EXHIBIT 1
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AGREEMENT AND PLAN OF MERGER
Dated as of August 9, 1999
By and Among
LUCENT TECHNOLOGIES INC.,
INTREPID MERGER INC.
And
INTERNATIONAL NETWORK SERVICES
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TABLE OF CONTENTS
Page
ARTICLE I
The Merger
SECTION 1.01. The Merger............................................. 2
SECTION 1.02. Closing................................................ 2
SECTION 1.03. Effective Time......................................... 2
SECTION 1.04. Effects of the Merger.................................. 3
SECTION 1.05. Certificate of Incorporation and By-laws............... 3
SECTION 1.06. Board of Directors and Officers........................ 3
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock................................. 3
(a) Capital Stock of Sub ............................... 4
(b) Cancelation of Treasury Stock and
Lucent-Owned Stock.............................. 4
(c) Conversion of INS Common Stock...................... 4
(d) Anti-Dilution Provisions............................ 4
SECTION 2.02. Exchange of Certificates................................ 4
(a) Exchange Agent...................................... 4
(b) Exchange Procedures................................. 5
(c) Distributions with Respect to
Unexchanged Shares.............................. 6
(d) No Further Ownership Rights in INS
Common Stock.................................... 6
(e) No Fractional Shares................................ 7
(f) Termination of Exchange Fund........................ 8
(g) No Liability........................................ 9
(h) Investment of Exchange Fund......................... 9
(i) Lost Certificates................................... 9
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of INS................... 10
(a) Organization, Standing and Corporate
Power........................................... 10
(b) Subsidiaries........................................ 10
(c) Capital Structure................................... 11
(d) Authority; Noncontravention......................... 12
(e) SEC Documents; Undisclosed
Liabilities..................................... 14
(f) Information Supplied................................ 16
(g) Absence of Certain Changes or Events................ 16
(h) Litigation.......................................... 17
(i) Compliance with Applicable Laws..................... 18
(j) Absence of Changes in Benefit Plans................. 19
(k) ERISA Compliance.................................... 19
(l) Taxes............................................... 22
(m) Voting Requirements................................. 23
(n) State Takeover Statutes............................. 23
(o) Accounting Matters.................................. 24
(p) Brokers............................................. 24
(q) Opinion of Financial Advisor........................ 24
(r) Intellectual Property; Year 2000.................... 24
(s) Certain Contracts................................... 26
(t) Title to Properties................................. 26
(u) INS Rights Agreement................................ 27
SECTION 3.02. Representations and Warranties of Lucent
and Sub................................... 27
(a) Organization, Standing and Corporate
Power.......................................... 28
(b) Capital Structure.................................. 28
(c) Authority; Noncontravention........................ 29
(d) SEC Documents; Undisclosed
Liabilities ................................... 31
(e) Information Supplied............................... 32
(f) Absence of Certain Changes or Events............... 32
(g) Voting Requirements................................ 32
(h) Tax Matters........................................ 33
(i) Interim Operations of Sub ......................... 33
(j) Litigation......................................... 33
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business.................................... 33
(a) Conduct of Business by INS......................... 33
(b) Advice of Changes.................................. 37
SECTION 4.02. No Solicitation by INS................................. 37
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Form S-4 and the INS
Proxy Statement; INS Stockholders
Meeting............................................. 40
SECTION 5.02. Letters of INS's Accountants............................ 41
SECTION 5.03. Letters of Lucent's Accountants......................... 42
SECTION 5.04. Access to Information; Confidentiality.................. 42
SECTION 5.05. Commercially Reasonable Efforts......................... 43
SECTION 5.06. Stock Options........................................... 44
SECTION 5.07. Employee Matters........................................ 46
SECTION 5.08. Indemnification, Exculpation and
Insurance...................................... 46
SECTION 5.09. Fees and Expenses....................................... 47
SECTION 5.10. Public Announcements.................................... 49
SECTION 5.11. Affiliates.............................................. 49
SECTION 5.12. Listings................................................ 50
SECTION 5.13. Litigation.............................................. 50
SECTION 5.14. Tax Treatment........................................... 50
SECTION 5.15. Pooling of Interests.................................... 50
SECTION 5.16. Stockholder Agreement Legend............................ 50
SECTION 5.17. Rights Agreement........................................ 51
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation To
Effect the Merger.................................. 51
(a) INS Stockholder Approval............................ 51
(b) HSR Act............................................. 51
(c) No Litigation....................................... 51
(d) Form S-4............................................ 52
(e) NYSE Listing........................................ 52
SECTION 6.02. Conditions to Obligations of Lucent and Sub............. 52
(a) Representations and Warranties...................... 52
(b) Performance of Obligations of INS................... 52
(c) Tax Opinions........................................ 52
(d) Pooling Letters..................................... 53
SECTION 6.03. Conditions to Obligations of INS........................ 53
(a) Representations and Warranties...................... 53
(b) Performance of Obligations of Lucent
and Sub....................................... 53
(c) Tax Opinions........................................ 54
SECTION 6.04. Frustration of Closing Conditions....................... 54
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01.
SECTION 7.02.
SECTION 7.03.
SECTION 7.04.
SECTION 7.05.
Termination............................................. 54
Effect of Termination................................... 55
Amendment............................................... 56
Extension; Waiver....................................... 56
Procedure for Termination, Amendment,
Extension or Waiver..................................... 56
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and
Warranties.......................................... 56
SECTION 8.02. Notices................................................. 57
SECTION 8.03. Definitions............................................. 58
SECTION 8.04. Interpretation.......................................... 59
SECTION 8.05. Counterparts............................................ 59
SECTION 8.06. Entire Agreement; No Third-Party
Beneficiaries....................................... 60
SECTION 8.07. Governing Law........................................... 60
SECTION 8.08. Assignment.............................................. 60
SECTION 8.09. Enforcement............................................. 60
SECTION 8.10. Severability............................................ 61
Annex I Index of Defined Terms
Exhibit A Form of Affiliate Letter
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER (this "Agreement")
dated as of August 9, 1999, among LUCENT TECHNOLOGIES
INC., a Delaware corporation ("Lucent"), INTREPID
MERGER INC., a Delaware corporation and a wholly owned
subsidiary of Lucent ("Sub"), and INTERNATIONAL NETWORK
SERVICES, a Delaware corporation ("INS").
WHEREAS the respective Boards of Directors of Lucent, Sub and INS
have approved and declared advisable this Agreement and the merger of Sub
with and into INS (the "Merger"), upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding
share of common stock, par value $0.001 per share, of INS ("INS Common
Stock"), other than shares owned by Lucent, Sub or INS, will be converted
into the right to receive the Merger Consideration;
WHEREAS the respective Boards of Directors of Lucent, Sub and INS
have each determined that the Merger and the other transactions
contemplated hereby are consistent with, and in furtherance of, their
respective business strategies and goals;
WHEREAS Lucent, Sub and INS desire to make certain
representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger;
WHEREAS for U.S. federal income tax purposes, it is intended that
(a) the Merger will qualify as a reorganization under the provisions of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the rules and regulations promulgated thereunder and (b) this
Agreement constitutes a plan of reorganization;
WHEREAS for financial accounting purposes, it is intended that
the Merger will be accounted for as a pooling of interests transaction;
WHEREAS simultaneously with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of Lucent
and Sub to enter into this Agreement, Lucent and certain principal
stockholders of INS (collectively, the "Stockholder") are entering into an
agreement (the "Stockholder Agreement") pursuant to which the Stockholder
will agree to vote to adopt and approve the Merger Agreement and to take
certain other actions in furtherance of the Merger upon the terms
and subject to the conditions set forth in the Stockholder
Agreement; and
WHEREAS immediately following the execution and delivery of this
Agreement, INS and Lucent will enter into a stock option agreement (the
"Option Agreement"), pursuant to which INS will grant Lucent the option to
purchase shares of INS Common Stock, upon the terms and subject to the
conditions set forth therein.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the
parties agree as follows:
ARTICLE I
The Merger
SECTION 1.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Delaware
General Corporation Law (the "DGCL"), Sub shall be merged with and into INS
at the Effective Time. Following the Effective Time, INS shall be the
surviving corporation (the "Surviving Corporation") and shall succeed to
and assume all the rights and obligations of Sub in accordance with the
DGCL.
SECTION 1.02. Closing. The closing of the Merger (the "Closing")
will take place at 10:00 a.m. on a date to be specified by the parties (the
"Closing Date"), which shall be no later than the second business day after
satisfaction or waiver of the conditions set forth in Article VI (other
than those conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of those conditions),
unless another time or date is agreed to by the parties hereto. The Closing
will be held at such location in the City of New York as is agreed to by
the parties hereto.
SECTION 1.03. Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on or after the Closing Date, the parties
shall file a certificate of merger or other appropriate documents (in any
such case, the "Certificate of Merger") executed in accordance with the
relevant provisions of the DGCL and shall make all other filings or
recordings required under the DGCL. The Merger shall become effective at
such time as the Certificate of Merger is duly filed with the Delaware
Secretary of State, or at such subsequent date or
time as Lucent and INS shall agree and specify in the Certificate of Merger
(the time the Merger becomes effective being hereinafter referred to as the
"Effective Time").
SECTION 1.04. Effects of the Merger. The Merger shall have the
effects set forth in Section 259 of the DGCL.
SECTION 1.05. Certificate of Incorporation and By-laws. (a) The
certificate of incorporation of INS, as in effect immediately prior to the
Effective Time, shall be amended as of the Effective Time of the Merger so
that Article FOURTH of such certificate of incorporation reads in its
entirety as follows: "The total number of shares of all classes of stock
which the corporation shall have authority to issue is 1,000 shares of
common stock, par value $1.00 per share.", and, as so amended, such
certificate of incorporation shall be the certificate of incorporation of
the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law.
(b) The by-laws of Sub, as in effect immediately prior to the
Effective Time, shall be the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.06. Board of Directors and Officers. (a) The directors
of Sub immediately prior to the Effective Time shall be the directors of
the Surviving Corporation until the earlier of their resignation or removal
or until their respective successors are duly elected and qualified, as the
case may be.
(b) The officers of Sub immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock. As of the Effective Time,
by virtue of the Merger and without any action on the part of the holder of
any shares of INS Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
capital stock of Sub shall be converted into one share of common stock
of the Surviving Corporation.
(b) Cancelation of Treasury Stock and Lucent- Owned Stock. Each
share of INS Common Stock that is owned by INS, Sub or Lucent shall
automatically be canceled and shall cease to exist, and no
consideration shall be delivered or deliverable in exchange therefor.
(c) Conversion of INS Common Stock. Subject to Section 2.02(e),
each issued and outstanding share of INS Common Stock (other than
shares to be canceled in accordance with Section 2.01(b)) shall be
converted into the right to receive 0.8473 (the "Exchange Ratio")
fully paid and nonassessable shares of common stock, par value $0.01
per share, of Lucent ("Lucent Common Stock") (the "Merger
Consideration"). As of the Effective Time, all such shares of INS
Common Stock shall no longer be outstanding and shall automatically be
canceled and shall cease to exist, and each holder of a certificate
representing any such shares of INS Common Stock shall cease to have
any rights with respect thereto, except the right to receive the
Merger Consideration and any cash in lieu of fractional shares of
Lucent Common Stock to be issued or paid in consideration therefor
upon surrender of such certificate in accordance with Section 2.02,
without interest.
(d) Anti-Dilution Provisions. In the event Lucent changes (or
establishes a record date for changing) the number of shares of Lucent
Common Stock issued and outstanding prior to the Effective Date as a
result of a stock split, stock dividend, recapitalization,
subdivision, reclassification, combination, exchange of shares or
similar transaction with respect to the outstanding Lucent Common
Stock and the record date therefor shall be prior to the Effective
Date, the Exchange Ratio shall be proportionately adjusted to reflect
such stock split, stock dividend, recapitalization, subdivision,
reclassification, combination, exchange of shares of similar
transaction.
SECTION 2.02. Exchange of Certificates. (a) Exchange Agent. As of
the Effective Time, Lucent shall enter into an agreement with such bank or
trust company as may be designated by Lucent (the "Exchange
Agent"), which shall provide that Lucent shall deposit with the Exchange
Agent as of the Effective Time, for the benefit of the holders of shares of
INS Common Stock, for exchange in accordance with this Article II, through
the Exchange Agent, certificates representing the shares of Lucent Common
Stock (such shares of Lucent Common Stock, together with any dividends or
distributions with respect thereto with a record date after the Effective
Time, any Excess Shares and any cash (including cash proceeds from the sale
of the Excess Shares) payable in lieu of any fractional shares of Lucent
Common Stock being hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 2.01 in exchange for outstanding shares of INS Common
Stock.
(b) Exchange Procedures. As soon as reasonably practicable after
the Effective Time, the Exchange Agent shall mail to each holder of record
of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of INS Common Stock (the
"Certificates") whose shares were converted into the right to receive the
Merger Consideration pursuant to Section 2.01, (i) a letter of transmittal
(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 Exchange Agent and shall be in such form and have such
other provisions as Lucent and INS may reasonably specify) and (ii)
instructions for use in surrendering the Certificates in exchange for the
Merger Consideration. Upon surrender of a Certificate for cancelation to
the Exchange Agent, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate shall receive in exchange
therefor a certificate representing that number of whole shares of Lucent
Common Stock which such holder has the right to receive pursuant to the
provisions of this Article II, certain dividends or other distributions in
accordance with Section 2.02(c) and cash in lieu of any fractional share of
Lucent Common Stock in accordance with Section 2.02(e), and the Certificate
so surrendered shall forthwith be canceled. In the event of a transfer of
ownership of INS Common Stock which is not registered in the transfer
records of INS, a certificate representing the proper number of shares of
Lucent Common Stock may be issued to a person other than the person in
whose name the Certificate so surrendered is registered if such Certificate
shall be properly endorsed or otherwise be in proper form for transfer and
the person requesting such issuance shall pay any transfer or other taxes
required by reason of the issuance of shares of Lucent Common Stock to
a person other than the registered holder of such Certificate or establish
to the satisfaction of Lucent that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.02(b), each
Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger
Consideration and any cash in lieu of fractional shares of Lucent Common
Stock to be issued or paid in consideration therefor upon surrender of such
certificate in accordance with this Section 2.02. No interest shall be paid
or will accrue on any cash payable to holders of Certificates pursuant to
the provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Lucent Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Lucent Common Stock
represented thereby, and no cash payment in lieu of fractional shares shall
be paid to any such holder pursuant to Section 2.02(e), and all such
dividends, other distributions and cash in lieu of fractional shares of
Lucent Common Stock shall be paid by Lucent to the Exchange Agent and shall
be included in the Exchange Fund, in each case until the surrender of such
Certificate in accordance with this Article II. Subject to the effect of
applicable escheat or similar laws, following surrender of any such
Certificate there shall be paid to the holder of the certificate
representing whole shares of Lucent Common Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount
of dividends or other distributions with a record date after the Effective
Time theretofore paid with respect to such whole shares of Lucent Common
Stock, and the amount of any cash payable in lieu of a fractional share of
Lucent Common Stock to which such holder is entitled pursuant to Section
2.02(e) and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but
prior to such surrender and with a payment date subsequent to such
surrender payable with respect to such whole shares of Lucent Common Stock.
