<PAGE>
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of
the Securities Exchange Act of 1934
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
</TABLE>
<TABLE>
<S> <C>
Check the appropriate box:
/ / Preliminary information statement
/ / Confidential, for use of the Commission only (as permitted
by Rule 14c-5(d)(2))
/X/ Definitive information statement
</TABLE>
<TABLE>
<S> <C>
PRINTRAK INTERNATIONAL INC.
------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and
0-11.
1) Title of each class of securities to which transaction
applies:
------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11. (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by
/ / Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount previously paid:
------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------
</TABLE>
<PAGE>
PRINTRAK LOGO
1250 N. TUSTIN AVENUE
ANAHEIM, CALIFORNIA 92807
TO THE STOCKHOLDERS OF PRINTRAK INTERNATIONAL INC.:
On August 28, 2000, the Board of Directors of Printrak International Inc.
and the holders of a majority of Printrak's outstanding Common Stock approved a
merger of Printrak with a wholly-owned subsidiary of Motorola, Inc. Printrak
will survive the Merger as a wholly-owned subsidiary of Motorola.
Printrak's board of directors has carefully considered the terms and
conditions of the proposed merger and has determined that the Merger is fair to
and in the best interests of all Printrak's stockholders. The enclosed
Information Statement is being provided to you in order to comply with
requirements of the Securities and Exchange Commission. I urge you to read it in
its entirety, but you need not take any other action at this time. No vote will
take place since all required stockholder approvals have been obtained, and you
are not being asked for a proxy. I encourage you to read the Information
Statement carefully.
You can find out how to obtain additional information regarding Printrak in
the section entitled "Where You can Find More Information" on page 28.
/s/ Richard M. Giles
Richard M. Giles
CHIEF EXECUTIVE OFFICER AND CHAIRMAN
Anaheim, California
October 21, 2000
--------------------------------------------------------------------------------
WE ARE NOT ASKING YOU FOR A PROXY. THE MERGER HAS BEEN APPROVED.
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 2
SUMMARY..................................................... 4
The Companies............................................. 4
Approval of the Merger.................................... 5
Appraisal Rights Under Delaware Law....................... 5
The Merger................................................ 6
Related Agreements........................................ 9
ACTION BY WRITTEN CONSENT OF MAJORITY STOCKHOLDERS.......... 9
THE MERGER AND RELATED TRANSACTIONS......................... 11
General................................................... 11
Closing................................................... 11
Background of the Merger.................................. 11
Printrak's Reasons for the Merger; Recommendation of
Printrak's Board of Directors........................... 13
Opinion of Printrak's Financial Advisor................... 14
Required Regulatory Filings and Approvals................. 18
Management and Operations Following the Merger............ 19
Interests of Certain Persons in the Merger................ 19
THE MERGER AGREEMENT........................................ 20
Structure of the Merger................................... 20
Merger Consideration...................................... 20
Representations and Warranties............................ 20
Conduct of Business Prior to the Merger................... 21
Additional Agreements..................................... 22
Conditions to the Merger.................................. 22
Stock Options, Stock Plans and Bonuses.................... 23
Termination Rights........................................ 23
Indemnification Rights.................................... 24
Amendment and Waiver...................................... 24
Certain Federal Income Tax Consequences................... 24
Accounting Treatment...................................... 25
Delisting and Deregistration of Printrak Common Stock
After the Merger........................................ 25
Appraisal Rights Under Delaware Law....................... 25
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL
OWNERS.................................................... 27
WHERE YOU CAN FIND MORE INFORMATION......................... 28
APPENDIX A -- Agreement and Plan of Merger, dated as of
August 28, 2000 by and among Printrak
International Inc., Motorola, Inc., Panther
Acquisition Corp., and The Smith Family
Revocable Trust dated October 2, 1992, The
Giles Living Trust UDT dated December 17, 1993
and The Giles Family Foundation.
APPENDIX B -- Opinion of Wedbush Morgan Securities, dated
August 28, 2000.
