8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report
(Date of earliest event reported): February 18, 2004

OneSource Information Services, Inc.

(Exact Name of Registrant as Specified in Charter)

Delaware
(State or Other
Jurisdiction of
Incorporation) 000-25849
(Commission
File Number) 04-3204522
(IRS Employer
Identification No.)

300 Baker Avenue
Concord, MA
(Address of Principal Executive Offices) 01742
(Zip Code)

Registrant’s telephone number, including area code: (978) 318-4300

(Former name or former address, if changed since last report)

TABLE OF CONTENTS

	Item 5. Other Events and Required FD Disclosure.
	Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
SIGNATURES
EXHIBIT INDEX
EX-2.1 Agreement and Plan of Merger
EX-4.1 Amendment No. 1 to Rights Agreement

Item 5. Other Events and Required FD Disclosure.

     On February 18, 2004, OneSource Information Services, Inc. (“OneSource”) announced that it had entered into an Agreement and Plan of Merger (the “Merger Agreement”), dated as of February 18, 2004, by and among OneSource, VAC-OS Holdings LLC, a Delaware limited liability company (“Parent”), and OS Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Sub”). Parent and Merger Sub are affiliates of ValueAct Capital and its affiliates. In connection with the completion of the transaction, Merger Sub will be merged with and into OneSource with OneSource becoming a wholly-owned subsidiary of Parent. Under the Merger Agreement, each share of common stock of OneSource, par value $0.01 per share (a “Common Share”) outstanding at the time of the closing of the Merger (other than shares held by ValueAct Capital and its affiliates), will be converted into the right to receive $8.40 per share in cash. ValueAct Capital and its affiliates currently hold approximately a 32% ownership interest in OneSource, according to its most recent filing with the Securities and Exchange Commission (SEC).

     The Merger is subject to the satisfaction of customary closing conditions, including the expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the Merger and the Merger Agreement being approved by the holders of a majority of OneSource’s outstanding Common Shares. This description of the Merger Agreement and the transactions contemplated thereby is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.

     On February 17, 2004, the Company and American Stock Transfer & Trust Company, as rights agent (the “Rights Agent”) entered into Amendment No. 1 (the “Amendment”) to the Rights Agreement, dated as of October 7, 2003 (the “Rights Agreement”), between the Company and the Rights Agent (filed as Exhibit 4.1 to Form 8—K dated October 5, 2003, No. 000-25849 and incorporated herein by reference). Pursuant to the terms of the Amendment, ValueAct and its affiliates (including Parent and Merger Sub) are excepted out of the definition of “Acquiring Person” by virtue of the transactions contemplated by the Merger Agreement being an “Approved Transaction” under the terms of the Rights Agreement. This description of the Amendment is qualified in its entirety by reference to the full text of the Amendment, which is attached hereto as Exhibit 4.1 and is incorporated herein by reference.

Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

     (c) Exhibits.

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated February 18, 2004
4.1	Amendment No. 1 to the Rights Agreement, dated as of February 17, 2004

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned authorized officer.

	ONESOURCE INFORMATION SERVICES, INC.
Date: February 18, 2004	By:	/s/ Martin Kahn
		Martin Kahn Chief Executive Officer

EXHIBIT INDEX

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated February 18, 2004
4.1	Amendment No. 1 to the Rights Agreement, dated as of February 17, 2004

EX-2.1 3 b495578kexv2w1.txt EX-2.1 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER BY AND AMONG VAC-OS HOLDINGS LLC, OS MERGER SUB, INC. and ONESOURCE INFORMATION SERVICES, INC. As of February 18, 2004 TABLE OF CONTENTS

PAGE ARTICLE I THE MERGER................................................ 1 1.1. The Merger................................................ 1 1.2. Effective Time; Closing................................... 1 1.3. Effects of the Merger..................................... 2 1.4. Certificate of Incorporation and Bylaws................... 2 1.5. Directors and Officers of the Surviving Corporation....... 2 ARTICLE II CONVERSION OF SECURITIES.................................. 2 2.1. Conversion of Capital Stock............................... 2 2.2. Exchange of Certificates.................................. 2 2.3. Dissenting Shares......................................... 4 2.4. Stock Option Plans........................................ 4 2.5. Company ESPP Plans........................................ 5 2.6. Withholding Rights........................................ 5 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............. 5 3.1. Organization and Standing................................. 5 3.2. Subsidiaries.............................................. 5 3.3. Corporate Power and Authority............................. 6 3.4. Capitalization of the Company............................. 6 3.5. Conflicts; Consents and Approvals......................... 7 3.6. No Material Adverse Effect................................ 7 3.7. Company SEC Documents..................................... 8 3.8. Taxes..................................................... 8 3.9. Compliance with Law....................................... 10 3.10. Intellectual Property..................................... 10 3.11. Title to Properties....................................... 14 3.12. Litigation................................................ 14 3.13. Proxy Statements.......................................... 15 3.14. Brokerage and Finder's Fees; Expenses..................... 15 3.15. Employee Benefit Plans.................................... 15 3.16. Contracts................................................. 18 3.17. Labor Matters............................................. 19 3.18. Undisclosed Liabilities................................... 20 3.19. Operation of the Company's Business; Relationships........ 20 3.20. Permits; Compliance....................................... 20 3.21. Environmental Matters..................................... 21 3.22. Opinion of Financial Advisor.............................. 21 3.23. Special Committee and Board Recommendation................ 22 3.24. Vote Required............................................. 22 3.25. Related Party Transactions................................ 22