(d) No Further Ownership Rights in INS Common Stock. All shares
of Lucent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms of this Article II (including any
cash paid pursuant to this Article II) shall be deemed to have been issued
(and paid) in full satisfaction of all rights pertaining to the shares of
INS Common Stock theretofore
represented by such Certificates, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by INS on such shares of INS Common Stock which
remain unpaid at the Effective Time, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of INS Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange
Agent for any reason, they shall be canceled and exchanged as provided in
this Article II, except as otherwise provided by law.
(e) No Fractional Shares. (i) No certificates or scrip
representing fractional shares of Lucent Common Stock shall be issued upon
the surrender for exchange of Certificates, no dividend or distribution of
Lucent shall relate to such fractional share interests and such fractional
share interests will not entitle the owner thereof to vote or to any rights
of a stockholder of Lucent.
(ii) As promptly as practicable following the Effective Time, the
Exchange Agent shall determine the excess of (A) the number of whole shares
of Lucent Common Stock delivered to the Exchange Agent by Lucent pursuant
to Section 2.02(a) over (B) the aggregate number of whole shares of Lucent
Common Stock to be distributed to former holders of INS Common Stock
pursuant to Section 2.02(b) (such excess being herein called the "Excess
Shares"). Following the Effective Time, the Exchange Agent shall, on behalf
of former stockholders of INS, sell the Excess Shares at then-prevailing
prices on the New York Stock Exchange, Inc. (the "NYSE"), all in the manner
provided in Section 2.02(e)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent shall
be executed on the NYSE through one or more member firms of the NYSE and
shall be executed in round lots to the extent practicable. The Exchange
Agent shall use reasonable efforts to complete the sale of the Excess
Shares as promptly following the Effective Time as, in the Exchange Agent's
sole judgment, is practicable consistent with obtaining the best execution
of such sales in light of prevailing market conditions. Until the net
proceeds of such sale or sales have been distributed to the holders of
Certificates formerly representing INS Common Stock, the Exchange Agent
shall hold such proceeds in trust for such holders (the "Common Shares
Trust"). INS shall
pay all commissions, transfer taxes and other out-of-pocket transaction
costs, including the expenses and compensation of the Exchange Agent,
incurred in connection with such sale of the Excess Shares. The Exchange
Agent shall determine the portion of the Common Shares Trust to which each
former holder of INS Common Stock is entitled, if any, by multiplying the
amount of the aggregate net proceeds comprising the Common Shares Trust by
a fraction, the numerator of which is the amount of the fractional share
interest to which such former holder of INS Common Stock is entitled (after
taking into account all shares of INS Common Stock held at the Effective
Time by such holder) and the denominator of which is the aggregate amount
of fractional share interests to which all former holders of INS Common
Stock are entitled.
(iv) Notwithstanding the provisions of Section 2.02(e)(ii) and
(iii), Lucent may elect at its option, exercised prior to the Effective
Time, in lieu of the issuance and sale of Excess Shares and the making of
the payments hereinabove contemplated, to pay each former holder of INS
Common Stock an amount in cash equal to the product obtained by multiplying
(A) the fractional share interest to which such former holder (after taking
into account all shares of INS Common Stock held at the Effective Time by
such holder) would otherwise be entitled by (B) the closing price for a
share of Lucent Common Stock as reported on the NYSE Composite Transaction
Tape (as reported in The Wall Street Journal, or, if not reported thereby,
any other authoritative source) on the Closing Date, and, in such case, all
references herein to the cash proceeds of the sale of the Excess Shares and
similar references shall be deemed to mean and refer to the payments
calculated as set forth in this Section 2.02(e)(iv).
(v) As soon as practicable after the determination of the amount
of cash, if any, to be paid to holders of Certificates formerly
representing INS Common Stock with respect to any fractional share
interests, the Exchange Agent shall make available such amounts to such
holders of Certificates formerly representing INS Common Stock subject to
and in accordance with the terms of Section 2.02(c).
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of the Certificates for six
months after the Effective Time shall be delivered to Lucent, upon demand,
and any holders of the Certificates who have not theretofore complied with
this Article II shall thereafter
look only to Lucent for payment of their claim for Merger Consideration,
any dividends or distributions with respect to Lucent Common Stock and any
cash in lieu of fractional shares of Lucent Common Stock.
(g) No Liability. None of Lucent, Sub, INS or the Exchange Agent
shall be liable to any person in respect of any shares of Lucent Common
Stock, any dividends or distributions with respect thereto, any cash in
lieu of fractional shares of Lucent Common Stock or any cash from the
Exchange Fund, in each case delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificate
shall not have been surrendered prior to one year after the Effective Time
(or immediately prior to such date on which any amounts payable pursuant to
this Article II would otherwise escheat to or become the property of any
Governmental Entity), any such amounts shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and
clear of all claims or interest of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall invest
any cash included in the Exchange Fund, as directed by Lucent, on a daily
basis. Any interest and other income resulting from such investments shall
be paid to Lucent.
(i) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Lucent, the posting by such person of a bond in such reasonable
amount as Lucent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent shall issue
in exchange for such lost, stolen or destroyed Certificate the applicable
Merger Consideration with respect thereto and, if applicable, any unpaid
dividends and distributions on shares of Lucent Common Stock deliverable in
respect thereof and any cash in lieu of fractional shares, in each case
pursuant to this Agreement.
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of INS. Except as
disclosed in (x) the INS Filed SEC Documents, (y) INS's audited financial
statements for the fiscal year ended June 27, 1999, as delivered to Lucent
prior to the date hereof (the "Audited 1999 Financials") or (z) the
Disclosure Schedule delivered by INS to Lucent prior to the execution of
this Agreement (the "INS Disclosure Schedule") and making reference to the
particular subsection of this Agreement to which exception is being taken,
INS represents and warrants to Lucent and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of
INS and its subsidiaries is a corporation or other legal entity
duly organized, validly existing and in good standing (with
respect to jurisdictions which recognize such concept) under the
laws of the jurisdiction in which it is organized and has the
requisite corporate or other power, as the case may be, and
authority to carry on its business as now being conducted, except
for those jurisdictions where the failure to be so organized,
existing or in good standing individually or in the aggregate is
not reasonably likely to have a material adverse effect on INS.
Each of INS and its subsidiaries is duly qualified or licensed to
do business and is in good standing (with respect to jurisdictions
which recognize such concept) in each jurisdiction in which the
nature of its business or the ownership, leasing or operation of
its assets makes such qualification or licensing necessary, except
for those jurisdictions where the failure to be so qualified or
licensed or to be in good standing individually or in the
aggregate is not reasonably likely to have a material adverse
effect on INS. INS has made available to Lucent prior to the
execution of this Agreement complete and correct copies of its
certificate of incorporation and by-laws, as amended to the date
of this Agreement.
(b) Subsidiaries. Section 3.01(b) of the INS Disclosure
Schedule sets forth a true and complete list of each of INS's
subsidiaries. All the outstanding shares of capital stock of, or
other equity interests in (other than shares held by directors or
officers of INS or its subsidiaries for regulatory reasons), each
subsidiary of INS have been validly issued, are fully paid and
nonassessable and
are owned directly or indirectly by INS, free and clear of all
pledges, claims, liens, charges, encumbrances, mortgages and
security interests of any kind or nature whatsoever (collectively,
"Liens") and free of any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership
interests except restrictions under applicable law.
(c) Capital Structure. The authorized capital stock of
INS consists of 150,000,000 shares of INS Common Stock and
5,000,000 shares of preferred stock, par value $0.001 per share,
of INS ("INS Authorized Preferred Stock"). At the close of
business on August 6, 1999, (i) 57,323,907 shares of INS Common
Stock were issued and outstanding; (ii) no shares of INS Common
Stock were held by INS in its treasury; (iii) no shares of INS
Authorized Preferred Stock were issued and outstanding; (iv)
26,470,779 shares of INS Common Stock were reserved, net of
exercises, for issuance pursuant to the INS 1996 Stock Plan, the
INS 1992 Flexible Incentive Stock Plan, the INS 1998 Nonstatutory
Stock Plan, the INS 1998 Director Option Plan, the INS 1996
Employee Stock Purchase Plan (the "ESPP"), the VitalSigns
Software, Inc. 1996 Stock Option Plan and the VitalSigns Software,
Inc. Pre-Plan Options (such plans, collectively, the "INS Stock
Plans") (of which 19,216,448 are subject to outstanding INS Stock
Options); and (v) 394,500 shares of INS Common Stock were reserved
for issuance upon exercise of an outstanding warrant (the
"Warrant"). Except as set forth above, at the close of business on
August 6, 1999, no shares of capital stock or other voting
securities of INS were issued, reserved for issuance or
outstanding. There are no outstanding stock appreciation rights
("SARs") or rights (other than the INS Stock Options) to receive
shares of INS Common Stock on a deferred basis granted under the
INS Stock Plans or otherwise. INS has delivered to Lucent a
complete and correct list, as of August 6, 1999, of each holder of
outstanding stock options or other rights to purchase or receive
INS Common Stock granted under the INS Stock Plans (collectively,
"INS Stock Options"), the number of shares of INS Common Stock
subject to each such INS Stock Option, the name of the INS Stock
Plan pursuant to which such INS Stock Options were granted and the
exercise prices of such INS Stock Options. No bonds, debentures,
notes or other indebtedness of INS having the right to vote (or
convertible into, or exchangeable for, securities having the right
to vote) on any matters on which
stockholders of INS or any of its subsidiaries may vote are issued
or outstanding or subject to issuance. All outstanding shares of
capital stock of INS are, and all shares which may be issued will
be, when issued, duly authorized, validly issued, fully paid and
nonassessable and will be delivered free and clear of all Liens
(other than Liens created by or imposed upon the holders thereof)
and not subject to preemptive rights. Except as set forth in this
Section 3.01(c) (including pursuant to the conversion or exercise
of the securities referred to above) and except pursuant to the
INS Stock Options issued after the date hereof as expressly
permitted by the terms of Section 4.01(a)(ii), (x) there are not
issued, reserved for issuance or outstanding (A) any shares of
capital stock or other voting securities of INS or any of its
subsidiaries (other than shares of capital stock or other voting
securities of such subsidiaries that are directly or indirectly
owned by INS), (B) any securities of INS or any of its
subsidiaries convertible into or exchangeable or exercisable for
shares of capital stock or other voting securities of, or other
ownership interests in, INS or any of its subsidiaries or (C) any
warrants, calls, options or other rights to acquire from INS or
any of its subsidiaries, and no obligation of INS or any of its
subsidiaries to issue, any capital stock or other voting
securities of, or other ownership interests in, or any securities
convertible into or exchangeable or exercisable for any capital
stock or other voting securities of, or other ownership interests
in, INS or any of its subsidiaries and (y) there are not any
outstanding obligations of INS or any of its subsidiaries to
repurchase, redeem or otherwise acquire any such securities or to
issue, deliver or sell, or cause to be issued, delivered or sold,
any such securities. INS is not a party to any voting agreement
with respect to the voting of any such securities. Other than the
capital stock of, or other equity interests in, its subsidiaries,
INS does not directly or indirectly beneficially own any
securities or other beneficial ownership interests in any other
entity.
(d) Authority; Noncontravention. INS has all requisite
corporate power and authority to enter into this Agreement and,
subject to the INS Stockholder Approval, to consummate the
transactions contemplated by this Agreement. INS has all requisite
corporate power and authority to enter into the Option Agreement
and to consummate the transactions contemplated
thereby. The execution and delivery of this Agreement and the
Option Agreement by INS and the consummation by INS of the
transactions contemplated by this Agreement and the Option
Agreement have been duly authorized by all necessary corporate
action on the part of INS, subject, in the case of the Merger, to
the INS Stockholder Approval. This Agreement and the Option
Agreement have been duly executed and delivered by INS and,
assuming the due authorization, execution and delivery by each of
the other parties thereto, constitute legal, valid and binding
obligations of INS, enforceable against INS in accordance with
their terms. The execution and delivery of this Agreement and the
Option Agreement do not, and the consummation of the transactions
contemplated by this Agreement and the Option Agreement and
compliance with the provisions of this Agreement and the Option
Agreement will not, conflict with, or result in any violation of,
or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancelation or
acceleration of any obligation or to the loss of a benefit under,
or result in the creation of any Lien upon any of the properties
or assets of INS or any of its subsidiaries under, (i) the
certificate of incorporation or by-laws of INS or the comparable
organizational documents of any of its subsidiaries, (ii) any loan
or credit agreement, note, bond, mortgage, indenture, lease or
other contract, agreement, obligation, commitment, arrangement,
understanding, instrument, permit, concession, franchise, license
or similar authorization applicable to INS or any of its
subsidiaries or their respective properties or assets or (iii)
subject to the governmental filings and other matters referred to
in the following sentence, (A) any judgment, order or decree or
(B) any statute, law, ordinance, rule or regulation, in each case
applicable to INS or any of its subsidiaries or their respective
properties or assets, other than, in the case of clauses (ii) and
(iii), any such conflicts, violations, defaults, rights, losses or
Liens that individually or in the aggregate are not reasonably
likely to (x) have a material adverse effect on INS, (y) impair
the ability of INS to perform its obligations under this Agreement
or the Option Agreement or (z) prevent or materially delay the
consummation of the transactions contemplated by this Agreement or
the Option Agreement. No consent, approval, order or authorization
of, action by or in respect of, or registration, declaration or
filing with, any federal, state, local or foreign government,
any court, administrative, regulatory or other governmental
agency, commission or authority or any non-governmental
self-regulatory agency, commission or authority (each a
"Governmental Entity") is required by or with respect to INS or
any of its subsidiaries in connection with the execution and
delivery of this Agreement or the Option Agreement by INS or the
consummation by INS of the transactions contemplated by this
Agreement or the Option Agreement, except for (1) the filing of a
premerger notification and report form by INS under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and any applicable filings and approvals under
similar foreign antitrust or competition laws and regulations; (2)
the filing with the Securities and Exchange Commission (the "SEC")
of (A) a proxy statement relating to the INS Stockholders Meeting
(such proxy statement, as amended or supplemented from time to
time, the "INS Proxy Statement"), and (B) such reports under
Section 13(a), 13(d), 15(d) or 16(a) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), as may be required
in connection with this Agreement, the Option Agreement and the
Stockholder Agreement and the transactions contemplated by this
Agreement, the Option Agreement and the Stockholder Agreement; (3)
the filing of the Certificate of Merger with the Delaware
Secretary of State and appropriate documents with the relevant
authorities of other states in which INS is qualified to do
business and such filings with Governmental Entities to satisfy
the applicable requirements of state securities or "blue sky"
laws; (4) such filings with and approvals of The Nasdaq National
Market ("Nasdaq") to permit the shares of INS Common Stock that
are to be issued pursuant to the Option Agreement to be quoted on
Nasdaq; and (5) such other consents, approvals, orders,
authorizations, registrations, declarations and filings the
failure of which to be made or obtained individually or in the
aggregate is not reasonably likely to (x) have a material adverse
effect on INS, (y) impair the ability of INS to perform its
obligations under this Agreement or the Option Agreement or (z)
prevent or materially delay the consummation of the transactions
contemplated by this Agreement or the Option Agreement.