APPENDIX C -- Section 262 of the Delaware General
Corporation Law--Appraisal Rights
</TABLE>
i
<PAGE>
PRINTRAK INTERNATIONAL INC.
1250 N. TUSTIN AVE
ANAHEIM, CALIFORNIA 92807
------------------------
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
This Information Statement is furnished by the Board of Directors of
Printrak International Inc., a Delaware corporation ("Printrak"), to holders of
the outstanding shares of Common Stock, par value $.0001 per share (the
"Printrak Common Stock" or "Common Stock"), of the Company in connection with an
Agreement and Plan of Merger, dated as of August 28, 2000 (the "Merger
Agreement"), by and between Motorola Inc. ("Motorola"), Panther Acquisition
Corp. a Delaware Corporation ("Acquisition Sub"), Printrak and The Smith Family
Revocable Trust dated October 2, 1992, The Giles Living Trust UDT dated
December 17, 1993 and The Giles Family Foundation (collectively, the "Majority
Stockholders"). The Merger Agreement provides for the merger (the "Merger") of
Acquisition Sub with and into Printrak, with Printrak as the corporation
surviving the Merger.
The Majority Stockholders currently beneficially own approximately 51.9% of
the Printrak Common Stock, representing approximately 51.9% of the voting power
of the stockholders of Printrak.
As a result of the Merger, each share of Printrak Common Stock (other than
shares owned by those stockholders who have validly perfected their dissenters
rights under Delaware law) will be converted into the right to receive $12.1406
in cash, without interest (the "Merger Consideration"). The Merger Consideration
represented a premium of approximately 35% over the $8.89 average closing price
per share during the 30 trading days preceding August 28, 2000, which was the
last full trading day before the execution and public announcement of the Merger
Agreement. Representatives of Printrak and Motorola negotiated the Merger
Consideration. The total consideration payable to the holders of Printrak Common
Stock in the Merger and to the holders of options to acquire Printrak Common
Stock is approximately $160 million. A copy of the Merger Agreement is attached
to this Information Statement as Exhibit A.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
A written consent executed by the majority stockholders of Printrak
approving the Merger was executed and delivered to Printrak on August 28, 2000.
The Merger is expected to become effective on or about November 10, 2000.
This Information Statement is being mailed on or about October 21, 2000 to
all holders of Printrak's Common Stock.
The shares of Common Stock constitute the only outstanding class of voting
securities of Printrak. Only the majority stockholders of Printrak of record as
of the close of business on August 28, 2000 (the "Record Date"), approved the
Merger in an action by written consent. As of the Record Date, there were
11,973,923 shares of Common Stock outstanding and entitled to vote. No shares of
Printrak's Preferred Stock, $.0001 par value, were outstanding.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
1
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT IS THE MERGER?
A: Panther Acquisition Corp., a wholly-owned subsidiary of Motorola, Inc. will
merge with and into Printrak, with Printrak as the surviving company.
Motorola is one of the world's leading providers of analog and digital
two-way voice and data radio communications products and systems for public
safety and other customers worldwide. As a result of the Merger, Printrak
will become a wholly-owned subsidiary of Motorola and will no longer be a
publicly traded company.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: In connection with the Merger, $12.1406 in cash will be issued for each share
of Printrak Common Stock subject to the right of stockholders to dissent and
seek appraisal of the fair value of their shares under Delaware law. For a
more complete description of the Merger, see the section of this Information
Statement entitled "Structure of the Merger" on page 20.
Q: WILL THE SURVIVING COMPANY BE A PUBLIC COMPANY?
A: No. As a result of the Merger, Printrak International Inc., as the
corporation surviving the merger, will be privately held. Upon consummation
of the merger, Printrak's Common Stock will cease to be quoted on the NASDAQ
National Market and there will be no public market for the stock. In
addition, registration of the Common Stock will be terminated and Printrak
will no longer be required to file periodic reports with the Securities and
Exchange Commission.
Q: WHY DID PRINTRAK AGREE TO MERGE WITH MOTOROLA?
