaries, taken as a whole, or impair the ability of Issuer to consummate the transactions contemplated by this Agreement. (d) The Issuer has taken, and will in the future take, all steps necessary to irrevocably exempt the transactions contemplated by this Agreement from any applicable state takeover law and from any applicable charter or contractual provision containing change of control or anti-takeover provisions. 7 10. REPRESENTATIONS AND WARRANTIES OF THE GRANTEE. Grantee hereby represents and warrants to Issuer as follows: (a) Grantee has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of Grantee and no other corporate proceedings on the part of Grantee are necessary to authorize this Agreement or to consummate the transactions so contemplated. This Agreement has been duly and validly executed and delivered by Grantee. This Agreement is the valid and legally binding obligation of Grantee, enforceable against Grantee in accordance with its terms. (b) The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not (i) conflict with, or result in any violation or breach of any provision of the Certificate of Incorporation, as amended to date, or Bylaws, as amended to date, of Grantee, (ii) result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any benefit) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, contract or other agreement, instrument or obligation to which the Grantee or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound, or (iii) conflict or violate any permit, concession, franchise, license, judgment, order, degree, statute, law, ordinance, rule or regulation applicable to Grantee or any of its Subsidiaries or any of its or their properties or assets, except in the case of (ii) and (iii) for any such violations, breaches, defaults, terminations, cancellations, accelerations or conflicts which could not, individually or in the aggregate, have a material adverse effect (as defined in the Merger Agreement) on Grantee and its Subsidiaries, taken as a whole, or impair the ability of Grantee to consummate the transactions contemplated by this Agreement. 11. GRANTEE COMPLIANCE. Grantee shall acquire the Option Shares for investment purposes only and not with a view to any distribution thereof in violation of the Securities Act, and shall not sell any Option Shares purchased pursuant to this Agreement except in compliance with the Securities Act. 12. ASSIGNMENT OF OPTION BY GRANTEE. Neither of the parties hereto may assign any of its rights or obligations under this Option Agreement or the Option created hereunder to any other person, without the express written consent of the other party. 13. LIMITATION OF GRANTEE PROFIT. (a) Notwithstanding any other provision of this Agreement, in no event shall the Grantee's Total Profit (as hereinafter defined) exceed $19 million. (b) As used herein, the term "Total Profit" shall mean the sum of (before taxes) (i) the net cash amounts received by Grantee pursuant to Section 8 and (ii) the amount received by Grantee pursuant to Section 9.1(b) of the Merger Agreement. 14. APPLICATION FOR REGULATORY APPROVAL. Each of Grantee and Issuer will use its commercially reasonable efforts to make all filings with, and to obtain consents of, all third parties and governmental authorities necessary to the consummation of the transactions contemplated by this Agreement, including without limitation making application to list the shares of Common Stock issuable hereunder on the Nasdaq National Market upon official notice of issuance. 15. SPECIFIC PERFORMANCE. The parties hereto acknowledge that damages would be an inadequate remedy for a breach of this Agreement by either party hereto and that the obligations of 8 the parties hereto shall be enforceable by either party hereto through injunctive or other equitable relief. 16. SEPARABILITY OF PROVISIONS. If any term, provision, covenant or restriction contained in this Agreement is held by a court or a federal or state regulatory agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions and covenants and restrictions contained in this Agreement shall remain in full force and effect, and shall in no way be affected, impaired or invalidated. 17. NOTICES. All notices, claims, demands and other communications hereunder shall be deemed to have been duly given or made when delivered in person, by overnight courier or by facsimile at the respective addresses of the parties set forth in the Merger Agreement. 18. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 19. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which will be deemed to be an original, but all of which shall constitute one and the same agreement. 20. EXPENSES. Except as otherwise expressly provided herein or in the Merger Agreement, each of the parties hereto shall bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants and counsel. 21. ENTIRE AGREEMENT. Except as otherwise expressly provided herein or in the Merger Agreement, this Agreement contains the entire agreement between the parties with respect to the transactions contemplated hereunder and supersedes all prior arrangements or understandings with respect thereof, written or oral. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement, expressed or implied, is intended to confer upon any party, other than the parties hereto, and their respective successors except as assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein. Any provision of this Agreement may be waived only in writing at any time by the party that is entitled to the benefits of such provision. This Agreement may not be modified, amended, altered or supplemented except upon the execution and delivery of a written agreement executed by the parties hereto. 22. FURTHER ASSURANCES. In the event of any exercise of the Option by Grantee, Issuer and Grantee shall execute and deliver all other documents and instruments and take all other action that may be reasonably necessary in order to consummate the transactions provided for by such exercise. Nothing contained in this Agreement shall be deemed to authorize Issuer or Grantee to breach any provision of the Merger Agreement. 23. HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 9 IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above. BLUESTONE SOFTWARE, INC. By: -------------------------------------------- Name: ----------------------------------------- Title: ------------------------------------------ HEWLETT-PACKARD COMPANY By: -------------------------------------------- Name: ----------------------------------------- Title: ------------------------------------------