(e) SEC Documents; Undisclosed Liabilities. INS has filed
all required reports, schedules, forms, statements and other
documents (including exhibits and all other information
incorporated therein) with the SEC since July 1, 1997
(collectively, the "INS SEC
Documents"). As of their respective dates, the INS SEC Documents
complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the
Exchange Act, as the case may be, and the rules and regulations of
the SEC promulgated thereunder applicable to such INS SEC
Documents, and none of the INS SEC Documents when filed contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading. Except to the extent
that information contained in any INS SEC Document has been
revised or superseded by a later filed INS SEC Document, none of
the INS SEC Documents contains any untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading. The financial statements of INS included in the INS
SEC Documents comply as to form, as of their respective dates of
filing with the SEC, in all material respects with applicable
accounting requirements and the published rules and regulations of
the SEC with respect thereto (the "Accounting Rules"), have been
prepared in accordance with generally accepted accounting
principles ("GAAP") (except, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present in all material respects the
consolidated financial position of INS and its consolidated
subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal recurring
year-end audit adjustments). The Audited 1999 Financials have been
prepared in accordance with GAAP applied on a consistent basis
(except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial
position of INS and its consolidated subsidiaries as of June 27,
1999, and the consolidated results of their operations and cash
flows for the fiscal year then ended. Except (i) as reflected in
such financial statements or in the notes thereto or (ii) for
liabilities incurred in connection with this Agreement or the
Option Agreement or the transactions contemplated hereby or
thereby, neither INS nor any of its subsidiaries has any
liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which, individually or
in the aggregate, are reasonably likely to have a material adverse
effect on INS.
(f) Information Supplied. None of the information
supplied or to be supplied by INS specifically for inclusion or
incorporation by reference in (i) the registration statement on
Form S-4 to be filed with the SEC by Lucent in connection with the
issuance of Lucent Common Stock in the Merger (the "Form S-4")
will, at the time the Form S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or (ii)
the INS Proxy Statement will, at the date it is first mailed to
INS's stockholders or at the time of the INS 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 INS
Proxy Statement will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and
regulations thereunder. No representation or warranty is made by
INS with respect to statements made or incorporated by reference
therein based on information supplied by Lucent specifically for
inclusion or incorporation by reference in the INS Proxy
Statement.
(g) Absence of Certain Changes or Events. Except for
liabilities incurred in connection with this Agreement or the
Option Agreement or the transactions contemplated hereby or
thereby and except as disclosed in the INS SEC Documents filed and
publicly available prior to the date of this Agreement (as amended
to the date of this Agreement, the "INS Filed SEC Documents") or
as disclosed in the Audited 1999 Financials, since June 27, 1999,
INS and its subsidiaries have conducted their business only in the
ordinary course, and since such date there has not been (1) any
material adverse change in INS, (2) any declaration, setting aside
or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any of INS's capital stock
(other than as expressly permitted by the terms of Section
4.01(a)(i)(C)), (3) any split, combination or reclassification of
any of INS's capital stock or any issuance or the authorization of
any issuance of any
other securities in respect of, in lieu of or in substitution for
shares of INS's capital stock, (4) (A) any granting by INS or any
of its subsidiaries to any current or former director, executive
officer or other employee of INS or its subsidiaries of any
increase in compensation, bonus or other benefits, except for
normal increases in cash compensation in the ordinary course of
business consistent with past practice or as was required under
any employment agreements in effect as of the date of the most
recent financial statements included in the INS Filed SEC
Documents and other than as expressly permitted by the terms of
Section 4.01(a)(ii), (B) any granting by INS or any of its
subsidiaries to any such current or former director, executive
officer or employee of any increase in severance or termination
pay, except to non-key employees in the ordinary course of
business consistent with past practice, (C) any entry by INS or
any of its subsidiaries into, or any amendments of, any
employment, deferred compensation, consulting, severance,
termination or indemnification agreement with any such current or
former director, executive officer or employee, except with
non-key employees in the ordinary course of business consistent
with past practice or (D) any amendment to, or modification of,
any INS Stock Option, (5) except insofar as may have been required
by a change in GAAP, any change in accounting methods, principles
or practices by INS or any of its subsidiaries materially
affecting their respective assets, liabilities or businesses, (6)
any tax election that individually or in the aggregate is
reasonably likely to adversely affect in any material respect the
tax liability or tax attributes of INS or any of its subsidiaries
or (7) any settlement or compromise of any material income tax
liability.
(h) Litigation. There is no suit, action or proceeding
pending or, to the knowledge of INS, threatened against or
affecting INS or any of its subsidiaries that, individually or in
the aggregate, is reasonably likely to have a material adverse
effect on INS nor is there any judgment, decree, injunction, rule
or order of any Governmental Entity or arbitrator outstanding
against INS or any of its subsidiaries having, or which is
reasonably likely to have, individually or in the aggregate, a
material adverse effect on INS; provided that for purposes of this
paragraph (h) any such suit, action, proceeding, judgment, decree,
injunction, rule or order arising after the date hereof shall not
be deemed to have a material adverse effect on INS if and to the
extent
such suit, action, proceeding, judgment, decree, injunction, rule
or order (or any relevant part thereof) is based on this Agreement
or the transactions contemplated hereby.
(i) Compliance with Applicable Laws. (i) INS and its
subsidiaries hold all material permits, licenses, variances,
exemptions, orders, registrations and approvals of all
Governmental Entities (the "INS Permits") that are required for
them to own, lease or operate their assets and to carry on their
businesses, except where the failure to have any such INS Permits
individually or in the aggregate is not reasonably likely to have
a material adverse effect on INS. INS and its subsidiaries are in
compliance in all material respects with the terms of the INS
Permits and all applicable statutes, laws, ordinances, rules and
regulations, except where the failure so to comply individually or
in the aggregate is not reasonably likely to have a material
adverse effect on INS. No action, demand, requirement or
investigation by any Governmental Entity and no suit, action or
proceeding by any person, in each case with respect to INS or any
of its subsidiaries or any of their respective properties, is
pending or, to the knowledge of INS, threatened, other than, in
each case, those the outcome of which individually or in the
aggregate are not (A) reasonably likely to have a material adverse
effect on INS or (B) reasonably likely to impair the ability of
INS to perform its obligations under this Agreement, or prevent or
materially delay the consummation of any of the transactions
contemplated by this Agreement; provided that for purposes of this
paragraph (i)(i) any such action, demand, requirement or
investigation or any such suit, action or proceeding arising after
the date hereof shall not be deemed to have a material adverse
effect on INS if and to the extent such action, demand,
requirement or investigation or such suit, action or proceeding
(or any relevant part thereof) is based on this Agreement or the
transactions contemplated hereby.
(ii) To INS's knowledge and except as is not,
individually or in the aggregate, reasonably likely to have a
material adverse effect on INS, (A) there have been no Releases of
any Hazardous Materials at, on or under any facility or property
currently or formerly owned, leased, or operated by INS or any of
its subsidiaries, (B) neither INS nor any of its subsidiaries is
the subject of any pending or threatened investigation or
proceeding under
Environmental Law relating in any manner to the off-site
treatment, storage or disposal of any Hazardous Materials
generated at any facility or property currently or formerly owned,
leased or operated by INS or any of its subsidiaries and (C)
neither INS nor any of its subsidiaries has assumed or otherwise
agreed to be responsible for any liabilities arising under
Environmental Law. The term "Environmental Law" means any and all
applicable laws or regulations or other requirements of any
Governmental Entity concerning the protection of human health or
the environment. The term "Hazardous Materials" means all
explosive or regulated radioactive materials, hazardous or toxic
substances, wastes or chemicals, petroleum (including crude oil or
any fraction thereof) or petroleum distillates, asbestos or
asbestos-containing materials, and all other materials or
chemicals regulated under any Environmental Law. The term
"Release" means any spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, emanation or
migration in, into, onto, or through the environment.
(j) Absence of Changes in Benefit Plans. Since the date
of the most recent audited financial statements included in the
INS Filed SEC Documents, there has not been any adoption or
amendment by INS or any of its subsidiaries of any collective
bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalization, medical,
welfare benefit or other plan, arrangement or understanding
providing benefits to any current or former employee, officer or
director of INS or any of its wholly owned subsidiaries
(collectively, the "INS Benefit Plans"), or any change in any
actuarial or other assumption used to calculate funding
obligations with respect to any INS pension plans, or any change
in the manner in which contributions to any INS pension plans are
made or the basis on which such contributions are determined.
(k) ERISA Compliance. (i) With respect to the INS Benefit
Plans, no event has occurred and, to the knowledge of INS, there
exists no condition or set of circumstances, in connection with
which INS or any of its subsidiaries could be subject to any
liability that individually or in the aggregate is reasonably
likely to have a material adverse effect on INS under
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), the Code or any other applicable law.
(ii) Each INS Benefit Plan has been administered in
accordance with its terms, except for any failures so to
administer any INS Benefit Plan that individually or in the
aggregate are not reasonably likely to have a material adverse
effect on INS. INS, its subsidiaries and all the INS Benefit Plans
are in compliance with the applicable provisions of ERISA, the
Code and all other applicable laws and the terms of all applicable
collective bargaining agreements, except for any failures to be in
such compliance that individually or in the aggregate are not
reasonably likely to have a material adverse effect on INS. Each
INS Benefit Plan that is intended to be qualified under Section
401(a) or 401(k) of the Code has received a favorable
determination letter from the IRS that it is so qualified and each
trust established in connection with any INS Benefit Plan that is
intended to be exempt from federal income taxation under Section
501(a) of the Code has received a determination letter from the
IRS that such trust is so exempt. To the knowledge of INS, no fact
or event has occurred since that date of any determination letter
from the IRS which is reasonably likely to materially adversely
affect the qualified status of any such INS Benefit Plan or the
exempt status of any such trust. There are no pending or, to the
knowledge of INS, threatened lawsuits, claims, grievances,
investigations or audits of any INS Benefit Plan that,
individually or in the aggregate, are reasonably likely to have a
material adverse effect on INS.
(iii) No INS Benefit Plan is a "defined benefit" plan (as
defined in Section 3(35) of ERISA) or is subject to the minimum
funding requirements of Section 302 of ERISA or Section 412 of the
Code and neither INS nor any of its subsidiaries has incurred any
liability under Title IV of ERISA which has not been satisfied in
full. No INS Benefit Plan has incurred an "accumulated funding
deficiency" (within the meaning of Section 302 of ERISA or Section
412 of the Code) whether or not waived. No INS Benefit Plan is a
"multiemployer plan" within the meaning of Section 3(37) of ERISA
and neither INS nor any of its subsidiaries or affiliates (as
defined in Section 8.03) has been required to contribute to any
such multiemployer plan in the past six years.
(iv) INS and its subsidiaries are in compliance with all
federal, state and local requirements regarding employment, except
for any failures to comply that individually or in the aggregate
are not reasonably likely to have a material adverse effect on
INS. Neither INS nor any of its subsidiaries is a party to any
collective bargaining or other labor union contract applicable to
persons employed by INS or any of its subsidiaries and no
collective bargaining agreement is being negotiated by INS or any
of its subsidiaries. As of the date of this Agreement, there is no
labor dispute, strike or work stoppage against INS or any of its
subsidiaries pending or, to the knowledge of INS, threatened which
may interfere with the respective business activities of INS or
any of its subsidiaries, except where such dispute, strike or work
stoppage individually or in the aggregate is not reasonably likely
to have a material adverse effect on INS. As of the date of this
Agreement, to the knowledge of INS, none of INS, any of its
subsidiaries or any of their respective representatives or
employees has committed any unfair labor practice in connection
with the operation of the respective business of INS or any of its
subsidiaries, and there is no charge or complaint against INS or
any of its subsidiaries by the National Labor Relations Board or
any comparable governmental agency pending or threatened in
writing, in each case except where such actions, charges or
complaints, individually or in the aggregate, are not reasonably
likely to have a material adverse effect on INS.
(v) No employee of INS will be entitled to any additional
benefits or any acceleration of the time of payment or vesting of
any benefits under any INS Benefit Plan as a result of the
transactions contemplated by this Agreement, the Option Agreement
or the Stockholder Agreement. No amount payable, or economic
benefit provided, by INS or its subsidiaries (including any
acceleration of the time of payment or vesting of any benefit)
could be considered an "excess parachute payment" under Section
280G of the Code. No person is entitled to receive any additional
payment from INS or its subsidiaries or any other person (a
"Parachute Gross-Up Payment") in the event that the excise tax of
Section 4999 of the Code is imposed on such person. The Board of
Directors of INS or any of its subsidiaries has not granted to any
person any right to receive any Parachute Gross-Up Payment.
(vi) Except as provided under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, no INS Benefit Plan
provides post-retirement health insurance plans, the total cost of
which is not incurred by the former employee.
(l) Taxes. (i) Each of INS and its subsidiaries has filed
all material tax returns and reports required to be filed by it
and all such returns and reports are complete and correct in all
material respects, or requests for extensions to file such returns
or reports have been timely filed, granted and have not expired,
except to the extent that such failures to file, to be complete or
correct or to have extensions granted that remain in effect
individually or in the aggregate are not reasonably likely to have
a material adverse effect on INS. INS and each of its subsidiaries
has paid (or INS has paid on its behalf) all taxes shown as due on
such returns, and the Audited 1999 Financials reflect an adequate
reserve for all taxes payable by INS and its subsidiaries for all
taxable periods and portions thereof accrued through the date of
such financial statements.
(ii) No deficiencies for any taxes have been proposed,
asserted or assessed against INS or any of its subsidiaries that
are not adequately reserved for, except for deficiencies that
individually or in the aggregate are not reasonably likely to have
a material adverse effect on INS. The federal income tax returns
of INS and each of its subsidiaries consolidated in such returns
have closed by virtue of the applicable statute of limitations.