3.26. Takeover Statutes; Rights Plan............................ 22 3.27. NASDAQ Qualification...................................... 22 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB............................................ 22 4.1. Organization and Standing................................. 22 4.2. Subsidiaries.............................................. 23 4.3. Power and Authority....................................... 23 4.4. Proxy Statement........................................... 23 4.5. Financing................................................. 23 4.6. Assets and Revenue........................................ 23 ARTICLE V COVENANTS................................................. 24 5.1. Mutual Covenants.......................................... 24 5.2. Covenants of Parent....................................... 26 5.3. Covenants of the Company.................................. 27 ARTICLE VI CONDITIONS................................................ 32 6.1. Conditions to the Obligations of Each Party............... 32 6.2. Conditions to Obligations of the Company.................. 32 6.3. Conditions to Obligations of Parent....................... 33 ARTICLE VII TERMINATION AND AMENDMENT................................. 33 7.1. Termination............................................... 33 7.2. Effect of Termination..................................... 34 7.3. Termination Fee; Expenses................................. 35 7.4. Amendment................................................. 35 7.5. Extension; Waiver......................................... 36 ARTICLE VIII MISCELLANEOUS............................................. 36 8.1. No Survival of Representations and Warranties............. 36 8.2. Notices................................................... 36 8.3. Interpretation; Definitions............................... 36 8.4. Counterparts.............................................. 37 8.5. Entire Agreement.......................................... 37 8.6. Third Party Beneficiaries................................. 38 8.7. Governing Law............................................. 38 8.8. Specific Performance...................................... 38 8.9. Assignment................................................ 38 8.10. Expenses.................................................. 38 ii AGREEMENT AND PLAN OF MERGER This Agreement and Plan of Merger (this "Agreement") is made and entered into as of the 18th day of February, 2004, by and among VAC-OS Holdings LLC, a Delaware limited liability company ("Parent"), OS Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Parent ("Merger Sub") and OneSource Information Services, Inc., a Delaware corporation (the "Company"). BACKGROUND A. The Boards of Directors of Parent and Merger Sub and the Special Committee and the Board of Directors of the Company (with Peter H. Kamin abstaining) have each approved the merger of Merger Sub with and into the Company, with the Company as the surviving corporation (the "Merger"), upon the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware (the "DGCL"). B. The Special Committee of the Board of Directors of the Company (the "Special Committee") and the Board of Directors of the Company (with Peter H. Kamin abstaining) have each approved this Agreement and the transactions contemplated hereby and declared the advisability and resolved to recommend approval of the Merger and approval and adoption of this Agreement by the stockholders of the Company, subject to the terms of this Agreement. TERMS In consideration of the foregoing and the mutual representations, warranties, covenants and agreements hereinafter set forth, the parties hereto agree as follows: ARTICLE I THE MERGER 1.1. The Merger. Upon the terms and subject to the conditions hereof, and in accordance with the provisions of the DGCL, at the Effective Time (as defined in Section 1.2), Merger Sub shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving corporation of the Merger (the "Surviving Corporation"). 1.2. Effective Time; Closing. Concurrently with the Closing (as hereinafter defined), the parties shall cause the Merger to be consummated by filing with the Secretary of State of the State of Delaware (the "Secretary of State") a certificate of merger (the "Certificate of Merger") in accordance with Section 251 of the DGCL. The Merger shall become effective (the "Effective Time") when the Certificate of Merger has been filed with the Secretary of State or at such later time as shall be agreed upon by the parties and specified in the Certificate of Merger. The closing of the transactions contemplated hereby (the "Closing") shall be held at the offices of Dechert LLP, 200 Clarendon Street, 27th Floor, Boston, Massachusetts, at 10:00 a.m. Boston time on the third business day after satisfaction or (to the extent permitted by law) waiver of those conditions set forth in Article VI (other than any of those conditions that by their terms are to be satisfied at the Closing, but subject to the satisfaction or (to the extent permitted by law) waiver of those conditions), or at such other place or time or on such other date as Parent and the Company may agree. The date on which the Closing takes place is referred to herein as the "Closing Date"). 1.3. Effects of the Merger. From and after the Effective Time, the Merger shall have the effects set forth in the DGCL. 1.4. Certificate of Incorporation and Bylaws. At the Effective Time, the Certificate of Incorporation and Bylaws of the Company, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation and Bylaws, respectively, of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. 1.5. Directors and Officers of the Surviving Corporation. The directors and officers of Merger Sub immediately prior to the Effective Time shall be the directors and officers of the Surviving Corporation immediately following the Effective Time. ARTICLE II CONVERSION OF SECURITIES 2.1. Conversion of Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or their respective stockholders: (a) Subject to the other provisions of this Article II, each share of Company Common Stock (as defined in Section 3.4) issued and outstanding immediately prior to the Effective Time (other than any shares of Company Common Stock to be cancelled pursuant to Section 2.1(b) and Dissenting Common Stock (as defined in Section 2.3) shall be converted into and represent the right to receive $8.40 in cash, without interest (the "Merger Consideration"). Subject to the other provisions of this Article II, as of the Effective Time, each such share of Company Common Stock shall, by virtue of the Merger, cease to be outstanding and shall be cancelled and retired, and each holder of a certificate representing any such shares shall thereafter cease to have any rights with respect thereto except the right to receive the Merger Consideration. (b) Each share of capital stock of the Company that is held in the treasury of the Company or directly owned by the Company, any subsidiary of the Company, Parent or Merger Sub immediately prior to the Effective Time shall be cancelled and retired and shall cease to exist and no Merger Consideration or any other payment shall be made in respect thereof. -2- 2.2. Exchange of Certificates. (a) Paying Agent. Prior to the Effective Time, Parent shall deposit, or shall cause to be deposited, with City National Bank or such other paying agent as may be designated by Parent and reasonably acceptable to the Company (the "Paying Agent"), for the benefit of the holders of Company Common Stock, for exchange in accordance with this Section 2.2, cash in an amount required to be paid pursuant to this Article II (such cash being hereinafter referred to as the "Exchange Fund"). (b) Exchange Procedures. After the Effective Time (and in any event within two business days), Parent shall cause the Paying Agent to mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding shares of Company Common Stock (the "Certificates") (i) a letter of transmittal in customary form which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in such form and have such other provisions as Parent and the Company may reasonably agree prior to the Effective Time and (ii) instructions for effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent, together with a duly executed letter of transmittal, and such other documents as may reasonably be required by the Paying Agent, the holder of such Certificate shall be entitled to receive in exchange therefor, the amount of cash which the number of shares of Company Common Stock previously represented by such Certificate shall have been converted into the right to receive pursuant to this Article II and the Certificate so surrendered shall forthwith be cancelled. No interest will be paid or accrued on the Merger Consideration. In the event of a transfer of ownership of shares of Company Common Stock which is not registered on the transfer records of the Company, payment of the Merger Consideration may be issued to such transferee if the Certificate representing such shares of Company Common Stock held by such transferee is presented to the Paying Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid. (c) No Further Ownership Rights in Company Common Stock. The Merger Consideration paid upon surrender of Certificates in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Common Stock formerly represented thereby, and there shall be no further registration of transfers on the stock transfer books of the Company of shares of Company Common Stock outstanding immediately prior to the Effective Time. All Certificates presented to the Surviving Corporation after the Effective Time for any reason shall be cancelled against delivery of cash to the holder thereof as provided in this Section 2.2. (d) Termination of Exchange Fund. Any portion of the Exchange Fund which remains undistributed to holders of Certificates 180 days after the Effective Time shall be delivered to Parent, upon demand therefor, and holders of Certificates who have not theretofore complied with this Section 2.2 shall thereafter look only to Parent for the Merger Consideration payable in respect of such shares of Company Common Stock, without any interest thereon. -3- (e) No Liability. None of Parent, Merger Sub, the Surviving Corporation or the Paying Agent shall be liable to any person in respect of any cash from the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Certificates shall not have been surrendered prior to two years after the Effective Time of the Merger (or immediately prior to such earlier date on which any Merger Consideration would otherwise escheat to or become the property of any Governmental Authority (as defined in Section 3.5)), any such Merger Consideration shall, to the extent permitted by Applicable Laws, become the property of Parent, free and clear of all claims or interest of any person previously entitled thereto. (f) Investment of Exchange Fund. The Paying Agent shall invest the cash in the Exchange Fund, as directed by Parent, on a daily basis. Any interest and other income resulting from such investments shall be paid to Parent upon termination of the Exchange Fund pursuant to this Article II. (g) Missing Certificates. In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact and providing an appropriate indemnity or surety bond by the person claiming such Certificate to be lost, stolen or destroyed, the Paying Agent will deliver in exchange for such lost, stolen or destroyed Certificate the applicable Merger Consideration with respect thereto. 2.3. Dissenting Shares. Notwithstanding any provision of this Agreement to the contrary, if and to the extent required by the DGCL, shares of Company Common Stock which are issued and outstanding immediately prior to the Effective Time and which are held by holders of such shares of Company Common Stock who have properly exercised appraisal rights with respect thereto (the "Dissenting Common Stock") in accordance with Section 262 of the DGCL, shall not be converted into the right to receive the Merger Consideration, and holders of such shares of Dissenting Common Stock shall be entitled to receive payment of the appraised value of such shares of Dissenting Common Stock in accordance with the provisions of Section 262 of the DGCL unless and until such holders fail to perfect or effectively withdraw or otherwise lose their rights to appraisal and payment under the DGCL. If, after the Effective Time, any such holder fails to perfect or effectively withdraws or loses such right, such shares of Dissenting Common Stock shall thereupon be treated as if they had been converted into and have become exchangeable for, at the Effective Time, the right to receive the Merger Consideration, without any interest thereon. The Company shall give Parent prompt notice of any demands received by the Company for appraisals of shares of Dissenting Common Stock. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any demands for appraisals or offer to settle or settle any such demands, and Parent shall have the right to participate in all negotiations and proceedings with respect to such demands. 2.4. Stock Option Plans. As soon as practicable following the date of this Agreement, but in any event no later than thirty (30) days before the Closing Date, the board of directors of the Company (or, if appropriate, any committee administering the stock option plans of the Company) shall adopt such resolutions or use all reasonable efforts to take such other actions as are required to provide that each then outstanding stock option (whether or not vested) to purchase shares of Company Common Stock (each, a "Company Stock Option") heretofore -4- granted under any stock option or other stock-based incentive plan, program or arrangement of the Company (collectively, the "Company Stock Option Plans") shall be cancelled immediately prior to the Effective Time in exchange for payment of an amount in cash equal to the product of (i) the number of unexercised shares of Company Common Stock subject to such Company Stock Option immediately prior to the Effective Time and (ii) the excess, if any, of the Merger Consideration over the per share exercise price of such Company Stock Option. 2.5. Company ESPP Plans. As soon as practicable following the date of this Agreement, but in any event no later than February 29, 2004, the board of directors of the Company (or, if appropriate, a committee administering the stock plans of the Company) shall adopt such resolutions or use all reasonable efforts to take such other actions as are required to terminate the Company's 1999 Employee Stock Purchase Plan (the "Company ESPP") effective as of February 29, 2004 so that no more stock options may be granted thereunder on or after March 1, 2004. Stock options granted under the Company ESPP with respect to the Payment Period (as such term is defined in the Company ESPP) that ends on February 29, 2004 shall be exercised in accordance with the terms of the Company ESPP and subject to the terms of the Company ESPP. 2.6. Withholding Rights. Parent or the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Company Common Stock such amounts as Parent or the Paying Agent is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended, (the "Code"), or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by Parent or the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Company Common Stock in respect of which such deduction and withholding was made by Parent or the Paying Agent. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY In order to induce Parent to enter into this Agreement, the Company hereby represents and warrants to Parent as follows: 3.1. Organization and Standing. Each of the Company and each subsidiary (as defined in Section 8.3) of the Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation with full corporate power and authority to own, lease, use and operate its properties and to conduct its business as and where now owned, leased, used, operated and conducted. Each of the Company and each subsidiary of the Company is duly qualified to do business and in good standing in each jurisdiction in which the nature of the business conducted by it or the property it owns, leases or operates requires it to so qualify, except where the failure to be so qualified or in good standing in such jurisdiction individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect (as defined in Section 8.3) on the Company. The Company is not in default in the performance, observance or fulfillment of any provision of its Certificate of Incorporation or its -5- Bylaws, each as in effect on the date hereof (the "Company Certificate" and the "Company Bylaws," respectively). The Company has heretofore furnished to Parent a complete and correct copy of the Company Certificate and the Company Bylaws. 3.2. Subsidiaries. The Company does not own, directly or indirectly, any equity or other ownership interest in any corporation, partnership, joint venture or other entity or enterprise, except for the subsidiaries and other entities set forth in Section 3.2 to the Company Disclosure Schedule. Except as set forth in Section 3.2 to the Company Disclosure Schedule, the Company is not subject to any obligation or requirement to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any entity or enterprise that is not wholly-owned by the Company. Except as set forth in Section 3.2 to the Company Disclosure Schedule, the Company owns directly or indirectly each of the outstanding shares of capital stock (or other ownership interests having by their terms ordinary voting power to elect a majority of directors or others performing similar functions with respect to such subsidiary) of each of the Company's subsidiaries, free and clear of all liens, pledges, security interests, claims or other encumbrances. Each of the outstanding shares of capital stock of each of the Company's subsidiaries is duly authorized, validly issued, fully paid and nonassessable. Other than as set forth in Section 3.2 to the Company Disclosure Schedule, there are no outstanding subscriptions, options, warrants, puts, calls, agreements, understandings, claims or other commitments or rights of any type relating to the issuance, sale, repurchase or transfer of any capital stock or other securities of any subsidiary of the Company, nor are there outstanding any securities which are convertible into or exchangeable for any shares of capital stock or other securities of any subsidiary of the Company, and neither the Company nor any subsidiary of the Company has any obligation of any kind to issue any additional shares of capital stock or other securities of any subsidiary of the Company or to pay for or repurchase any shares of capital stock or other securities of any subsidiary of the Company or any predecessor thereof. 3.3. Corporate Power and Authority. The Company has all requisite corporate power and authority to enter into and deliver this Agreement, to perform its obligations hereunder and, subject to approval of the Merger and the transactions contemplated hereby by the stockholders of the Company, to consummate the transactions contemplated by this Agreement. The execution, delivery and performance of this Agreement by the Company have been duly and validly authorized by all necessary corporate action on the part of the Company, other than the approval of this Agreement by the holders of a majority of the outstanding shares of Company Common Stock entitled to vote in accordance with the DGCL and the Company's Certificate of Incorporation and Bylaws (the "Requisite Company Vote"). The Special Committee and the Board of Directors of the Company have each approved this Agreement and the transactions contemplated hereby and declared the advisability thereof. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company enforceable against it in accordance with its terms. 3.4. Capitalization of the Company. The authorized capital stock of the Company consists solely of (a) 35,000,000 shares of common stock, par value $0.01 per share ("Company Common Stock"), of which 11,635,932 shares were issued and outstanding as of January 31, 2004 and (b) 1,000,000 shares of preferred stock, par value $0.01 per share, 100,000 shares of which have been designated as Series A Junior Participating Preferred Stock, and none of which -6- are issued and outstanding on the date hereof. As of January 31, 2004, (i) 1,085,847 shares of Company Common Stock remain available for issuance pursuant to the Company Stock Option Plans and 2,523,027 shares of Company Common Stock are subject to outstanding Company Stock Options and (ii) 1,651,521 shares of Company Common Stock were held by the Company in its treasury. Except as set forth in this Section 3.4 and the preferred stock purchase rights (the "Rights") issued pursuant to the Rights Agreement dated as of October 7, 2003 between the Company and American Stock Transfer & Trust Company, as amended by Amendment No. 1 to the Rights Agreement dated as of February 17, 2004 (the "Rights Plan"), there are not any options, warrants, calls, subscriptions, convertible securities or other rights, or other agreements obligating the Company to issue, transfer or sell any shares of capital stock of, or other equity interests in, the Company. All issued and outstanding shares of Company Common Stock are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. Except as set forth in Section 3.4 to the Company Disclosure Schedule, there are no outstanding obligations of the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of, or other equity interests in, the Company. 3.5. Conflicts; Consents and Approvals. Except as set forth in Section 3.5 to the Company Disclosure Schedule and, in the case of (b), (c) and (d), for any of the following that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby will: (a) conflict with, or result in a breach of any provision of, the Company Certificate or the Company Bylaws; (b) violate, or conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with the giving of notice, the passage of time or otherwise, would constitute a default) under, or entitle any party (with the giving of notice, the passage of time or otherwise) to terminate, accelerate, modify or call a default under, or result in the creation of any lien, security interest or encumbrance upon any of the properties or assets of the Company under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, contract, undertaking, agreement, lease or other instrument or obligation to which the Company or any of its subsidiaries is a party; (c) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or any of its subsidiaries or any of their respective properties or assets; or (d) require any action or consent or approval of, or review by, or registration or filing by the Company or any of its affiliates with, any third party or any local, domestic, foreign or multi-national or supra-national court, tribunal, administrative agency or commission or other governmental or regulatory body, agency, instrumentality or authority (a "Governmental Authority"), other than (i) approval of the Merger and the transactions contemplated hereby by stockholders of the Company, (ii) actions required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the "HSR Act"), (iii) filings and consents under non-U.S. laws and regulations intended to -7- prohibit, restrict or regulate actions or transactions having the purpose or effect of monopolization, restraint of trade, harm to competition or effectuating foreign investment ("Foreign Antitrust Laws"); and (iv) registrations, filings, consents, approvals or other actions required under federal and state securities laws and the rules of the Nasdaq Stock Market, Inc. as are contemplated by this Agreement. 3.6. No Material Adverse Effect. Except as specifically disclosed in the Company SEC Documents (as defined in Section 3.7) filed with the Commission prior to the date of this Agreement, since December 31, 2002, there has been no change in the business, assets, liabilities, results of operations or financial condition of the Company which individually or in the aggregate would reasonably be expected to have a Material Adverse Effect on the Company. 3.7. Company SEC Documents. The Company has timely filed with the Commission all forms, reports, schedules, statements and other documents required to be filed by it since December 31, 1998 under the Securities Exchange Act of 1934, as amended (together with the rules and regulations thereunder, the "Exchange Act") or the Securities Act of 1933, as amended, (the "Securities Act") (such documents, as supplemented and amended since the time of filing, collectively, the "Company SEC Documents"). The Company SEC Documents, including, without limitation, any financial statements or schedules included or incorporated by reference therein, at the time filed (and, in the case of registration statements and proxy statements, on the dates of effectiveness and the dates of mailing, respectively) (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. Except as set forth in Section 3.7 of the Company Disclosure Schedule, the financial statements of the Company included in the Company SEC Documents at the time filed (and, in the case of registration statements and proxy statements, on the dates of effectiveness and the dates of mailing, respectively) complied as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect thereto, were prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q of the Commission), and fairly present (subject, in the case of the unaudited interim financial statements, to normal, recurring year-end audit adjustments consistent with past practice), in all material respects, the consolidated financial position of the Company and its consolidated subsidiaries as at the dates thereof and the consolidated results of their operations and cash flows for the periods then ended. No subsidiary of the Company is subject to the periodic reporting requirements of the Exchange Act or required to file any form, report or other document with the Commission, the Nasdaq Stock Market, Inc., any stock exchange or any other comparable Governmental Authority. 3.8. Taxes. Except as set forth in Section 3.8 to the Company Disclosure Schedule and except for such matters that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company: -8- (a) The Company and its subsidiaries (i) have duly filed all Tax Returns (as defined in Section 3.8(d)) (including, but not limited to, those filed on a consolidated, combined or unitary basis) required to have been filed by the Company or its subsidiaries, all of which Tax Returns are true and correct; (ii) have within the time and manner prescribed by Applicable Law paid all Taxes (as defined in Section 3.8(d)), required to be paid in respect of the periods covered by such Tax Returns or otherwise due to any Governmental Authority; (iii) have established in accordance with their normal accounting practices and procedures, accruals and reserves that are adequate for the payment of all Taxes not yet due and payable; (iv) are not delinquent in the payment of any Tax; and (v) have not received written notice of any deficiencies for any Tax from any Governmental Authority against the Company or any of its subsidiaries, which deficiency has not been satisfied. Neither the Company nor any of its subsidiaries is the subject of any currently ongoing Tax audit. Neither the Company nor any of its subsidiaries has requested, or been granted, an extension of time in which to file Tax Returns or pay Taxes, which extension has continuing effect. With respect to any taxable period ended prior to January 1, 1999, all federal income Tax Returns including the Company or any of its subsidiaries have been audited by the Internal Revenue Service or are closed by the applicable statute of limitations. Neither the Company nor any of its Subsidiaries is or may be subject to any "accuracy-related penalty" under Code Section 6662 (or any comparable provision of state, local or foreign law) with respect to Tax periods for which Tax Returns have been filed. Neither the Company nor any of its Subsidiaries is subject to any extension of the statute of limitations for collection of Taxes under Code Section 6501 (or any comparable provision of state, local, or foreign law) from the minimum period allowed by law as a result of failure to accurately complete, or to disclose any items in, a Tax Return. There are no liens with respect to Taxes upon any of the properties or assets, real or personal, tangible or intangible, of the Company or any of its subsidiaries (other than liens for Taxes not yet due). No claim has ever been made in writing by a Governmental Authority in a jurisdiction where the Company or its subsidiaries do not file Tax Returns that the Company or any of its subsidiaries is or may be subject to taxation by that jurisdiction. (b) Neither the Company nor any of its subsidiaries is obligated by any contract, agreement or other arrangement to indemnify any other person with respect to Taxes. Neither the Company nor any of its subsidiaries is now or has ever been a party to or bound by any contract, agreement or other arrangement (whether or not written and including, without limitation, any arrangement required or permitted by Applicable Law (including pursuant to Treasury Regulation Section 1.1502-6 or any analogous provision of state, local or foreign law)) that (i) requires the Company or any of its subsidiaries to make any Tax payment to or for the account of any other person, (ii) affords any other person the benefit of any net operating loss, net capital loss, investment Tax credit, foreign Tax credit, charitable deduction or any other credit or Tax attribute which could reduce Taxes (including, without limitation, deductions and credits related to alternative minimum Taxes) of the Company or any of its subsidiaries, or (iii) requires or permits the transfer or assignment of income, revenues, receipts or gains to the Company or any of its subsidiaries from any other person, other than payments made to the Company and its subsidiaries in the ordinary course of business. Neither the Company nor any of its subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on -9- or prior to the Closing Date; (ii) "closing agreement" as described in Code Section 7121 (or any comparable provision of state, local, or foreign law); (iii) intercompany transactions or any excess loss account described in Treasury Regulations under Code Section 1502 (or any comparable provision of state, local, or foreign law); (iv) installment sale or open transaction disposition made on or prior to the Closing Date; or (v) prepaid amount received on or prior to the Closing Date. Neither the Company nor any of its subsidiaries is a party to any "gain recognition agreement" as described in Treasury Regulation Section 1.367(a)-8 (or any analogous provision of foreign law). Neither the Company nor any of it subsidiaries is a party to any transaction that is or was (i) since January 1, 1998, intended to qualify under Code sections 355 or 368 other than as a recapitalization pursuant to Code Section 368(a)(1)(E), or (ii) required to be reported as a "listed transaction" to any Governmental Authority under Treasury Regulation Section 1.6011-4(b)(2) (or any comparable or predecessor provision of federal, state, local or foreign law). (c) The Company and its subsidiaries have withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party. (d) For purposes of this Agreement, (i) "Tax" (and, with correlative meaning, "Taxes") means any federal, state, local or foreign income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, premium, withholding, alternative or added minimum, ad valorem, inventory, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, imposed by any Governmental Authority, and (ii) "Tax Return" means any return, report or similar statement required to be filed with respect to any Tax (including any attached schedules), including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax. 3.9. Compliance with Law. Except as specifically disclosed in the Company SEC Documents filed with the Commission prior to the date hereof, the Company is in compliance with all applicable laws, statutes, orders, rules, regulations, policies or guidelines promulgated, or judgments, decisions or orders entered, by any Governmental Authority, (all such laws, statutes, orders, rules, regulations, policies, guidelines, judgments, decisions and orders, collectively, "Applicable Laws"), relating to the Company or its business or properties, except where the failure to be in compliance with such Applicable Laws individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect on the Company. Except as specifically disclosed in the Company SEC Documents filed with the Commission prior to the date hereof, no investigation or review by any Governmental Authority with respect to the Company is pending, or, to the knowledge of the Company, threatened, nor has any Governmental Authority indicated in writing an intention to conduct the same, other than those the outcome of which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. 3.10. Intellectual Property. (a) Definitions. For the purposes of this Section 3.10, the following terms have the following definitions: -10- (i) "Intellectual Property" shall mean any or all of the following and all rights in, arising out of, or associated therewith: (i) all United States and foreign patents and applications therefor (including, without limitation, petty patents and utility models) and all reissues, divisions, renewals, extensions, provisional, continuations and continuations-in-part thereof ("Patents"); (ii) all inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, know how, technology, technical data and customer lists, and all documentation relating to any of the foregoing; (iii) all works of authorship, copyrights, copyright registrations and applications therefor and all other rights corresponding thereto throughout the world; (iv) all semiconductor and semiconductor circuit designs; (v) all rights to all mask works and reticules, mask work registrations and applications therefor; (vi) all industrial designs and any registrations and applications therefor throughout the world; (vii) all trade names, logos, common law trademarks and service marks; trademark and service mark registrations and applications therefor and all goodwill associated therewith throughout the world; (viii) all databases and data collections and all rights therein throughout the world; (ix) all computer software including all source code, object code, firmware, development tools, files, records and data, all media on which any of the foregoing is recorded, all Web addresses, sites and domain names; (x) any similar, corresponding or equivalent rights to any of the foregoing; and (xi) all technical, design, end-user and other documentation related to any of the foregoing. Notwithstanding the foregoing, "Intellectual Property" shall not include any licenses, agreements or other rights in any generally available or "off the shelf" third party software or related intellectual property. (ii) "Company Intellectual Property" shall mean any Intellectual Property that is owned by, controlled by or licensed to the Company or any of its subsidiaries. Without in any way limiting the generality of the foregoing, Company Intellectual Property includes all Intellectual Property owned or licensed by the Company related to the Company's products. (iii) "Registered Intellectual Property" shall mean all United States, international and foreign: (i) patents, patent applications (including provisional applications); (ii) registered trademarks, applications to register trademarks, intent-to-use applications, or other registrations or applications related to trademarks, and any domain name registrations; (iii) registered copyrights and applications for copyright registration; (iv) any mask work registrations and applications to register mask works; and (v) any other Intellectual Property that is the subject of an application, certificate, filing, registration or other document issued by, filed with, or recorded by, any state, government or other public legal authority. (iv) "Company Registered Intellectual Property" means all of the Registered Intellectual Property owned by, exclusively licensed or filed in the name of, the Company or any of its subsidiaries. (b) Section 3.10(b) of the Company Disclosure Schedule is a complete and accurate list of all Company Registered Intellectual Property and specifies, where applicable, (i) the jurisdictions in which each such item of Company Registered Intellectual Property has been issued or registered, (ii) the owner of the Company Registered Intellectual Property, (iii) respective issuance, application, serial or registration number, (iv) the date of its creation, -11- application and issuance or registration, and (v) lists any proceedings or actions before any court, tribunal (including the United States Patent and Trademark Office (the "PTO") or equivalent authority anywhere in the world) related to any of the Company Registered Intellectual Property. (c) Except as set forth in Section 3.10(c) to the Company Disclosure Schedule, no Company Intellectual Property or software, hardware, content or other products or any services that the Company sells, licenses out or otherwise distributes to third parties ("Company Product(s)") is subject to any proceeding or outstanding decree, order, judgment, contract, license, agreement, or stipulation restricting in any manner the use, transfer, or licensing thereof by Company or any of its subsidiaries, or which may affect the validity, use or enforceability of such Company Intellectual Property or Company Product. (d) Except as set forth in Section 3.10(d) of the Company Disclosure Schedule, each item of Company Registered Intellectual Property is valid and subsisting, all necessary registration, maintenance and renewal fees currently due in connection with such Company Registered Intellectual Property have been made and all necessary documents, recordations and certificates in connection with such Company Registered Intellectual Property have been filed with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such Company Registered Intellectual Property. (e) The Company owns and has good and exclusive title to, each item of Company Intellectual Property free and clear of any lien or encumbrance (excluding non-exclusive licenses and related restrictions granted in the ordinary course). Without limiting the foregoing: (i) the Company or a subsidiary of the Company is the exclusive owner of all trademarks and trade names used in connection with the operation or conduct of the business of Company and its subsidiaries, including the sale, distribution or provision of any Company Products by Company or its subsidiaries; (ii) the Company or a subsidiary of the Company owns exclusively, and has good title to, all copyrighted works that are Company Products or which the Company or any of its subsidiaries otherwise purports to own; and (iii) to the extent that any Patents would be infringed by any Company Products, the Company is the exclusive owner of such Patents. (f) To the extent that any technology, software or Intellectual Property has been developed or created independently or jointly by a third party specifically for the Company or any of its subsidiaries or any of the Company Products, the Company has a written agreement with such third party with respect thereto and Company thereby either (i) has obtained ownership of, and is the exclusive owner of, or (ii) has obtained a valid and enforceable license (sufficient for the conduct of its business as currently conducted and as proposed to be conducted) to all such third party's Intellectual Property in such work, material or invention by operation of law or by valid assignment. (g) Except as set forth in Section 3.10(g) of the Company Disclosure Schedule, neither the Company nor any of its subsidiaries has transferred ownership of, or granted any exclusive license with respect to, any Intellectual Property that is or was Company -12- Intellectual Property, to any third party, or permitted the Company's rights in such Company Intellectual Property to lapse or enter the public domain. (h) Section 3.10(h) of the Company Disclosure Schedule lists all material contracts, licenses and agreements in effect as of the date hereof to which the Company or any of its subsidiaries is a party: (i) with respect to Company Intellectual Property licensed or transferred to any third party (other than non-exclusive end-user or customer licenses granted by the Company in the ordinary course) or (ii) pursuant to which a third party has licensed or transferred any Intellectual Property to the Company. (i) All material contracts, licenses and agreements relating to either (i) Company Intellectual Property or (ii) Intellectual Property of a third party used in the business of Company or any of its subsidiaries, are in full force and effect. Except as set forth in Section 3.10(i) of the Company Disclosure Schedule, the consummation of the transactions contemplated by this Agreement will neither violate nor result in the breach, modification, cancellation, termination or suspension of such contracts, licenses and agreements. Each of the Company and its subsidiaries is in compliance in all material respects with, and has not materially breached any term of, any such contracts, licenses and agreements and, to the knowledge of the Company, all other parties to such contracts, licenses and agreements are in compliance with, and have not breached any term of, such contracts, licenses and agreements. Following the Closing Date, assuming the receipt of required consents or waivers set forth on Section 3.10(i) of the Company Disclosure Schedule, the Surviving Corporation will be entitled to exercise all of the Company's rights under such contracts, licenses and agreements to the same extent the Company and its subsidiaries would have been able to had the transactions contemplated by this Agreement not occurred and without the payment of any additional amounts or consideration other than ongoing fees, royalties or payments which the Company would otherwise be required to pay. Neither this Agreement nor the transactions contemplated by this Agreement will result in (i) either Parent's or the Merger Sub's granting to any third party any right to or with respect to any Intellectual Property right owned by, or licensed to, either of them, (ii) either the Parent's or the Merger Sub's being bound by, or subject to, any non-compete or other restriction on the operation or scope of their respective businesses, or (iii) either the Parent's or the Merger Sub's being obligated to pay any royalties or other amounts to any third party in excess of those payable by Parent or Merger Sub, respectively, prior to the Closing. (j) The Company Intellectual Property includes all Intellectual Property required for the operation of the business of the Company and its subsidiaries as such business has been conducted and currently is conducted, including (i) the Company's and its subsidiaries' design, development, manufacture, distribution, reproduction, marketing or sale of the products or services of Company and its subsidiaries (including Company Products) and (ii) the Company's use of any product, device or process, (A) has not infringed or misappropriated and does not infringe or misappropriate the Intellectual Property of any third party (other than any patent applications of a third party), (B) to the Company's knowledge, has not infringed or misappropriated and does not infringe or misappropriate the Intellectual Property of any patent applications of any third party or (C) constitute unfair competition or trade practices under the laws of any jurisdiction. -13- (k) Neither the Company nor any of its subsidiaries has received notice from any third party (i) alleging invalidity with respect to any Intellectual Property used by the Company or its subsidiaries, or (ii) that the operation of the business of the Company or any of its subsidiaries or any act, product or service of the Company or any of its subsidiaries, infringes or misappropriates the Intellectual Property of any third party or constitutes unfair competition or trade practices under the laws of any jurisdiction. (l) Except as set forth in Section 3.10(l) to the Company Disclosure Schedule, to the Company's knowledge, no third party is infringing on or has misappropriated any of the Company Intellectual Property. (m) The Company and each of its subsidiaries has taken all prudent and reasonable steps to protect the Company's and its subsidiaries' rights in the Company's confidential information, trade secrets and other Intellectual Property used by the Company and its subsidiaries, and any trade secrets or confidential information of third parties provided to the Company or any of its subsidiaries, and, without limiting the foregoing, each of the Company and its subsidiaries has and enforces a policy requiring each employee and contractor who either contributes to, develops or otherwise has material access to the Company Intellectual Property to execute nondisclosure and assignment of copyrights and inventions agreements, each agreement substantially in the forms provided to Parent and all current and former employees and consultants of the Company and any of its subsidiaries have executed such agreements. (n) With respect to the Company Products set forth in Section 3.10(n) of the Company Disclosure Schedule, except as described in such Section 3.10(n) of the Company Disclosure Schedule, (i) the Company and its subsidiaries maintain machine-readable master-reproducible copies, source code listings, technical documentation and user manuals for the most current releases or versions thereof and for all earlier releases or versions thereof currently being supported by them; (ii) in each case, the machine-readable copy conforms to the corresponding source code listing; (iii) such Company Products are written in the language set forth on Schedule 3.10(n) of the Company Disclosure Schedules, for use on the hardware set forth on Schedule 3.10(n) of the Company Disclosure Schedules with standard operating systems; (iv) such Company Products can be maintained and modified by reasonably competent programmers familiar with such language, hardware and operating systems; (v) in each case, the Company Products operate in accordance with the user manual therefor without material operating defects; (vi) the Company Products do not require "dongles" or other hardware locks, and the Company Products do not include any serial number, clock, timer, counter, or other limiting, disabling, or self-replicating code that causes the Company Products or any other data to be disabled, distorted, erased, made inoperable or otherwise incapable of being used in accordance with the full manner for which it is designed, (vii) to the Company's knowledge, the Company Products do not include any computer viruses or other harmful code, the purpose of which is to disable or interrupt the operation of a computer system or destroy or alter any data, (viii) Schedule 3.10(n) of the Company Disclosure Schedules lists any third party products or services that are necessary for the use of the Company Products in accordance with any documentation or descriptions thereto distributed by the Company or its subsidiaries, and (ix) Schedule 3.10(n) of the Company Disclosure Schedules lists any source code escrow arrangements entered into by the Company or its subsidiaries. -14- 3.11. Title to Properties. The Company owns or holds under valid leases all material real property, plants, machinery and equipment necessary for the conduct of the business of the Company as presently conducted. 