A: Printrak's Board of Directors believes that the terms and provisions of the
Merger Agreement with Motorola and the Merger with Motorola is fair to and
in the best interests of Printrak and its stockholders. For more information
on the reasons Printrak is proposing the Merger, see the section of this
Information Statement entitled "Printrak's Reasons for the Merger;
Recommendation of Printrak's Board of Directors" on page 13.
Q: WHAT WILL MOTOROLA RECEIVE IN THE MERGER?
A: Upon the closing of the Merger, all shares of Printrak's Common Stock that
are issued and outstanding immediately prior to the Merger will be
automatically converted into the right to receive $12.1406. Upon the closing
of the Merger, Motorola will own 100% of Printrak's issued and outstanding
stock.
Q: WHAT RIGHTS DO I HAVE IF I OPPOSE THE MERGER?
A If you wish, you may dissent and seek an appraisal of the fair market value
of your shares, but only if you comply with all Delaware laws and procedures
explained on pages 25-26 of this Information Statement.
Q: WHY AM I BEING PROVIDED WITH THIS INFORMATION STATEMENT?
A: The Securities and Exchange Commission and federal securities laws require
that Printrak provide its holders of voting securities with notice of
corporate action undertaken by written consent if proxies were not
solicited. We are providing you with this Information Statement because the
Merger was approved by the written consent of the holders of a majority of
Printrak's stock and proxies were not solicited.
Q: SHOULD I SEND IN MY SHARE CERTIFICATES NOW?
A: No. We will send you written instructions for exchanging your share
certificates promptly after the closing of the Merger.
2
<PAGE>
Q: WHAT VOTE WAS REQUIRED TO APPROVE THE MERGER?
A: The approval of the Merger required the affirmative vote of the holders of a
majority of the shares issued, outstanding and entitled to vote as of the
date the written consent was executed, August 28, 2000.
Q: WHAT ARE THE FEDERAL TAX CONSEQUENCES OF THE MERGER TO ME?
A: The Merger generally will be taxable to you for U.S. Federal income tax
purposes. To review the federal income tax consequences to stockholders in
greater detail, see pages 24-25 of this Information Statement.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: The Merger is expected to become effective on or about November 10, 2000.
Q: WHOM SHOULD I CALL WITH MY QUESTIONS?
A: If you would like additional copies of this document, or if you have more
questions about the Merger, including the procedures for obtaining the cash
payment for your shares, please contact:
PRINTRAK INTERNATIONAL INC.
ATTENTION: JANET HARMIER
CONTROLLER
Phone number: (714) 238-2000
3
<PAGE>
SUMMARY
This summary highlights information from this Information Statement. This
summary may not contain all of the information that is important to you. You
should read carefully the entire Information Statement and the other documents
referred to in this Information Statement to obtain a full understanding of the
matters about which you are being informed.
Throughout this Information Statement, the "Merger Agreement" refers to the
Agreement and Plan of Merger, dated as of August 28, 2000, and attached hereto
as Exhibit A, and "Merger" refers to the merger of Panther Acquisition Corp.
with and into Printrak International Inc. with Printrak International Inc. as
the surviving corporation. Panther Acquisition Corp. is wholly-owned by
Motorola Inc. For ease of reference we sometimes refer in this document to
Panther Acquisition Corp. as "Acquisition Sub," to Motorola Inc. as "Motorola,"
to Printrak International Inc. as "Printrak" and The Smith Family Revocable
Trust dated October 2, 1992, The Giles Living Trust UDT dated December 17, 1993
and The Giles Family Foundation, collectively, as the "Majority Stockholders."
We are using the term "Printrak Common Stock" or "Common Stock" to mean all of
the Common Stock of Printrak, par value $.0001 per share.
THE COMPANIES
PRINTRAK INTERNATIONAL INC.