(iii) Neither INS nor any of its subsidiaries has taken
any action or knows of any fact, agreement, plan or other
circumstance that is reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of Section
368(a) of the Code.
(iv) The INS Benefit Plans and other INS employee
compensation arrangements in effect as of the date of this
Agreement have been designed so that the disallowance of a
material deduction under Section 162(m) of the Code for employee
remuneration will not apply to any amounts paid or payable by INS
or any of its subsidiaries under any such plan or arrangement and,
to the knowledge of INS, no fact or circumstance exists that is
reasonably likely to cause such disallowance to apply to any such
amounts.
(v) Neither INS nor any of its subsidiaries has
constituted either a "distributing corporation" or a "controlled
corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (x) in the two years prior
to the date of this Agreement or (y) in a distribution which could
otherwise constitute part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the Code)
in conjunction with the Merger.
(vi) As used in this Agreement, "taxes" shall include all (x)
federal, state, local or foreign income, property, sales, excise
and other taxes or similar governmental charges, including any
interest, penalties or additions with respect thereto, (y)
liability for the payment of any amounts of the type described in
(x) as a result of being a member of an affiliated, consolidated,
combined or unitary group, and (z) liability for the payment of
any amounts as a result of being party to any tax sharing
agreement or as a result of any express or implied obligation to
indemnify any other person with respect to the payment of any
amounts of the type described in clause (x) or (y).
(m) Voting Requirements. The affirmative vote of the
holders of a majority of the voting power of all outstanding
shares of INS Common Stock at the INS Stockholders Meeting to
adopt this Agreement (the "INS Stockholder Approval") is the only
vote of the holders of any class or series of INS's capital stock
necessary to approve and adopt this Agreement, the Option
Agreement and the transactions contemplated hereby and thereby.
(n) State Takeover Statutes. The Board of Directors of
INS (including the disinterested directors thereof) has approved
the terms of this Agreement, the Option Agreement and the
Stockholder Agreement and the consummation of the Merger and the
other transactions contemplated by this Agreement, the Option
Agreement and the Stockholder Agreement and such approval
constitutes approval of the Merger and the other transactions
contemplated by this Agreement, the Option Agreement and the
Stockholder Agreement by the INS Board of Directors under the
provisions of Section 203 of the DGCL and represents all the
action necessary to ensure that such Section 203 does not apply to
Lucent in connection with the Merger and the other transactions
contemplated by this Agreement, the
Option Agreement and the Stockholder Agreement. To the knowledge
of INS, no other state takeover statute is applicable to the
Merger or the other transactions contemplated hereby, by the
Option Agreement and by the Stockholder Agreement.
(o) Accounting Matters. Neither INS nor any of its
affiliates has taken, failed to take or agreed to take any action
that would prevent the business combination to be effected by the
Merger to be accounted for as a pooling of interests.
(p) Brokers. No broker, investment banker, financial
advisor or other person, other than ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
Incorporated, the fees and expenses of which will be paid by INS,
is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the
transactions contemplated by this Agreement and the Option
Agreement based upon arrangements made by or on behalf of INS. INS
has furnished to Lucent true and complete copies of all agreements
under which any such fees or expenses are payable and all
indemnification and other agreements related to the engagement of
the persons to whom such fees are payable.
(q) Opinion of Financial Advisor. INS has received the
written opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated, dated the
date of this Agreement, to the effect that, as of such date, the
Exchange Ratio is fair from a financial point of view to the
stockholders of INS (other than Lucent and its affiliates), a
signed copy of which opinion has been or promptly will be
delivered to Lucent.
(r) Intellectual Property; Year 2000. (i) INS and its
subsidiaries own, or are validly licensed or otherwise have the
right to use, all patents, patent rights, trademarks, trade
secrets, trade names, service marks, copyrights and other
proprietary intellectual property rights and computer programs
(the "Intellectual Property Rights") which are material to the
conduct of the business of INS and its subsidiaries.
(ii) To the knowledge of INS, neither INS nor any of its
subsidiaries has interfered with, infringed upon, misappropriated
or otherwise come into conflict with any Intellectual Property
Rights or other proprietary information of any other person,
except for any such interference, infringement,
misappropriation or other conflict which is not, individually or
in the aggregate, reasonably likely to have a material adverse
effect on INS. Neither INS nor any of its subsidiaries has
received any written charge, complaint, claim, demand or notice
alleging any such interference, infringement, misappropriation or
other conflict (including any claim that INS or any such
subsidiary must license or refrain from using any Intellectual
Property Rights or other proprietary information of any other
person) which has not been settled or otherwise fully resolved. To
INS's knowledge, no other person has interfered with, infringed
upon, misappropriated or otherwise come into conflict with any
Intellectual Property Rights of INS or any of its subsidiaries,
except for any such interference, infringement, misappropriation
or other conflict which is not, individually or in the aggregate,
reasonably likely to have a material adverse effect on INS.
(iii) As the business of INS and its subsidiaries is
presently conducted and proposed to be conducted without giving
effect to any change with respect thereto that may be made by
Lucent, to INS's knowledge, Lucent's use after the Closing of the
Intellectual Property Rights which are material to the conduct of
the business of INS and its subsidiaries taken as a whole will not
interfere with, infringe upon, misappropriate or otherwise come
into conflict with the Intellectual Property Rights of any other
person.
(iv) INS has taken reasonable steps to protect INS's
rights in INS's confidential information and trade secrets that it
wishes to protect or any trade secrets or confidential information
of third parties provided to INS, and, without limiting the
foregoing, INS has and enforces a policy requiring (x) each
employee to execute a proprietary information/confidentiality
agreement substantially in the form provided to Lucent and (y)
each contractor to enter into an agreement containing provisions
protecting INS's Intellectual Property and confidential
information, and all current and former employees and contractors
of INS have executed such agreements, except where the failure to
do so is not reasonably expected to be material to INS.
(v) INS has substantially completed a program directed at
ensuring that its and its subsidiaries' software products
(including prior and current
software products and technology and software products and
technology currently under development) will, when used in
accordance with associated documentation on a specified platform
or platforms that is or are year 2000 compliant, be capable upon
installation of (i) operating in the same manner on dates in both
the Twentieth and Twenty-First centuries and (ii) accurately
processing, providing and receiving date data from, into and
between the Twentieth and Twenty-First centuries, including the
years 1999 and 2000, and making leap-year calculations and that,
to the knowledge of INS, all other non-INS products (e.g.,
hardware, software and firmware) used by INS in or in combination
with INS software products, properly exchange data with INS
software products. In addition, INS has taken the necessary steps
to ensure that operations and all material systems utilized to
support such operations will not be materially adversely impacted
by the year 2000 date change or any other date change. INS further
represents and warrants: (i) the accuracy of year 2000 product
information provided on its external website; and (ii) that based
on all currently available information, INS believes it has
sufficient resources to complete all necessary customer year 2000
upgrades.
(s) Certain Contracts. Neither INS nor any of its
subsidiaries is a party to or bound by any non-competition
agreement or any other similar agreement or obligation which
purports to limit in any material respect the manner in which, or
the localities in which, the business of INS and its subsidiaries
is conducted.
(t) Title to Properties. (i) Section 3.01(t) of the INS
Disclosure Schedule sets forth a true and complete list of all
material real property and leasehold property owned or leased by
INS or any of its subsidiaries with required payments of over
$400,000 per annum. Each of INS and its subsidiaries has good and
valid title to, or valid leasehold interests in or valid rights
to, all its material properties and assets except for such as are
no longer used or useful in the conduct of its businesses or as
have been disposed of in the ordinary course of business and
except for defects in title, easements, restrictive covenants and
similar encumbrances that individually or in the aggregate do not
materially interfere with its ability to conduct its business as
currently conducted. All such material assets and properties,
other than assets and properties in which
INS or any of its subsidiaries has a leasehold interest, are free
and clear of all Liens except for Liens that individually or in
the aggregate do not materially interfere with the ability of INS
and its subsidiaries to conduct their respective businesses as
currently conducted.
(ii) Each of INS and its subsidiaries has complied in all
material respects with the terms of all leases listed in Section
3.01(t) of the INS Disclosure Schedule to which it is a party and
under which it is in occupancy, and all such leases are in full
force and effect. Each of INS and its subsidiaries enjoys peaceful
and undisturbed possession under all such leases, except for
failures to do so that individually or in the aggregate is not
reasonably likely to have a material adverse effect on INS.
(u) INS Rights Agreement. The Board of Directors of INS
has authorized its management to adopt a rights plan on customary
terms (the "INS Rights Agreement") granting rights ("INS Rights")
to stockholders of INS. The terms of the INS Rights Agreement will
provide that (i) it is inapplicable to the Merger and the other
transactions contemplated by this Agreement, the Option Agreement
and the Stockholder Agreement, (ii) (1) neither Lucent nor Sub is
deemed to be an Acquiring Person (as such term is to be defined in
the INS Rights Agreement) pursuant to the INS Rights Agreement and
(2) a Distribution Date, a Triggering Event or Stock Acquisition
Date (as such terms are to be defined in the INS Rights Agreement)
does not occur solely by reason of the execution and delivery of
this Agreement, the Option Agreement, the Stockholder Agreement,
the consummation of the Merger, or the consummation of the other
transactions contemplated by this Agreement, the Option Agreement
and the Stockholder Agreement and (iii) the Acquiring Person
threshold is 15%, and INS agrees that the foregoing provisions of
the INS Rights Agreement may not be amended by INS without the
prior written consent of Lucent.
SECTION 3.02. Representations and Warranties of Lucent and Sub.
Except as disclosed in the Lucent Filed SEC Documents or as set forth on
the Disclosure Schedule
delivered by Lucent to INS prior to the execution of this Agreement (the
"Lucent Disclosure Schedule") and making reference to the particular
subsection of this Agreement to which exception is being taken, Lucent and
Sub represent and warrant to INS as follows:
(a) Organization, Standing and Corporate Power. Each of
Lucent and Sub is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction in which
it is incorporated and has the requisite corporate power and
authority to carry on its business as now being conducted. Each of
Lucent and Sub is duly qualified or licensed to do business and is
in good standing (with respect to jurisdictions which recognize
such concept) in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its assets
makes such qualification or licensing necessary, except for those
jurisdictions where the failure to be so qualified or licensed or
to be in good standing individually or in the aggregate is not
reasonably likely to have a material adverse effect on Lucent.
Lucent has made available to INS prior to the execution of this
Agreement complete and correct copies of its certificate of
incorporation and by-laws and the certificate of incorporation and
by-laws of Sub, in each case as amended to the date of this
Agreement.
(b) Capital Structure. The authorized capital stock of
Lucent consists of 6 billion shares of Lucent Common Stock and 250
million shares of preferred stock, par value $1.00 per share, of
Lucent ("Lucent Authorized Preferred Stock"), of which 15 million
shares have been designated Series A Junior Participating
Preferred Stock (the "Lucent Junior Preferred Stock"). As of June
30, 1999, (i) approximately 3 billion shares of Lucent Common
Stock were issued and outstanding, (ii) no shares of Lucent Junior
Preferred Stock were issued and outstanding and (iii) other than
the Lucent Junior Preferred Stock, no other shares of Lucent
Authorized Preferred Stock have been designated or issued. As of
the date of this Agreement, no bonds, debentures, notes or other
indebtedness of Lucent having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of Lucent may vote are issued or
outstanding. All outstanding shares of capital stock of Lucent
are, and all shares which may be issued will be, when issued, duly
authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights.
Lucent has made available to INS a complete and correct copy of
the Rights Agreement dated as of April 4, 1996, as amended (the
"Lucent Rights Agreement") between Lucent and The Bank of New
York, as Rights Agent, relating to rights ("Lucent Rights") to
purchase Lucent Junior Preferred Stock.
(c) Authority; Noncontravention. Each of Lucent and Sub
has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated by this
Agreement. Lucent has all requisite corporate power and authority
to enter into the Option Agreement and to consummate the
transactions contemplated thereby. The execution and delivery of
this Agreement by Lucent and Sub, and the execution and delivery
of the Option Agreement by Lucent, and the consummation by Lucent
and Sub of the transactions contemplated by this Agreement and the
consummation by Lucent of the transactions contemplated by the
Option Agreement have been duly authorized by all necessary
corporate action on the part of Lucent and Sub, as applicable.
This Agreement has been duly executed and delivered by Lucent and
Sub and, assuming the due authorization, execution and delivery by
each of the other parties thereto, constitutes a legal, valid and
binding obligation of Lucent and Sub, enforceable against each of
them in accordance with its terms. The Option Agreement has been
duly executed and delivered by Lucent, and, assuming the due
authorization, execution and delivery by each of the other parties
thereto, constitutes a legal, valid and binding obligation of
Lucent, enforceable against Lucent in accordance with its terms.
The execution and delivery of this Agreement and the Option
Agreement do not, and the consummation of the transactions
contemplated by this Agreement and the Option Agreement and
compliance with the provisions of this Agreement and the Option
Agreement will not, conflict with, or result in any violation of,
or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancelation or
acceleration of any obligation or loss of a benefit under, or
result in the creation of any Lien upon any of the properties or
assets of Lucent or Sub under, (i) the certificate of
incorporation or by-laws of Lucent or Sub, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other
contract, agreement, obligation, commitment, arrangement,
understanding, instrument, permit, concession, franchise, license
or
similar authorization applicable to Lucent or Sub or their
respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the
following sentence, (A) any judgment, order or decree or (B) any
statute, law, ordinance, rule or regulation, in each case,
applicable to Lucent or Sub or their respective properties or
assets, other than, in the case of clauses (ii) and (iii), any
such conflicts, violations, defaults, rights, losses or Liens that
individually or in the aggregate are not reasonably likely to (x)
have a material adverse effect on Lucent, (y) impair the ability
of Lucent or Sub to perform its obligations under this Agreement
or, in the case of Lucent, to perform its obligations under the
Option Agreement or (z) prevent or materially delay the
consummation of the transactions contemplated by this Agreement
or, in the case of Lucent, the Option Agreement. No consent,
approval, order or authorization of, action by, or in respect of,
or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Lucent or Sub in
connection with the execution and delivery of this Agreement by
Lucent and Sub or the execution and delivery of the Option
Agreement by Lucent or the consummation by Lucent and Sub of the
transactions contemplated by this Agreement or the consummation by
Lucent of the transactions contemplated by the Option Agreement,
except for (1) the filing of a premerger notification and report
form by Lucent under the HSR Act and any applicable filings and
approvals under similar foreign antitrust or competition laws and
regulations; (2) the filing with the SEC of (A) the Form S-4 and
(B) such reports under Section 13(a), 13(d), 15(d) or 16(a) of the
Exchange Act as may be required in connection with this Agreement,
the Option Agreement and the Stockholder Agreement and the
transactions contemplated by this Agreement, the Option Agreement
and the Stockholder Agreement; (3) the filing of the Certificate
of Merger with the Delaware Secretary of State and appropriate
documents with the relevant authorities of other states in which
Lucent is qualified to do business and such filings with
Governmental Entities to satisfy the applicable requirements of
state securities or "blue sky" laws; (4) such filings with and
approvals of the NYSE to permit the shares of Lucent Common Stock
that are to be issued in the Merger to be listed on the NYSE; and
(5) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be
made or obtained
individually or in the aggregate is not reasonably likely to (x)
have a material adverse effect on Lucent, (y) impair the ability
of Lucent or Sub to perform its obligations under this Agreement
or, in the case of Lucent, to perform its obligations under the
Option Agreement or (z) prevent or materially delay the
consummation of the transactions contemplated by this Agreement
or, in the case of Lucent, the Option Agreement.