3.12. Litigation. Except as set forth in Section 3.12 to the Company Disclosure Schedule or specifically disclosed in the Company SEC Documents filed with the Commission prior to the date of this Agreement, there is no suit, claim, action, proceeding, audit or investigation (an "Action") pending or, to the knowledge of the Company, threatened against the Company which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on the Company. Except as set forth in Section 3.12 to the Company Disclosure Schedule, since December 31, 1998 the Company has not been subject to any outstanding order, writ, injunction or decree specifically applicable to the Company which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on the Company. 3.13. Proxy Statements. The Proxy Statement (as hereinafter defined) (including, without limitation, a Schedule 13E-3 filing), or similar materials distributed to the Company's stockholders in connection with the Merger, including any amendments or supplements thereto, shall not, at the time filed with the SEC, at the time mailed to the Company's stockholders or at the time of the Company Stockholders 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 will comply in all material respects with the provisions of the Exchange Act. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information provided by or required to be provided by Parent or Merger Sub and/or by their respective auditors, legal counsel, financial advisors or other consultants or advisors specifically for use in the Proxy Statement. 3.14. Brokerage and Finder's Fees; Expenses. Except in connection with the engagement of Morgan Stanley and Portico Capital Securities (the fees of both of which firm shall be the sole responsibility of the Company), none of the Company or Merger Sub or any of their respective stockholders, directors, officers or employee thereof has incurred or will incur on behalf of the Company any brokerage, finder's or similar fee in connection with the transactions contemplated by this Agreement. The Company has heretofore furnished to Parent an accurate summary of the material terms of the engagement letter between the Company and each of Morgan Stanley and Portico Capital Securities and set forth in Section 3.14 of the Company Disclosure Schedule are the total amounts payable to Morgan Stanley and Portico Capital Securities upon consummation of the transactions contemplated hereby and otherwise relating to the transactions contemplated hereby. 3.15. Employee Benefit Plans. (a) For purposes of this Agreement, the following terms have the definitions given below: "Company Plan" means each material plan, program, policy, practice or other arrangement providing for compensation, severance, retirement benefits, fringe benefits, equity-based awards or other benefits of any kind (including, but not limited to, all employee welfare -15- benefit plans within the meaning of Section 3(l) of ERISA and all employee pension benefit plans within the meaning of Section 3(2) of ERISA) maintained, sponsored, contributed to or required to be contributed to by the Company for the benefit of its employees or former employees, or with respect to which the Company or any ERISA Affiliates has or may have any material liability, contingent or otherwise, and further including any of the foregoing which cover directors or former directors of the Company or any subsidiary. "Controlled Group Liability" means any and all liabilities under (i) Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of the Code, (iv) the continuation coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the Code, or (v) corresponding or similar provisions of foreign laws or regulations, in each case other than pursuant to the Company Plans. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder. "ERISA Affiliate" means, with respect to any entity, trade or business, any other entity, trade or business that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes the first entity, trade or business, or that is a member of the same "controlled group" as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA. "Withdrawal Liability" means liability to a Multiemployer Plan (as defined in Section 3.16) as a result of a complete or partial withdrawal from such Multiemployer Plan, as those terms are defined in Part I of Subtitle E of Title IV of ERISA. (b) With respect to each Company Plan, the Company has provided to Parent a true, correct and complete copy of (where applicable): (i) each writing constituting a part of such Company Plan, including without limitation all plan documents, trust agreements, and insurance contracts and other funding vehicles; (ii) the most recent Annual Report (Form 5500 Series) and accompanying schedule, if any; (iii) the current summary plan description, if any; (iv) the most recent annual financial report, if any; (v) the most recent determination letter from the Internal Revenue Service, if any, and (vi) if any Company Plan is unwritten, a written summary thereof. Except as set forth in Section 3.16(b) of the Company Disclosure Schedule, no Plan is now nor at any time has been subject to Part 3, Subtitle B of Title I of ERISA or Title IV of ERISA. (c) The Company Plans which are "employee pension benefit plans" within the meaning of Section 3(2) of ERISA and which are intended to meet the qualification requirements of Section 401(a) of the Code, or Sections 401(k) or 401(m) of the Code, as applicable (each a "Qualified Plan"), now meet, and at all times since their inception have met, the requirements for such qualification in all material respects, and the related trusts are now, and at all times since their inception have been, exempt from taxation under Section 501(a) of the Code in all material respects. Except as set forth on Section 3.15(c) of the Company Disclosure Schedule, each of the Qualified Plans has received a favorable determination from the Internal Revenue Service, and no such determination letter has been revoked nor, are there any existing circumstances why any such determination letter should be revoked nor has any Qualified Plan -16- been amended since the date of its most recent determination letter in any respect which would adversely affect the qualified status of any Company Qualified Plan or the related trust. (d) No Company Plans are now or at any time have been subject to Part 3, Subtitle B of Title I of ERISA or Title IV of ERISA. All contributions required to be made to any Company Plan by Applicable Laws or by any plan document or other contractual undertaking, and all premiums due or payable with respect to insurance policies funding any Company Plan, before the date hereof have been made or paid in full on or before the final due date thereof. All contributions with respect to the period ending at the Effective Time will have been made or paid in full even if not due until a later date. All payments under the Company Plans, except those to be made from a trust qualified under section 401(a) of the Code, for any period ending before the Effective Time that are not yet, but will be, required to be made are properly accrued and reflected on the Company's balance sheet or are disclosed in Section 3.15(d) of the Company Disclosure Schedule. (e) The Company and its subsidiaries have materially complied, and are now in material compliance, with all applicable provisions of ERISA and the Code and all Applicable Laws relating to employees and employee benefits. Each Company Plan has been established and operated in material compliance with its terms and Applicable Laws. There is not now, and there are no existing circumstances that individually or in the aggregate would reasonably be expected to give rise to, any requirement for the posting of security with respect to a Company Plan or the imposition of any lien on the assets of the Company or any of its subsidiaries under ERISA or the Code. The Company and its subsidiaries are each in material compliance with all Applicable Laws respecting employment. (f) Except as set forth in Section 3.15(f) to the Company Disclosure Schedule, no Company Plan is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan that has two or more contributing sponsors at least two of whom are not under common control, within the meaning of Section 4063 of ERISA (a "Multiple Employer Plan"), nor has the Company or any of its subsidiaries or any of their respective ERISA Affiliates, at any time within six years before the date hereof, contributed to or been obligated to contribute to any Multiemployer Plan or Multiple Employer Plan. With respect to each Multiemployer Plan: (i) neither the Company nor any of its ERISA Affiliates has incurred any Withdrawal Liability that has not been satisfied in full; (ii) neither the Company nor any ERISA Affiliate has received any notification, nor has any reason to believe, that any such plan is in reorganization, is insolvent, or has been terminated, or could reasonably be expected to be in reorganization, to be insolvent, or to be terminated; and (iii) no circumstances exist which individually or in the aggregate could reasonably be expected to result in Withdrawal Liability with respect to a Plan. (g) There does not now exist, and there are no existing circumstances that individually or in the aggregate would reasonably be expected to result in, any material Controlled Group Liability. Without limiting the generality of the foregoing, neither the Company nor any of its subsidiaries nor any of their respective ERISA Affiliates has engaged in any transaction described in Section 4069 or Section 4204 of ERISA. -17- (h) Except for health continuation coverage as required by Section 4980B of the Code or Part 6 of Title I of ERISA or similar state laws and except as set forth in Section 3.15(h) to the Company Disclosure Schedule, neither the Company nor any of its subsidiaries has any material liability for life, health, medical or other welfare benefits to former employees or beneficiaries or dependents thereof. (i) Except as disclosed in Section 3.15(i) to the Company Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in, or constitute an event which, with the passage of time or the giving of notice or both will result in, cause the accelerated vesting or delivery of, or increase the amount or value of, any payment or benefit to any employee, officer, director or consultant of the Company or any of its subsidiaries. Without limiting the generality of the foregoing, except as set forth in Section 3.15(i) to the Company Disclosure Schedule, no amount paid or payable by the Company or any of its subsidiaries or affiliates in connection with the transactions contemplated hereby either solely as a result thereof or as a result of such transactions in conjunction with any other events will be an "excess parachute payment" within the meaning of Section 280G of the Code. Except as disclosed in Section 3.15(i) of the Company Disclosure Schedule, there is no agreement, plan, arrangement or other contract covering any employee or independent contractor or former employee or independent contractor of the Company that, considered individually or considered collectively with any other such Contracts, will, or could reasonably be expected to, give rise directly or indirectly to the payment of any amount that would not be deductible pursuant to Section 280G or Section 162 of the Code nor will the Company be required to "gross up" or otherwise compensate any such person because of the imposition of any excise tax as a payment to such person. (j) Except as disclosed in Section 3.15(j) to the Company Disclosure Schedule, there are no pending, or to the knowledge of the Company threatened, Actions (other than claims for benefits in the ordinary course) with respect to the Company Plans. (k) Section 3.15(k) to the Company Disclosure Schedule sets forth a list of each employment, consulting, severance or similar agreement under which the Company or any of its subsidiaries is or could become obligated to provide compensation or benefits in excess of $75,000, and the Company has provided to Parent a copy of each such agreement. Except for the severance amounts listed under the heading "At Will Severance Amounts" on Section 3.15(k) of the Company Disclosure Schedule, the aggregate amount of payments which the Company and its subsidiaries is or could become obligated to pay pursuant to existing agreements, arrangements and benefit plans to its officers, directors, employees and consultants for change-in-control, success fee, stay-put, retention or similar fees and bonuses does not exceed $1,351,000. (l) No employer securities, employer real property or other employer property is included in the assets of any Company Plan. (m) No event has occurred, and there exists no condition or set of circumstances in connection with any Plan, under which the Parent, Merger Sub, the Company or any of its subsidiaries, nor any employee of the foregoing, directly or indirectly, could -18- reasonably be expected to be subject to any risk of material liability under Sections 409 or 502 of ERISA or Section 4975 of the Code. (n) Company maintains policies or practices on the proper classification for all employees, leased employees, consultants and independent contracts, for all purposes (including, without limitation, for all tax purpose and for purposes of determining eligibility to participate in any Company Plan.) 3.16. Contracts. Section 3.16 to the Company Disclosure Schedule lists all contracts, agreements, guarantees, leases and executory commitments (each a "Contract"), other than Company Plans and any Contracts heretofore filed as an exhibit to any Company SEC Document since January 1, 1999, that exist as of the date hereof to which the Company is a party or by which it is bound and which fall within any of the following categories: (a) Contracts not entered into in the ordinary course of the Company's business other than those that individually or in the aggregate are not material to the business of the Company, (b) joint venture and partnership agreements, (c) Contracts containing covenants purporting to limit the freedom of the Company to compete in any line of business in any geographic area or to hire any individual or group of individuals, (d) Contracts which after the Effective Time would have the effect of limiting the freedom of Parent or its subsidiaries (including the Surviving Corporation) to compete in any line of business in any geographic area or to hire any individual or group of individuals, (e) Contracts which contain minimum purchase conditions in excess of $250,000, or requirements or other terms that restrict or limit the purchasing relationships of the Company or its affiliates, or any customer, licensee or lessee thereof, (f) Contracts relating to any outstanding commitment for capital expenditures in excess of $250,000, (g) indentures, mortgages, promissory notes, loan agreements or guarantees of borrowed money in excess of $100,000 in the aggregate, letters of credit or other agreements or instruments of the Company or commitments for the borrowing or the lending by the Company of amounts in excess of $100,000 in the aggregate or providing for the creation of any charge, security interest, encumbrance or lien upon any of the assets of the Company with an aggregate value in excess of $250,000, (h) Contracts providing for "earn-outs" or other contingent payments by the Company involving more than $250,000 in the aggregate over the terms of all such Contracts, (i) Contracts associated with off balance sheet financing in excess of $100,000 in the aggregate, including but not limited to arrangements for the sale of receivables, (j) licenses or similar agreements granting the right to use any material Intellectual Property (other than non-exclusive end-user or customer licenses granted by the Company in the ordinary course of business), or (k) stock purchase agreements, asset purchase agreements or other acquisition or divestiture agreements relating to material transactions since January 1, 1999. All Contracts to which the Company is a party or by which it is bound are valid and binding obligations of the Company and, to the knowledge of the Company, the valid and binding obligation of each other party thereto except such Contracts which if not so valid and binding would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. Neither the Company nor, to the knowledge of the Company, any other party thereto is in violation of or in default in respect of, nor has there occurred an event or condition which with the passage of time or giving of notice (or both) would constitute a default under or permit the termination of, any such Contract except such violations or defaults under or terminations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company. Set forth in Section 3.16(m) to the Company -19- Disclosure Schedule is a description of any material changes to the amount and terms of the indebtedness of the Company and its subsidiaries from (i) the Exhibits to the Company's Form 10-Q for the period ended September 30, 2003 filed with the Commission, with respect to the terms of such indebtedness, and (ii) the description in the financial statements (including the notes thereto) incorporated in the Company's Form 10-Q for the period ended September 30, 2003 filed with the Commission, with respect to the amount of such indebtedness. Set forth in Section 3.16(n) to the Company Disclosure Schedule is the amount of the annual premium currently paid by the Company for its directors' and officers' liability insurance. 3.17. Labor Matters. Except as set forth on Section 3.17 of the Company Disclosure Schedule, at the present time and during the past three years, (A) no unfair labor practice complaint or charge against the Company has been brought before, or, to the knowledge of the Company, threatened by, the National Labor Relations Board or any other government agency or court in any jurisdiction; (B) there has not occurred or, to the knowledge of the Company, been threatened any labor strike, dispute, picketing, slowdown, stoppage, or other similar labor activity against or involving any the Company; (C) the Company is not nor has it been party to any collective bargaining agreement and there are no labor unions or other organizations representing, purporting to represent, or attempting to represent any employee; and (D) the Company is not nor has it been a party to, or affected by or threatened with, any union organizing or election activity or any dispute or controversy with a union involving its employees. The Company has not effectuated a "plant closing" or "mass layoff" under the Worker Adjustment Retraining Notification Act ("WARN Act") with respect to the business of the Company; nor in the past 90 days has the Company effectuated any plant closings or layoffs, which constitute an "employment loss" within the meaning of the WARN Act or any state or local law similar to the WARN Act. 3.18. Undisclosed Liabilities. Except (i) as and to the extent disclosed or reserved against in the consolidated balance sheet of the Company as of September 30, 2003 included in the Company SEC Documents, or disclosed in the footnotes to the financial statements as of such date or the footnotes to the September 30, 2003 financial statements included in the Company SEC Documents filed prior to the date hereof, (ii) as incurred after September 30, 2003 in the ordinary course of business consistent with prior practice and not prohibited by this Agreement, (iii) as described in the Company SEC documents filed since September 30, 2003 but prior to the date hereof, or (iv) as set forth in Section 3.18 to the Company Disclosure Schedule, the Company does not have any liabilities or obligations of any nature, whether known or unknown, absolute, accrued, contingent or otherwise and whether due or to become due, that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on the Company. 3.19. Operation of the Company's Business; Relationships. (a) Since September 30, 2003 through the date of this Agreement and except for entering into this Agreement, the Company has not engaged in any transaction which, if done after execution of this Agreement, would violate in any material respect Section 5.3(c), except as set forth in Section 3.19(a) to the Company Disclosure Schedule or as specifically disclosed in the Company SEC Documents filed with the Commission prior to the date of this Agreement. -20- (b) Except as set forth in Section 3.19(b) to the Company Disclosure Schedule, (i) from January 1, 2000 to the date hereof, no material customer of the Company has indicated in writing that it will stop or materially decrease purchasing materials, products or services from the Company and (ii) since January 1, 2000, no material supplier of the Company has indicated in writing that it will stop or materially decrease the supply of materials, products or services to the Company, or impose conditions or credit limits on the Company, in each case, the effect of which individually or in the aggregate would reasonably be expected to have a Material Adverse Effect on the Company. 3.20. Permits; Compliance. The Company is in possession of all material franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the "Company Permits"), except where the failure to be in possession of such Company Permits would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company and there has occurred no default or breach under any such Company Permit, except for such defaults or breaches which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. 3.21. Environmental Matters. Except for matters disclosed in Section 3.21 of the Company Disclosure Schedule, (a) the properties, operations and activities of the Company and its subsidiaries have at all times been for all applicable periods of limitation, and are, in material compliance with all applicable Environmental Laws and Environmental Permits (each as defined below); (b) the Company and its subsidiaries and the properties and operations of the Company and its subsidiaries are not subject to any pending or, to the knowledge of the Company, threatened Action under any Environmental Law, including without limitation with respect to any present or former operations, facilities or subsidiaries; (c) there has been no release of any Hazardous Materials (as defined below) into the environment by the Company or its subsidiaries, and there are no Hazardous Materials present at, on, under, within or which have migrated from, any properties of the Company or its subsidiaries; and (d) neither the Company nor any of its subsidiaries (x) has received any written notice that the Company, any of its subsidiaries or any of their respective present or former operations, facilities or subsidiaries is or may be a potentially responsible party or otherwise liable in connection with any site used for the disposal of or otherwise containing Hazardous Materials, or (y) has disposed of, arranged for the disposal of, or transported any Hazardous Materials to any site which is listed on the U.S. Environmental Protection Agency's National Priorities List or which is otherwise subject to remediation or investigation. The Company and its subsidiaries have made available to Parent all material internal and external environmental audits and reports (in each case relevant to the Company or any of its subsidiaries) in the possession of the Company or its subsidiaries. The term "Environmental Laws") means all Applicable Laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or industrial, toxic or hazardous substances or wastes (collectively, "Hazardous Materials") into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, -21- codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder, as in effect on the date hereof. "Environmental Permit" means any permit, approval, identification number, license or other authorization required under or issued pursuant to any applicable Environmental Law. 3.22. Opinion of Financial Advisor. The Special Committee has received the written opinion of Morgan Stanley, its financial advisor, to the effect that, as of the date of this Agreement, the Merger Consideration to be received by the holders of Company Common Stock, other than Parent, Merger Sub, ValueAct Capital Partners, L.P., ValueAct Capital Partners II, L.P. and ValueAct Capital International, Ltd., pursuant to this Agreement is fair to such holders from a financial point of view, and such opinion has not been withdrawn or revoked or modified in any respect. 3.23. Special Committee and Board Recommendation. The Special Committee and the Board of Directors of the Company, the latter at a meeting duly called and held at which a quorum was present throughout, has (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair to and in the best interests of the Company Stockholders and (ii) resolved to recommend that the holders of the shares of Company Common Stock entitled to vote thereon approve this Agreement and the transactions contemplated herein, including the Merger (the "Company Board Recommendation"). The Company Board Recommendation has not been withdrawn, revoked or modified. 3.24. Vote Required. The Requisite Company Vote is the only vote of the holders of any class or series of the Company's capital stock necessary (under the charter documents of the Company, the DGCL, other applicable law or otherwise) to approve this Agreement and the Merger. 3.25. Related Party Transactions. Except as set forth in Section 3.25 of the Company Disclosure Schedule, since the date of the Company's proxy statement dated April 18, 2003, no event has occurred that would be required to be reported under Item 404 of Regulation S-K promulgated by the Commission. 3.26. Takeover Statutes; Rights Plan. The Company has taken all actions such that no restrictive provision of any "fair price," "moratorium," "control share acquisition," "interested stockholder" or other similar anti-takeover statute or regulation (including, without limitation, Section 203 of the DGCL) (each a "Takeover Statute") or restrictive provision of any applicable anti-takeover provision in the governing documents of the Company is, or at the Effective Time will be, applicable to the Company, Parent, Merger Sub, the Merger, this Agreement or any of the other transactions contemplated hereby or thereby. After giving effect to the amendment to the Rights Plan effective as of the date hereof, the Rights Plan is inapplicable to the Merger, this Agreement and the transactions contemplated hereby or thereby. 3.27. NASDAQ Qualification. All outstanding shares of the Company Common Stock are designated as qualified for trading on the NASDAQ National Market of the NASDAQ Stock Market operated by the NASDAQ Stock Market Inc. -22- ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB In order to induce Parent to enter into this Agreement, Parent and Merger Sub hereby represent and warrant to the Company as follows: 4.1. Organization and Standing. Parent is a limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, each with full power and authority to own, lease, use and operate its properties and to conduct its business as and where now owned and with full corporate power and authority to own, lease, use and operate its properties and to conduct its business as and where now owned, leased, used, operated and conducted. Each of Parent and Merger Sub is duly qualified to do business and in good standing in each jurisdiction in which the nature of the business conducted by it or the property it owns, leases or operates requires it to so qualify, except where the failure to be so qualified or in good standing in such jurisdiction individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect on Parent. Parent is not in default in the performance, observance or fulfillment of any provision of its Certificate of Formation or its Operating Agreement, each as in effect on the date hereof (the "Parent Certificate" and the "Parent Operating Agreement," respectively). 4.2. Subsidiaries. Parent does not own, directly or indirectly, any equity or other ownership interest in any corporation, partnership, joint venture or other entity or enterprise, other than Merger Sub. 4.3. Power and Authority. Parent and Merger Sub have all requisite power and authority to (a) enter into and deliver this Agreement, (b) perform its obligations hereunder and (c) to consummate the transactions contemplated by this Agreement. The execution, delivery and performance of this Agreement by Parent and Merger Sub have been duly authorized by all necessary action on the part of Parent and Merger Sub. This Agreement has been duly executed and delivered by Parent and Merger Sub and constitutes the legal, valid and binding obligation of Parent and Merger Sub enforceable against them in accordance with its terms. 4.4. Proxy Statement. None of the information provided by Parent or Merger Sub and/or by their respective auditors, legal counsel, financial advisors or other consultants or advisors specifically for use in the Proxy Statement (including, without limitation, a Schedule 13E-3 filing), shall, at the time filed with the SEC, at the time mailed to the Company's stockholders or at the time of the Company Stockholders 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. If at any time prior to the Company Stockholders Meeting, or the Closing, any event relating to Parent or any of its Affiliates, officers or directors should be discovered by Parent that should be set forth in a supplement to the Proxy Statement, Parent shall promptly inform the Company. -23- 4.5. Financing. Parent and Merger Sub have available to them all funds necessary to pay the Merger Consideration for each outstanding share of Company Common Stock and to consummate the Merger and the other transactions contemplated hereby. ARTICLE V COVENANTS 5.1. Mutual Covenants. (a) HSR Act Filings; Best Efforts; Notification. (i) Each of Parent and the Company shall (A) 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 hereby as promptly as practicable and in any event within five (5) business days after the date of this Agreement, (B) 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 Authority in respect of such filings or such transactions, and (C) cooperate with the other party in connection with any such filing and in connection with resolving any investigation or other inquiry of any such agency or other Governmental Authority under any Foreign Antitrust Laws with respect to any such filing or any such transaction. Each party shall use its best efforts to furnish to each other all information required for any application or other 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, undertaking, or agreement with, any Governmental Authority regarding any such filings or any such transaction. Neither party shall independently participate in any formal meeting with any Governmental Authority in respect of any such filings, investigation, or other inquiry without giving the other party prior notice of the meeting and, to the extent permitted by such Governmental Authority, the opportunity to attend and/or participate. The parties hereto will consult and cooperate with one another in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto in connection with proceedings under or relating to the HSR Act or other Antitrust Laws. (ii) Each of Parent and the Company shall use its best efforts to resolve such objections, if any, as may be asserted by any Governmental Authority with respect to the transactions contemplated by this Agreement under the HSR Act, the Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade Commission Act, as amended, any Foreign Antitrust Laws, 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") provided, however, that neither Parent, Merger Sub nor the Company, nor any of their respective Affiliates, shall be required, as a result of this Section 5.1(a)(ii), to propose or agree to accept any undertaking or condition, to enter into any consent decree, to make any divestiture or accept any operational restriction, or take or commit to take any action that could reasonably be expected to limit (A) the freedom of action of Parent or its subsidiaries or -24- Affiliates with respect to operation of, or Parent's or its subsidiaries' or Affiliates' ability to retain, the Company or any business, product lines or assets of the Company, or (B) the ability to retain, own or operate any portion of the businesses, product lines or assets, of the Parent or alter or restrict in any way the business or commercial practices of the Company, the Parent, or either of their subsidiaries or Affiliates. Parent shall be entitled to direct any proceedings or negotiations with any Governmental Authority relating to any of the foregoing described in this paragraph (ii) or to the matters described in paragraph (i) of this Section 5.1(a), provided that it shall afford the Company a reasonable opportunity to participate therein, and provided, further, that nothing in this sentence shall affect the parties' rights and obligations contained in the third, fourth and fifth sentences of Section 5.1(a)(i). Notwithstanding the foregoing or any other provision of this Agreement, nothing in this Section 5.1(a) shall limit a party's right to terminate this Agreement pursuant to Section 7.1, so long as such party has up to then complied in all material respects with its obligations under this Section 5.1(a). Each of Parent and the Company shall use its best efforts to take such action as may be required to cause the expiration or early termination of the notice period under the HSR Act or other Antitrust Laws with respect to such transactions as promptly as possible after the execution of this Agreement. (iii) Each of the parties shall use its best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other transactions contemplated by this Agreement, including (A) the obtaining of all other necessary actions or nonactions, waivers, consents, licenses, permits, authorizations, orders and approvals from Governmental Authorities and the making of all other necessary registrations and filings (including other filings with Governmental Authorities, if any), subject to the limitations of Section 5.1(a)(ii), (B) the obtaining of all consents, approvals or waivers from third parties related to or required in connection with the Merger that are necessary to consummate the Merger and the transactions contemplated by this Agreement or required to prevent a Material Adverse Effect on Parent or the Company from occurring prior to or after the Effective Time, (C) the preparation of the Proxy Statement and (D) the execution and delivery of any additional instruments necessary to consummate the transaction contemplated by, and to fully carry out the purposes of, this Agreement. (iv) Notwithstanding anything to the contrary in this Agreement, neither Parent nor the Company shall be required to (i) hold separate (including by trust or otherwise) or divest any of their respective businesses or assets or (ii) waive any of the conditions to the Merger set forth in Article VI of this Agreement as they apply to such party. (b) Public Announcements. Each of the parties agrees that it shall not, nor shall any of their respective affiliates, issue or cause the publication of any press release or other public announcement with respect to the Merger, this Agreement or the other transactions contemplated hereby without the prior approval of the other party, except such disclosure as may be required by law or by any listing agreement with the Nasdaq Stock Market, Inc., a national securities exchange; provided, if such disclosure is required by law or any such listing agreement, such disclosure may not be made without prior consultation of the other parties. -25- (c) Taking of Necessary Action; Further Action. Each of Parent, Merger Sub and the Company will take all such reasonable and lawful action as may be necessary or appropriate in order to effectuate the Merger in accordance with this Agreement as promptly as possible. If at any time after the Effective Time, any such further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company and Merger Sub, the officers and directors of the Company and Merger Sub immediately prior to the Effective Time are fully authorized in the name of their respective corporations or otherwise to take, and will take, all such lawful and necessary action. 5.2. Covenants of Parent. (a) Indemnification; Directors' and Officers' Insurance. (i) Parent and the Company agree that all rights to indemnification or advancement of expenses and director exculpation, and all limitations with respect thereto, existing in favor of any Indemnified Person, as provided in the Company Certificate or the Company Bylaws, shall survive the Merger and shall continue in full force and effect for six years, without any amendment thereto; provided, however, that in the event any Claim is asserted or made, any determination required to be made with respect to whether an Indemnified Person's conduct complies with the standards set forth under the DGCL, the Company Certificate or the Company Bylaws or any such agreement, as the case may be, shall be made by independent legal counsel selected by such Indemnified Person and reasonably acceptable to Parent. For a period of six years after the Effective Time, Parent shall cause the Surviving Corporation to indemnify, defend and hold harmless (and make advances for expenses as incurred to) all past and present officers and directors of the Company and of its Subsidiaries to the same extent and in the same manner such persons are entitled to indemnification and advancement of expenses as of the date of this Agreement (to the extent consistent with applicable law) by the Company pursuant to the DGCL, the Company Certificate or the Company Bylaws for acts or omissions occurring at or prior to the Effective Time. For a period of six years after the Effective Time, Parent shall cause the Surviving Corporation to perform all of the obligations set forth in the Company Charter and the Company Bylaws. (ii) Parent shall maintain the Company's existing directors' and officers' liability insurance policy ("D&O Insurance") for a period of not less than six years after the Effective Time; provided, however, that Parent may substitute therefor policies of substantially similar coverage and amounts (with carriers comparable to the Company's existing carriers) containing terms no less advantageous to such former directors or officers; provided further that if the existing D&O Insurance expires or is canceled during such period, Parent shall use its reasonable efforts to obtain substantially similar D&O Insurance; provided further that Parent and the Company shall not be required pursuant to its obligations under this Section 5.2(a)(ii) to pay in excess of an aggregate amount of $950,000, but in such case shall purchase as much coverage as possible for such amount. (b) Section 16 Matters. Prior to the Effective Time, Parent and the Company shall take all such steps as may be required to cause the Merger and the transactions -26- contemplated hereby, including any dispositions of Company Common Stock (including derivative securities with respect to the Company Common Stock) by each individual who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Company 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 regarding such matters. 