10 EX-3 4 a2029284zex-3.txt EX 3 EXHIBIT 3 VOTING AGREEMENT VOTING AGREEMENT, dated as of October 24, 2000 (this "AGREEMENT"), among the stockholders listed on the signature pages hereto (collectively, the "STOCKHOLDERS" and each individually, a "STOCKHOLDER"), Bluestone Software, Inc., a Delaware corporation (the "COMPANY"), and Hewlett-Packard Company, a Delaware corporation ("PARENT"). Capitalized terms used and not otherwise defined herein shall have the respective meanings assigned to them in the Merger Agreement referred to below. WHEREAS, as of the date hereof, each Stockholder owns of record and beneficially shares of capital stock of the Company, as set forth opposite such Stockholder's name on Schedule I hereto (such shares, or any other voting or equity of securities of the Company hereafter acquired by any Stockholder prior to the termination of this Agreement, being referred to herein collectively as the "SHARES"); WHEREAS, concurrently with the execution of this Agreement, Parent and the Company are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "MERGER AGREEMENT"), pursuant to which, upon the terms and subject to the conditions thereof, a subsidiary of Parent will be merged with and into the Company, and the Company will be the surviving corporation (the "MERGER"); and WHEREAS, as a condition to the willingness of Parent to enter into the Merger Agreement, Parent has required that the Stockholders agree, and in order to induce Parent to enter into the Merger Agreement, the Stockholders are willing to agree, to vote in favor of adopting the Merger Agreement and approving the Merger, upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereby agree, severally and not jointly, as follows: SECTION 1. DEFINITIONS. For purposes of this Voting Agreement: (a) As used in this Agreement, "TAKEOVER PROPOSAL" shall mean any tender or exchange offer involving the Company or any Subsidiary of the Company, any proposal for a merger, consolidation or other business combination involving the Company or any Subsidiary of the Company, any proposal or offer to acquire in any manner an interest in excess of 15% of the outstanding equity securities of, or a substantial portion of the business or assets of, the Company or any Subsidiary of the Company, any proposal or offer with respect to any recapitalization or restructuring with respect to the Company or any Subsidiary of the Company or any proposal or offer with respect to any other transaction similar to any of the foregoing with respect to such the Company or any Subsidiary of the Company, other than pursuant to the transactions to be effected pursuant to the Merger Agreement. (b) "BENEFICIALLY OWN" or "BENEFICIAL OWNERSHIP" with respect to any securities shall mean having "beneficial ownership" of such securities (as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")), including pursuant to any agreement, arrangement or understanding, whether or not in writing; provided that such beneficial ownership shall be limited to securities (not including those that the Person (as defined in the Exchange Act) has a right to acquire within 60 days unless so acquired) over which such Person has sole or shared voting power. Without duplicative counting of the same securities by the same holder, securities Beneficially Owned by a Person shall include securities Beneficially Owned by all other Persons with whom such Person would constitute a "group" within the meaning of Section 13(d)(3) of the Exchange Act and over which such Person has sole or shared voting power. 1 SECTION 2. VOTING OF SHARES. (a) Each Stockholder covenants and agrees that until the termination of this Agreement in accordance with the terms hereof, at the meeting of the Company's stockholders to consider the Merger Agreement and the Merger or any other meeting of the stockholders of the Company, however called, and in any action by written consent of the stockholders of the Company, such Stockholder will vote, or cause to be voted, all of his, her or its respective Shares (i) in favor of adoption of the Merger Agreement and approval of the Merger contemplated by the Merger Agreement, as the Merger Agreement may be modified or amended from time to time in a manner not adverse to such Stockholder, and (ii) against any other Takeover Proposal. (b) Each Stockholder hereby irrevocably grants to, and appoints, Parent, and any individual designated in writing by it, and each of them individually, as its proxy and attorney-in-fact (with full power of substitution), for and in its name, place and stead, to vote his, her or its Shares at any meeting of the stockholders of the Company called with respect to any of the matters specified in, and in accordance and consistent with this Section 2. Each Stockholder understands and acknowledges that Parent is entering into the Merger Agreement in reliance upon the Stockholder's execution and delivery of this Agreement. Each Stockholder hereby affirms that the irrevocable proxy set forth in this Section 2(b) is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Stockholder under this Agreement. Except as otherwise provided for herein, each Stockholder hereby (i) affirms that the irrevocable proxy is coupled with an interest and may under no circumstances be revoked, (ii) ratifies and confirms all that the proxies appointed hereunder may lawfully do or cause to be done by virtue hereof and (iii) affirms that such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of Section 212(e) of the Delaware General Corporation Law. Notwithstanding any other provisions of this Agreement, the irrevocable proxy granted hereunder shall automatically terminate upon the termination of this Agreement. SECTION 3. TRANSFER OF SHARES. Each Stockholder covenants and agrees that such Stockholder will not directly or indirectly, (a) sell, assign, transfer (including by merger, testamentary disposition, interspousal disposition pursuant to a domestic relations proceeding or otherwise by operation of law), pledge, encumber or otherwise dispose of any of the Shares, (b) deposit any of