(d) SEC Documents; Undisclosed Liabilities. Lucent has
filed all required reports, schedules, forms, statements and other
documents (including exhibits and all other information
incorporated therein) with the SEC since October 1, 1997
(collectively, the "Lucent SEC Documents"). As of their respective
dates, the Lucent SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Lucent SEC Documents,
and none of the Lucent SEC Documents when filed contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which
they were made, not misleading. Except to the extent that
information contained in any Lucent SEC Document has been revised
or superseded by a later filed Lucent SEC Document, none of the
Lucent SEC Documents contains any untrue statement of a material
fact or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading. The financial statements of Lucent included in the
Lucent SEC Documents comply as to form, as of their respective
dates of filing with the SEC, in all material respects with the
Accounting Rules, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and
fairly present in all material respects the consolidated financial
position of Lucent and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal recurring year-end audit
adjustments). Except (i) as reflected in such
financial statements or in the notes thereto or (ii) for
liabilities incurred in connection with this Agreement or the
Option Agreement or the transactions contemplated hereby or
thereby, neither Lucent nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) which, individually or in the
aggregate, are reasonably likely to have a material adverse effect
on Lucent.
(e) Information Supplied. None of the information
supplied or to be supplied by Lucent specifically for inclusion or
incorporation by reference in (i) the Form S-4 will, at the time
the Form S-4 becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make
the statements therein not misleading or (ii) the INS Proxy
Statement will, at the date it is first mailed to INS's
stockholders or at the time of the INS 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 Form
S-4 will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations
thereunder. No representation or warranty is made by Lucent with
respect to statements made or incorporated by reference therein
based on information supplied by INS specifically for inclusion or
incorporation by reference in the Form S-4.
(f) Absence of Certain Changes or Events. Except for
liabilities incurred in connection with this Agreement, the Option
Agreement or the Stockholder Agreement or the transactions
contemplated hereby or thereby and except as disclosed in the
Lucent SEC Documents filed and publicly available prior to the
date of this Agreement (the "Lucent Filed SEC Documents"), since
March 31, 1999, Lucent and its subsidiaries have conducted their
business only in the ordinary course, and there has not been any
material adverse change in Lucent.
(g) Voting Requirements. No vote of the holders of shares
of Lucent Common Stock or any other class or series of capital
stock of Lucent is necessary to approve and adopt this Agreement,
the Option Agreement
and the Stockholder Agreement and the transactions
contemplated hereby and thereby.
(h) Tax Matters. Neither Lucent nor any of its
subsidiaries has taken any action or knows of any fact, agreement,
plan or other circumstance that is reasonably likely to prevent
the Merger from qualifying as a reorganization within the meaning
of Section 368(a) of the Code.
(i) Interim Operations of Sub. Sub was formed solely for
the purpose of engaging in the transactions contemplated hereby,
has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
(j) Litigation. There is no suit, action or proceeding
pending, or to the knowledge of Lucent, threatened against or
affecting Lucent or any of its subsidiaries that, individually or
in the aggregate, is reasonably likely to have a material adverse
effect on Lucent nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding
against Lucent or any of its subsidiaries having, or which is
reasonably likely to have, individually or in the aggregate, a
material adverse effect on Lucent; provided that, for purposes of
this paragraph (j), any such suit, action, proceeding, judgment,
decree, injunction, rule or order arising after the date hereof
shall not be deemed to have a material adverse effect on Lucent if
and to the extent such suit, action proceeding, judgment, decree,
injunction, rule or order (or any relevant part thereof) is based
on this Agreement, the Option Agreement or the transactions
contemplated hereby or thereby.
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business. (a) Conduct of Business by
INS. Except as set forth in Section 4.01(a) of the INS Disclosure Schedule,
as otherwise expressly contemplated by this Agreement or the Option
Agreement or as consented to in writing by Lucent, during the period from
the date of this Agreement to the Effective Time, INS shall, and shall
cause its subsidiaries to, carry on their respective businesses in the
ordinary course consistent with past practice and in compliance in all
material
respects with all applicable laws and regulations and, to the extent
consistent therewith, use commercially reasonable efforts to (x) preserve
intact their current business organizations, (y) keep available the
services of their current officers and other key employees and (z) preserve
their relationships with those persons having business dealings with them,
in each case to the end that their goodwill and ongoing businesses shall
not be impaired in any material respect at the Effective Time. Without
limiting the generality of the foregoing (but subject to the above
exceptions), during the period from the date of this Agreement to the
Effective Time, INS shall not, and shall not permit any of its subsidiaries
to:
(i) other than dividends and distributions (including
liquidating distributions) by a direct or indirect wholly owned
subsidiary of INS to its parent, (x) declare, set aside or pay
any dividends on, or make any other distributions (whether in
cash, stock, property or otherwise) in respect of, any of its
capital stock, (y) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for
shares of its capital stock, or (z) purchase, redeem or otherwise
acquire, directly or indirectly, any shares of capital stock of
INS or any of its subsidiaries or any other securities thereof or
any rights, warrants or options to acquire any such shares or
other securities, other than pursuant to (A) the exercise of
existing stock repurchase rights outstanding as of the date
hereof in accordance with the present terms of the INS Stock
Plans, (B) a claim made against the escrow fund established in
connection with INS's acquisition of VitalSigns Software, Inc. in
accordance with the present terms of the escrow fund or (C) the
declaration and payment of a dividend consisting of INS Rights in
connection with the implementation of the INS Rights Agreement;
(ii) issue, deliver, sell, pledge or otherwise encumber
or subject to any Lien any shares of its capital stock, any other
voting securities or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting
securities or convertible securities, other than (w) the issuance
of the INS Rights, (x) the issuance of INS Stock Options granted
consistent with past practice to employees (other than executive
officers) of INS representing in the aggregate not more than
1,200,000 shares of INS Common Stock (net of INS Stock Option
cancelations), if issued within the three month
period commencing on the date of this Agreement and, if
applicable, up to an additional 400,000 shares of INS Common Stock
(net of INS Stock Option cancelations) per month for each month
thereafter, (y) the issuance of INS Common Stock upon the exercise
of (A) INS Stock Options, (B) the Warrant and (C) the INS Rights,
in each case outstanding as of the date hereof in accordance with
their present terms, or upon the exercise of the INS Stock Options
referred to in clause (x) in accordance with their terms or (z)
the issuance of INS Common Stock pursuant to the ESPP in
accordance with its present terms and not in violation of this
Agreement;
(iii) amend INS's certificate of incorporation, by-laws
or other comparable organizational documents;
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing assets of, or by any other
manner, any business or any person;
(v) sell, lease, license, sell and leaseback, mortgage or
otherwise encumber or subject to any Lien or otherwise dispose of
any of its properties or assets (including securitizations), other
than in the ordinary course of business consistent with past
practice;
(vi) (x) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell
any debt securities or warrants or other rights to acquire any
debt securities of INS or any of its subsidiaries, guarantee any
debt securities of another person, enter into any "keep well" or
other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic
effect of any of the foregoing, except for short-term borrowings
incurred in the ordinary course of business (or to refund existing
or maturing indebtedness) consistent with past practice and except
for intercompany indebtedness between INS and any of its
subsidiaries or between such subsidiaries, or (y) make any loans,
advances or capital contributions to, or investments in, any other
person, except for employee loans or employee advances made in the
ordinary course of business consistent with past practice;
(vii) make or agree to make any new capital
expenditure or expenditures which, individually, are
in excess of $1.0 million or, in the aggregate, are in
excess of $5.0 million;
(viii) make any tax election that, individually or in the
aggregate, is reasonably likely to adversely affect in any
material respect the tax liability or tax attributes of INS or any
of its subsidiaries or settle or compromise any material income
tax liability;
(ix) (x) pay, discharge, settle or satisfy any material
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), or litigation (whether or
not commenced prior to the date of this Agreement) other than the
payment, discharge, settlement or satisfaction, in the ordinary
course of business consistent with past practice or in accordance
with their terms, of liabilities recognized or disclosed in the
Audited 1999 Financials or incurred since the date of such
financial statements, or (y) waive the benefits of, agree to
modify in any manner, terminate, release any person from or fail
to enforce any confidentiality, standstill or similar agreement to
which INS or any of its subsidiaries is a party or of which INS or
any of its subsidiaries is a beneficiary;
(x) except as required by law or contemplated hereby and
except for labor agreements negotiated in the ordinary course,
enter into, adopt or amend or terminate any INS Benefit Plan or
any other agreement, plan or policy involving INS or its
subsidiaries, and one or more of its directors, officers or
employees, or change any actuarial or other assumption used to
calculate funding obligations with respect to any pension plan, or
change the manner in which contributions to any pension plan are
made or the basis on which such contributions are determined;
(xi) except for normal increases in the ordinary course
of business consistent with past practice or as contemplated
hereby or by the terms of any employment agreement the existence
of which does not constitute a violation of this Agreement,
increase the cash compensation of any director, officer or other
employee or pay any benefit or amount not required by a plan or
arrangement as in effect on the date of this Agreement to any such
person;
(xii) transfer or license to any person or entity
or otherwise extend, amend or modify any rights to the
Intellectual Property Rights of INS and its subsidiaries other
than in the ordinary course of business consistent with past
practices; provided that in no event shall INS license on an
exclusive basis or sell any Intellectual Property Rights of INS
and its subsidiaries;
(xiii) enter into or amend any agreements pursuant to
which any person is granted exclusive marketing, manufacturing or
other rights with respect to any INS product, process or
technology;
(xiv) take any action that would, or that is reasonably
likely to, (A) result in any representation or warranty made by
INS becoming untrue or inaccurate such that the condition set
forth in Section 6.02(a) would not be satisfied or (B) result in
any other condition to the Merger set forth in Article VI not
being satisfied; or
(xv) authorize, commit or agree to take any of the
foregoing actions.
(b) Advice of Changes. INS and Lucent shall promptly advise the
other party orally and in writing to the extent it has knowledge of (i) any
representation or warranty made by it (and, in the case of Lucent, made by
Sub) contained in this Agreement or the Option Agreement becoming untrue or
inaccurate such that the condition set forth in Section 6.02(a) or Section
6.03(a), respectively, would not be satisfied, (ii) the failure by it (and,
in the case of Lucent, by Sub) to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement or the Option Agreement and (iii) any
change or event causing, or which is reasonably likely to cause, any of the
conditions set forth in Article VI not to be satisfied; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties (or remedies with respect thereto)
or the conditions to the obligations of the parties under this Agreement or
the Option Agreement.
SECTION 4.02. No Solicitation by INS. (a) INS shall not, nor
shall it permit any of its subsidiaries to, nor shall it authorize or
permit any of its directors, officers or employees or any investment
banker, financial advisor, attorney, accountant or other representative
retained by it or any of its subsidiaries to, directly or indirectly
through another person, (i) solicit, initiate or encourage (including by
way of furnishing information), or
take any other action to facilitate, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Takeover Proposal (as defined below) or (ii) participate in any discussions
or negotiations regarding any Takeover Proposal; provided, however, that
if, at any time prior to the date of the INS Stockholders Meeting (the
"Applicable Period"), the Board of Directors of INS determines in good
faith, after consultation with outside counsel, that it is necessary to do
so in order to comply with its fiduciary duties to INS's stockholders under
applicable law, INS and its representatives may, in response to a Superior
Proposal which was not solicited by it or which did not otherwise result
from a breach of this Section 4.02(a), and subject to providing prior
written notice of its decision to take such action to Lucent (a "Section
4.02 Notice") and compliance with Section 4.02(c), (x) furnish information
with respect to INS and its subsidiaries to any person making a Superior
Proposal pursuant to a customary confidentiality agreement (as determined
by INS after consultation with its outside counsel) and (y) participate in
discussions or negotiations regarding such Superior Proposal. For purposes
of this Agreement, "Takeover Proposal" means any inquiry, proposal or offer
from any person relating to any direct or indirect acquisition or purchase
of 15% or more of the assets of INS and its subsidiaries, taken as a whole,
or 15% or more of any class or series of equity securities of INS or any of
its subsidiaries, any tender offer or exchange offer that if consummated
would result in any person beneficially owning 15% or more of any class or
series of equity securities of INS or any of its subsidiaries, or any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving INS or any of its
subsidiaries, other than the transactions contemplated by this Agreement.
(b) Neither the Board of Directors of INS nor any committee
thereof shall (i) withdraw or modify, or propose publicly to withdraw or
modify, in a manner adverse to Lucent, the approval or recommendation by
such Board of Directors or such committee of the Merger or this Agreement,
(ii) approve or recommend, or propose publicly to approve or recommend, any
Takeover Proposal, or (iii) approve or recommend, or propose to approve or
recommend, or execute or enter into, any letter of intent, agreement in
principle, merger agreement, acquisition agreement, option agreement or
other similar agreement or propose publicly or agree to do any of the
foregoing (each, an "Acquisition Agreement") related to any Takeover
Proposal, other than any such agreement entered into
concurrently with a termination pursuant to the next sentence in order to
facilitate such action. Notwithstanding the foregoing, during the
Applicable Period, in response to a Superior Proposal which was not
solicited by INS and which did not otherwise result from a breach of
Section 4.02(a), if the Board of Directors of INS determines in good faith,
after consultation with outside counsel, that it is necessary to do so in
order to comply with its fiduciary duties to INS's stockholders under
applicable law, the Board of Directors of INS may (subject to this and the
following sentence) terminate this Agreement (and concurrently with or
after such termination, if it so chooses, cause INS to enter into any
Acquisition Agreement with respect to any Superior Proposal), but only at a
time that is during the Applicable Period and is after the tenth business
day following Lucent's receipt of written notice advising Lucent that the
Board of Directors of INS is prepared to accept a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal. For purposes of this
Agreement, a "Superior Proposal" means any proposal made by a third party
to acquire, directly or indirectly, including pursuant to a tender offer,
exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction, for
consideration consisting of cash and/or securities, more than 50% of the
combined voting power of the shares of INS Common Stock then outstanding or
all or substantially all the assets of INS and otherwise on terms which the
Board of Directors of INS determines in its good faith judgment (based on
the advice of a financial advisor of nationally recognized reputation) to
be more favorable to INS's stockholders than the Merger and for which
financing, to the extent required, is then committed or which, in the good
faith judgment of the Board of Directors of INS, is reasonably capable of
being obtained by such third party.