5.3. Covenants of the Company. (a) The Company Stockholders Meeting. The Company shall take all action in accordance with the federal securities laws, the DGCL and the Company Certificate and the Company Bylaws necessary to convene a special meeting of the stockholders of the Company entitled to vote (the "Company Stockholders Meeting") to be held and completed on the earliest practicable date following the execution of this Agreement and determined by Parent, subject to the consent of the Company (which shall not be unreasonably withheld), to consider and vote upon approval of the Merger, this Agreement and the transactions contemplated hereby; provided, however, that the Company shall not hold the Company Stockholders Meeting until any applicable waiting periods (and any extensions thereof, including any written commitment to an HSR Authority to defer or delay consummation of the Merger notwithstanding expiration of such waiting periods) under the HSR Act relating to the Merger and the transactions contemplated by this Agreement shall have expired or been terminated. (b) SEC Filings. The Company shall, in accordance with applicable law, as soon as practicable following the execution of this Agreement: (i) prepare and file with the Securities and Exchange Commission (the "SEC") a proxy statement (including, without limitation, a Schedule 13E-3 filing, if required to be filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or information statement (together with any supplement or amendment thereto, the "Proxy Statement") relating to the Company Stockholders Meeting in accordance with the Exchange Act and (ii) include in the Proxy Statement the recommendation of the Special Committee and the Board of Directors of the Company that stockholders of the Company vote in favor of the approval and adoption of this Agreement and the transactions contemplated hereby, provided that the Special Committee or the Board of Directors of the Company may withdraw or modify its recommendation relating to this Agreement and the Merger pursuant to the terms of Section 5.3(d) hereof. The Company shall also as soon as practicable following the execution of this Agreement use its commercially reasonable efforts (i) to obtain and furnish the information required to be included by it in the Proxy Statement and, after consultation with Parent, respond promptly to any comments made by the SEC with respect to the Proxy Statement and any preliminary version thereof and cause the Proxy Statement to be mailed to its stockholders at the earliest practicable time following the execution of this Agreement in accordance with SEC rules and regulations and (ii) to obtain the necessary approvals by its stockholders of this Agreement and the transactions contemplated hereby. At the Company Stockholders Meeting, Parent and Merger Sub will vote all Shares owned by them to approve this Agreement and the transactions contemplated hereby. (c) Conduct of the Company's Operations. During the period from the date of this Agreement to the Effective Time, the Company shall conduct its operations in the ordinary -27- course except as expressly contemplated by this Agreement and the transactions contemplated hereby and shall use all reasonable efforts to maintain and preserve its business organization and to retain the services of its officers and key employees and maintain relationships with customers, suppliers, lessees, licensees and other third parties to the end that its goodwill and ongoing business shall not be impaired in any material respect. Without limiting the generality of the foregoing, during the period from the date of this Agreement to the Effective Time, the Company shall not, except as otherwise expressly contemplated by this Agreement and the transactions contemplated hereby or as set forth in Section 5.3(c) to the Company Disclosure Schedule, without the prior written consent of Parent: (i) do or effect any of the following actions with respect to its securities: (A) adjust, split, combine or reclassify its capital stock, (B) make, declare or pay any dividend or distribution on, or directly or indirectly redeem, purchase or otherwise acquire, any shares of its capital stock or any securities or obligations convertible into or exchangeable for any shares of its capital stock, (C) grant any person any right or option to acquire any shares of its capital stock, (D) issue, deliver or sell or agree to issue, deliver or sell any additional shares of its capital stock or any other securities or obligations convertible into or exchangeable or exercisable for any shares of its capital stock or such securities (except pursuant to the exercise of Company Options which are outstanding as of the date hereof) or (E) enter into any agreement, understanding or arrangement with respect to the sale, voting, registration or repurchase of its capital stock; (ii) directly or indirectly sell, transfer, lease, pledge, mortgage, encumber or otherwise dispose of any of its property or assets other than in the ordinary course of business; (iii) amend the Company Certificate or the Company Bylaws; (iv) merge or consolidate with any other person; (v) acquire assets or capital stock of or other equity interests in any other person; (vi) incur, create, assume or otherwise become liable for any indebtedness for borrowed money or, assume, guarantee, endorse or otherwise as an accommodation become responsible or liable for the obligations of any other individual, corporation or other entity; (vii) enter into or modify any employment, severance, stay-put termination or similar agreements or arrangements (other than at-will employment arrangements in the ordinary course of business consistent with past practice of the Company) with, or grant any bonuses, salary increases, severance or termination pay to, any officer, director, consultant or employee (except for change-of-control severance agreements that in all cases shall require the prior written consent of Parent), or otherwise increase the compensation or benefits provided to any officer, director, consultant or employee except as may be required by Applicable Law; -28- (viii) enter into, adopt or amend any employee benefit or similar plan except as may be required by Applicable Law; (ix) change any method or principle of accounting in a manner that is inconsistent with past practice except to the extent required by generally accepted accounting principles as advised by the Company's regular independent accountants, or make any material Tax election (unless required by law) or settle any material Tax liability which is the subject of dispute between the Company and a Governmental Authority, unless, in each case, Parent is given reasonable prior written notice thereof; (x) enter into, amend or terminate any contract other than in the ordinary course of business consistent with past practices and which individually or in the aggregate would not be reasonably expected to have a Material Adverse Effect on the Company; (xi) except as expressly permitted by Section 5.3(d) hereof, enter into any confidentiality, standstill or non-compete agreements or arrangements; (xii) incur or commit to any capital expenditures, individually or in the aggregate, in excess of $200,000; (xiii) modify or waive any of its rights under any provision of any confidentiality agreement or standstill agreement; (xiv) take any action that will likely result in the failure to satisfy the conditions set forth in Section 6.3(a) hereof; (xv) fail to file any material Tax Returns when they become due, or fail to pay any material Taxes when they become due and payable; (xvi) permit or cause any subsidiary to do any of the foregoing or agree or commit to do any of the foregoing; or (xvii) agree in writing or otherwise to take any of the foregoing actions. (d) No Solicitation. During the term of this Agreement, the Company shall not, and shall not authorize or permit any of its subsidiaries or any directors, officers, employees, agents or representatives of the Company or any of its subsidiaries (including, without limitation, any investment banker, financial advisor, attorney or accountant retained by the Company or any of its subsidiaries) to directly or indirectly solicit, initiate, encourage or facilitate, or furnish or disclose non-public information in furtherance of, any inquiries or the making of any proposal with respect to any recapitalization, merger, consolidation or other business combination involving the Company, or acquisition of any capital stock from the Company (other than upon exercise of the Company options which are outstanding as of the date hereof) or 15% or more of the assets of the Company and its subsidiaries, taken as a whole, in a single transaction or a series of related transactions, or any acquisition by the Company of any material assets or capital stock of any other person, or any combination of the foregoing (a "Competing Transaction"), or negotiate or otherwise engage in discussions with any person (other than Parent or its directors, -29- officers, employees, agents and representatives) with respect to any Competing Transaction, agree to approve or recommend a Competing Transaction or enter into any agreement, arrangement or understanding requiring it to abandon, terminate or fail to consummate the Merger or any other transactions contemplated by this Agreement; provided, that, at any time prior to the approval of the Merger by the stockholders of the Company, the Company may furnish information to, and negotiate or otherwise engage in discussions with, any party who delivers a bona fide written proposal for a Competing Transaction that was not solicited or encouraged after the date of this Agreement if and so long as (A) the Special Committee or the Board of Directors of the Company determines, after consultation with its outside legal counsel, that failing to take such action may constitute a breach of the fiduciary duties of the Special Committee or the Board of Directors of the Company under Applicable Law, (B) the Special Committee or the Board of Directors of the Company determines that such proposal is, after consulting with Morgan Stanley (or any other nationally recognized investment banking firm), if accepted, reasonably likely to be consummated and is more favorable to the Company's stockholders from a financial point of view than the transactions contemplated by this Agreement (including any adjustment to the terms and conditions proposed by Parent in response to such Competing Transaction) and (C) such proposal is not subject to any financing contingencies (a "Superior Proposal"); provided, further, that the Company, prior to taking any such action, notifies Parent not less than two days prior to taking such action (which notice shall identify the person making the proposal, and describe the terms thereof) and receives from the person making the proposal an executed confidentiality agreement in reasonably customary form. The Company shall notify Parent of any proposal for a Competing Transaction (including the material terms and conditions thereof and the identity of the person making it) as promptly as practicable (but in no event more than 24 hours) after its receipt thereof, and shall thereafter inform Parent on a prompt basis of the status of any discussion or negotiations with such third party and any material changes to the terms and conditions of such proposal, and shall promptly give Parent a copy of any information delivered to such person that has not previously been reviewed by Parent. The Company will immediately cease all existing activities, discussions and negotiations with any parties conducted heretofore with respect to any proposal for a Competing Transaction. Notwithstanding any other provision of this Section 5.3(d), in the event that prior to the approval of the Merger by the stockholders of the Company the Special Committee or the Board of Directors of the Company determines, after consultation with outside legal counsel, that failure to do so may constitute a breach of the fiduciary duties of the Special Committee or the Board of Directors of the Company under Applicable Law, the Special Committee or the Board of Directors of the Company may (subject to this and the following sentences) withdraw, modify or change, in a manner adverse to Parent, the Company Board Recommendation and take and disclose to the stockholders of the Company a position with respect to a Superior Proposal and, to the extent applicable, comply with Rule 14e-2 and Rule 14d-9 promulgated under the Exchange Act with respect to a Competing Transaction by disclosing such withdrawn, modified or changed Company Board Recommendation and recommendation with respect to the Competing Transaction in connection with a tender or exchange offer for the Company securities, provided that it gives Parent two business days prior written notice of its intention to do so. Neither the Special Committee nor the Board of Directors of the Company shall, in connection with any such withdrawal, modification or change of the Company Board Recommendation, take any action to change the approval of the Special Committee or the Board of Directors of the Company for purposes of causing any state takeover statute or other state law -30- to be applicable to the transactions contemplated hereby, including this Agreement and the Merger; provided, however, that this sentence shall not prohibit the Company from withdrawing, modifying or changing its recommendation or approving or recommending any Superior Proposal under the circumstances and subject to the conditions set forth in this Section 5.3(d). Notwithstanding any subsequent determination by the Board of Directors of the Company to change the Company Board Recommendation, this Agreement shall be submitted to the stockholders of the Company at the Company Stockholders Meeting for the purpose of obtaining the approval of the Merger and the transactions contemplated hereby and nothing contained herein shall be deemed to relieve the Company of such obligation. From and after the execution of this Agreement, the Company shall immediately advise Parent in writing of the receipt, directly or indirectly, of any inquiries, discussions, negotiations, or proposals relating to a Competing Transaction (including the specific terms thereof and the identity of the other party or parties involved) and furnish to Parent within three days of such receipt an accurate description of all material terms (including any changes or adjustments to such terms as a result of negotiations or otherwise) of any such written proposal in addition to any information provided to any third party relating thereto. Notwithstanding any other provision of this Section 5.3(d), the Company, its directors and its advisors may refer a third party to this Section 5.3(d). (e) Access. The Company shall permit representatives of Parent to have full access at all reasonable times and upon reasonable notice to the Company's premises, properties, books, records, contracts, documents, customers and suppliers, and shall cause its independent accountants to give Parent access to such accountants' work papers. Information obtained by Parent pursuant to this Section 5.3(e) shall be subject to the provisions of the Confidentiality Agreement, which agreement remains in full force and effect. No investigation conducted pursuant to this Section 5.3(e) or otherwise shall affect or be deemed to modify any representation or warranty made in this Agreement. Notwithstanding the foregoing, the Company shall have no obligation to provide Parent with information if the Company determines in good faith, upon written advice of its outside antitrust counsel, that providing information may violate any Applicable Law. (f) Notification of Certain Matters. The Company shall give prompt notice to Parent of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would likely cause any representation or warranty by the Company contained in this Agreement to be untrue or inaccurate at or prior to the Effective Time in any material respect and (ii) any material failure of the Company to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 5.3(f) shall not limit or otherwise affect the remedies available hereunder to Parent. (g) 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. (h) No Redemption of Rights Plan. Other than the amendment described in Section 5.3(h) of the Company Disclosure Schedule, between the date of this Agreement and the -31- earlier of the Effective Time and the termination of this Agreement, the Company shall not (a) redeem, amend or waive any provisions of the Rights Plan (other than such amendments as are necessary to accommodate this Agreement and the transactions contemplated hereby, but not with respect to any Competing Transaction) or (b) implement or adopt any so-called "poison pill," stockholder rights plan or other similar plan. ARTICLE VI CONDITIONS 6.1. Conditions to the Obligations of Each Party. The obligations of the Company, Merger Sub and Parent to consummate the Merger shall be subject to the satisfaction of the following conditions: (a) This Agreement, the Merger and the transactions contemplated hereby shall have been duly approved and adopted by the Requisite Company Vote. (b) Any applicable waiting periods (and any extensions thereof, including any written commitment to an HSR Authority to defer or delay consummation of the Merger notwithstanding expiration of such waiting periods) under the HSR Act or any Foreign Antitrust Laws relating to the Merger and the transactions contemplated by this Agreement shall have expired or been terminated. (c) No provision of any Applicable Law and no judgment, injunction, order or decree shall prohibit or enjoin the consummation of the Merger or the transactions contemplated by this Agreement (the parties having used their respective best efforts (consistent with the provisions of this Agreement) to cause such Applicable Law to be satisfied (if such Applicable Law is capable of being satisfied) so as to cause such Applicable Law not to prohibit the Merger or the transactions contemplated hereby). (d) There shall not be pending any Action by any Governmental Authority challenging or seeking to restrain or prohibit the consummation of the Merger or any of the other transactions contemplated by this Agreement. 6.2. Conditions to Obligations of the Company. The obligations of the Company to consummate the Merger and the transactions contemplated hereby shall be subject to the fulfillment of the following conditions unless waived by the Company: (a) The representations and warranties of Parent and Merger Sub set forth in Article IV shall be true and correct in all respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date (except for such representations and warranties made as of a specified date, the accuracy of which will be determined as of the specified date), except for any such inaccuracies which, individually or in the aggregate, would not have a material adverse effect on the ability of the Parent or the Merger Sub to consummate the transactions contemplated by this Agreement. -32- (b) Parent shall have performed in all material respects each obligation and agreement and shall have complied in all material respects with each covenant to be performed and complied with by it hereunder at or prior to the Effective Time, except for acts and omissions of Parent which, in the aggregate, do not have a Material Adverse Effect on Parent. (c) 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 6.2(a) and (b) have been satisfied. 6.3. Conditions to Obligations of Parent. The obligations of Parent to consummate the Merger and the other transactions contemplated hereby shall be subject to the fulfillment of the following conditions unless waived by Parent: (a) The representations and warranties of the Company set forth in Article III shall be true and correct in all respects on and as of the Closing Date with the same effect as though made on and as of the Closing Date (except for such representations and warranties made as of a specified date, the accuracy of which will be determined as of the specified date), except for changes permitted by Section 5.3(c) and except for any such inaccuracies which, individually or in the aggregate, would not have a Material Adverse Effect on the Company or a material adverse effect on the ability of the Company to consummate the transactions contemplated by this Agreement (it being agreed that any materiality qualifications in particular representations and warranties shall be disregarded in determining whether any such inaccuracies would have a Material Adverse Effect for purposes of this Section 6.3(a)). (b) The Company shall have performed in all material respects each obligation and agreement and shall have complied in all material respects with each covenant to be performed and complied with by it hereunder at or prior to the Effective Time. (c) The Company shall have furnished Parent with a certificate dated the Closing Date signed on its behalf by its Chairman, President or any Vice President to the effect that the conditions set forth in Sections 6.3(a) and (b) have been satisfied. (d) Since the date of this Agreement, there shall not have occurred any Material Adverse Effect on the Company. (e) The aggregate number of shares of Company Common Stock which dissents from the transactions contemplated by this Agreement shall not exceed 5% of the outstanding shares of Company Common Stock on the Closing Date. (f) There shall not be pending any Action by any Governmental Authority (i) seeking to prohibit or limit the ownership or operation by Parent, the Surviving Corporation or any of their respective subsidiaries of, or to compel Parent, the Surviving Corporation or any of their respective subsidiaries to dispose of or hold separate, any material portion of the business or assets of Parent, the Company or any of their respective subsidiaries, as a result of the Merger or any of the other transactions contemplated by this Agreement or (ii) seeking to prohibit Parent or any subsidiary of Parent from effectively controlling in any material respect the business or operations of the Company or the subsidiaries of the Company. -33- ARTICLE VII TERMINATION AND AMENDMENT 7.1. Termination. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time (notwithstanding any approval of this Agreement by the stockholders of the Company): (a) by mutual written consent of Parent and the Company; (b) by either Parent or the Company if there shall be judgment, injunction, order or decree of a court or other competent Governmental Authority enjoining Parent or the Company from consummating the Merger shall have been entered and such judgment, injunction, order or decree shall have become final and nonappealable; provided that a party may not terminate the Agreement pursuant to this Section 7.1(b) if its failure to perform its obligations under this Agreement resulted in or contributed to the issuance of such judgment, injunction, order or decree; (c) by either Parent or the Company if the Merger shall not have been consummated before June 30, 2004; provided, however, that the right to terminate this Agreement under this Section 7.1(c) shall not be available to any party whose failure or whose affiliate's failure to perform any material covenant or obligation under this Agreement has been the cause of or resulted in the failure of the Merger to occur on or before such date; (d) by Parent or the Company if at the Company Stockholders Meeting (including any adjournment or postponement thereof) the Requisite Company Vote of the stockholders shall not have been obtained to approve the Merger, the Merger Agreement and the transactions contemplated hereby; (e) by Parent or the Company if: (x) there shall have been a material breach by the other of any of its representations, warranties, covenants or agreements contained in this Agreement, which breach would result in the failure to satisfy one or more of the conditions set forth in Section 6.2(a) or 6.2(b) (in the case of a breach by Parent) or Section 6.3(a) or 6.3(b) (in the case of a breach by the Company) or would result in a material adverse effect on the ability of Parent and/or the Company to consummate the transactions contemplated hereby, and such breach shall not have been cured within 30 days after notice thereof shall have been received by the party alleged to be in breach; or (y) the condition set forth in Section 6.3(d) (in the case of a termination by Parent) is not satisfied and cannot reasonably be expected to be satisfied by the Termination Date; (f) by Parent at any time prior to the Company Stockholders Meeting if the Special Committee or the Board of Directors of the Company or any committees thereof shall -34- have withdrawn or modified, in a manner adverse to Parent, the Company Board Recommendation or shall have approved, endorsed or recommended a Competing Transaction; or (g) by the Company at any time prior to the Company Stockholders Meeting if all of the following conditions have been met: (x) the Company has complied with the provisions of Section 5.3(c)(xi), 5.3(d) and 5.3(h) hereof, (y) the Company has received a Superior Proposal and (z) the full amount of the termination fee and the Cost reimbursement required under Section 7.3 hereof is paid at the time notice of such termination is delivered. 7.2. Effect of Termination. In the event of the termination of this Agreement pursuant to Section 7.1, this Agreement, except for the provisions of each of Sections 7.2, 7.3, 8.7 and 8.10, shall become void and have no effect, without any liability on the part of any party or its directors, officers or stockholders. Notwithstanding the foregoing, nothing in this Section 7.2 shall relieve any party to this Agreement of liability for a willful or intentional breach of any provision of this Agreement and provided, further, however, that if it shall be judicially determined that termination of this Agreement was caused by a willful or intentional breach of this Agreement, then, in addition to other remedies at law or equity for breach of this Agreement, the party so found to have intentionally breached this Agreement shall indemnify and hold harmless the other parties for their respective out-of-pocket costs, fees and expenses of their counsel, accountants, financial advisors and other experts and advisors as well as fees and expenses incident to negotiation, preparation and execution and performance of this Agreement and related documentation and stockholders' meetings and consents ("Costs"). 7.3. Termination Fee; Expenses. (a) In the event that this Agreement is terminated (i) by Parent pursuant to Section 7.1(e)(x) due to a material breach by the Company of its obligations under Section 5.3(d) and, if such breach is of a nature that it may be cured by the Company, the Company does not cure such breach within 48 hours after such breach; (ii) pursuant to Section 7.1(f); (iii) pursuant to Section 7.1(g) or (iv) by Parent pursuant to Section 7.1(c) or 7.1(d) in the event (A) a Competing Transaction shall have been made known to the Company or shall have been made directly to the stockholders of the Company generally or any person shall have publicly announced its intention (whether or not conditional) to make a proposal for a Competing Transaction, (B) the condition set forth in Section 6.1(a) is not satisfied or Parent has terminated this Agreement pursuant to Section 7.1(c) (but only if a vote to obtain the Requisite Company Vote or the Company's Stockholder Meeting has not been held), and (C) within 12 months of such termination, the Company enters into a definitive agreement with respect to, or consummates, a Competing Transaction, then in any such event, the Company shall pay to Parent a termination fee equal to $3,000,000 in cash, plus the reimbursement of any and all Costs incurred by Parent and Merger Sub up to a maximum of $1,000,000. Except as set forth in Section 7.2, the fee and expense arrangements contemplated hereby are the sole remedies hereunder (other than equitable or injunctive relief under Section 8.8) and shall be paid pursuant to this Section 7.3 regardless of any alleged breach, other than a willful or intentional breach, by Parent of its obligations hereunder, provided that no payment made by the Company pursuant to -35- this Section 7.3 shall operate or be construed as a waiver by the Company of any breach of this Agreement by Parent or Purchaser or of any rights of the Company in respect thereof. (b) Any payment required to be made pursuant to paragraph (a) of this Section 7.3 shall be made to the Parent not later than two Business Days after delivery to the Company of notice of demand for payment, or, if earlier, upon the consummation of a Competing Transaction if such payment is required pursuant to Section 7.3(a)(iv); provided, that any such payment required pursuant to Section 7.3(a)(iii) shall be made to Parent in accordance with the terms of Section 7.1(g) hereof. Any payment required to be made pursuant to paragraph (a) of this Section 7.3 shall be made to the Parent by wire transfer of immediately available funds to an account designated by the Parent in the notice of demand for payment delivered pursuant to this Section 7.3(b). 7.4. Amendment. This Agreement may be amended by the parties hereto, by action taken or authorized by the Special Committee of the Company and by the respective Boards of Directors of Parent and Merger Sub, at any time before or after adoption of this Agreement by stockholders of Parent or the Company, but after any such approval, no amendment shall be made which by law requires further approval or authorization by the stockholders of Parent or the Company without such further approval or authorization. Notwithstanding the foregoing, this Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 7.5. Extension; Waiver. At any time prior to the Effective Time, Parent (with respect to the Company) and the Company (with respect to Parent) by action taken or authorized by their respective Boards of Directors, may, to the extent legally allowed, (a) extend the time for the performance of any of the obligations or other acts of such party, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. ARTICLE VIII MISCELLANEOUS 8.1. No Survival of Representations and Warranties. The representations and warranties made herein by the parties hereto shall not survive the Effective Time. This Section 8.1 shall not limit any covenant or agreement of the parties hereto which by its terms contemplates performance after the Effective Time or after the termination of this Agreement. 8.2. Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed) or dispatched by a nationally recognized overnight courier service to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): -36- (a) if to Parent or Merger Sub: c/o ValueAct Capital One Maritime Plaza Suite 1400 San Francisco, CA 94111 Attn.: George F. Hamel, Jr. Fax: 415-362-5727 with a copy to: Dechert LLP 1717 Arch Street 4000 Bell Atlantic Tower Philadelphia, PA 19103-2793 Attn.: Christopher G. Karras, Esq. Fax: 215-994-2222 (b) if to the Company: 300 Baker Avenue Concord, MA 01742 Attn.: President Fax: 978-318-4690 with a copy to: Testa, Hurwitz & Thibeault, LLP 125 High Street Boston, MA 02110 Attn: Kathy Fields, Esq. Fax: 617-790-0097 8.3. Interpretation; Definitions. (a) When a reference is made in this Agreement to an Article or Section, such reference shall be to an Article or Section of this Agreement unless otherwise indicated. The headings and the table of contents contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (b) For the purposes of any provision of this Agreement, a "Material Adverse Effect" with respect to any party shall be deemed to occur if any event, change or effect, individually or in the aggregate with such other events, changes or effects, has occurred which would have or would reasonably be expect to have a material adverse effect on (i) the business, assets (including intangible assets), liabilities (contingent or otherwise), results of operations or condition (financial or otherwise) of such party and its subsidiaries taken as a whole or (ii) the ability of such party to consummate the transactions contemplated by this Agreement; provided, -37- however, that a Material Adverse Effect shall not include any change in or effect upon the business, assets (including intangible assets), liabilities (contingent or otherwise), results of operations or financial condition of such party or any of its subsidiaries directly or indirectly arising out of or attributable to (i) any changes in the market price or trading volume of the shares of Company Common Stock in the case of the Company (but not any change or effect underlying such decrease to the extent such change or effect would otherwise constitute a Material Adverse Effect on such party), (ii) conditions, events, or circumstances generally affecting the economy as a whole or the Company's industry as a whole, (iii) changes, effects or events resulting from or arising out of the public announcement of the execution of this Agreement or (iv) changes, effects or events caused by the taking of any action required by this Agreement or the taking of any action by the Company that has been approved in writing by Parent. (c) For purposes of this Agreement, a "subsidiary" of any person means another person, an amount of the voting securities or other voting ownership or voting partnership interests (or, in the case of a trust, beneficial interests) of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting securities or interests, 50% or more of the equity interests of which is owned directly or indirectly by such first person). (d) For purposes of this Agreement, "knowledge" of a party shall mean the knowledge, assuming due inquiry, of all elected officers of such party or any of its subsidiaries with a title of vice president or higher. (e) For purposes of this Agreement, references to any financial statements or any component thereof shall be deemed to include the footnotes thereto. (f) For purposes of this Agreement, the term "including" shall mean "including, without limitation." 8.4. Counterparts. This Agreement may be executed in counterparts, which together shall constitute one and the same Agreement. The parties may execute more than one copy of the Agreement, each of which shall constitute an original. 8.5. Entire Agreement. This Agreement (including the documents and the instruments referred to herein) constitute the entire agreement among the parties and supersede all prior agreements and understandings, agreements or representations by or among the parties, written and oral, with respect to the subject matter hereof and thereof. 8.6. Third Party Beneficiaries. Except for the agreement set forth in Section 5.2(a), nothing in this Agreement, express or implied, is intended or shall be construed to create any third party beneficiaries. 8.7. Governing Law. Except to the extent that the laws of the jurisdiction of organization of any party hereto, or any other jurisdiction, are mandatorily applicable to the Merger or to matters arising under or in connection with this Agreement, this Agreement shall be governed by the laws of the State of Delaware, without giving effect to the conflict of laws -38- principles thereof. Each party hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of Delaware and of the United States of America, in each case located in the State of Delaware, for any Action (and agrees not to commence any Action except in any such court), and further agrees that service of process, summons, notice or document by U.S. registered mail to its respective address set forth in Section 8.2 shall be effective service of process for any Action brought against it in any such court. Each party hereby irrevocably and unconditionally waives any objection to the laying of venue of any Action in the courts of the State of Delaware or of the United States of America, in each case located in the State of Delaware, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any Action brought in any such court has been brought in an inconvenient forum. 8.8. Specific Performance. The transactions contemplated by this Agreement are unique. Accordingly, each of the parties acknowledges and agrees that, in addition to all other remedies to which it may be entitled, each of the parties hereto is entitled to a decree of specific performance and injunctive and other equitable relief. 8.9. 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; provided, that Parent or Merger Sub may assign any of Merger Sub's rights and obligation under this Agreement to any other wholly-owned direct or indirect subsidiary of Parent upon notice to the Company. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. 8.10. Expenses. Subject to the provisions of Section 7.3, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby and thereby shall be paid by the party incurring such expenses, except that the filing fee required under the HSR Act will be paid by Parent. -39- IN WITNESS WHEREOF, Parent, Merger Sub and the Company have signed this Agreement as of the date first written above. VAC-OS HOLDINGS LLC By: ----------------------------------- Name: Title: OS MERGER SUB, INC. By: ----------------------------------- Name: Title: ONESOURCE INFORMATION SERVICES, INC. By: ----------------------------------- Name: Title: -40- EX-4.1 4 b495578kexv4w1.txt EX-4.1 AMENDMENT NO. 1 TO RIGHTS AGREEMENT - -------------------------------------------------------------------------------- AMENDMENT NO.1 TO THE RIGHTS AGREEMENT BETWEEN ONESOURCE INFORMATION SERVICES, INC. and AMERICAN STOCK TRANSFER & TRUST COMPANY as Rights Agent ---------- Dated as of February 17, 2004 - -------------------------------------------------------------------------------- AMENDMENT NO.1 TO RIGHTS AGREEMENT This Amendment No.1, dated as of February 17, 2004 (this "Amendment"), to the Rights Agreement between OneSource Information Services, Inc., a Delaware corporation (the "Company"), and American Stock Transfer & Trust Company, as rights agent (the "Rights Agent"). WHEREAS, the Company entered into a Rights Agreement, dated as of October 7, 2003, with the Rights Agent (the "Rights Agreement"); WHEREAS, pursuant to Section 27 of the Rights Agreement, the Company may from time to time, and the Rights Agent shall, if the Company so directs, supplement or amend the Agreement without the approval of any holders of Right Certificates to make any change to or delete any provision thereof or to adopt any other provisions with respect to the Rights which the Company may deem necessary or desirable; WHEREAS, as of the date of this Amendment, no Person has become an Acquiring Person under the Rights Plan; WHEREAS, the Company and the Rights Agent wish to amend the Rights Agreement as set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: Section 1. Definitions. All capitalized terms used in this Amendment and not otherwise defined herein shall have the same meanings set forth in the Rights Agreement. Section 2. Amendments. (a) The definition of Acquiring Person is hereby amended to include a new clause (v) as follows: "Acquiring Person" shall mean any Person who or which, together with all Affiliates and Associates of such Person, shall be the Beneficial Owner of 15%, or in the case of a Grandfathered Stockholder, 35%, or more of the Common Shares of the Company then outstanding but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of the Company or any Subsidiary of the Company, (iv) any entity holding Common Shares for or pursuant to the terms of any such employee benefit plan or (v) any Person who becomes the Beneficial Owner of Common Shares of the Company in an Approved Transaction. Notwithstanding the foregoing: (1) no Person shall become an "Acquiring Person" as the result of an acquisition of Common Shares by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 15% (or such other percentage as would otherwise result in such person becoming an Acquiring Person) or more of the Common Shares of the Company then outstanding; provided, however, that if a Person shall so become the Beneficial Owner of 15% (or such other percentage) or more of the Common Shares of the Company then outstanding by reason of an acquisition of Common Shares by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of 1 an additional 1% of the outstanding Common Shares of the Company, then such Person shall be deemed to be an "Acquiring Person"; and (2) if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an "Acquiring Person," as defined pursuant to the foregoing provisions of this paragraph, has become such inadvertently and without any plan or intention to seek or affect control of the Company, and such Person enters into an irrevocable commitment with the Company to divest, and thereafter divests in accordance with the terms of such commitment as promptly as practicable a sufficient number of Common Shares so that such Person would no longer be an "Acquiring Person," as defined pursuant to the foregoing provisions of this paragraph, then such Person shall not be deemed to have become an "Acquiring Person" for any purposes of this Agreement. (b) A new definition for Approved Transaction is included in Section 1 of the Rights Agreement as follows: "Approved Transaction" shall mean the transaction contemplated by the Agreement and Plan of Merger by and between the Company, VAC-OS Holdings LLC and OS Merger Sub, Inc. Section 3. No Other Changes; References. Except as set forth above, all terms and conditions contained in the Rights Agreement shall remain in full force and effect. All references in the Rights Agreement or any other document shall be deemed to be references to the Rights Agreement as amended hereby. Section 4. Governing Law. This Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State. Section 5. Counterparts. This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Section 6. Descriptive Headings; Construction. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. Whenever the content of this Agreement permits, the masculine gender shall include the feminine and neuter genders, and reference to singular or plural shall be interchangeable with the other. * * * * * * * 2 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and their respective corporate seals to be hereunder affixed and attested, all as of the day and year first above written. ONESOURCE INFORMATION SERVICES, INC. Attest: /s/ Marcos Dinnerstein By: /s/ Martin Kahn - ------------------------------- ------------------------- Name: Martin Kahn Title: Chairman and Chief Executive Officer AMERICAN STOCK TRANSFER & TRUST COMPANY Attest: /s/ Susan Silber By: /s/ Herbert A. Lemmer - ------------------------------- ------------------------- Name: Herbert A. Lemmer Title: Vice President -----END PRIVACY-ENHANCED MESSAGE-----