the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares or grant any proxy or power of attorney with respect thereto which is inconsistent with this Agreement or (c) enter into any contract, option or other arrangement or undertaking with respect to the direct or indirect sale, assignment, transfer (including by merger, testamentary disposition, interspousal disposition pursuant to a domestic relations proceeding or otherwise by operation of law) or other disposition of any Shares. Notwithstanding the foregoing, any Stockholder may sell, assign or transfer all or any part of its Shares to any director, officer, stockholder, partner or affiliate of such Stockholder provided that the transferee thereof agrees to and becomes bound by this Agreement as a Stockholder by executing a counterpart hereof. SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each Stockholder on its own behalf hereby severally (but not jointly) represents and warrants to Parent with respect to itself and its, his or her ownership of the Shares as follows: (a) OWNERSHIP OF SHARES. On the date hereof, the Shares are Beneficially Owned by Stockholder or its nominee. Stockholder has full voting power, with respect to all of the Shares. Such Stockholder is the record and Beneficial Owner. (b) POWER, BINDING AGREEMENT. Stockholder has the legal capacity, power and authority to enter into and perform all of its obligations, under this Agreement. The execution, delivery and performance of this Agreement by Stockholder will not violate any agreement to which Stockholder is a party, including, without limitation, any voting agreement, stockholders' agreement, partnership 2 agreement or voting trust other than such violations which individually or in the aggregate do not materially impair the ability of Stockholder to perform its obligations hereunder. This Agreement has been duly and validly executed and delivered by Stockholder and constitutes a valid and binding obligation of Stockholder, enforceable against Stockholder in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). (c) NO CONFLICTS. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby will not, conflict with or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, any provision of any loan or credit agreement, note, bond, mortgage, indenture, lease, or other agreement, instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Stockholder or any of its properties or assets, other than such conflicts, violations or defaults or terminations, cancellations or accelerations which individually or in the aggregate do not materially impair the ability of Stockholder to perform its obligations hereunder. SECTION 5. NO SOLICITATION. Prior to the termination of this Agreement in accordance with its terms, each Stockholder agrees, in its individual capacity as a stockholder of the Company, that it will not, nor will it authorize or permit any of its employees, agents and representatives to, directly or indirectly, (a) initiate, solicit or encourage any inquiries or the making of any Takeover Proposal, (b) enter into any agreement with respect to any Takeover Proposal, or (c) participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Takeover Proposal, except to the extent that any such action is permitted by Section 6.6(a) of the Merger Agreement. SECTION 6. TERMINATION. This Agreement, including without limitation the representations and warranties in Section 4, shall terminate upon the earliest to occur of (i) the Effective Time or (ii) any termination of the Merger Agreement in accordance with the terms thereof; provided that no such termination shall relieve any party of liability for a willful breach hereof prior to termination. SECTION 7. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy at law or in equity. SECTION 8. FIDUCIARY DUTIES. Each Stockholder is signing this Agreement solely in such Stockholder's capacity as an owner of his, her or its respective Shares, and nothing herein shall prohibit, prevent or preclude such Stockholder or its affiliate from taking or not taking any action in his or her capacity as an officer or director of the Company, including the recommendation of the Merger Agreement, to the extent not in breach of the Merger Agreement. SECTION 9. MISCELLANEOUS. (a) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, between the parties with respect thereto. This Agreement may not be amended, modified or rescinded except by an instrument in writing signed by each of the parties hereto. (b) If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good 3 faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in a mutually acceptable manner in order that the terms of this Agreement remain as originally contemplated to the fullest extent possible. (c) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to the principles of conflicts of law thereof. (d) This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. (e) The obligations and liabilities of the Stockholders under this Agreement shall be several and not joint. 4 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be signed individually or by its respective duly authorized officer as of the date first written above. HEWLETT-PACKARD COMPANY By: -------------------------------------------- Name: ----------------------------------------- Title: ------------------------------------------ BLUESTONE SOFTWARE, INC. By: -------------------------------------------- Name: ----------------------------------------- Title: ------------------------------------------ STOCKHOLDERS: Signature -------------------------------------- Print Name: ------------------------------------ Signature -------------------------------------- Print Name: ------------------------------------ Signature -------------------------------------- Print Name: ------------------------------------ Signature -------------------------------------- Print Name: ------------------------------------ Signature -------------------------------------- Print Name: ------------------------------------ Signature -------------------------------------- Print Name: ------------------------------------ Signature -------------------------------------- Print Name: ------------------------------------ Signature -------------------------------------- Print Name: ------------------------------------
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