(c) In addition to the obligations of INS set forth in paragraphs
(a) and (b) of this Section 4.02, INS shall promptly (and no later than 48
hours) advise Lucent orally and in writing of any request for information
or of any inquiry with respect to a Takeover Proposal, the material terms
and conditions of such request, inquiry or Takeover Proposal and the
identity of the person making such request, inquiry or Takeover Proposal.
INS will promptly keep Lucent informed of the status and details (including
amendments or changes or proposed amendments or changes) of any such
request, inquiry or Takeover Proposal.
(d) Nothing contained in this Section 4.02 or elsewhere in this
Agreement shall prohibit INS from taking and disclosing to its stockholders
a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act
or from making any disclosure to INS's stockholders if, in the good faith
judgment of the Board of Directors of INS, after consultation with outside
counsel, failure so to disclose would be inconsistent with its obligations
under applicable law; provided, however, that neither INS nor its Board of
Directors nor any committee thereof shall withdraw or modify, or propose to
withdraw or modify, its position with respect to this Agreement or the
Merger or approve or recommend, or propose to approve or recommend, a
Takeover Proposal.
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Form S-4 and the INS Proxy
Statement; INS Stockholders Meeting. (a) As soon as practicable following
the date of this Agreement, Lucent and INS shall prepare and INS shall file
with the SEC the INS Proxy Statement and Lucent and INS shall prepare and
Lucent shall file with the SEC the Form S-4, in which the INS Proxy
Statement will be included as a prospectus. Each of INS and Lucent shall
use all reasonable efforts to have the Form S-4 declared effective under
the Securities Act as promptly as practicable after such filing. INS will
use all reasonable efforts to cause the INS Proxy Statement to be mailed to
INS's stockholders as promptly as practicable after the Form S-4 is
declared effective under the Securities Act. Lucent shall also take any
action (other than qualifying to do business in any jurisdiction in which
it is not now so qualified or to file a general consent to service of
process) required to be taken under any applicable state securities laws in
connection with the issuance of Lucent Common Stock in the Merger and INS
shall furnish all information concerning INS and the holders of capital
stock of INS as may be reasonably requested in connection with any such
action and the preparation, filing and distribution of the INS Proxy
Statement. No filing of, or amendment or supplement to, or correspondence
to the SEC or its staff with respect to, the Form S-4 will be made by
Lucent, or the INS Proxy Statement will be made by INS, without providing
the other party a reasonable opportunity to review and comment thereon.
Lucent will advise INS, promptly after it receives notice thereof, of the
time when the Form S-4 has become effective or any supplement or amendment
has been filed, the issuance
of any stop order, the suspension of the qualification of the Lucent Common
Stock issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Form S-4 or
comments thereon and responses thereto or requests by the SEC for
additional information. INS will advise Lucent, promptly after it receives
notice thereof, of any request by the SEC for the amendment of the INS
Proxy Statement or comments thereon and responses thereto or requests by
the SEC for additional information. If at any time prior to the Effective
Time any information relating to INS or Lucent, or any of their respective
affiliates, officers or directors, should be discovered by INS or Lucent
which should be set forth in an amendment or supplement to any of the Form
S-4 or the INS Proxy Statement, so that any of such documents would not
include any misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto
and an appropriate amendment or supplement describing such information
shall be promptly filed with the SEC and, to the extent required by law,
disseminated to the stockholders of INS.
(b) INS shall, as soon as practicable following the date of this
Agreement, establish a record date (which will be as soon as practicable
following the date of this Agreement) for, duly call, give notice of,
convene and hold a meeting of its stockholders (the "INS Stockholders
Meeting") solely for the purpose of obtaining the INS Stockholder Approval.
INS shall, through its Board of Directors, recommend to its stockholders
the approval and adoption of this Agreement, the Merger and the other
transactions contemplated hereby. Without limiting the generality of the
foregoing but subject to its right to terminate this Agreement pursuant to
Section 4.02(b), INS agrees that its obligations pursuant to the first
sentence of this Section 5.01(b) shall not be affected by the commencement,
public proposal, public disclosure or communication to INS of any Takeover
Proposal.
SECTION 5.02. Letters of INS's Accountants. (a) INS shall use
reasonable efforts to cause to be delivered to Lucent two letters from
INS's independent public accountants, one dated a date within two business
days before the date on which the Form S-4 shall become effective and one
dated a date within two business days before the Closing Date, each
addressed to Lucent, in form and substance reasonably satisfactory to
Lucent and customary in scope and substance for comfort letters
delivered by independent public accountants in connection with registration
statements similar to the Form S-4.
(b) INS shall provide all reasonable cooperation to each of
Lucent's independent public accountants and INS's independent public
accountants to enable them to issue the letters referred to in Section
6.02(d) and shall use all reasonable efforts to cause them to do so.
SECTION 5.03. Letters of Lucent's Accountants. (a) Lucent shall
use reasonable efforts to cause to be delivered to INS two letters from
Lucent's independent accountants, one dated a date within two business days
before the date on which the Form S-4 shall become effective and one dated
a date within two business days before the Closing Date, each addressed to
INS, in form and substance reasonably satisfactory to INS and customary in
scope and substance for comfort letters delivered by independent public
accountants in connection with registration statements similar to the Form
S-4.
(b) Lucent shall provide all reasonable cooperation to each of
Lucent's independent public accountants and INS's independent public
accountants to enable them to issue the letters referred to in Section
6.02(d) and shall use all reasonable efforts to cause them to do so, unless
Section 6.02(d) is otherwise waived by Lucent.
SECTION 5.04. Access to Information; Confidentiality. Upon
reasonable notice and subject to the Confidentiality Agreement dated April
23, 1999, between Lucent and INS (the "Confidentiality Agreement"), INS
shall, and shall cause each of its subsidiaries to, afford to Lucent and to
its officers, employees, accountants, counsel, financial advisors and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time to all its properties, books, contracts,
commitments, personnel and records and, during such period, INS shall, and
shall cause each of its subsidiaries to, furnish promptly to Lucent (a) a
copy of each report, schedule, registration statement and other document
filed by it during such period pursuant to the requirements of federal or
state securities laws and (b) all other information concerning its
business, properties and personnel as Lucent may reasonably request
(including INS's outside accountants work papers). INS shall not be
required to provide access to or disclose information where such access or
disclosure would contravene any law, rule, regulation, order or decree. No
review pursuant to this Section 5.04 shall have an effect
for the purpose of determining the accuracy of any representation or
warranty given by either party hereto to the other party hereto. Lucent
will hold, and will cause its officers, employees, accountants, counsel,
financial advisors and other representatives and affiliates to hold, any
nonpublic information in accordance with the terms of the Confidentiality
Agreement.
SECTION 5.05. Commercially Reasonable Efforts. (a) Upon the terms
and subject to the conditions set forth in this Agreement, each of the
parties agrees to use commercially reasonable 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, the Option Agreement and the Stockholder Agreement, including
using commercially reasonable efforts to accomplish the following: (i) the
taking of all commercially reasonable acts necessary to cause the
conditions to Closing to be satisfied as promptly as practicable, (ii) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities, if
any) and the taking of all steps as may be necessary to obtain an approval
or waiver from, or to avoid an action or proceeding by, any Governmental
Entity, (iii) the obtaining of all necessary consents, approvals or waivers
from third parties, (iv) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this
Agreement, the Option Agreement or the Stockholder Agreement or the
consummation of the transactions contemplated by this Agreement, the Option
Agreement or the Stockholder Agreement, including seeking to have any stay
or temporary restraining order entered by any court or other Governmental
Entity vacated or reversed, and (v) the execution and delivery of any
additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement,
the Option Agreement and the Stockholder Agreement.
(b) In connection with and without limiting the foregoing, INS
and its Board of Directors and Lucent and its Board of Directors shall (i)
take all action necessary to ensure that no state takeover statute or
similar statute or regulation is or becomes applicable to the Merger, this
Agreement, the Option Agreement, the Stockholder Agreement or any of the
other transactions contemplated by this
Agreement, the Option Agreement or the Stockholder Agreement and (ii) if
any state takeover statute or similar statute or regulation becomes
applicable to the Merger, this Agreement, the Option Agreement, the
Stockholder Agreement or any other transaction contemplated by this
Agreement, the Option Agreement or the Stockholder Agreement, take all
action necessary to ensure that the Merger and the other transactions
contemplated by this Agreement, the Option Agreement and the Stockholder
Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement, the Option Agreement and the Stockholder
Agreement and otherwise to minimize the effect of such statute or
regulation on the Merger and the other transactions contemplated by this
Agreement, the Option Agreement and the Stockholder Agreement.
SECTION 5.06. Stock Options. (a) As soon as practicable following
the date of this Agreement, the Board of Directors of INS (or, if
appropriate, any committee thereof administering the INS Stock Plans) shall
adopt such resolutions or take such other actions as may be required to
effect the following:
(i) adjust the terms of all outstanding INS Stock Options
granted under the INS Stock Plans, whether vested or unvested, as
necessary to provide that, at the Effective Time, each INS Stock
Option outstanding immediately prior to the Effective Time shall
be amended and converted into an option to acquire, on the same
terms and conditions as were applicable under such INS Stock
Option the number of shares of Lucent Common Stock (rounded down
to the nearest whole share) equal to (A) the number of shares of
INS Common Stock subject to such INS Stock Option immediately
prior to the Effective Time multiplied by (B) the Exchange Ratio,
at an exercise price per share of Lucent Common Stock (rounded to
the nearest one-hundredth of a cent) equal to (x) the exercise
price per share of such INS Common Stock immediately prior to the
Effective Time divided by (y) the Exchange Ratio (each, as so
adjusted, an "Adjusted Option"); and
(ii) make such other changes to the INS Stock Plans as INS
and Lucent may agree are appropriate to give effect to the
Merger.
(b) As soon as practicable after the Effective Time, Lucent shall
deliver to the holders of INS Stock Options appropriate notices setting
forth such holders'
rights pursuant to the respective INS Stock Plans and the agreements
evidencing the grants of such INS Stock Options and that such INS Stock
Options and agreements shall be assumed by Lucent and shall continue in
effect on the same terms and conditions (subject to the adjustments
required by this Section 5.06 after giving effect to the Merger).
(c) A holder of an Adjusted Option may exercise such Adjusted
Option in whole or in part in accordance with its terms by following
procedures to be communicated by Lucent with the notice contemplated by
Section 5.06(b), together with the consideration therefor and the federal
withholding tax information, if any, required in accordance with the
related INS Stock Plan.
(d) Except as otherwise contemplated by this Section 5.06 and
except to the extent required under the respective terms of the INS Stock
Options or under the respective terms of the change of control agreements
with certain employees of INS as in effect on the date hereof, all
restrictions or limitations on transfer and vesting with respect to INS
Stock Options awarded under the INS Stock Plans or any other plan, program
or arrangement of INS or any of its subsidiaries, to the extent that such
restrictions or limitations shall not have already lapsed, shall remain in
full force and effect with respect to such options after giving effect to
the Merger and the assumption by Lucent as set forth above.
(e) After the Closing and within five business days after receipt
by Lucent of all required information from INS, Lucent shall prepare and
file with the SEC a registration statement on Form S-8 (or another
appropriate form) registering a number of shares of Lucent Common Stock
equal to the number of shares subject to the Adjusted Options. Such
registration statement shall be kept effective (and the current status of
the prospectus or prospectuses required thereby shall be maintained) at
least for so long as the Adjusted Options remain outstanding. INS shall
cooperate with, and assist Lucent in the preparation of, such registration
statement.
(f) INS shall take, or cause to be taken, all action necessary to
amend the ESPP to terminate the ESPP and all future offering periods
thereunder, in each case, effective as of the date that is five business
days prior to the Closing Date. Within one month after the Closing Date,
employees of INS will become eligible to participate in Lucent's employee
stock purchase plan, subject to the terms and conditions of such plan.
SECTION 5.07. Employee Matters. (a) As soon as practicable after
the Closing Date (the "Benefits Date"), Lucent shall provide, or cause to
be provided, employee benefit plans, programs and arrangements to employees
of INS that are the same as those made generally available to similarly
situated non-represented employees of Lucent who are hired by Lucent after
December 31, 1998. From the Effective Time to the Benefits Date (which the
parties acknowledge may occur on different dates with respect to different
plans, programs or arrangements of Lucent), Lucent shall provide, or cause
to be provided, the employee benefit plans, programs and arrangements of
INS (other than equity-based plans, programs and arrangements) provided to
employees of INS as of the date hereof.
(b) With respect to each benefit plan, program, practice, policy
or arrangement maintained by Lucent (the "Lucent Plans") in which employees
of INS subsequently participate, (i) service with INS and its subsidiaries
prior to the Effective Time shall be credited against all service and
waiting period requirements under the Lucent Plans (provided that such
recognition shall not be for the purpose of determining (x) retirement
benefits under Lucent's defined benefit pension plans (unless otherwise
required by law) or (y) any Lucent subsidy under Lucent's retiree health
plans), (ii) the Lucent Plans shall not provide any pre-existing condition
exclusions and (iii) the deductibles, copayments and out-of-pocket maximums
in effect under the Lucent Plans shall be reduced by any deductibles,
copayments and out-of-pocket maximums paid by such individuals under the
INS Benefit Plans for the plan year in which the Effective Time occurs.
SECTION 5.08. Indemnification, Exculpation and Insurance. (a)
Lucent agrees that all rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective
Time now existing in favor of the current or former directors or officers
of INS and its subsidiaries as provided in their respective certificate of
incorporation or by-laws (or comparable organizational documents) and any
indemnification agreements of INS (as each is in effect on the date
hereof), the existence of which does not constitute a breach of this
Agreement, shall be assumed by the Surviving Corporation in the Merger,
without further action, as of the Effective Time and shall survive the
Merger and shall continue in full force and effect in accordance with their
terms, and Lucent shall cause the Surviving Corporation to honor all such
rights.
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person
and is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially
all of its properties and assets to any person, or otherwise dissolves the
Surviving Corporation, then, and in each such case, Lucent shall cause
proper provision to be made so that the successors and assigns of the
Surviving Corporation assume the obligations set forth in this Section
5.08.