EX-2.1

                          AGREEMENT AND PLAN OF MERGER

                                  BY AND AMONG

                              VAC-OS HOLDINGS LLC,

                               OS MERGER SUB, INC.

                                       and

                      ONESOURCE INFORMATION SERVICES, INC.







                             As of February 18, 2004

                                TABLE OF CONTENTS



                                                                            PAGE
                                                                      
ARTICLE I      THE MERGER................................................     1

      1.1.     The Merger................................................     1
      1.2.     Effective Time; Closing...................................     1
      1.3.     Effects of the Merger.....................................     2
      1.4.     Certificate of Incorporation and Bylaws...................     2
      1.5.     Directors and Officers of the Surviving Corporation.......     2

ARTICLE II     CONVERSION OF SECURITIES..................................     2

      2.1.     Conversion of Capital Stock...............................     2
      2.2.     Exchange of Certificates..................................     2
      2.3.     Dissenting Shares.........................................     4
      2.4.     Stock Option Plans........................................     4
      2.5.     Company ESPP Plans........................................     5
      2.6.     Withholding Rights........................................     5

ARTICLE III    REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............     5

      3.1.     Organization and Standing.................................     5
      3.2.     Subsidiaries..............................................     5
      3.3.     Corporate Power and Authority.............................     6
      3.4.     Capitalization of the Company.............................     6
      3.5.     Conflicts; Consents and Approvals.........................     7
      3.6.     No Material Adverse Effect................................     7
      3.7.     Company SEC Documents.....................................     8
      3.8.     Taxes.....................................................     8
      3.9.     Compliance with Law.......................................    10
      3.10.    Intellectual Property.....................................    10
      3.11.    Title to Properties.......................................    14
      3.12.    Litigation................................................    14
      3.13.    Proxy Statements..........................................    15
      3.14.    Brokerage and Finder's Fees; Expenses.....................    15
      3.15.    Employee Benefit Plans....................................    15
      3.16.    Contracts.................................................    18
      3.17.    Labor Matters.............................................    19
      3.18.    Undisclosed Liabilities...................................    20
      3.19.    Operation of the Company's Business; Relationships........    20
      3.20.    Permits; Compliance.......................................    20
      3.21.    Environmental Matters.....................................    21
      3.22.    Opinion of Financial Advisor..............................    21
      3.23.    Special Committee and Board Recommendation................    22
      3.24.    Vote Required.............................................    22
      3.25.    Related Party Transactions................................    22


                                                                      
      3.26.    Takeover Statutes; Rights Plan............................    22
      3.27.    NASDAQ Qualification......................................    22

ARTICLE IV     REPRESENTATIONS AND WARRANTIES OF PARENT
               AND MERGER SUB............................................    22

      4.1.     Organization and Standing.................................    22
      4.2.     Subsidiaries..............................................    23
      4.3.     Power and Authority.......................................    23
      4.4.     Proxy Statement...........................................    23
      4.5.     Financing.................................................    23
      4.6.     Assets and Revenue........................................    23

ARTICLE V      COVENANTS.................................................    24

      5.1.     Mutual Covenants..........................................    24
      5.2.     Covenants of Parent.......................................    26
      5.3.     Covenants of the Company..................................    27

ARTICLE VI     CONDITIONS................................................    32

      6.1.     Conditions to the Obligations of Each Party...............    32
      6.2.     Conditions to Obligations of the Company..................    32
      6.3.     Conditions to Obligations of Parent.......................    33

ARTICLE VII    TERMINATION AND AMENDMENT.................................    33

      7.1.     Termination...............................................    33
      7.2.     Effect of Termination.....................................    34
      7.3.     Termination Fee; Expenses.................................    35
      7.4.     Amendment.................................................    35
      7.5.     Extension; Waiver.........................................    36

ARTICLE VIII   MISCELLANEOUS.............................................    36

      8.1.     No Survival of Representations and Warranties.............    36
      8.2.     Notices...................................................    36
      8.3.     Interpretation; Definitions...............................    36
      8.4.     Counterparts..............................................    37
      8.5.     Entire Agreement..........................................    37
      8.6.     Third Party Beneficiaries.................................    38
      8.7.     Governing Law.............................................    38
      8.8.     Specific Performance......................................    38
      8.9.     Assignment................................................    38
      8.10.    Expenses..................................................    38




                                       ii

                          AGREEMENT AND PLAN OF MERGER

            This Agreement and Plan of Merger (this "Agreement") is made and
entered into as of the 18th day of February, 2004, by and among VAC-OS Holdings
LLC, a Delaware limited liability company ("Parent"), OS Merger Sub, Inc., a
Delaware corporation and wholly-owned subsidiary of Parent ("Merger Sub") and
OneSource Information Services, Inc., a Delaware corporation (the "Company").

                                   BACKGROUND

            A.    The Boards of Directors of Parent and Merger Sub and the
Special Committee and the Board of Directors of the Company (with Peter H. Kamin
abstaining) have each approved the merger of Merger Sub with and into the
Company, with the Company as the surviving corporation (the "Merger"), upon the
terms and subject to the conditions of this Agreement and in accordance with the
General Corporation Law of the State of Delaware (the "DGCL").

            B.    The Special Committee of the Board of Directors of the Company
(the "Special Committee") and the Board of Directors of the Company (with Peter
H. Kamin abstaining) have each approved this Agreement and the transactions
contemplated hereby and declared the advisability and resolved to recommend
approval of the Merger and approval and adoption of this Agreement by the
stockholders of the Company, subject to the terms of this Agreement.

                                      TERMS

            In consideration of the foregoing and the mutual representations,
warranties, covenants and agreements hereinafter set forth, the parties hereto
agree as follows:

                                    ARTICLE I

                                   THE MERGER

      1.1.  The Merger. Upon the terms and subject to the conditions hereof, and
in accordance with the provisions of the DGCL, at the Effective Time (as defined
in Section 1.2), Merger Sub shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Merger Sub shall cease
and the Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation").

      1.2.  Effective Time; Closing. Concurrently with the Closing (as
hereinafter defined), the parties shall cause the Merger to be consummated by
filing with the Secretary of State of the State of Delaware (the "Secretary of
State") a certificate of merger (the "Certificate of Merger") in accordance with
Section 251 of the DGCL. The Merger shall become effective (the "Effective
Time") when the Certificate of Merger has been filed with the Secretary of State
or at such later time as shall be agreed upon by the parties and specified in
the Certificate of Merger. The closing of the transactions contemplated hereby
(the "Closing") shall be held at the offices of Dechert LLP, 200 Clarendon
Street, 27th Floor, Boston, Massachusetts, at 10:00 a.m. Boston

time on the third business day after satisfaction or (to the extent permitted by
law) waiver of those conditions set forth in Article VI (other than any of those
conditions that by their terms are to be satisfied at the Closing, but subject
to the satisfaction or (to the extent permitted by law) waiver of those
conditions), or at such other place or time or on such other date as Parent and
the Company may agree. The date on which the Closing takes place is referred to
herein as the "Closing Date").

      1.3.  Effects of the Merger. From and after the Effective Time, the Merger
shall have the effects set forth in the DGCL.

      1.4.  Certificate of Incorporation and Bylaws. At the Effective Time, the
Certificate of Incorporation and Bylaws of the Company, as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation and
Bylaws, respectively, of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.

      1.5.  Directors and Officers of the Surviving Corporation. The directors
and officers of Merger Sub immediately prior to the Effective Time shall be the
directors and officers of the Surviving Corporation immediately following the
Effective Time.

                                   ARTICLE II

                            CONVERSION OF SECURITIES

      2.1.  Conversion of Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Merger Sub, the Company or
their respective stockholders:

            (a)   Subject to the other provisions of this Article II, each share
of Company Common Stock (as defined in Section 3.4) issued and outstanding
immediately prior to the Effective Time (other than any shares of Company Common
Stock to be cancelled pursuant to Section 2.1(b) and Dissenting Common Stock (as
defined in Section 2.3) shall be converted into and represent the right to
receive $8.40 in cash, without interest (the "Merger Consideration"). Subject to
the other provisions of this Article II, as of the Effective Time, each such
share of Company Common Stock shall, by virtue of the Merger, cease to be
outstanding and shall be cancelled and retired, and each holder of a certificate
representing any such shares shall thereafter cease to have any rights with
respect thereto except the right to receive the Merger Consideration.

            (b)   Each share of capital stock of the Company that is held in the
treasury of the Company or directly owned by the Company, any subsidiary of the
Company, Parent or Merger Sub immediately prior to the Effective Time shall be
cancelled and retired and shall cease to exist and no Merger Consideration or
any other payment shall be made in respect thereof.


                                      -2-

      2.2.  Exchange of Certificates.


            (a)   Paying Agent. Prior to the Effective Time, Parent shall
deposit, or shall cause to be deposited, with City National Bank or such other
paying agent as may be designated by Parent and reasonably acceptable to the
Company (the "Paying Agent"), for the benefit of the holders of Company Common
Stock, for exchange in accordance with this Section 2.2, cash in an amount
required to be paid pursuant to this Article II (such cash being hereinafter
referred to as the "Exchange Fund").

            (b)   Exchange Procedures. After the Effective Time (and in any
event within two business days), Parent shall cause the Paying Agent to mail to
each holder of record of a certificate or certificates which immediately prior
to the Effective Time represented outstanding shares of Company Common Stock
(the "Certificates") (i) a letter of transmittal in customary form which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in such form and have such other provisions as Parent and the
Company may reasonably agree prior to the Effective Time and (ii) instructions
for effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent, together with a duly executed letter of transmittal, and such other
documents as may reasonably be required by the Paying Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor, the amount of
cash which the number of shares of Company Common Stock previously represented
by such Certificate shall have been converted into the right to receive pursuant
to this Article II and the Certificate so surrendered shall forthwith be
cancelled. No interest will be paid or accrued on the Merger Consideration. In
the event of a transfer of ownership of shares of Company Common Stock which is
not registered on the transfer records of the Company, payment of the Merger
Consideration may be issued to such transferee if the Certificate representing
such shares of Company Common Stock held by such transferee is presented to the
Paying Agent, accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer taxes have been
paid.

            (c)   No Further Ownership Rights in Company Common Stock. The
Merger Consideration paid upon surrender of Certificates in accordance with the
terms hereof shall be deemed to have been paid in full satisfaction of all
rights pertaining to the shares of Company Common Stock formerly represented
thereby, and there shall be no further registration of transfers on the stock
transfer books of the Company of shares of Company Common Stock outstanding
immediately prior to the Effective Time. All Certificates presented to the
Surviving Corporation after the Effective Time for any reason shall be cancelled
against delivery of cash to the holder thereof as provided in this Section 2.2.

            (d)   Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to holders of Certificates 180 days after the
Effective Time shall be delivered to Parent, upon demand therefor, and holders
of Certificates who have not theretofore complied with this Section 2.2 shall
thereafter look only to Parent for the Merger Consideration payable in respect
of such shares of Company Common Stock, without any interest thereon.


                                      -3-

            (e)   No Liability. None of Parent, Merger Sub, the Surviving
Corporation or the Paying Agent shall be liable to any person in respect of any
cash from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificates shall
not have been surrendered prior to two years after the Effective Time of the
Merger (or immediately prior to such earlier date on which any Merger
Consideration would otherwise escheat to or become the property of any
Governmental Authority (as defined in Section 3.5)), any such Merger
Consideration shall, to the extent permitted by Applicable Laws, become the
property of Parent, free and clear of all claims or interest of any person
previously entitled thereto.

            (f)   Investment of Exchange Fund. The Paying Agent shall invest the
cash in the Exchange Fund, as directed by Parent, on a daily basis. Any interest
and other income resulting from such investments shall be paid to Parent upon
termination of the Exchange Fund pursuant to this Article II.

            (g)   Missing Certificates. In the event any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact and
providing an appropriate indemnity or surety bond by the person claiming such
Certificate to be lost, stolen or destroyed, the Paying Agent will deliver in
exchange for such lost, stolen or destroyed Certificate the applicable Merger
Consideration with respect thereto.

      2.3.  Dissenting Shares. Notwithstanding any provision of this Agreement
to the contrary, if and to the extent required by the DGCL, shares of Company
Common Stock which are issued and outstanding immediately prior to the Effective
Time and which are held by holders of such shares of Company Common Stock who
have properly exercised appraisal rights with respect thereto (the "Dissenting
Common Stock") in accordance with Section 262 of the DGCL, shall not be
converted into the right to receive the Merger Consideration, and holders of
such shares of Dissenting Common Stock shall be entitled to receive payment of
the appraised value of such shares of Dissenting Common Stock in accordance with
the provisions of Section 262 of the DGCL unless and until such holders fail to
perfect or effectively withdraw or otherwise lose their rights to appraisal and
payment under the DGCL. If, after the Effective Time, any such holder fails to
perfect or effectively withdraws or loses such right, such shares of Dissenting
Common Stock shall thereupon be treated as if they had been converted into and
have become exchangeable for, at the Effective Time, the right to receive the
Merger Consideration, without any interest thereon. The Company shall give
Parent prompt notice of any demands received by the Company for appraisals of
shares of Dissenting Common Stock. The Company shall not, except with the prior
written consent of Parent, make any payment with respect to any demands for
appraisals or offer to settle or settle any such demands, and Parent shall have
the right to participate in all negotiations and proceedings with respect to
such demands.

      2.4.  Stock Option Plans. As soon as practicable following the date of
this Agreement, but in any event no later than thirty (30) days before the
Closing Date, the board of directors of the Company (or, if appropriate, any
committee administering the stock option plans of the Company) shall adopt such
resolutions or use all reasonable efforts to take such other actions as are
required to provide that each then outstanding stock option (whether or not
vested) to purchase shares of Company Common Stock (each, a "Company Stock
Option") heretofore


                                      -4-

granted under any stock option or other stock-based incentive plan, program or
arrangement of the Company (collectively, the "Company Stock Option Plans")
shall be cancelled immediately prior to the Effective Time in exchange for
payment of an amount in cash equal to the product of (i) the number of
unexercised shares of Company Common Stock subject to such Company Stock Option
immediately prior to the Effective Time and (ii) the excess, if any, of the
Merger Consideration over the per share exercise price of such Company Stock
Option.

      2.5.  Company ESPP Plans. As soon as practicable following the date of
this Agreement, but in any event no later than February 29, 2004, the board of
directors of the Company (or, if appropriate, a committee administering the
stock plans of the Company) shall adopt such resolutions or use all reasonable
efforts to take such other actions as are required to terminate the Company's
1999 Employee Stock Purchase Plan (the "Company ESPP") effective as of February
29, 2004 so that no more stock options may be granted thereunder on or after
March 1, 2004. Stock options granted under the Company ESPP with respect to the
Payment Period (as such term is defined in the Company ESPP) that ends on
February 29, 2004 shall be exercised in accordance with the terms of the Company
ESPP and subject to the terms of the Company ESPP.

      2.6.  Withholding Rights. Parent or the Paying Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Company Common Stock such amounts as Parent or the
Paying Agent is required to deduct and withhold with respect to the making of
such payment under the Internal Revenue Code of 1986, as amended, (the "Code"),
or any provision of state, local or foreign tax law. To the extent that amounts
are so withheld by Parent or the Paying Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the Company Common Stock in respect of which such deduction and withholding was
made by Parent or the Paying Agent.

                                   ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

            In order to induce Parent to enter into this Agreement, the Company
hereby represents and warrants to Parent as follows:

      3.1.  Organization and Standing. Each of the Company and each subsidiary
(as defined in Section 8.3) of the Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation with full corporate power and authority to own, lease, use and
operate its properties and to conduct its business as and where now owned,
leased, used, operated and conducted. Each of the Company and each subsidiary of
the Company is duly qualified to do business and in good standing in each
jurisdiction in which the nature of the business conducted by it or the property
it owns, leases or operates requires it to so qualify, except where the failure
to be so qualified or in good standing in such jurisdiction individually or in
the aggregate would not reasonably be expected to have a Material Adverse Effect
(as defined in Section 8.3) on the Company. The Company is not in default in the
performance, observance or fulfillment of any provision of its Certificate of
Incorporation or its


                                      -5-

Bylaws, each as in effect on the date hereof (the "Company Certificate" and the
"Company Bylaws," respectively). The Company has heretofore furnished to Parent
a complete and correct copy of the Company Certificate and the Company Bylaws.

      3.2.  Subsidiaries. The Company does not own, directly or indirectly, any
equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise, except for the subsidiaries and other
entities set forth in Section 3.2 to the Company Disclosure Schedule. Except as
set forth in Section 3.2 to the Company Disclosure Schedule, the Company is not
subject to any obligation or requirement to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
entity or enterprise that is not wholly-owned by the Company. Except as set
forth in Section 3.2 to the Company Disclosure Schedule, the Company owns
directly or indirectly each of the outstanding shares of capital stock (or other
ownership interests having by their terms ordinary voting power to elect a
majority of directors or others performing similar functions with respect to
such subsidiary) of each of the Company's subsidiaries, free and clear of all
liens, pledges, security interests, claims or other encumbrances. Each of the
outstanding shares of capital stock of each of the Company's subsidiaries is
duly authorized, validly issued, fully paid and nonassessable. Other than as set
forth in Section 3.2 to the Company Disclosure Schedule, there are no
outstanding subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type relating to
the issuance, sale, repurchase or transfer of any capital stock or other
securities of any subsidiary of the Company, nor are there outstanding any
securities which are convertible into or exchangeable for any shares of capital
stock or other securities of any subsidiary of the Company, and neither the
Company nor any subsidiary of the Company has any obligation of any kind to
issue any additional shares of capital stock or other securities of any
subsidiary of the Company or to pay for or repurchase any shares of capital
stock or other securities of any subsidiary of the Company or any predecessor
thereof.

      3.3.  Corporate Power and Authority. The Company has all requisite
corporate power and authority to enter into and deliver this Agreement, to
perform its obligations hereunder and, subject to approval of the Merger and the
transactions contemplated hereby by the stockholders of the Company, to
consummate the transactions contemplated by this Agreement. The execution,
delivery and performance of this Agreement by the Company have been duly and
validly authorized by all necessary corporate action on the part of the Company,
other than the approval of this Agreement by the holders of a majority of the
outstanding shares of Company Common Stock entitled to vote in accordance with
the DGCL and the Company's Certificate of Incorporation and Bylaws (the
"Requisite Company Vote"). The Special Committee and the Board of Directors of
the Company have each approved this Agreement and the transactions contemplated
hereby and declared the advisability thereof. This Agreement has been duly
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company enforceable against it in accordance with its
terms.

      3.4.  Capitalization of the Company. The authorized capital stock of the
Company consists solely of (a) 35,000,000 shares of common stock, par value
$0.01 per share ("Company Common Stock"), of which 11,635,932 shares were issued
and outstanding as of January 31, 2004 and (b) 1,000,000 shares of preferred
stock, par value $0.01 per share, 100,000 shares of which have been designated
as Series A Junior Participating Preferred Stock, and none of which


                                      -6-

are issued and outstanding on the date hereof. As of January 31, 2004, (i)
1,085,847 shares of Company Common Stock remain available for issuance pursuant
to the Company Stock Option Plans and 2,523,027 shares of Company Common Stock
are subject to outstanding Company Stock Options and (ii) 1,651,521 shares of
Company Common Stock were held by the Company in its treasury. Except as set
forth in this Section 3.4 and the preferred stock purchase rights (the "Rights")
issued pursuant to the Rights Agreement dated as of October 7, 2003 between the
Company and American Stock Transfer & Trust Company, as amended by Amendment No.
1 to the Rights Agreement dated as of February 17, 2004 (the "Rights Plan"),
there are not any options, warrants, calls, subscriptions, convertible
securities or other rights, or other agreements obligating the Company to issue,
transfer or sell any shares of capital stock of, or other equity interests in,
the Company. All issued and outstanding shares of Company Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. Except as set forth in Section 3.4 to the Company Disclosure Schedule,
there are no outstanding obligations of the Company or any of its subsidiaries
to repurchase, redeem or otherwise acquire any shares of capital stock of, or
other equity interests in, the Company.

      3.5.  Conflicts; Consents and Approvals. Except as set forth in Section
3.5 to the Company Disclosure Schedule and, in the case of (b), (c) and (d), for
any of the following that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company, neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby will:

            (a)   conflict with, or result in a breach of any provision of, the
Company Certificate or the Company Bylaws;

            (b)   violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with the giving of
notice, the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or otherwise)
to terminate, accelerate, modify or call a default under, or result in the
creation of any lien, security interest or encumbrance upon any of the
properties or assets of the Company under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
contract, undertaking, agreement, lease or other instrument or obligation to
which the Company or any of its subsidiaries is a party;

            (c)   violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or any of its subsidiaries or any of their
respective properties or assets; or

            (d)   require any action or consent or approval of, or review by, or
registration or filing by the Company or any of its affiliates with, any third
party or any local, domestic, foreign or multi-national or supra-national court,
tribunal, administrative agency or commission or other governmental or
regulatory body, agency, instrumentality or authority (a "Governmental
Authority"), other than (i) approval of the Merger and the transactions
contemplated hereby by stockholders of the Company, (ii) actions required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act"), (iii) filings and
consents under non-U.S. laws and regulations intended to


                                      -7-

prohibit, restrict or regulate actions or transactions having the purpose or
effect of monopolization, restraint of trade, harm to competition or
effectuating foreign investment ("Foreign Antitrust Laws"); and (iv)
registrations, filings, consents, approvals or other actions required under
federal and state securities laws and the rules of the Nasdaq Stock Market, Inc.
as are contemplated by this Agreement.

      3.6.  No Material Adverse Effect. Except as specifically disclosed in the
Company SEC Documents (as defined in Section 3.7) filed with the Commission
prior to the date of this Agreement, since December 31, 2002, there has been no
change in the business, assets, liabilities, results of operations or financial
condition of the Company which individually or in the aggregate would reasonably
be expected to have a Material Adverse Effect on the Company.

      3.7.  Company SEC Documents. The Company has timely filed with the
Commission all forms, reports, schedules, statements and other documents
required to be filed by it since December 31, 1998 under the Securities Exchange
Act of 1934, as amended (together with the rules and regulations thereunder, the
"Exchange Act") or the Securities Act of 1933, as amended, (the "Securities
Act") (such documents, as supplemented and amended since the time of filing,
collectively, the "Company SEC Documents"). The Company SEC Documents,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, at the time filed (and, in the case of
registration statements and proxy statements, on the dates of effectiveness and
the dates of mailing, respectively) (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. Except as set forth in Section 3.7 of
the Company Disclosure Schedule, the financial statements of the Company
included in the Company SEC Documents at the time filed (and, in the case of
registration statements and proxy statements, on the dates of effectiveness and
the dates of mailing, respectively) complied as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the Commission with respect thereto, were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto or,
in the case of unaudited statements, as permitted by Form 10-Q of the
Commission), and fairly present (subject, in the case of the unaudited interim
financial statements, to normal, recurring year-end audit adjustments consistent
with past practice), in all material respects, the consolidated financial
position of the Company and its consolidated subsidiaries as at the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended. No subsidiary of the Company is subject to the periodic
reporting requirements of the Exchange Act or required to file any form, report
or other document with the Commission, the Nasdaq Stock Market, Inc., any stock
exchange or any other comparable Governmental Authority.

      3.8.  Taxes. Except as set forth in Section 3.8 to the Company Disclosure
Schedule and except for such matters that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company:


                                      -8-

            (a)   The Company and its subsidiaries (i) have duly filed all Tax
Returns (as defined in Section 3.8(d)) (including, but not limited to, those
filed on a consolidated, combined or unitary basis) required to have been filed
by the Company or its subsidiaries, all of which Tax Returns are true and
correct; (ii) have within the time and manner prescribed by Applicable Law paid
all Taxes (as defined in Section 3.8(d)), required to be paid in respect of the
periods covered by such Tax Returns or otherwise due to any Governmental
Authority; (iii) have established in accordance with their normal accounting
practices and procedures, accruals and reserves that are adequate for the
payment of all Taxes not yet due and payable; (iv) are not delinquent in the
payment of any Tax; and (v) have not received written notice of any deficiencies
for any Tax from any Governmental Authority against the Company or any of its
subsidiaries, which deficiency has not been satisfied. Neither the Company nor
any of its subsidiaries is the subject of any currently ongoing Tax audit.
Neither the Company nor any of its subsidiaries has requested, or been granted,
an extension of time in which to file Tax Returns or pay Taxes, which extension
has continuing effect. With respect to any taxable period ended prior to January
1, 1999, all federal income Tax Returns including the Company or any of its
subsidiaries have been audited by the Internal Revenue Service or are closed by
the applicable statute of limitations. Neither the Company nor any of its
Subsidiaries is or may be subject to any "accuracy-related penalty" under Code
Section 6662 (or any comparable provision of state, local or foreign law) with
respect to Tax periods for which Tax Returns have been filed. Neither the
Company nor any of its Subsidiaries is subject to any extension of the statute
of limitations for collection of Taxes under Code Section 6501 (or any
comparable provision of state, local, or foreign law) from the minimum period
allowed by law as a result of failure to accurately complete, or to disclose any
items in, a Tax Return. There are no liens with respect to Taxes upon any of the
properties or assets, real or personal, tangible or intangible, of the Company
or any of its subsidiaries (other than liens for Taxes not yet due). No claim
has ever been made in writing by a Governmental Authority in a jurisdiction
where the Company or its subsidiaries do not file Tax Returns that the Company
or any of its subsidiaries is or may be subject to taxation by that
jurisdiction.

            (b)   Neither the Company nor any of its subsidiaries is obligated
by any contract, agreement or other arrangement to indemnify any other person
with respect to Taxes. Neither the Company nor any of its subsidiaries is now or
has ever been a party to or bound by any contract, agreement or other
arrangement (whether or not written and including, without limitation, any
arrangement required or permitted by Applicable Law (including pursuant to
Treasury Regulation Section 1.1502-6 or any analogous provision of state, local
or foreign law)) that (i) requires the Company or any of its subsidiaries to
make any Tax payment to or for the account of any other person, (ii) affords any
other person the benefit of any net operating loss, net capital loss, investment
Tax credit, foreign Tax credit, charitable deduction or any other credit or Tax
attribute which could reduce Taxes (including, without limitation, deductions
and credits related to alternative minimum Taxes) of the Company or any of its
subsidiaries, or (iii) requires or permits the transfer or assignment of income,
revenues, receipts or gains to the Company or any of its subsidiaries from any
other person, other than payments made to the Company and its subsidiaries in
the ordinary course of business. Neither the Company nor any of its subsidiaries
will be required to include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of any (i) change in method of
accounting for a taxable period ending on


                                      -9-

or prior to the Closing Date; (ii) "closing agreement" as described in Code
Section 7121 (or any comparable provision of state, local, or foreign law);
(iii) intercompany transactions or any excess loss account described in Treasury
Regulations under Code Section 1502 (or any comparable provision of state,
local, or foreign law); (iv) installment sale or open transaction disposition
made on or prior to the Closing Date; or (v) prepaid amount received on or prior
to the Closing Date. Neither the Company nor any of its subsidiaries is a party
to any "gain recognition agreement" as described in Treasury Regulation Section
1.367(a)-8 (or any analogous provision of foreign law). Neither the Company nor
any of it subsidiaries is a party to any transaction that is or was (i) since
January 1, 1998, intended to qualify under Code sections 355 or 368 other than
as a recapitalization pursuant to Code Section 368(a)(1)(E), or (ii) required to
be reported as a "listed transaction" to any Governmental Authority under
Treasury Regulation Section 1.6011-4(b)(2) (or any comparable or predecessor
provision of federal, state, local or foreign law).

            (c)   The Company and its subsidiaries have withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
third party.

            (d)   For purposes of this Agreement, (i) "Tax" (and, with
correlative meaning, "Taxes") means any federal, state, local or foreign income,
gross receipts, property, sales, use, license, excise, franchise, employment,
payroll, premium, withholding, alternative or added minimum, ad valorem,
inventory, transfer or excise tax, or any other tax, custom, duty, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any Governmental Authority, and (ii) "Tax
Return" means any return, report or similar statement required to be filed with
respect to any Tax (including any attached schedules), including, without
limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.

      3.9.  Compliance with Law. Except as specifically disclosed in the Company
SEC Documents filed with the Commission prior to the date hereof, the Company is
in compliance with all applicable laws, statutes, orders, rules, regulations,
policies or guidelines promulgated, or judgments, decisions or orders entered,
by any Governmental Authority, (all such laws, statutes, orders, rules,
regulations, policies, guidelines, judgments, decisions and orders,
collectively, "Applicable Laws"), relating to the Company or its business or
properties, except where the failure to be in compliance with such Applicable
Laws individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect on the Company. Except as specifically disclosed in the
Company SEC Documents filed with the Commission prior to the date hereof, no
investigation or review by any Governmental Authority with respect to the
Company is pending, or, to the knowledge of the Company, threatened, nor has any
Governmental Authority indicated in writing an intention to conduct the same,
other than those the outcome of which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company.

      3.10. Intellectual Property.

            (a)   Definitions. For the purposes of this Section 3.10, the
following terms have the following definitions:


                                      -10-

                  (i)   "Intellectual Property" shall mean any or all of the
following and all rights in, arising out of, or associated therewith: (i) all
United States and foreign patents and applications therefor (including, without
limitation, petty patents and utility models) and all reissues, divisions,
renewals, extensions, provisional, continuations and continuations-in-part
thereof ("Patents"); (ii) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists, and all documentation relating to
any of the foregoing; (iii) all works of authorship, copyrights, copyright
registrations and applications therefor and all other rights corresponding
thereto throughout the world; (iv) all semiconductor and semiconductor circuit
designs; (v) all rights to all mask works and reticules, mask work registrations
and applications therefor; (vi) all industrial designs and any registrations and
applications therefor throughout the world; (vii) all trade names, logos, common
law trademarks and service marks; trademark and service mark registrations and
applications therefor and all goodwill associated therewith throughout the
world; (viii) all databases and data collections and all rights therein
throughout the world; (ix) all computer software including all source code,
object code, firmware, development tools, files, records and data, all media on
which any of the foregoing is recorded, all Web addresses, sites and domain
names; (x) any similar, corresponding or equivalent rights to any of the
foregoing; and (xi) all technical, design, end-user and other documentation
related to any of the foregoing. Notwithstanding the foregoing, "Intellectual
Property" shall not include any licenses, agreements or other rights in any
generally available or "off the shelf" third party software or related
intellectual property.

                  (ii)  "Company Intellectual Property" shall mean any
Intellectual Property that is owned by, controlled by or licensed to the Company
or any of its subsidiaries. Without in any way limiting the generality of the
foregoing, Company Intellectual Property includes all Intellectual Property
owned or licensed by the Company related to the Company's products.

                  (iii) "Registered Intellectual Property" shall mean all United
States, international and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks, and any domain name registrations; (iii) registered
copyrights and applications for copyright registration; (iv) any mask work
registrations and applications to register mask works; and (v) any other
Intellectual Property that is the subject of an application, certificate,
filing, registration or other document issued by, filed with, or recorded by,
any state, government or other public legal authority.

                  (iv)  "Company Registered Intellectual Property" means all of
the Registered Intellectual Property owned by, exclusively licensed or filed in
the name of, the Company or any of its subsidiaries.

            (b)   Section 3.10(b) of the Company Disclosure Schedule is a
complete and accurate list of all Company Registered Intellectual Property and
specifies, where applicable, (i) the jurisdictions in which each such item of
Company Registered Intellectual Property has been issued or registered, (ii) the
owner of the Company Registered Intellectual Property, (iii) respective
issuance, application, serial or registration number, (iv) the date of its
creation,


                                      -11-

application and issuance or registration, and (v) lists any proceedings or
actions before any court, tribunal (including the United States Patent and
Trademark Office (the "PTO") or equivalent authority anywhere in the world)
related to any of the Company Registered Intellectual Property.

            (c)   Except as set forth in Section 3.10(c) to the Company
Disclosure Schedule, no Company Intellectual Property or software, hardware,
content or other products or any services that the Company sells, licenses out
or otherwise distributes to third parties ("Company Product(s)") is subject to
any proceeding or outstanding decree, order, judgment, contract, license,
agreement, or stipulation restricting in any manner the use, transfer, or
licensing thereof by Company or any of its subsidiaries, or which may affect the
validity, use or enforceability of such Company Intellectual Property or Company
Product.

            (d)   Except as set forth in Section 3.10(d) of the Company
Disclosure Schedule, each item of Company Registered Intellectual Property is
valid and subsisting, all necessary registration, maintenance and renewal fees
currently due in connection with such Company Registered Intellectual Property
have been made and all necessary documents, recordations and certificates in
connection with such Company Registered Intellectual Property have been filed
with the relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Company Registered Intellectual Property.

            (e)   The Company owns and has good and exclusive title to, each
item of Company Intellectual Property free and clear of any lien or encumbrance
(excluding non-exclusive licenses and related restrictions granted in the
ordinary course). Without limiting the foregoing: (i) the Company or a
subsidiary of the Company is the exclusive owner of all trademarks and trade
names used in connection with the operation or conduct of the business of
Company and its subsidiaries, including the sale, distribution or provision of
any Company Products by Company or its subsidiaries; (ii) the Company or a
subsidiary of the Company owns exclusively, and has good title to, all
copyrighted works that are Company Products or which the Company or any of its
subsidiaries otherwise purports to own; and (iii) to the extent that any Patents
would be infringed by any Company Products, the Company is the exclusive owner
of such Patents.

            (f)   To the extent that any technology, software or Intellectual
Property has been developed or created independently or jointly by a third party
specifically for the Company or any of its subsidiaries or any of the Company
Products, the Company has a written agreement with such third party with respect
thereto and Company thereby either (i) has obtained ownership of, and is the
exclusive owner of, or (ii) has obtained a valid and enforceable license
(sufficient for the conduct of its business as currently conducted and as
proposed to be conducted) to all such third party's Intellectual Property in
such work, material or invention by operation of law or by valid assignment.

            (g)   Except as set forth in Section 3.10(g) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries has
transferred ownership of, or granted any exclusive license with respect to, any
Intellectual Property that is or was Company


                                      -12-

Intellectual Property, to any third party, or permitted the Company's rights in
such Company Intellectual Property to lapse or enter the public domain.

            (h)   Section 3.10(h) of the Company Disclosure Schedule lists all
material contracts, licenses and agreements in effect as of the date hereof to
which the Company or any of its subsidiaries is a party: (i) with respect to
Company Intellectual Property licensed or transferred to any third party (other
than non-exclusive end-user or customer licenses granted by the Company in the
ordinary course) or (ii) pursuant to which a third party has licensed or
transferred any Intellectual Property to the Company.

            (i)   All material contracts, licenses and agreements relating to
either (i) Company Intellectual Property or (ii) Intellectual Property of a
third party used in the business of Company or any of its subsidiaries, are in
full force and effect. Except as set forth in Section 3.10(i) of the Company
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement will neither violate nor result in the breach, modification,
cancellation, termination or suspension of such contracts, licenses and
agreements. Each of the Company and its subsidiaries is in compliance in all
material respects with, and has not materially breached any term of, any such
contracts, licenses and agreements and, to the knowledge of the Company, all
other parties to such contracts, licenses and agreements are in compliance with,
and have not breached any term of, such contracts, licenses and agreements.
Following the Closing Date, assuming the receipt of required consents or waivers
set forth on Section 3.10(i) of the Company Disclosure Schedule, the Surviving
Corporation will be entitled to exercise all of the Company's rights under such
contracts, licenses and agreements to the same extent the Company and its
subsidiaries would have been able to had the transactions contemplated by this
Agreement not occurred and without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments which the Company
would otherwise be required to pay. Neither this Agreement nor the transactions
contemplated by this Agreement will result in (i) either Parent's or the Merger
Sub's granting to any third party any right to or with respect to any
Intellectual Property right owned by, or licensed to, either of them, (ii)
either the Parent's or the Merger Sub's being bound by, or subject to, any
non-compete or other restriction on the operation or scope of their respective
businesses, or (iii) either the Parent's or the Merger Sub's being obligated to
pay any royalties or other amounts to any third party in excess of those payable
by Parent or Merger Sub, respectively, prior to the Closing.

            (j)   The Company Intellectual Property includes all Intellectual
Property required for the operation of the business of the Company and its
subsidiaries as such business has been conducted and currently is conducted,
including (i) the Company's and its subsidiaries' design, development,
manufacture, distribution, reproduction, marketing or sale of the products or
services of Company and its subsidiaries (including Company Products) and (ii)
the Company's use of any product, device or process, (A) has not infringed or
misappropriated and does not infringe or misappropriate the Intellectual
Property of any third party (other than any patent applications of a third
party), (B) to the Company's knowledge, has not infringed or misappropriated and
does not infringe or misappropriate the Intellectual Property of any patent
applications of any third party or (C) constitute unfair competition or trade
practices under the laws of any jurisdiction.


                                      -13-

            (k)   Neither the Company nor any of its subsidiaries has received
notice from any third party (i) alleging invalidity with respect to any
Intellectual Property used by the Company or its subsidiaries, or (ii) that the
operation of the business of the Company or any of its subsidiaries or any act,
product or service of the Company or any of its subsidiaries, infringes or
misappropriates the Intellectual Property of any third party or constitutes
unfair competition or trade practices under the laws of any jurisdiction.

            (l)   Except as set forth in Section 3.10(l) to the Company
Disclosure Schedule, to the Company's knowledge, no third party is infringing on
or has misappropriated any of the Company Intellectual Property.

            (m)   The Company and each of its subsidiaries has taken all prudent
and reasonable steps to protect the Company's and its subsidiaries' rights in
the Company's confidential information, trade secrets and other Intellectual
Property used by the Company and its subsidiaries, and any trade secrets or
confidential information of third parties provided to the Company or any of its
subsidiaries, and, without limiting the foregoing, each of the Company and its
subsidiaries has and enforces a policy requiring each employee and contractor
who either contributes to, develops or otherwise has material access to the
Company Intellectual Property to execute nondisclosure and assignment of
copyrights and inventions agreements, each agreement substantially in the forms
provided to Parent and all current and former employees and consultants of the
Company and any of its subsidiaries have executed such agreements.

            (n)   With respect to the Company Products set forth in Section
3.10(n) of the Company Disclosure Schedule, except as described in such Section
3.10(n) of the Company Disclosure Schedule, (i) the Company and its subsidiaries
maintain machine-readable master-reproducible copies, source code listings,
technical documentation and user manuals for the most current releases or
versions thereof and for all earlier releases or versions thereof currently
being supported by them; (ii) in each case, the machine-readable copy conforms
to the corresponding source code listing; (iii) such Company Products are
written in the language set forth on Schedule 3.10(n) of the Company Disclosure
Schedules, for use on the hardware set forth on Schedule 3.10(n) of the Company
Disclosure Schedules with standard operating systems; (iv) such Company Products
can be maintained and modified by reasonably competent programmers familiar with
such language, hardware and operating systems; (v) in each case, the Company
Products operate in accordance with the user manual therefor without material
operating defects; (vi) the Company Products do not require "dongles" or other
hardware locks, and the Company Products do not include any serial number,
clock, timer, counter, or other limiting, disabling, or self-replicating code
that causes the Company Products or any other data to be disabled, distorted,
erased, made inoperable or otherwise incapable of being used in accordance with
the full manner for which it is designed, (vii) to the Company's knowledge, the
Company Products do not include any computer viruses or other harmful code, the
purpose of which is to disable or interrupt the operation of a computer system
or destroy or alter any data, (viii) Schedule 3.10(n) of the Company Disclosure
Schedules lists any third party products or services that are necessary for the
use of the Company Products in accordance with any documentation or descriptions
thereto distributed by the Company or its subsidiaries, and (ix) Schedule
3.10(n) of the Company Disclosure Schedules lists any source code escrow
arrangements entered into by the Company or its subsidiaries.


                                      -14-

      3.11. Title to Properties. The Company owns or holds under valid leases
all material real property, plants, machinery and equipment necessary for the
conduct of the business of the Company as presently conducted.

      3.12. Litigation. Except as set forth in Section 3.12 to the Company
Disclosure Schedule or specifically disclosed in the Company SEC Documents filed
with the Commission prior to the date of this Agreement, there is no suit,
claim, action, proceeding, audit or investigation (an "Action") pending or, to
the knowledge of the Company, threatened against the Company which, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect on the Company. Except as set forth in Section 3.12 to the Company
Disclosure Schedule, since December 31, 1998 the Company has not been subject to
any outstanding order, writ, injunction or decree specifically applicable to the
Company which, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect on the Company.

      3.13. Proxy Statements. The Proxy Statement (as hereinafter defined)
(including, without limitation, a Schedule 13E-3 filing), or similar materials
distributed to the Company's stockholders in connection with the Merger,
including any amendments or supplements thereto, shall not, at the time filed
with the SEC, at the time mailed to the Company's stockholders or at the time of
the Company Stockholders 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 will comply in
all material respects with the provisions of the Exchange Act. Notwithstanding
the foregoing, the Company makes no representation or warranty with respect to
any information provided by or required to be provided by Parent or Merger Sub
and/or by their respective auditors, legal counsel, financial advisors or other
consultants or advisors specifically for use in the Proxy Statement.

      3.14. Brokerage and Finder's Fees; Expenses. Except in connection with the
engagement of Morgan Stanley and Portico Capital Securities (the fees of both of
which firm shall be the sole responsibility of the Company), none of the Company
or Merger Sub or any of their respective stockholders, directors, officers or
employee thereof has incurred or will incur on behalf of the Company any
brokerage, finder's or similar fee in connection with the transactions
contemplated by this Agreement. The Company has heretofore furnished to Parent
an accurate summary of the material terms of the engagement letter between the
Company and each of Morgan Stanley and Portico Capital Securities and set forth
in Section 3.14 of the Company Disclosure Schedule are the total amounts payable
to Morgan Stanley and Portico Capital Securities upon consummation of the
transactions contemplated hereby and otherwise relating to the transactions
contemplated hereby.

      3.15. Employee Benefit Plans. (a) For purposes of this Agreement, the
following terms have the definitions given below:

            "Company Plan" means each material plan, program, policy, practice
or other arrangement providing for compensation, severance, retirement benefits,
fringe benefits, equity-based awards or other benefits of any kind (including,
but not limited to, all employee welfare


                                      -15-

benefit plans within the meaning of Section 3(l) of ERISA and all employee
pension benefit plans within the meaning of Section 3(2) of ERISA) maintained,
sponsored, contributed to or required to be contributed to by the Company for
the benefit of its employees or former employees, or with respect to which the
Company or any ERISA Affiliates has or may have any material liability,
contingent or otherwise, and further including any of the foregoing which cover
directors or former directors of the Company or any subsidiary.

            "Controlled Group Liability" means any and all liabilities under (i)
Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of the
Code, (iv) the continuation coverage requirements of Section 601 et seq. of
ERISA and Section 4980B of the Code, or (v) corresponding or similar provisions
of foreign laws or regulations, in each case other than pursuant to the Company
Plans.

            "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.

            "ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
of ERISA that includes the first entity, trade or business, or that is a member
of the same "controlled group" as the first entity, trade or business pursuant
to Section 4001(a)(14) of ERISA.

            "Withdrawal Liability" means liability to a Multiemployer Plan (as
defined in Section 3.16) as a result of a complete or partial withdrawal from
such Multiemployer Plan, as those terms are defined in Part I of Subtitle E of
Title IV of ERISA.

            (b)   With respect to each Company Plan, the Company has provided to
Parent a true, correct and complete copy of (where applicable): (i) each writing
constituting a part of such Company Plan, including without limitation all plan
documents, trust agreements, and insurance contracts and other funding vehicles;
(ii) the most recent Annual Report (Form 5500 Series) and accompanying schedule,
if any; (iii) the current summary plan description, if any; (iv) the most recent
annual financial report, if any; (v) the most recent determination letter from
the Internal Revenue Service, if any, and (vi) if any Company Plan is unwritten,
a written summary thereof. Except as set forth in Section 3.16(b) of the Company
Disclosure Schedule, no Plan is now nor at any time has been subject to Part 3,
Subtitle B of Title I of ERISA or Title IV of ERISA.

            (c)   The Company Plans which are "employee pension benefit plans"
within the meaning of Section 3(2) of ERISA and which are intended to meet the
qualification requirements of Section 401(a) of the Code, or Sections 401(k) or
401(m) of the Code, as applicable (each a "Qualified Plan"), now meet, and at
all times since their inception have met, the requirements for such
qualification in all material respects, and the related trusts are now, and at
all times since their inception have been, exempt from taxation under Section
501(a) of the Code in all material respects. Except as set forth on Section
3.15(c) of the Company Disclosure Schedule, each of the Qualified Plans has
received a favorable determination from the Internal Revenue Service, and no
such determination letter has been revoked nor, are there any existing
circumstances why any such determination letter should be revoked nor has any
Qualified Plan


                                      -16-

been amended since the date of its most recent determination letter in any
respect which would adversely affect the qualified status of any Company
Qualified Plan or the related trust.

            (d)   No Company Plans are now or at any time have been subject to
Part 3, Subtitle B of Title I of ERISA or Title IV of ERISA. All contributions
required to be made to any Company Plan by Applicable Laws or by any plan
document or other contractual undertaking, and all premiums due or payable with
respect to insurance policies funding any Company Plan, before the date hereof
have been made or paid in full on or before the final due date thereof. All
contributions with respect to the period ending at the Effective Time will have
been made or paid in full even if not due until a later date. All payments under
the Company Plans, except those to be made from a trust qualified under section
401(a) of the Code, for any period ending before the Effective Time that are not
yet, but will be, required to be made are properly accrued and reflected on the
Company's balance sheet or are disclosed in Section 3.15(d) of the Company
Disclosure Schedule.

            (e)   The Company and its subsidiaries have materially complied, and
are now in material compliance, with all applicable provisions of ERISA and the
Code and all Applicable Laws relating to employees and employee benefits. Each
Company Plan has been established and operated in material compliance with its
terms and Applicable Laws. There is not now, and there are no existing
circumstances that individually or in the aggregate would reasonably be expected
to give rise to, any requirement for the posting of security with respect to a
Company Plan or the imposition of any lien on the assets of the Company or any
of its subsidiaries under ERISA or the Code. The Company and its subsidiaries
are each in material compliance with all Applicable Laws respecting employment.

            (f)   Except as set forth in Section 3.15(f) to the Company
Disclosure Schedule, no Company Plan is a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan that
has two or more contributing sponsors at least two of whom are not under common
control, within the meaning of Section 4063 of ERISA (a "Multiple Employer
Plan"), nor has the Company or any of its subsidiaries or any of their
respective ERISA Affiliates, at any time within six years before the date
hereof, contributed to or been obligated to contribute to any Multiemployer Plan
or Multiple Employer Plan. With respect to each Multiemployer Plan: (i) neither
the Company nor any of its ERISA Affiliates has incurred any Withdrawal
Liability that has not been satisfied in full; (ii) neither the Company nor any
ERISA Affiliate has received any notification, nor has any reason to believe,
that any such plan is in reorganization, is insolvent, or has been terminated,
or could reasonably be expected to be in reorganization, to be insolvent, or to
be terminated; and (iii) no circumstances exist which individually or in the
aggregate could reasonably be expected to result in Withdrawal Liability with
respect to a Plan.

            (g)   There does not now exist, and there are no existing
circumstances that individually or in the aggregate would reasonably be expected
to result in, any material Controlled Group Liability. Without limiting the
generality of the foregoing, neither the Company nor any of its subsidiaries nor
any of their respective ERISA Affiliates has engaged in any transaction
described in Section 4069 or Section 4204 of ERISA.


                                      -17-

            (h)   Except for health continuation coverage as required by Section
4980B of the Code or Part 6 of Title I of ERISA or similar state laws and except
as set forth in Section 3.15(h) to the Company Disclosure Schedule, neither the
Company nor any of its subsidiaries has any material liability for life, health,
medical or other welfare benefits to former employees or beneficiaries or
dependents thereof.

            (i)   Except as disclosed in Section 3.15(i) to the Company
Disclosure Schedule, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will result in, or
constitute an event which, with the passage of time or the giving of notice or
both will result in, cause the accelerated vesting or delivery of, or increase
the amount or value of, any payment or benefit to any employee, officer,
director or consultant of the Company or any of its subsidiaries. Without
limiting the generality of the foregoing, except as set forth in Section 3.15(i)
to the Company Disclosure Schedule, no amount paid or payable by the Company or
any of its subsidiaries or affiliates in connection with the transactions
contemplated hereby either solely as a result thereof or as a result of such
transactions in conjunction with any other events will be an "excess parachute
payment" within the meaning of Section 280G of the Code. Except as disclosed in
Section 3.15(i) of the Company Disclosure Schedule, there is no agreement, plan,
arrangement or other contract covering any employee or independent contractor or
former employee or independent contractor of the Company that, considered
individually or considered collectively with any other such Contracts, will, or
could reasonably be expected to, give rise directly or indirectly to the payment
of any amount that would not be deductible pursuant to Section 280G or Section
162 of the Code nor will the Company be required to "gross up" or otherwise
compensate any such person because of the imposition of any excise tax as a
payment to such person.

            (j)   Except as disclosed in Section 3.15(j) to the Company
Disclosure Schedule, there are no pending, or to the knowledge of the Company
threatened, Actions (other than claims for benefits in the ordinary course) with
respect to the Company Plans.

            (k)   Section 3.15(k) to the Company Disclosure Schedule sets forth
a list of each employment, consulting, severance or similar agreement under
which the Company or any of its subsidiaries is or could become obligated to
provide compensation or benefits in excess of $75,000, and the Company has
provided to Parent a copy of each such agreement. Except for the severance
amounts listed under the heading "At Will Severance Amounts" on Section 3.15(k)
of the Company Disclosure Schedule, the aggregate amount of payments which the
Company and its subsidiaries is or could become obligated to pay pursuant to
existing agreements, arrangements and benefit plans to its officers, directors,
employees and consultants for change-in-control, success fee, stay-put,
retention or similar fees and bonuses does not exceed $1,351,000.

            (l)   No employer securities, employer real property or other
employer property is included in the assets of any Company Plan.

            (m)   No event has occurred, and there exists no condition or set of
circumstances in connection with any Plan, under which the Parent, Merger Sub,
the Company or any of its subsidiaries, nor any employee of the foregoing,
directly or indirectly, could


                                      -18-

reasonably be expected to be subject to any risk of material liability under
Sections 409 or 502 of ERISA or Section 4975 of the Code.

            (n)   Company maintains policies or practices on the proper
classification for all employees, leased employees, consultants and independent
contracts, for all purposes (including, without limitation, for all tax purpose
and for purposes of determining eligibility to participate in any Company Plan.)

      3.16. Contracts. Section 3.16 to the Company Disclosure Schedule lists all
contracts, agreements, guarantees, leases and executory commitments (each a
"Contract"), other than Company Plans and any Contracts heretofore filed as an
exhibit to any Company SEC Document since January 1, 1999, that exist as of the
date hereof to which the Company is a party or by which it is bound and which
fall within any of the following categories: (a) Contracts not entered into in
the ordinary course of the Company's business other than those that individually
or in the aggregate are not material to the business of the Company, (b) joint
venture and partnership agreements, (c) Contracts containing covenants
purporting to limit the freedom of the Company to compete in any line of
business in any geographic area or to hire any individual or group of
individuals, (d) Contracts which after the Effective Time would have the effect
of limiting the freedom of Parent or its subsidiaries (including the Surviving
Corporation) to compete in any line of business in any geographic area or to
hire any individual or group of individuals, (e) Contracts which contain minimum
purchase conditions in excess of $250,000, or requirements or other terms that
restrict or limit the purchasing relationships of the Company or its affiliates,
or any customer, licensee or lessee thereof, (f) Contracts relating to any
outstanding commitment for capital expenditures in excess of $250,000, (g)
indentures, mortgages, promissory notes, loan agreements or guarantees of
borrowed money in excess of $100,000 in the aggregate, letters of credit or
other agreements or instruments of the Company or commitments for the borrowing
or the lending by the Company of amounts in excess of $100,000 in the aggregate
or providing for the creation of any charge, security interest, encumbrance or
lien upon any of the assets of the Company with an aggregate value in excess of
$250,000, (h) Contracts providing for "earn-outs" or other contingent payments
by the Company involving more than $250,000 in the aggregate over the terms of
all such Contracts, (i) Contracts associated with off balance sheet financing in
excess of $100,000 in the aggregate, including but not limited to arrangements
for the sale of receivables, (j) licenses or similar agreements granting the
right to use any material Intellectual Property (other than non-exclusive
end-user or customer licenses granted by the Company in the ordinary course of
business), or (k) stock purchase agreements, asset purchase agreements or other
acquisition or divestiture agreements relating to material transactions since
January 1, 1999. All Contracts to which the Company is a party or by which it is
bound are valid and binding obligations of the Company and, to the knowledge of
the Company, the valid and binding obligation of each other party thereto except
such Contracts which if not so valid and binding would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on the
Company. Neither the Company nor, to the knowledge of the Company, any other
party thereto is in violation of or in default in respect of, nor has there
occurred an event or condition which with the passage of time or giving of
notice (or both) would constitute a default under or permit the termination of,
any such Contract except such violations or defaults under or terminations
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on the Company. Set forth in Section 3.16(m) to
the Company


                                      -19-

Disclosure Schedule is a description of any material changes to the amount and
terms of the indebtedness of the Company and its subsidiaries from (i) the
Exhibits to the Company's Form 10-Q for the period ended September 30, 2003
filed with the Commission, with respect to the terms of such indebtedness, and
(ii) the description in the financial statements (including the notes thereto)
incorporated in the Company's Form 10-Q for the period ended September 30, 2003
filed with the Commission, with respect to the amount of such indebtedness. Set
forth in Section 3.16(n) to the Company Disclosure Schedule is the amount of the
annual premium currently paid by the Company for its directors' and officers'
liability insurance.