(c) Lucent shall, at its option, for a period of not less than
six years after the Effective Time, either (i) maintain INS's current
directors' and officers' liability insurance covering acts or omissions
occurring prior to the Effective Time ("D&O Insurance") with respect to
those persons who are currently covered by INS's directors' and officers'
liability insurance policy on terms with respect to such coverage and
amount no less favorable than those of such policy in effect on the date
hereof or (ii) cause to be provided by a reputable insurance company
coverage no less favorable to such directors or officers, as the case may
be, than the D&O Insurance, in each case so long as the annual premium
therefor would not be in excess of 200% of the last annual premium paid for
the D&O Insurance prior to the date of this Agreement (such 200% amount the
"Maximum Premium"). If the existing or substituted directors' and officers'
liability insurance expires, is terminated or canceled during such six-year
period, Lucent will obtain as much D&O Insurance as can be obtained for the
remainder of such period for an annualized premium not in excess of the
Maximum Premium. INS represents that the Maximum Premium is $350,000.
(d) The provisions of this Section 5.08 (i) are intended to be
for the benefit of, and will be enforceable by, each indemnified party, his
or her heirs and his or her representatives and (ii) are in addition to,
and not in substitution for, any other rights to indemnification or
contribution that any such person may have by contract or otherwise.
SECTION 5.09. Fees and Expenses. (a) All fees and expenses
incurred in connection with the Merger, this Agreement, the Option
Agreement, the Stockholder Agreement and the transactions contemplated by
this Agreement, the Option Agreement and the Stockholder Agreement shall be
paid by the party incurring such fees or expenses, whether or not the
Merger is consummated, except that each of
Lucent and INS shall bear and pay one-half of (1) the costs and expenses
incurred in connection with the filing, printing and mailing of the Form
S-4 and the INS Proxy Statement (including SEC filing fees) and (2) the
filing fees for the premerger notification and report forms under the HSR
Act. Lucent shall file any return with respect to, and shall pay, any state
or local taxes (including any penalties or interest with respect thereto),
if any, which are attributable to the transfer of the beneficial ownership
of INS's real property (collectively, the "Real Estate Transfer Taxes") as
a result of the Merger (other than any such taxes that are solely the
obligations of a stockholder of INS, in which case INS shall pay any such
taxes). INS shall cooperate with Lucent in the filing of such returns
including, in the case of INS, supplying in a timely manner a complete list
of all real property interests held by INS and any information with respect
to such property that is reasonably necessary to complete such returns. The
fair market value of any real property of INS subject to the Real Estate
Transfer Taxes shall be as agreed to between Lucent and INS.
(b) In the event that (1) a bona fide Takeover Proposal shall
have been made known to INS or any of its subsidiaries or has been made
directly to the stockholders of INS generally or shall have otherwise
become publicly known or any person shall have publicly announced an
intention (whether or not conditional) to make a Takeover Proposal and
thereafter this Agreement is terminated by either Lucent or INS pursuant to
Section 7.01(b)(i) or (ii) or (2) this Agreement is terminated (x) by INS
pursuant to Section 7.01(f) or (y) by Lucent pursuant to Section 7.01(d),
then INS shall promptly, but in no event later than the date of such
termination, pay Lucent a fee equal to $110 million (the "Termination
Fee"), payable by wire transfer of same day funds; provided, however, that
no Termination Fee shall be payable to Lucent pursuant to clause (1) of
this paragraph (b) or pursuant to a termination by Lucent pursuant to
Section 7.01(d) unless and until within 15 months of such termination INS
or any of its subsidiaries enters into any Acquisition Agreement or
consummates any Takeover Proposal (for the purposes of the foregoing
proviso the terms "Acquisition Agreement" and "Takeover Proposal" shall
have the meanings assigned to such terms in Section 4.02 except that the
references to "15%" in the definition of "Takeover Proposal" in Section
4.02(a) shall be deemed to be references to "35%" and "Takeover Proposal"
shall only be deemed to refer to a transaction involving INS, or with
respect to assets (including the shares of any subsidiary), INS and its
subsidiaries, taken as a whole, and not any of its
subsidiaries alone), in which event the Termination Fee shall be payable
upon the first to occur of such events. INS acknowledges that the
agreements contained in this Section 5.09(b) are an integral part of the
transactions contemplated by this Agreement, and that without these
agreements Lucent would not enter into this Agreement; accordingly, if INS
fails promptly to pay the amount due pursuant to this Section 5.09(b), and,
in order to obtain such payment, Lucent commences a suit which results in a
judgment against INS for the fee set forth in this Section 5.09(b), INS
shall pay to Lucent its costs and expenses (including attorneys' fees and
expenses) in connection with such suit, together with interest on the
amount of the fee at the prime rate of Citibank, N.A. in effect on the date
such payment was required to be made.
SECTION 5.10. Public Announcements. Lucent and INS will consult
with each other before issuing, and provide each other the opportunity to
review, comment upon and concur with, any press release or other public
statements with respect to the transactions contemplated by this Agreement,
including the Merger, the Option Agreement and the Stockholder Agreement,
and shall not issue any such press release or make any such public
statement prior to such consultation, except as either party may determine
is required by applicable law, the SEC, court process or by obligations
pursuant to any listing agreement with any national securities exchange or
national trading system. The parties agree that the initial press release
to be issued with respect to the transactions contemplated by this
Agreement, the Option Agreement and the Stockholder Agreement shall be in
the form heretofore agreed to by the parties.
SECTION 5.11. Affiliates. INS shall deliver to Lucent at least 30
days prior to the Closing Date, a letter identifying all persons who are,
at the time of such letter, "affiliates" of INS for purposes of Rule 145
under the Securities Act or for purposes of qualifying the Merger for
pooling of interests accounting treatment under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations. INS
shall use reasonable efforts to cause each such person to deliver to Lucent
at least 30 days prior to the Closing Date, a written agreement
substantially in the form attached as Exhibit A hereto. Lucent shall use
reasonable efforts to cause all persons who are "affiliates" of Lucent for
purposes of qualifying the Merger for pooling of interests accounting
treatment under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations to deliver to INS at least 30 days
prior to the Closing
Date, a written agreement complying with the fourth paragraph of Exhibit A
hereto.
SECTION 5.12. Listings. Lucent shall use reasonable efforts to
cause the Lucent Common Stock issuable in the Merger to be approved for
listing on the NYSE, subject to official notice of issuance, as promptly as
practicable after the date hereof, and in any event prior to the Closing
Date. INS shall use reasonable efforts to cause the shares of INS Common
Stock to be issued pursuant to the Option Agreement to be approved for
quotation on Nasdaq, subject to official notice of issuance, as promptly as
practicable after the date hereof, and in any event prior to the Closing
Date.
SECTION 5.13. Litigation. INS shall give Lucent the opportunity
to participate in the defense of any litigation against INS and/or its
directors relating to the transactions contemplated by this Agreement, the
Option Agreement and the Stockholder Agreement.
SECTION 5.14. Tax Treatment. Each of Lucent and INS shall use
reasonable efforts to cause the Merger to qualify as a reorganization under
the provisions of Section 368 of the Code and to obtain the opinions of
counsel referred to in Sections 6.02(c) and 6.03(c), including the
execution of the letters of representation referred to therein.
SECTION 5.15. Pooling of Interests. Each of INS and Lucent shall
use reasonable efforts to cause the transactions contemplated by this
Agreement, including the Merger, the Option Agreement and the Stockholder
Agreement to be accounted for as a pooling of interests under Opinion 16 of
the Accounting Principles Board and applicable SEC rules and regulations,
and each of INS and Lucent agrees that it shall take no action that would
cause such accounting treatment not to be obtained.
SECTION 5.16. Stockholder Agreement Legend. INS will inscribe
upon any certificate representing Subject Shares (as defined in the
Stockholder Agreement) tendered by the Stockholder (as defined in the
Stockholder Agreement) in connection with any proposed transfer of any
Subject Shares by the Stockholder in accordance with the terms of the
Stockholder Agreement the following legend: "THE SHARES OF COMMON STOCK,
PAR VALUE $0.001 PER SHARE, OF INTERNATIONAL NETWORK SERVICES, REPRESENTED
BY THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDER AGREEMENT DATED AS OF
AUGUST 9, 1999, AND ARE SUBJECT TO THE TERMS THEREOF. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT THE PRINCIPAL
EXECUTIVE OFFICES OF INTERNATIONAL NETWORK SERVICES."; and INS will return
such certificate containing such inscription to the Stockholder within
three business days following INS's receipt thereof.
SECTION 5.17. Rights Agreement. INS's Board of Directors shall
not, without the prior written consent of Lucent, (a) amend the INS Rights
Agreement after it is adopted or (b) take any action with respect to, or
make any determination under, the INS Rights Agreement, including, a
redemption of the INS Rights or any action to facilitate a Takeover
Proposal.
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation To Effect the
Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of
the following conditions:
(a) INS Stockholder Approval. The INS Stockholder Approval shall
have been obtained.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated
or shall have expired.
(c) No Litigation. No judgment, order, decree, statute, law,
ordinance, rule or regulation, entered, enacted, promulgated, enforced
or issued by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect, and there shall not be pending or
threatened any suit, action or proceeding by any Governmental Entity
(i) preventing the consummation of the Merger, (ii) prohibiting or
limiting the ownership or operation by INS or Lucent and their
respective subsidiaries of any material portion of the business or
assets of INS or Lucent and their respective subsidiaries taken as a
whole, or compelling INS or Lucent and their respective subsidiaries
to dispose of or hold separate any material portion of the business or
assets of INS or Lucent and their respective subsidiaries taken as a
whole, as a result of the Merger or any of the other transactions
contemplated by this Agreement, the
Option Agreement or the Stockholder Agreement or (iii) which
otherwise is reasonably likely to have a material adverse effect
on INS or Lucent, as applicable; provided, however, that each of
the parties shall have used its reasonable efforts to prevent the
entry of any such Restraints and to appeal as promptly as possible
any such Restraints that may be entered.
(d) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
(e) NYSE Listing. The shares of Lucent Common Stock issuable to
INS's stockholders as contemplated by this Agreement shall have been
approved for listing on the NYSE, subject to official notice of
issuance.
SECTION 6.02. Conditions to Obligations of Lucent and Sub. The
obligation of Lucent and Sub to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations and
warranties of INS set forth herein shall be true and correct as of the
date hereof and as of the Effective Time, with the same effect as if
made at and as of such time (except to the extent expressly made as of
an earlier date, in which case as of such date), except where the
failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to "materiality"
or "material adverse effect" set forth therein) does not have, and is
not reasonably likely to have, individually or in the aggregate, a
material adverse effect on INS. Lucent shall have received a
certificate signed on behalf of INS by the chief executive officer of
INS to such effect.
(b) Performance of Obligations of INS. INS shall have performed
in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date. Lucent shall
have received a certificate signed on behalf of INS by the chief
executive officer of INS to such effect.
(c) Tax Opinions. Lucent shall have received from Cravath, Swaine
& ▇▇▇▇▇, counsel to Lucent, on the date on which the Form S-4 is
declared effective
by the SEC and on the Closing Date, an opinion, in each case dated
as of such respective date and stating that the Merger will
qualify for U.S. federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code. The issuance of
such opinion shall be conditioned upon the receipt by such tax
counsel of customary representation letters from each of Lucent,
Sub and INS, in each case, in form and substance reasonably
satisfactory to such tax counsel.
(d) Pooling Letters. Each of Lucent and INS shall have
received letters, dated as of the Closing Date, in each case
addressed to Lucent and INS, from PricewaterhouseCoopers LLP
stating in substance that PricewaterhouseCoopers LLP concurs with
the conclusion of Lucent's and INS's management that no
conditions exist that would preclude accounting for the merger as
a pooling of interests under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations.
SECTION 6.03. Conditions to Obligations of INS. The obligation of
INS to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. The representations and
warranties of Lucent and Sub set forth herein shall be true and
correct as of the date hereof and as of the Effective Time, with
the same effect as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case as of
such date), except where the failure of such representations and
warranties to be so true and correct (without giving effect to
any limitation as to "materiality" or "material adverse effect"
set forth therein) does not have, and is not reasonably likely to
have, individually or in the aggregate, a material adverse effect
on Lucent. INS shall have received a certificate signed on behalf
of Lucent by an authorized signatory of Lucent to such effect.
(b) Performance of Obligations of Lucent and Sub. Lucent and
Sub shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior
to the Closing Date. INS shall have received a certificate signed
on behalf of Lucent by an authorized signatory of Lucent to such
effect.
(c) Tax Opinions. INS shall have received from ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to INS, on the date on which
the Form S-4 is declared effective by the SEC and on the Closing
Date, an opinion, in each case dated as of such respective date
and stating that the Merger will qualify for U.S. federal income
tax purposes as a reorganization within the meaning of Section
368(a) of the Code. The issuance of such opinion shall be
conditioned upon the receipt by such tax counsel of customary
representation letters from each of INS, Sub and Lucent, in each
case, in form and substance reasonably satisfactory to such tax
counsel.
SECTION 6.04. Frustration of Closing Conditions. None of Lucent,
Sub or INS may rely on the failure of any condition set forth in Section
6.01, 6.02 or 6.03, as the case may be, to be satisfied if such failure was
caused by such party's failure to use reasonable efforts to consummate the
Merger and the other transactions contemplated by this Agreement, the
Option Agreement and the Stockholder Agreement, as required by and subject
to Section 5.05.
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after the INS
Stockholder Approval:
(a) by mutual written consent of Lucent, Sub and INS;
(b) by either Lucent or INS:
(i) if the Merger shall not have been consummated by April
30, 2000; provided, however, that the right to terminate this
Agreement pursuant to this Section 7.01(b)(i) shall not be
available to any party whose failure to perform any of its
obligations under this Agreement results in the failure of the
Merger to be consummated by such time;
(ii) if the INS Stockholder Approval shall not have been
obtained at an INS Stockholders Meeting duly convened therefor or
at any adjournment or postponement thereof; or
(iii) if any Restraint having any of the effects set forth
in Section 6.01(c) shall be in effect and shall have become final
and nonappealable; provided that the party seeking to terminate
this Agreement pursuant to this Section 7.01(b)(iii) shall have
used reasonable efforts to prevent the entry of and to remove
such Restraint;
(c) by Lucent, if INS shall have breached or failed to perform in
any material respect any of its representations, warranties, covenants
or other agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of a condition
set forth in Section 6.02(a) or (b), and (B) is incapable of being or
has not been cured by INS within 30 calendar days after giving written
notice to INS of such breach or failure to perform;
(d) by Lucent, if INS or any of its directors or officers shall
participate in discussions or negotiations in breach of Section 4.02;
(e) by INS, if Lucent shall have breached or failed to perform in
any material respect any of its representations, warranties, covenants
or other agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of a condition
set forth in Section 6.03(a) or (b), and (B) is incapable of being or
has not been cured by Lucent within 30 calendar days after the giving
of written notice to Lucent of such breach or failure to perform; or
(f) by INS in accordance with Section 4.02(b); provided that, in
order for the termination of this Agreement pursuant to this paragraph
(f) to be deemed effective, INS shall have complied with all
provisions of Section 4.02, including the notice provisions therein,
and with applicable requirements, including the payment of the
Termination Fee, of Section 5.09.