      3.17. Labor Matters. Except as set forth on Section 3.17 of the Company
Disclosure Schedule, at the present time and during the past three years, (A) no
unfair labor practice complaint or charge against the Company has been brought
before, or, to the knowledge of the Company, threatened by, the National Labor
Relations Board or any other government agency or court in any jurisdiction; (B)
there has not occurred or, to the knowledge of the Company, been threatened any
labor strike, dispute, picketing, slowdown, stoppage, or other similar labor
activity against or involving any the Company; (C) the Company is not nor has it
been party to any collective bargaining agreement and there are no labor unions
or other organizations representing, purporting to represent, or attempting to
represent any employee; and (D) the Company is not nor has it been a party to,
or affected by or threatened with, any union organizing or election activity or
any dispute or controversy with a union involving its employees. The Company has
not effectuated a "plant closing" or "mass layoff" under the Worker Adjustment
Retraining Notification Act ("WARN Act") with respect to the business of the
Company; nor in the past 90 days has the Company effectuated any plant closings
or layoffs, which constitute an "employment loss" within the meaning of the WARN
Act or any state or local law similar to the WARN Act.

      3.18. Undisclosed Liabilities. Except (i) as and to the extent disclosed
or reserved against in the consolidated balance sheet of the Company as of
September 30, 2003 included in the Company SEC Documents, or disclosed in the
footnotes to the financial statements as of such date or the footnotes to the
September 30, 2003 financial statements included in the Company SEC Documents
filed prior to the date hereof, (ii) as incurred after September 30, 2003 in the
ordinary course of business consistent with prior practice and not prohibited by
this Agreement, (iii) as described in the Company SEC documents filed since
September 30, 2003 but prior to the date hereof, or (iv) as set forth in Section
3.18 to the Company Disclosure Schedule, the Company does not have any
liabilities or obligations of any nature, whether known or unknown, absolute,
accrued, contingent or otherwise and whether due or to become due, that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on the Company.

      3.19. Operation of the Company's Business; Relationships. (a) Since
September 30, 2003 through the date of this Agreement and except for entering
into this Agreement, the Company has not engaged in any transaction which, if
done after execution of this Agreement, would violate in any material respect
Section 5.3(c), except as set forth in Section 3.19(a) to the Company Disclosure
Schedule or as specifically disclosed in the Company SEC Documents filed with
the Commission prior to the date of this Agreement.


                                      -20-

            (b)   Except as set forth in Section 3.19(b) to the Company
Disclosure Schedule, (i) from January 1, 2000 to the date hereof, no material
customer of the Company has indicated in writing that it will stop or materially
decrease purchasing materials, products or services from the Company and (ii)
since January 1, 2000, no material supplier of the Company has indicated in
writing that it will stop or materially decrease the supply of materials,
products or services to the Company, or impose conditions or credit limits on
the Company, in each case, the effect of which individually or in the aggregate
would reasonably be expected to have a Material Adverse Effect on the Company.

      3.20. Permits; Compliance. The Company is in possession of all material
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted (collectively, the "Company Permits"), except where the failure to be
in possession of such Company Permits would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company and there has occurred no default or breach under any such Company
Permit, except for such defaults or breaches which would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on the
Company.

      3.21. Environmental Matters. Except for matters disclosed in Section 3.21
of the Company Disclosure Schedule, (a) the properties, operations and
activities of the Company and its subsidiaries have at all times been for all
applicable periods of limitation, and are, in material compliance with all
applicable Environmental Laws and Environmental Permits (each as defined below);
(b) the Company and its subsidiaries and the properties and operations of the
Company and its subsidiaries are not subject to any pending or, to the knowledge
of the Company, threatened Action under any Environmental Law, including without
limitation with respect to any present or former operations, facilities or
subsidiaries; (c) there has been no release of any Hazardous Materials (as
defined below) into the environment by the Company or its subsidiaries, and
there are no Hazardous Materials present at, on, under, within or which have
migrated from, any properties of the Company or its subsidiaries; and (d)
neither the Company nor any of its subsidiaries (x) has received any written
notice that the Company, any of its subsidiaries or any of their respective
present or former operations, facilities or subsidiaries is or may be a
potentially responsible party or otherwise liable in connection with any site
used for the disposal of or otherwise containing Hazardous Materials, or (y) has
disposed of, arranged for the disposal of, or transported any Hazardous
Materials to any site which is listed on the U.S. Environmental Protection
Agency's National Priorities List or which is otherwise subject to remediation
or investigation. The Company and its subsidiaries have made available to Parent
all material internal and external environmental audits and reports (in each
case relevant to the Company or any of its subsidiaries) in the possession of
the Company or its subsidiaries. The term "Environmental Laws") means all
Applicable Laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or industrial, toxic or hazardous
substances or wastes (collectively, "Hazardous Materials") into the environment,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials, as
well as all authorizations,

                                      -21-

codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued,
entered, promulgated or approved thereunder, as in effect on the date hereof.
"Environmental Permit" means any permit, approval, identification number,
license or other authorization required under or issued pursuant to any
applicable Environmental Law.

      3.22. Opinion of Financial Advisor. The Special Committee has received the
written opinion of Morgan Stanley, its financial advisor, to the effect that, as
of the date of this Agreement, the Merger Consideration to be received by the
holders of Company Common Stock, other than Parent, Merger Sub, ValueAct Capital
Partners, L.P., ValueAct Capital Partners II, L.P. and ValueAct Capital
International, Ltd., pursuant to this Agreement is fair to such holders from a
financial point of view, and such opinion has not been withdrawn or revoked or
modified in any respect.

      3.23. Special Committee and Board Recommendation. The Special Committee
and the Board of Directors of the Company, the latter at a meeting duly called
and held at which a quorum was present throughout, has (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, are
fair to and in the best interests of the Company Stockholders and (ii) resolved
to recommend that the holders of the shares of Company Common Stock entitled to
vote thereon approve this Agreement and the transactions contemplated herein,
including the Merger (the "Company Board Recommendation"). The Company Board
Recommendation has not been withdrawn, revoked or modified.

      3.24. Vote Required. The Requisite Company Vote is the only vote of the
holders of any class or series of the Company's capital stock necessary (under
the charter documents of the Company, the DGCL, other applicable law or
otherwise) to approve this Agreement and the Merger.

      3.25. Related Party Transactions. Except as set forth in Section 3.25 of
the Company Disclosure Schedule, since the date of the Company's proxy statement
dated April 18, 2003, no event has occurred that would be required to be
reported under Item 404 of Regulation S-K promulgated by the Commission.

      3.26. Takeover Statutes; Rights Plan. The Company has taken all actions
such that no restrictive provision of any "fair price," "moratorium," "control
share acquisition," "interested stockholder" or other similar anti-takeover
statute or regulation (including, without limitation, Section 203 of the DGCL)
(each a "Takeover Statute") or restrictive provision of any applicable
anti-takeover provision in the governing documents of the Company is, or at the
Effective Time will be, applicable to the Company, Parent, Merger Sub, the
Merger, this Agreement or any of the other transactions contemplated hereby or
thereby. After giving effect to the amendment to the Rights Plan effective as of
the date hereof, the Rights Plan is inapplicable to the Merger, this Agreement
and the transactions contemplated hereby or thereby.

      3.27. NASDAQ Qualification. All outstanding shares of the Company Common
Stock are designated as qualified for trading on the NASDAQ National Market of
the NASDAQ Stock Market operated by the NASDAQ Stock Market Inc.

                                      -22-

                                   ARTICLE IV

             REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

            In order to induce Parent to enter into this Agreement, Parent and
Merger Sub hereby represent and warrant to the Company as follows:

      4.1.  Organization and Standing. Parent is a limited liability company
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its formation, and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, each with full power and authority to own, lease, use and operate
its properties and to conduct its business as and where now owned and with full
corporate power and authority to own, lease, use and operate its properties and
to conduct its business as and where now owned, leased, used, operated and
conducted. Each of Parent and Merger Sub is duly qualified to do business and in
good standing in each jurisdiction in which the nature of the business conducted
by it or the property it owns, leases or operates requires it to so qualify,
except where the failure to be so qualified or in good standing in such
jurisdiction individually or in the aggregate would not reasonably be expected
to have a Material Adverse Effect on Parent. Parent is not in default in the
performance, observance or fulfillment of any provision of its Certificate of
Formation or its Operating Agreement, each as in effect on the date hereof (the
"Parent Certificate" and the "Parent Operating Agreement," respectively).

      4.2.  Subsidiaries. Parent does not own, directly or indirectly, any
equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise, other than Merger Sub.

      4.3.  Power and Authority. Parent and Merger Sub have all requisite power
and authority to (a) enter into and deliver this Agreement, (b) perform its
obligations hereunder and (c) to consummate the transactions contemplated by
this Agreement. The execution, delivery and performance of this Agreement by
Parent and Merger Sub have been duly authorized by all necessary action on the
part of Parent and Merger Sub. This Agreement has been duly executed and
delivered by Parent and Merger Sub and constitutes the legal, valid and binding
obligation of Parent and Merger Sub enforceable against them in accordance with
its terms.

      4.4.  Proxy Statement. None of the information provided by Parent or
Merger Sub and/or by their respective auditors, legal counsel, financial
advisors or other consultants or advisors specifically for use in the Proxy
Statement (including, without limitation, a Schedule 13E-3 filing), shall, at
the time filed with the SEC, at the time mailed to the Company's stockholders or
at the time of the Company Stockholders 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. If at any time prior to
the Company Stockholders Meeting, or the Closing, any event relating to Parent
or any of its Affiliates, officers or directors should be discovered by Parent
that should be set forth in a supplement to the Proxy Statement, Parent shall
promptly inform the Company.

                                      -23-

      4.5.  Financing. Parent and Merger Sub have available to them all funds
necessary to pay the Merger Consideration for each outstanding share of Company
Common Stock and to consummate the Merger and the other transactions
contemplated hereby.

                                   ARTICLE V

                                    COVENANTS

      5.1.  Mutual Covenants.

            (a)   HSR Act Filings; Best Efforts; Notification. (i) Each of
Parent and the Company shall (A) 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 hereby as promptly as practicable and
in any event within five (5) business days after the date of this Agreement, (B)
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 Authority in
respect of such filings or such transactions, and (C) cooperate with the other
party in connection with any such filing and in connection with resolving any
investigation or other inquiry of any such agency or other Governmental
Authority under any Foreign Antitrust Laws with respect to any such filing or
any such transaction. Each party shall use its best efforts to furnish to each
other all information required for any application or other 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,
undertaking, or agreement with, any Governmental Authority regarding any such
filings or any such transaction. Neither party shall independently participate
in any formal meeting with any Governmental Authority in respect of any such
filings, investigation, or other inquiry without giving the other party prior
notice of the meeting and, to the extent permitted by such Governmental
Authority, the opportunity to attend and/or participate. The parties hereto will
consult and cooperate with one another in connection with any analyses,
appearances, presentations, memoranda, briefs, arguments, opinions and proposals
made or submitted by or on behalf of any party hereto in connection with
proceedings under or relating to the HSR Act or other Antitrust Laws.

                  (ii)  Each of Parent and the Company shall use its best
efforts to resolve such objections, if any, as may be asserted by any
Governmental Authority with respect to the transactions contemplated by this
Agreement under the HSR Act, the Sherman Act, as amended, the Clayton Act, as
amended, the Federal Trade Commission Act, as amended, any Foreign Antitrust
Laws, 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")
provided, however, that neither Parent, Merger Sub nor the Company, nor any of
their respective Affiliates, shall be required, as a result of this Section
5.1(a)(ii), to propose or agree to accept any undertaking or condition, to enter
into any consent decree, to make any divestiture or accept any operational
restriction, or take or commit to take any action that could reasonably be
expected to limit (A) the freedom of action of Parent or its subsidiaries or

                                      -24-

Affiliates with respect to operation of, or Parent's or its subsidiaries' or
Affiliates' ability to retain, the Company or any business, product lines or
assets of the Company, or (B) the ability to retain, own or operate any portion
of the businesses, product lines or assets, of the Parent or alter or restrict
in any way the business or commercial practices of the Company, the Parent, or
either of their subsidiaries or Affiliates. Parent shall be entitled to direct
any proceedings or negotiations with any Governmental Authority relating to any
of the foregoing described in this paragraph (ii) or to the matters described in
paragraph (i) of this Section 5.1(a), provided that it shall afford the Company
a reasonable opportunity to participate therein, and provided, further, that
nothing in this sentence shall affect the parties' rights and obligations
contained in the third, fourth and fifth sentences of Section 5.1(a)(i).
Notwithstanding the foregoing or any other provision of this Agreement, nothing
in this Section 5.1(a) shall limit a party's right to terminate this Agreement
pursuant to Section 7.1, so long as such party has up to then complied in all
material respects with its obligations under this Section 5.1(a). Each of Parent
and the Company shall use its best efforts to take such action as may be
required to cause the expiration or early termination of the notice period under
the HSR Act or other Antitrust Laws with respect to such transactions as
promptly as possible after the execution of this Agreement.

                  (iii) Each of the parties shall use its best efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including (A) the obtaining of all other necessary actions or
nonactions, waivers, consents, licenses, permits, authorizations, orders and
approvals from Governmental Authorities and the making of all other necessary
registrations and filings (including other filings with Governmental
Authorities, if any), subject to the limitations of Section 5.1(a)(ii), (B) the
obtaining of all consents, approvals or waivers from third parties related to or
required in connection with the Merger that are necessary to consummate the
Merger and the transactions contemplated by this Agreement or required to
prevent a Material Adverse Effect on Parent or the Company from occurring prior
to or after the Effective Time, (C) the preparation of the Proxy Statement and
(D) the execution and delivery of any additional instruments necessary to
consummate the transaction contemplated by, and to fully carry out the purposes
of, this Agreement.

                  (iv)  Notwithstanding anything to the contrary in this
Agreement, neither Parent nor the Company shall be required to (i) hold separate
(including by trust or otherwise) or divest any of their respective businesses
or assets or (ii) waive any of the conditions to the Merger set forth in Article
VI of this Agreement as they apply to such party.

            (b)   Public Announcements. Each of the parties agrees that it shall
not, nor shall any of their respective affiliates, issue or cause the
publication of any press release or other public announcement with respect to
the Merger, this Agreement or the other transactions contemplated hereby without
the prior approval of the other party, except such disclosure as may be required
by law or by any listing agreement with the Nasdaq Stock Market, Inc., a
national securities exchange; provided, if such disclosure is required by law or
any such listing agreement, such disclosure may not be made without prior
consultation of the other parties.

                                      -25-

            (c)   Taking of Necessary Action; Further Action. Each of Parent,
Merger Sub and the Company will take all such reasonable and lawful action as
may be necessary or appropriate in order to effectuate the Merger in accordance
with this Agreement as promptly as possible. If at any time after the Effective
Time, any such further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub immediately prior to the Effective Time are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.

      5.2.  Covenants of Parent.

            (a)   Indemnification; Directors' and Officers' Insurance.

                  (i)   Parent and the Company agree that all rights to
indemnification or advancement of expenses and director exculpation, and all
limitations with respect thereto, existing in favor of any Indemnified Person,
as provided in the Company Certificate or the Company Bylaws, shall survive the
Merger and shall continue in full force and effect for six years, without any
amendment thereto; provided, however, that in the event any Claim is asserted or
made, any determination required to be made with respect to whether an
Indemnified Person's conduct complies with the standards set forth under the
DGCL, the Company Certificate or the Company Bylaws or any such agreement, as
the case may be, shall be made by independent legal counsel selected by such
Indemnified Person and reasonably acceptable to Parent. For a period of six
years after the Effective Time, Parent shall cause the Surviving Corporation to
indemnify, defend and hold harmless (and make advances for expenses as incurred
to) all past and present officers and directors of the Company and of its
Subsidiaries to the same extent and in the same manner such persons are entitled
to indemnification and advancement of expenses as of the date of this Agreement
(to the extent consistent with applicable law) by the Company pursuant to the
DGCL, the Company Certificate or the Company Bylaws for acts or omissions
occurring at or prior to the Effective Time. For a period of six years after the
Effective Time, Parent shall cause the Surviving Corporation to perform all of
the obligations set forth in the Company Charter and the Company Bylaws.

                  (ii)  Parent shall maintain the Company's existing directors'
and officers' liability insurance policy ("D&O Insurance") for a period of not
less than six years after the Effective Time; provided, however, that Parent may
substitute therefor policies of substantially similar coverage and amounts (with
carriers comparable to the Company's existing carriers) containing terms no less
advantageous to such former directors or officers; provided further that if the
existing D&O Insurance expires or is canceled during such period, Parent shall
use its reasonable efforts to obtain substantially similar D&O Insurance;
provided further that Parent and the Company shall not be required pursuant to
its obligations under this Section 5.2(a)(ii) to pay in excess of an aggregate
amount of $950,000, but in such case shall purchase as much coverage as possible
for such amount.

            (b)   Section 16 Matters. Prior to the Effective Time, Parent and
the Company shall take all such steps as may be required to cause the Merger and
the transactions

                                      -26-

contemplated hereby, including any dispositions of Company Common Stock
(including derivative securities with respect to the Company Common Stock) by
each individual who is subject to the reporting requirements of Section 16(a) of
the Exchange Act with respect to the Company 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 regarding such
matters.

      5.3.  Covenants of the Company.

            (a)   The Company Stockholders Meeting. The Company shall take all
action in accordance with the federal securities laws, the DGCL and the Company
Certificate and the Company Bylaws necessary to convene a special meeting of the
stockholders of the Company entitled to vote (the "Company Stockholders
Meeting") to be held and completed on the earliest practicable date following
the execution of this Agreement and determined by Parent, subject to the consent
of the Company (which shall not be unreasonably withheld), to consider and vote
upon approval of the Merger, this Agreement and the transactions contemplated
hereby; provided, however, that the Company shall not hold the Company
Stockholders Meeting until any applicable waiting periods (and any extensions
thereof, including any written commitment to an HSR Authority to defer or delay
consummation of the Merger notwithstanding expiration of such waiting periods)
under the HSR Act relating to the Merger and the transactions contemplated by
this Agreement shall have expired or been terminated.

            (b)   SEC Filings. The Company shall, in accordance with applicable
law, as soon as practicable following the execution of this Agreement: (i)
prepare and file with the Securities and Exchange Commission (the "SEC") a proxy
statement (including, without limitation, a Schedule 13E-3 filing, if required
to be filed under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or information statement (together with any supplement or amendment
thereto, the "Proxy Statement") relating to the Company Stockholders Meeting in
accordance with the Exchange Act and (ii) include in the Proxy Statement the
recommendation of the Special Committee and the Board of Directors of the
Company that stockholders of the Company vote in favor of the approval and
adoption of this Agreement and the transactions contemplated hereby, provided
that the Special Committee or the Board of Directors of the Company may withdraw
or modify its recommendation relating to this Agreement and the Merger pursuant
to the terms of Section 5.3(d) hereof. The Company shall also as soon as
practicable following the execution of this Agreement use its commercially
reasonable efforts (i) to obtain and furnish the information required to be
included by it in the Proxy Statement and, after consultation with Parent,
respond promptly to any comments made by the SEC with respect to the Proxy
Statement and any preliminary version thereof and cause the Proxy Statement to
be mailed to its stockholders at the earliest practicable time following the
execution of this Agreement in accordance with SEC rules and regulations and
(ii) to obtain the necessary approvals by its stockholders of this Agreement and
the transactions contemplated hereby. At the Company Stockholders Meeting,
Parent and Merger Sub will vote all Shares owned by them to approve this
Agreement and the transactions contemplated hereby.

            (c)   Conduct of the Company's Operations. During the period from
the date of this Agreement to the Effective Time, the Company shall conduct its
operations in the ordinary

                                      -27-

course except as expressly contemplated by this Agreement and the transactions
contemplated hereby and shall use all reasonable efforts to maintain and
preserve its business organization and to retain the services of its officers
and key employees and maintain relationships with customers, suppliers, lessees,
licensees and other third parties to the end that its goodwill and ongoing
business shall not be impaired in any material respect. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time, the Company shall not, except as otherwise expressly
contemplated by this Agreement and the transactions contemplated hereby or as
set forth in Section 5.3(c) to the Company Disclosure Schedule, without the
prior written consent of Parent:

                  (i)   do or effect any of the following actions with respect
to its securities: (A) adjust, split, combine or reclassify its capital stock,
(B) make, declare or pay any dividend or distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible into or exchangeable for any
shares of its capital stock, (C) grant any person any right or option to acquire
any shares of its capital stock, (D) issue, deliver or sell or agree to issue,
deliver or sell any additional shares of its capital stock or any other
securities or obligations convertible into or exchangeable or exercisable for
any shares of its capital stock or such securities (except pursuant to the
exercise of Company Options which are outstanding as of the date hereof) or (E)
enter into any agreement, understanding or arrangement with respect to the sale,
voting, registration or repurchase of its capital stock;

                  (ii)  directly or indirectly sell, transfer, lease, pledge,
mortgage, encumber or otherwise dispose of any of its property or assets other
than in the ordinary course of business;

                  (iii) amend the Company Certificate or the Company Bylaws;

                  (iv)  merge or consolidate with any other person;

                   (v)   acquire assets or capital stock of or other equity
interests in any other person;

                  (vi)  incur, create, assume or otherwise become liable for any
indebtedness for borrowed money or, assume, guarantee, endorse or otherwise as
an accommodation become responsible or liable for the obligations of any other
individual, corporation or other entity;

                  (vii) enter into or modify any employment, severance, stay-put
termination or similar agreements or arrangements (other than at-will employment
arrangements in the ordinary course of business consistent with past practice of
the Company) with, or grant any bonuses, salary increases, severance or
termination pay to, any officer, director, consultant or employee (except for
change-of-control severance agreements that in all cases shall require the prior
written consent of Parent), or otherwise increase the compensation or benefits
provided to any officer, director, consultant or employee except as may be
required by Applicable Law;

                                      -28-

                  (viii) enter into, adopt or amend any employee benefit or
similar plan except as may be required by Applicable Law;

                  (ix)  change any method or principle of accounting in a manner
that is inconsistent with past practice except to the extent required by
generally accepted accounting principles as advised by the Company's regular
independent accountants, or make any material Tax election (unless required by
law) or settle any material Tax liability which is the subject of dispute
between the Company and a Governmental Authority, unless, in each case, Parent
is given reasonable prior written notice thereof;

                  (x)   enter into, amend or terminate any contract other than
in the ordinary course of business consistent with past practices and which
individually or in the aggregate would not be reasonably expected to have a
Material Adverse Effect on the Company;

                  (xi)  except as expressly permitted by Section 5.3(d) hereof,
enter into any confidentiality, standstill or non-compete agreements or
arrangements;

                  (xii) incur or commit to any capital expenditures,
individually or in the aggregate, in excess of $200,000;

                  (xiii) modify or waive any of its rights under any provision
of any confidentiality agreement or standstill agreement;

                  (xiv) take any action that will likely result in the failure
to satisfy the conditions set forth in Section 6.3(a) hereof;

                  (xv)  fail to file any material Tax Returns when they become
due, or fail to pay any material Taxes when they become due and payable;

                  (xvi) permit or cause any subsidiary to do any of the
foregoing or agree or commit to do any of the foregoing; or

                  (xvii) agree in writing or otherwise to take any of the
foregoing actions.

            (d)   No Solicitation. During the term of this Agreement, the
Company shall not, and shall not authorize or permit any of its subsidiaries or
any directors, officers, employees, agents or representatives of the Company or
any of its subsidiaries (including, without limitation, any investment banker,
financial advisor, attorney or accountant retained by the Company or any of its
subsidiaries) to directly or indirectly solicit, initiate, encourage or
facilitate, or furnish or disclose non-public information in furtherance of, any
inquiries or the making of any proposal with respect to any recapitalization,
merger, consolidation or other business combination involving the Company, or
acquisition of any capital stock from the Company (other than upon exercise of
the Company options which are outstanding as of the date hereof) or 15% or more
of the assets of the Company and its subsidiaries, taken as a whole, in a single
transaction or a series of related transactions, or any acquisition by the
Company of any material assets or capital stock of any other person, or any
combination of the foregoing (a "Competing Transaction"), or negotiate or
otherwise engage in discussions with any person (other than Parent or its
directors,

                                      -29-

officers, employees, agents and representatives) with respect to any Competing
Transaction, agree to approve or recommend a Competing Transaction or enter into
any agreement, arrangement or understanding requiring it to abandon, terminate
or fail to consummate the Merger or any other transactions contemplated by this
Agreement; provided, that, at any time prior to the approval of the Merger by
the stockholders of the Company, the Company may furnish information to, and
negotiate or otherwise engage in discussions with, any party who delivers a bona
fide written proposal for a Competing Transaction that was not solicited or
encouraged after the date of this Agreement if and so long as (A) the Special
Committee or the Board of Directors of the Company determines, after
consultation with its outside legal counsel, that failing to take such action
may constitute a breach of the fiduciary duties of the Special Committee or the
Board of Directors of the Company under Applicable Law, (B) the Special
Committee or the Board of Directors of the Company determines that such proposal
is, after consulting with Morgan Stanley (or any other nationally recognized
investment banking firm), if accepted, reasonably likely to be consummated and
is more favorable to the Company's stockholders from a financial point of view
than the transactions contemplated by this Agreement (including any adjustment
to the terms and conditions proposed by Parent in response to such Competing
Transaction) and (C) such proposal is not subject to any financing contingencies
(a "Superior Proposal"); provided, further, that the Company, prior to taking
any such action, notifies Parent not less than two days prior to taking such
action (which notice shall identify the person making the proposal, and describe
the terms thereof) and receives from the person making the proposal an executed
confidentiality agreement in reasonably customary form. The Company shall notify
Parent of any proposal for a Competing Transaction (including the material terms
and conditions thereof and the identity of the person making it) as promptly as
practicable (but in no event more than 24 hours) after its receipt thereof, and
shall thereafter inform Parent on a prompt basis of the status of any discussion
or negotiations with such third party and any material changes to the terms and
conditions of such proposal, and shall promptly give Parent a copy of any
information delivered to such person that has not previously been reviewed by
Parent. The Company will immediately cease all existing activities, discussions
and negotiations with any parties conducted heretofore with respect to any
proposal for a Competing Transaction. Notwithstanding any other provision of
this Section 5.3(d), in the event that prior to the approval of the Merger by
the stockholders of the Company the Special Committee or the Board of Directors
of the Company determines, after consultation with outside legal counsel, that
failure to do so may constitute a breach of the fiduciary duties of the Special
Committee or the Board of Directors of the Company under Applicable Law, the
Special Committee or the Board of Directors of the Company may (subject to this
and the following sentences) withdraw, modify or change, in a manner adverse to
Parent, the Company Board Recommendation and take and disclose to the
stockholders of the Company a position with respect to a Superior Proposal and,
to the extent applicable, comply with Rule 14e-2 and Rule 14d-9 promulgated
under the Exchange Act with respect to a Competing Transaction by disclosing
such withdrawn, modified or changed Company Board Recommendation and
recommendation with respect to the Competing Transaction in connection with a
tender or exchange offer for the Company securities, provided that it gives
Parent two business days prior written notice of its intention to do so. Neither
the Special Committee nor the Board of Directors of the Company shall, in
connection with any such withdrawal, modification or change of the Company Board
Recommendation, take any action to change the approval of the Special Committee
or the Board of Directors of the Company for purposes of causing any state
takeover statute or other state law

                                      -30-

to be applicable to the transactions contemplated hereby, including this
Agreement and the Merger; provided, however, that this sentence shall not
prohibit the Company from withdrawing, modifying or changing its recommendation
or approving or recommending any Superior Proposal under the circumstances and
subject to the conditions set forth in this Section 5.3(d). Notwithstanding any
subsequent determination by the Board of Directors of the Company to change the
Company Board Recommendation, this Agreement shall be submitted to the
stockholders of the Company at the Company Stockholders Meeting for the purpose
of obtaining the approval of the Merger and the transactions contemplated hereby
and nothing contained herein shall be deemed to relieve the Company of such
obligation. From and after the execution of this Agreement, the Company shall
immediately advise Parent in writing of the receipt, directly or indirectly, of
any inquiries, discussions, negotiations, or proposals relating to a Competing
Transaction (including the specific terms thereof and the identity of the other
party or parties involved) and furnish to Parent within three days of such
receipt an accurate description of all material terms (including any changes or
adjustments to such terms as a result of negotiations or otherwise) of any such
written proposal in addition to any information provided to any third party
relating thereto. Notwithstanding any other provision of this Section 5.3(d),
the Company, its directors and its advisors may refer a third party to this
Section 5.3(d).

            (e)   Access. The Company shall permit representatives of Parent to
have full access at all reasonable times and upon reasonable notice to the
Company's premises, properties, books, records, contracts, documents, customers
and suppliers, and shall cause its independent accountants to give Parent access
to such accountants' work papers. Information obtained by Parent pursuant to
this Section 5.3(e) shall be subject to the provisions of the Confidentiality
Agreement, which agreement remains in full force and effect. No investigation
conducted pursuant to this Section 5.3(e) or otherwise shall affect or be deemed
to modify any representation or warranty made in this Agreement. Notwithstanding
the foregoing, the Company shall have no obligation to provide Parent with
information if the Company determines in good faith, upon written advice of its
outside antitrust counsel, that providing information may violate any Applicable
Law.

            (f)   Notification of Certain Matters. The Company shall give prompt
notice to Parent of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would likely cause any representation or
warranty by the Company contained in this Agreement to be untrue or inaccurate
at or prior to the Effective Time in any material respect and (ii) any material
failure of the Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5.3(f) shall not limit
or otherwise affect the remedies available hereunder to Parent.

            (g)   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.

            (h)   No Redemption of Rights Plan. Other than the amendment
described in Section 5.3(h) of the Company Disclosure Schedule, between the date
of this Agreement and the

                                      -31-

earlier of the Effective Time and the termination of this Agreement, the Company
shall not (a) redeem, amend or waive any provisions of the Rights Plan (other
than such amendments as are necessary to accommodate this Agreement and the
transactions contemplated hereby, but not with respect to any Competing
Transaction) or (b) implement or adopt any so-called "poison pill," stockholder
rights plan or other similar plan.

                                   ARTICLE VI

                                   CONDITIONS

      6.1.  Conditions to the Obligations of Each Party. The obligations of the
Company, Merger Sub and Parent to consummate the Merger shall be subject to the
satisfaction of the following conditions:

            (a)   This Agreement, the Merger and the transactions contemplated
hereby shall have been duly approved and adopted by the Requisite Company Vote.

            (b)   Any applicable waiting periods (and any extensions thereof,
including any written commitment to an HSR Authority to defer or delay
consummation of the Merger notwithstanding expiration of such waiting periods)
under the HSR Act or any Foreign Antitrust Laws relating to the Merger and the
transactions contemplated by this Agreement shall have expired or been
terminated.

            (c)   No provision of any Applicable Law and no judgment,
injunction, order or decree shall prohibit or enjoin the consummation of the
Merger or the transactions contemplated by this Agreement (the parties having
used their respective best efforts (consistent with the provisions of this
Agreement) to cause such Applicable Law to be satisfied (if such Applicable Law
is capable of being satisfied) so as to cause such Applicable Law not to
prohibit the Merger or the transactions contemplated hereby).

            (d)   There shall not be pending any Action by any Governmental
Authority challenging or seeking to restrain or prohibit the consummation of the
Merger or any of the other transactions contemplated by this Agreement.

      6.2.  Conditions to Obligations of the Company. The obligations of the
Company to consummate the Merger and the transactions contemplated hereby shall
be subject to the fulfillment of the following conditions unless waived by the
Company:

            (a)   The representations and warranties of Parent and Merger Sub
set forth in Article IV shall be true and correct in all respects on and as of
the Closing Date with the same effect as though made on and as of the Closing
Date (except for such representations and warranties made as of a specified
date, the accuracy of which will be determined as of the specified date), except
for any such inaccuracies which, individually or in the aggregate, would not
have a material adverse effect on the ability of the Parent or the Merger Sub to
consummate the transactions contemplated by this Agreement.

                                      -32-

            (b)   Parent shall have performed in all material respects each
obligation and agreement and shall have complied in all material respects with
each covenant to be performed and complied with by it hereunder at or prior to
the Effective Time, except for acts and omissions of Parent which, in the
aggregate, do not have a Material Adverse Effect on Parent.

            (c)   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 6.2(a) and (b)
have been satisfied.

      6.3.  Conditions to Obligations of Parent. The obligations of Parent to
consummate the Merger and the other transactions contemplated hereby shall be
subject to the fulfillment of the following conditions unless waived by Parent:

            (a)   The representations and warranties of the Company set forth in
Article III shall be true and correct in all respects on and as of the Closing
Date with the same effect as though made on and as of the Closing Date (except
for such representations and warranties made as of a specified date, the
accuracy of which will be determined as of the specified date), except for
changes permitted by Section 5.3(c) and except for any such inaccuracies which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company or a material adverse effect on the ability of the Company to
consummate the transactions contemplated by this Agreement (it being agreed that
any materiality qualifications in particular representations and warranties
shall be disregarded in determining whether any such inaccuracies would have a
Material Adverse Effect for purposes of this Section 6.3(a)).

            (b)   The Company shall have performed in all material respects each
obligation and agreement and shall have complied in all material respects with
each covenant to be performed and complied with by it hereunder at or prior to
the Effective Time.

            (c)   The Company shall have furnished Parent with a certificate
dated the Closing Date signed on its behalf by its Chairman, President or any
Vice President to the effect that the conditions set forth in Sections 6.3(a)
and (b) have been satisfied.

            (d)   Since the date of this Agreement, there shall not have
occurred any Material Adverse Effect on the Company.

            (e)   The aggregate number of shares of Company Common Stock which
dissents from the transactions contemplated by this Agreement shall not exceed
5% of the outstanding shares of Company Common Stock on the Closing Date.

            (f)   There shall not be pending any Action by any Governmental
Authority (i) seeking to prohibit or limit the ownership or operation by Parent,
the Surviving Corporation or any of their respective subsidiaries of, or to
compel Parent, the Surviving Corporation or any of their respective subsidiaries
to dispose of or hold separate, any material portion of the business or assets
of Parent, the Company or any of their respective subsidiaries, as a result of
the Merger or any of the other transactions contemplated by this Agreement or
(ii) seeking to prohibit Parent or any subsidiary of Parent from effectively
controlling in any material respect the business or operations of the Company or
the subsidiaries of the Company.

                                      -33-

                                   ARTICLE VII

                            TERMINATION AND AMENDMENT

      7.1.  Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding any approval
of this Agreement by the stockholders of the Company):

            (a)   by mutual written consent of Parent and the Company;

            (b)   by either Parent or the Company if there shall be judgment,
injunction, order or decree of a court or other competent Governmental Authority
enjoining Parent or the Company from consummating the Merger shall have been
entered and such judgment, injunction, order or decree shall have become final
and nonappealable; provided that a party may not terminate the Agreement
pursuant to this Section 7.1(b) if its failure to perform its obligations under
this Agreement resulted in or contributed to the issuance of such judgment,
injunction, order or decree;

            (c)   by either Parent or the Company if the Merger shall not have
been consummated before June 30, 2004; provided, however, that the right to
terminate this Agreement under this Section 7.1(c) shall not be available to any
party whose failure or whose affiliate's failure to perform any material
covenant or obligation under this Agreement has been the cause of or resulted in
the failure of the Merger to occur on or before such date;

            (d)   by Parent or the Company if at the Company Stockholders
Meeting (including any adjournment or postponement thereof) the Requisite
Company Vote of the stockholders shall not have been obtained to approve the
Merger, the Merger Agreement and the transactions contemplated hereby;

            (e)   by Parent or the Company if:

                  (x)   there shall have been a material breach by the other of
any of its representations, warranties, covenants or agreements contained in
this Agreement, which breach would result in the failure to satisfy one or more
of the conditions set forth in Section 6.2(a) or 6.2(b) (in the case of a breach
by Parent) or Section 6.3(a) or 6.3(b) (in the case of a breach by the Company)
or would result in a material adverse effect on the ability of Parent and/or the
Company to consummate the transactions contemplated hereby, and such breach
shall not have been cured within 30 days after notice thereof shall have been
received by the party alleged to be in breach; or

                  (y)   the condition set forth in Section 6.3(d) (in the case
of a termination by Parent) is not satisfied and cannot reasonably be expected
to be satisfied by the Termination Date;

            (f)   by Parent at any time prior to the Company Stockholders
Meeting if the Special Committee or the Board of Directors of the Company or any
committees thereof shall

                                      -34-

have withdrawn or modified, in a manner adverse to Parent, the Company Board
Recommendation or shall have approved, endorsed or recommended a Competing
Transaction; or

            (g)   by the Company at any time prior to the Company Stockholders
Meeting if all of the following conditions have been met: (x) the Company has
complied with the provisions of Section 5.3(c)(xi), 5.3(d) and 5.3(h) hereof,
(y) the Company has received a Superior Proposal and (z) the full amount of the
termination fee and the Cost reimbursement required under Section 7.3 hereof is
paid at the time notice of such termination is delivered.

      7.2.  Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement, except for the provisions of
each of Sections 7.2, 7.3, 8.7 and 8.10, shall become void and have no effect,
without any liability on the part of any party or its directors, officers or
stockholders. Notwithstanding the foregoing, nothing in this Section 7.2 shall
relieve any party to this Agreement of liability for a willful or intentional
breach of any provision of this Agreement and provided, further, however, that
if it shall be judicially determined that termination of this Agreement was
caused by a willful or intentional breach of this Agreement, then, in addition
to other remedies at law or equity for breach of this Agreement, the party so
found to have intentionally breached this Agreement shall indemnify and hold
harmless the other parties for their respective out-of-pocket costs, fees and
expenses of their counsel, accountants, financial advisors and other experts and
advisors as well as fees and expenses incident to negotiation, preparation and
execution and performance of this Agreement and related documentation and
stockholders' meetings and consents ("Costs").

      7.3.  Termination Fee; Expenses.

            (a)   In the event that this Agreement is terminated (i) by Parent
pursuant to Section 7.1(e)(x) due to a material breach by the Company of its
obligations under Section 5.3(d) and, if such breach is of a nature that it may
be cured by the Company, the Company does not cure such breach within 48 hours
after such breach; (ii) pursuant to Section 7.1(f); (iii) pursuant to Section
7.1(g) or (iv) by Parent pursuant to Section 7.1(c) or 7.1(d) in the event (A) a
Competing Transaction shall have been made known to the Company or shall have
been made directly to the stockholders of the Company generally or any person
shall have publicly announced its intention (whether or not conditional) to make
a proposal for a Competing Transaction, (B) the condition set forth in Section
6.1(a) is not satisfied or Parent has terminated this Agreement pursuant to
Section 7.1(c) (but only if a vote to obtain the Requisite Company Vote or the
Company's Stockholder Meeting has not been held), and (C) within 12 months of
such termination, the Company enters into a definitive agreement with respect
to, or consummates, a Competing Transaction, then in any such event, the Company
shall pay to Parent a termination fee equal to $3,000,000 in cash, plus the
reimbursement of any and all Costs incurred by Parent and Merger Sub up to a
maximum of $1,000,000. Except as set forth in Section 7.2, the fee and expense
arrangements contemplated hereby are the sole remedies hereunder (other than
equitable or injunctive relief under Section 8.8) and shall be paid pursuant to
this Section 7.3 regardless of any alleged breach, other than a willful or
intentional breach, by Parent of its obligations hereunder, provided that no
payment made by the Company pursuant to

                                      -35-

this Section 7.3 shall operate or be construed as a waiver by the Company of any
breach of this Agreement by Parent or Purchaser or of any rights of the Company
in respect thereof.

            (b)   Any payment required to be made pursuant to paragraph (a) of
this Section 7.3 shall be made to the Parent not later than two Business Days
after delivery to the Company of notice of demand for payment, or, if earlier,
upon the consummation of a Competing Transaction if such payment is required
pursuant to Section 7.3(a)(iv); provided, that any such payment required
pursuant to Section 7.3(a)(iii) shall be made to Parent in accordance with the
terms of Section 7.1(g) hereof. Any payment required to be made pursuant to
paragraph (a) of this Section 7.3 shall be made to the Parent by wire transfer
of immediately available funds to an account designated by the Parent in the
notice of demand for payment delivered pursuant to this Section 7.3(b).

      7.4.  Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by the Special Committee of the Company and by the
respective Boards of Directors of Parent and Merger Sub, at any time before or
after adoption of this Agreement by stockholders of Parent or the Company, but
after any such approval, no amendment shall be made which by law requires
further approval or authorization by the stockholders of Parent or the Company
without such further approval or authorization. Notwithstanding the foregoing,
this Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.

      7.5.  Extension; Waiver. At any time prior to the Effective Time, Parent
(with respect to the Company) and the Company (with respect to Parent) by action
taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of such party, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.

                                  ARTICLE VIII

                                  MISCELLANEOUS

      8.1.  No Survival of Representations and Warranties. The representations
and warranties made herein by the parties hereto shall not survive the Effective
Time. This Section 8.1 shall not limit any covenant or agreement of the parties
hereto which by its terms contemplates performance after the Effective Time or
after the termination of this Agreement.

      8.2.  Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed) or dispatched by a nationally recognized overnight courier service to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):

                                      -36-

            (a)   if to Parent or Merger Sub:

                  c/o ValueAct Capital
                  One Maritime Plaza
                  Suite 1400
                  San Francisco, CA 94111
                  Attn.: George F. Hamel, Jr.
                  Fax:  415-362-5727

                  with a copy to:

                  Dechert LLP
                  1717 Arch Street
                  4000 Bell Atlantic Tower
                  Philadelphia, PA  19103-2793
                  Attn.:  Christopher G. Karras, Esq.
                  Fax:  215-994-2222

            (b)   if to the Company:

                  300 Baker Avenue
                  Concord, MA 01742
                  Attn.:  President
                  Fax: 978-318-4690

                  with a copy to:

                  Testa, Hurwitz & Thibeault, LLP
                  125 High Street
                  Boston, MA 02110
                  Attn: Kathy Fields, Esq.
                  Fax: 617-790-0097

      8.3.  Interpretation; Definitions. (a) When a reference is made in this
Agreement to an Article or Section, such reference shall be to an Article or
Section of this Agreement unless otherwise indicated. The headings and the table
of contents contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.

            (b)   For the purposes of any provision of this Agreement, a
"Material Adverse Effect" with respect to any party shall be deemed to occur if
any event, change or effect, individually or in the aggregate with such other
events, changes or effects, has occurred which would have or would reasonably be
expect to have a material adverse effect on (i) the business, assets (including
intangible assets), liabilities (contingent or otherwise), results of operations
or condition (financial or otherwise) of such party and its subsidiaries taken
as a whole or (ii) the ability of such party to consummate the transactions
contemplated by this Agreement; provided,

                                      -37-

however, that a Material Adverse Effect shall not include any change in or
effect upon the business, assets (including intangible assets), liabilities
(contingent or otherwise), results of operations or financial condition of such
party or any of its subsidiaries directly or indirectly arising out of or
attributable to (i) any changes in the market price or trading volume of the
shares of Company Common Stock in the case of the Company (but not any change or
effect underlying such decrease to the extent such change or effect would
otherwise constitute a Material Adverse Effect on such party), (ii) conditions,
events, or circumstances generally affecting the economy as a whole or the
Company's industry as a whole, (iii) changes, effects or events resulting from
or arising out of the public announcement of the execution of this Agreement or
(iv) changes, effects or events caused by the taking of any action required by
this Agreement or the taking of any action by the Company that has been approved
in writing by Parent.

            (c)   For purposes of this Agreement, a "subsidiary" of any person
means another person, an amount of the voting securities or other voting
ownership or voting partnership interests (or, in the case of a trust,
beneficial interests) of which is sufficient to elect at least a majority of its
Board of Directors or other governing body (or, if there are no such voting
securities or interests, 50% or more of the equity interests of which is owned
directly or indirectly by such first person).

            (d)   For purposes of this Agreement, "knowledge" of a party shall
mean the knowledge, assuming due inquiry, of all elected officers of such party
or any of its subsidiaries with a title of vice president or higher.

            (e)   For purposes of this Agreement, references to any financial
statements or any component thereof shall be deemed to include the footnotes
thereto.

            (f)   For purposes of this Agreement, the term "including" shall
mean "including, without limitation."

      8.4.  Counterparts. This Agreement may be executed in counterparts, which
together shall constitute one and the same Agreement. The parties may execute
more than one copy of the Agreement, each of which shall constitute an original.

      8.5.  Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitute the entire agreement among the
parties and supersede all prior agreements and understandings, agreements or
representations by or among the parties, written and oral, with respect to the
subject matter hereof and thereof.

      8.6.  Third Party Beneficiaries. Except for the agreement set forth in
Section 5.2(a), nothing in this Agreement, express or implied, is intended or
shall be construed to create any third party beneficiaries.

      8.7.  Governing Law. Except to the extent that the laws of the
jurisdiction of organization of any party hereto, or any other jurisdiction, are
mandatorily applicable to the Merger or to matters arising under or in
connection with this Agreement, this Agreement shall be governed by the laws of
the State of Delaware, without giving effect to the conflict of laws

                                      -38-

principles thereof. Each party hereby irrevocably and unconditionally consents
to submit to the exclusive jurisdiction of the courts of the State of Delaware
and of the United States of America, in each case located in the State of
Delaware, for any Action (and agrees not to commence any Action except in any
such court), and further agrees that service of process, summons, notice or
document by U.S. registered mail to its respective address set forth in Section
8.2 shall be effective service of process for any Action brought against it in
any such court. Each party hereby irrevocably and unconditionally waives any
objection to the laying of venue of any Action in the courts of the State of
Delaware or of the United States of America, in each case located in the State
of Delaware, and hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any Action brought in any
such court has been brought in an inconvenient forum.

      8.8.  Specific Performance. The transactions contemplated by this
Agreement are unique. Accordingly, each of the parties acknowledges and agrees
that, in addition to all other remedies to which it may be entitled, each of the
parties hereto is entitled to a decree of specific performance and injunctive
and other equitable relief.

      8.9.  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; provided, that Parent or Merger Sub may assign any of Merger Sub's
rights and obligation under this Agreement to any other wholly-owned direct or
indirect subsidiary of Parent upon notice to the Company. Subject to the
preceding sentence, this Agreement shall be binding upon, inure to the benefit
of and be enforceable by the parties and their respective successors and
assigns.

      8.10. Expenses. Subject to the provisions of Section 7.3, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses, except that the filing fee required under the HSR Act will be paid by
Parent.

                                      -39-

      IN WITNESS WHEREOF, Parent, Merger Sub and the Company have signed this
Agreement as of the date first written above.

                                        VAC-OS HOLDINGS LLC

                                        By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                        OS MERGER SUB, INC.

                                        By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                        ONESOURCE INFORMATION SERVICES, INC.

                                        By:
                                             -----------------------------------
                                             Name:
                                             Title:

                                      -40-

EX-4.1

- --------------------------------------------------------------------------------



                             AMENDMENT NO.1 TO THE

                                RIGHTS AGREEMENT

                                     BETWEEN

                      ONESOURCE INFORMATION SERVICES, INC.

                                       and

                     AMERICAN STOCK TRANSFER & TRUST COMPANY
                                 as Rights Agent


                                   ----------


                          Dated as of February 17, 2004



- --------------------------------------------------------------------------------

                       AMENDMENT NO.1 TO RIGHTS AGREEMENT

      This Amendment No.1, dated as of February 17, 2004 (this "Amendment"), to
the Rights Agreement between OneSource Information Services, Inc., a Delaware
corporation (the "Company"), and American Stock Transfer & Trust Company, as
rights agent (the "Rights Agent").

      WHEREAS, the Company entered into a Rights Agreement, dated as of October
7, 2003, with the Rights Agent (the "Rights Agreement");

      WHEREAS, pursuant to Section 27 of the Rights Agreement, the Company may
from time to time, and the Rights Agent shall, if the Company so directs,
supplement or amend the Agreement without the approval of any holders of Right
Certificates to make any change to or delete any provision thereof or to adopt
any other provisions with respect to the Rights which the Company may deem
necessary or desirable;

      WHEREAS, as of the date of this Amendment, no Person has become an
Acquiring Person under the Rights Plan;

      WHEREAS, the Company and the Rights Agent wish to amend the Rights
Agreement as set forth herein.

      NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:

      Section 1.  Definitions. All capitalized terms used in this Amendment and
not otherwise defined herein shall have the same meanings set forth in the
Rights Agreement.

      Section 2.  Amendments.

      (a)   The definition of Acquiring Person is hereby amended to include a
new clause (v) as follows:

      "Acquiring Person" shall mean any Person who or which, together with all
Affiliates and Associates of such Person, shall be the Beneficial Owner of 15%,
or in the case of a Grandfathered Stockholder, 35%, or more of the Common Shares
of the Company then outstanding but shall not include (i) the Company, (ii) any
Subsidiary of the Company, (iii) any employee benefit plan of the Company or any
Subsidiary of the Company, (iv) any entity holding Common Shares for or pursuant
to the terms of any such employee benefit plan or (v) any Person who becomes the
Beneficial Owner of Common Shares of the Company in an Approved Transaction.
Notwithstanding the foregoing:

            (1)   no Person shall become an "Acquiring Person" as the result of
      an acquisition of Common Shares by the Company which, by reducing the
      number of shares outstanding, increases the proportionate number of shares
      beneficially owned by such Person to 15% (or such other percentage as
      would otherwise result in such person becoming an Acquiring Person) or
      more of the Common Shares of the Company then outstanding; provided,
      however, that if a Person shall so become the Beneficial Owner of 15% (or
      such other percentage) or more of the Common Shares of the Company then
      outstanding by reason of an acquisition of Common Shares by the Company
      and shall, after such share purchases by the Company, become the
      Beneficial Owner of


                                       1

      an additional 1% of the outstanding Common Shares of the Company, then
      such Person shall be deemed to be an "Acquiring Person"; and

            (2)   if the Board of Directors of the Company determines in good
      faith that a Person who would otherwise be an "Acquiring Person," as
      defined pursuant to the foregoing provisions of this paragraph, has become
      such inadvertently and without any plan or intention to seek or affect
      control of the Company, and such Person enters into an irrevocable
      commitment with the Company to divest, and thereafter divests in
      accordance with the terms of such commitment as promptly as practicable a
      sufficient number of Common Shares so that such Person would no longer be
      an "Acquiring Person," as defined pursuant to the foregoing provisions of
      this paragraph, then such Person shall not be deemed to have become an
      "Acquiring Person" for any purposes of this Agreement.

      (b)   A new definition for Approved Transaction is included in Section 1
of the Rights Agreement as follows:

      "Approved Transaction" shall mean the transaction contemplated by the
Agreement and Plan of Merger by and between the Company, VAC-OS Holdings LLC
and OS Merger Sub, Inc.

      Section 3.  No Other Changes; References. Except as set forth above, all
terms and conditions contained in the Rights Agreement shall remain in full
force and effect. All references in the Rights Agreement or any other document
shall be deemed to be references to the Rights Agreement as amended hereby.

      Section 4.  Governing Law. This Amendment shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such State applicable
to contracts to be made and performed entirely within such State.

      Section 5.  Counterparts. This Amendment may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.

      Section 6.  Descriptive Headings; Construction. Descriptive headings of
the several Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof. Whenever the content of this Agreement permits, the masculine gender
shall include the feminine and neuter genders, and reference to singular or
plural shall be interchangeable with the other.

                                  * * * * * * *

                                       2

      IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and their respective corporate seals to be hereunder affixed and
attested, all as of the day and year first above written.

                                                   ONESOURCE INFORMATION
                                                   SERVICES, INC.
Attest:



      /s/ Marcos Dinnerstein                       By: /s/ Martin Kahn
- -------------------------------                    -------------------------
                                                   Name:  Martin Kahn
                                                   Title: Chairman and Chief
                                                          Executive Officer



                                                   AMERICAN STOCK TRANSFER &
                                                   TRUST COMPANY

Attest:



      /s/ Susan Silber                             By: /s/ Herbert A. Lemmer
- -------------------------------                    -------------------------
                                                   Name:  Herbert A. Lemmer
                                                   Title: Vice President