SECTION 7.02. Effect of Termination. In the event of termination
of this Agreement by either INS or Lucent as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Lucent or INS, other than the
provisions of Section 3.01(p), the last sentence of Section 5.04, Section
5.09, this Section 7.02 and Article VIII, which provisions survive such
termination,
and except to the extent that such termination results from the willful and
material breach by a party of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
SECTION 7.03. Amendment. This Agreement may be amended by the
parties at any time before or after the INS Stockholder Approval; provided,
however, that after any such approval, there shall not be made any
amendment that by law requires further approval by the stockholders of INS
or the approval of the stockholders of Lucent without the further approval
of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
SECTION 7.04. Extension; Waiver. At any time prior to the
Effective Time, a party may (a) extend the time for the performance of any
of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties of the other parties
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) subject to the proviso of Section 7.03, waive compliance
by the other party with any of the agreements or conditions contained in
this Agreement. Any agreement on the part of a party to any such extension
or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement
to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of such rights.
SECTION 7.05. Procedure for Termination, Amendment, Extension or
Waiver. A termination of this Agreement pursuant to Section 7.01, an
amendment of this Agreement pursuant to Section 7.03 or an extension or
waiver pursuant to Section 7.04 shall, in order to be effective, require,
in the case of Lucent or INS, action by its Board of Directors or, with
respect to any amendment to this Agreement, the duly authorized committee
of its Board of Directors to the extent permitted by law.
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and Warranties. None
of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.01 shall not limit any covenant or agreement of
the parties which by its terms contemplates performance after the Effective
Time.
SECTION 8.02. Notices. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally, telecopied (which is confirmed) or
sent by overnight courier (providing proof of delivery) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Lucent or Sub, to
Lucent Technologies Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Room 6A 311
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: Separately supplied
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President-Law
with a copy to:
Cravath, Swaine & ▇▇▇▇▇
Worldwide Plaza
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: Separately supplied
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III; and
(b) if to INS, to
International Network Services
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: Separately supplied
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy No.: Separately supplied
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
SECTION 8.03. Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first person,
where "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management policies of a
person, whether through the ownership of voting securities, by
contract, as trustee or executor, or otherwise;
(b) "business day" means any day other than Saturday, Sunday or
any other day on which banks are legally permitted to be closed in New
York;
(c) "knowledge" of any person which is not an individual means
the knowledge of such person's executive officers after reasonable
inquiry;
(d) "material adverse change" or "material adverse effect" means,
when used in connection with INS or Lucent, any change, effect, event,
occurrence, condition or development or state of facts that is
materially adverse to the business, results of operations or financial
condition of such party and its subsidiaries taken as a whole, other
than any change, effect, event, occurrence, condition, development or
state of facts (i) relating to the economy or securities markets in
general, (ii) relating to the industries in which such party operates
in general, (iii) arising as a result of this Agreement or the
transactions contemplated hereby or the announcement or pendency
thereof (including (w) actions by customers or competitors, (x) loss
of personnel, customers, resellers or referrals, (y) the delay or
cancelation of orders for services and products and (z) any failure by
INS to meet any revenue or earnings predictions or expectations to the
extent resulting from the foregoing clauses (w), (x)
and (y)) or (iv) in the case of INS, litigation brought or threatened
against INS or any member of its Board of Directors in respect of
this Agreement;
(e) "person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity; and
(f) a "subsidiary" of any person means another person, an amount
of the voting securities, other voting ownership or voting partnership
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 interests, 50% or more of the equity interests of which) is
owned directly or indirectly by such first person.
SECTION 8.04. Interpretation. When a reference is made in this
Agreement to an Article, Section or Exhibit, such reference shall be to an
Article or Section of, or an Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed
to be followed by the words "without limitation". The words "hereof",
"herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All terms defined in this Agreement
shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including
(in the case of agreements or instruments) by waiver or consent and (in the
case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns.
SECTION 8.05. Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall
be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and
delivered to the other parties.
SECTION 8.06. Entire Agreement; No Third-Party Beneficiaries.
This Agreement (including the documents and instruments referred to
herein), the Option Agreement, the Stockholder Agreement and the
Confidentiality Agreement (a) constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter of this Agreement and
(b) except for the provisions of Article II, Section 5.06, and Section
5.08, are not intended to confer upon any person other than the parties any
rights or remedies.
SECTION 8.07. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable
principles of conflict of laws thereof.
SECTION 8.08. Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties
hereto without the prior written consent of the other parties. Any
assignment in violation of the preceding sentence shall be void. Subject to
the preceding two sentences, this Agreement will be binding upon, inure to
the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
SECTION 8.09. Enforcement. Each of the parties hereto agrees that
irreparable damage would occur and that the parties would not have any
adequate remedy at law in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions of this
Agreement in any federal court located in the State of Delaware or in
Delaware state court, this being in addition to any other remedy to which
they are entitled at law or in equity. In addition, each of the parties
hereto (a) consents to submit itself to the personal jurisdiction of any
federal court located in the State of Delaware or any Delaware state court
in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it will not
attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such
court and (c) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any
court other than a federal court sitting in the State of Delaware or a
Delaware state court.
SECTION 8.10. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any
rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
IN WITNESS WHEREOF, Lucent, Sub and INS have caused this
Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
LUCENT TECHNOLOGIES INC.,
by
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Executive Vice
President, Strategy
and Corporate
Operations
INTREPID MERGER INC.,
by
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President,
INTERNATIONAL NETWORK SERVICES,
by
/s/ ▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: President and Chief
Executive Officer
ANNEX I
TO THE MERGER AGREEMENT
Index of Defined Terms
Term Page Term Page
Accounting Rules................. 15 INS Stock Plans............ 11
Acquisition Agreement............ 38 INS Stockholder Approval... 23
Adjusted Option.................. 44 INS Stockholders Meeting... 41
affiliate........................ 58 Intellectual Property
Agreement........................ 1 Rights.................. 24
Applicable Period................ 38 knowledge.................. 58
Audited 1999 Financials.......... 10 Liens...................... 11
Benefits Date.................... 46 Lucent..................... 1
business day..................... 58 Lucent Authorized Preferred
Certificate of Merger............ 2 Stock................... 28
Certificates..................... 5 Lucent Common Stock........ 4
Closing.......................... 2 Lucent Disclosure Schedule 28
Closing Date..................... 2 Lucent Filed SEC Documents 32
Code............................. 1 Lucent Junior Preferred
Common Shares Trust.............. 7 Stock................... 28
Confidentiality Agreement........ 42 Lucent Plans............... 46
control.......................... 58 Lucent Rights.............. 29
D&O Insurance.................... 47 Lucent Rights Agreements... 29
DGCL............................. 2 Lucent SEC Documents....... 31
Effective Time................... 3 material adverse change.... 58
Environmental Law................ 19 material adverse effect.... 58
ERISA............................ 20 Maximum Premium............ 47
ESPP............................. 11 Merger..................... 1
Excess Shares.................... 7 Merger Consideration....... 4
Exchange Act..................... 14 Nasdaq..................... 14
Exchange Agent................... 4 NYSE....................... 7
Exchange Fund.................... 5 Option Agreement........... 2
Exchange Ratio................... 4 Parachute Gross-Up Payment 21
Form S-4......................... 16 person..................... 59
GAAP............................. 15 Real Estate Transfer Taxes 48
Governmental Entity.............. 14 Release.................... 19
Hazardous Materials.............. 19 Restraints................. 51
HSR Act.......................... 14 SARs....................... 11
INS.............................. 1 SEC........................ 14
INS Authorized Preferred Section 4.02 Notice........ 38
Stock.......................... 11 Securities Act............. 15
INS Benefit Plans................ 19 Stockholder................ 1
INS Common Stock................. 1 Stockholder Agreement...... 1
INS Disclosure Schedule.......... 10 Sub........................ 1
INS Filed SEC Documents.......... 16 subsidiary................. 59
INS Permits...................... 18 Superior Proposal.......... 39
INS Proxy Statement.............. 14 Surviving Corporation...... 2
INS Rights....................... 27 Takeover Proposal.......... 38
INS Rights Agreement............. 27 taxes...................... 23
INS SEC Documents................ 14 Termination Fee............ 48
INS Stock Options................ 11 Warrant.................... 11
EXHIBIT A
TO THE MERGER AGREEMENT
Form of Affiliate Letter
Dear Sirs:
The undersigned, a holder of shares of common stock, par value $.001
per share ("INS Common Stock"), of International Network Services, a
Delaware corporation ("INS"), is entitled to receive in connection with the
merger (the "Merger") of a subsidiary of Lucent Technologies Inc., a
Delaware corporation ("Lucent"), with and into INS, securities of Lucent,
as the parent of the surviving corporation in the Merger (the "Lucent
Securities"). The undersigned acknowledges that the undersigned may be
deemed an "affiliate" of INS within the meaning of Rule 145 ("Rule 145")
promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), by the Securities and Exchange Commission (the "SEC") and may be
deemed an "affiliate" of INS for purposes of qualifying the Merger for
pooling of interests accounting treatment under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations,
although nothing contained herein should be construed as an admission of
either such fact.
If in fact the undersigned were an affiliate under the Securities Act,
the undersigned's ability to sell, assign or transfer the Lucent Securities
received by the undersigned in exchange for any shares of INS Common Stock
in connection with the Merger may be restricted unless such transaction is
registered under the Securities Act or an exemption from such registration
is available. The undersigned understands that such exemptions are limited
and the undersigned has obtained or will obtain advice of counsel as to the
nature and conditions of such exemptions, including information with
respect to the applicability to the sale of such securities of Rules 144
and 145(d) promulgated under the Securities Act. The undersigned
understands that Lucent will not be required to maintain the effectiveness
of any registration statement under the Securities Act for the purposes of
resale of Lucent Securities by the undersigned.
The undersigned hereby represents to and covenants with Lucent that
the undersigned will not sell, assign or transfer any of the Lucent
Securities received by the undersigned in exchange for shares of INS Common
Stock in connection with the Merger except (i) pursuant to an effective
registration statement under the Securities Act, (ii) in conformity with
the volume and other limitations of Rule 145 or (iii) in a transaction
which, in the opinion of counsel to Lucent or other counsel satisfactory to
Lucent or as described in a "no-action" or interpretive letter
from the Staff of the SEC specifically issued with respect to a transaction
to be engaged in by the undersigned, is not required to be registered under
the Securities Act.
The undersigned hereby further represents to and covenants with Lucent
that the undersigned has not, within the preceding 30 days, sold,
transferred or otherwise disposed of any shares of INS Common Stock held by
the undersigned and that the undersigned will not sell, transfer or
otherwise dispose of any Lucent Securities received by the undersigned in
connection with the Merger until after such time as results covering at
least 30 days of post-Merger combined operations of INS and Lucent have
been published by Lucent, in the form of a quarterly earnings report, an
effective registration statement filed with the SEC, a report to the SEC on
Form 10-K, 10-Q or 8-K, or any other public filing or announcement which
includes such combined results of operations, except as would not otherwise
reasonably be expected to adversely affect the qualification of the Merger
as a pooling-of-interests.
In the event of a sale or other disposition by the undersigned of
Lucent Securities pursuant to Rule 145, the undersigned will supply Lucent
with evidence of compliance with such Rule, in the form of a letter in the
form of Annex I hereto and the opinion of counsel or no-action letter
referred to above. The undersigned understands that Lucent may instruct its
transfer agent to withhold the transfer of any Lucent Securities disposed
of by the undersigned, but that (provided such transfer is not prohibited
by any other provision of this letter agreement) upon receipt of such
evidence of compliance, Lucent shall cause the transfer agent to effectuate
the transfer of the Lucent Securities sold as indicated in such letter.
Lucent covenants that it will take all such actions as may be
reasonably available to it to permit the sale or other disposition of
Lucent Securities by the undersigned under Rule 145 in accordance with the
terms thereof.
The undersigned acknowledges and agrees that the legends set forth
below will be placed on certificates representing Lucent Securities
received by the undersigned in connection with the Merger or held by a
transferee thereof, which legends will be removed by delivery of substitute
certificates upon receipt of an opinion in form and substance reasonably
satisfactory to Lucent from independent counsel reasonably satisfactory to
Lucent to the effect that such legends are no longer required for purposes
of the Securities Act.
There will be placed on the certificates for Lucent Securities issued
to the undersigned, or any substitutions therefor, a legend stating in
substance:
"The shares represented by this certificate were issued pursuant
to a business combination which is being accounted for as a pooling of
interests, in a transaction to which Rule 145 promulgated under the
Securities Act of 1933 applies. The shares have not been acquired by
the holder with a view to, or for resale in connection with, any
distribution thereof within the meaning of the Securities Act of 1933.
The shares may not be sold, pledged or otherwise transferred (i) until
such time as Lucent Technologies Inc. shall have published financial
results covering at least 30 days of combined operations after the
Effective Time and (ii) except in accordance with an exemption from
the registration requirements of the Securities Act of 1933."
The undersigned acknowledges that (i) the undersigned has carefully
read this letter and understands the requirements hereof and the
limitations imposed upon the distribution, sale, transfer or other
disposition of Lucent Securities and (ii) the receipt by Lucent of this
letter is an inducement to Lucent's obligations to consummate the Merger.
Very truly yours,
Dated:
ANNEX I
TO EXHIBIT A
[Name] [Date]
On , the undersigned sold the securities of Lucent Technologies Inc.,
a Delaware corporation ("Lucent"), described below in the space provided
for that purpose (the "Securities"). The Securities were received by the
undersigned in connection with the merger of a subsidiary of Lucent with
and into International Network Services, a Delaware corporation.
Based upon the most recent report or statement filed by Lucent with
the Securities and Exchange Commission, the Securities sold by the
undersigned were within the prescribed limitations set forth in paragraph
(e) of Rule 144 promulgated under the Securities Act of 1933, as amended
(the "Securities Act").
The undersigned hereby represents that the Securities were sold in
"brokers' transactions" within the meaning of Section 4(4) of the
Securities Act or in transactions directly with a "market maker" as that
term is defined in Section 3(a)(38) of the Securities Exchange Act of 1934,
as amended. The undersigned further represents that the undersigned has not
solicited or arranged for the solicitation of orders to buy the Securities,
and that the undersigned has not made any payment in connection with the
offer or sale of the Securities to any person other than to the broker who
executed the order in respect of such sale.
Very truly yours,
[Space to be provided for description of the Securities.]