1250 N. TUSTIN BLVD.
ANAHEIM, CALIFORNIA 92807
(714) 666-2700
Printrak International Inc. is a global supplier of enterprise software and
related services for information management and decision support that ensures
community safety and security. Printrak's suite of networked applications
provides comprehensive management of government records for rapid access and
analysis of critical and time-sensitive public information. The systems operate
by gathering, validating, warehousing, mining and distributing mission critical
data to government agencies and businesses using private networks, the Internet
or wireless services. Printrak technology also provides the positive
identification infrastructure necessary to reduce fraud and enhance data
exchange. Printrak's systems serve national, state, county and municipal
agencies in 36 countries. Printrak is a Delaware corporation with its principal
offices located at the above address.
MOTOROLA, INC.
1303 E. ALGONQUIN RD.
SCHAUMBURG, ILLINOIS 60196
(847) 576-5000
Motorola is a global leader in providing integrated communications solutions
and embedded electronic solutions. These include:
- software-enhanced wireless telephone, two-way radio, messaging and
satellite communications products and systems, as well as networking and
Internet-access products, for consumers, network operators, and
commercial, government and industrial customers;
- embedded semiconductor solutions for customers in networking and
computing, transportation, wireless communications and imaging and
entertainment industries;
- embedded electronic systems for automotive, communications, imaging,
manufacturing systems, computer, consumer and industrial customers; and
- digital and analog systems and set-top terminals for broadband cable
television operators.
Motorola is a Delaware corporation with its principal offices located at the
above address.
4
<PAGE>
PANTHER ACQUISITION CORP.
1303 E. ALGONQUIN RD.
SCHAUMBURG, ILLINOIS 60196
(847) 576-5000
Acquisition Sub is a newly-formed, wholly-owned subsidiary of Motorola
formed solely for the purposes of the Merger. Acquisition Sub is a Delaware
corporation with its principal officers located at the above address.
PURPOSE, BACKGROUND AND EFFECTS OF THE MERGER
The Merger will cause Printrak to be privately owned, which the Majority
Stockholders believe will advance Printrak's long-term strategy, and will be
beneficial from a competitive and cost standpoint and from the standpoint of
employee relations. Upon the consummation of the Merger, Printrak's stock will
cease to be publicly traded and holders of Printrak Common Stock (other than
those who dissent from the Merger and seek appraisal of their shares in
accordance with Delaware law (the "Dissenting Stockholders")) will receive
$12.1406 per share in cash. Following the Merger, all of the capital stock of
Printrak, as the surviving corporation, will be owned by Motorola.
APPROVAL OF THE MERGER
ACTION BY WRITTEN CONSENT OF PRINTRAK MAJORITY STOCKHOLDERS (PAGE 9)
On August 28, 2000, holders of a majority of the outstanding Common Stock of
Printrak approved the Merger of Panther Acquisition Corp. with and into
Acquisition Sub in an action by written consent.
RECORD DATE; VOTE REQUIRED (PAGE 9)
On August 28, 2000, the Record Date, there were 11,973,923 shares of
Printrak Common Stock outstanding. Holders of Printrak Common Stock were
entitled to one vote for each share of Printrak Common Stock that they owned on
the Record Date. Approval of the Merger by Printrak majority stockholders
required the affirmative vote of more than 50% of the total shares issued and
outstanding as of the time of the execution of the Merger Agreement, August 28,
2000.
APPROVAL OF THE MERGER AND RECOMMENDATIONS OF PRINTRAK'S BOARD OF DIRECTORS
(PAGES 10 AND 13-14)
Printrak's Board of Directors declared the Merger advisable and determined
that the Merger is fair to Printrak and you, as a Printrak stockholder, and is
also in the best interests of Printrak and its stockholders as a whole.
APPRAISAL RIGHTS UNDER DELAWARE LAW
If the Merger is consummated, holders of Common Stock may have the right
under Delaware law to demand an appraisal of their shares of Common Stock
(shares held by stockholders who perfect such rights are referred to herein as
Dissenting Shares). The required procedure set forth in Section 262 of the DGCL
must be followed exactly or any appraisal rights may be lost. In order to be
entitled to exercise appraisal rights, a Printrak stockholder may not have voted
in favor of the Merger Agreement. A Printrak stockholder electing to exercise
appraisal rights must also make written demand upon Printrak for the purchase of
Dissenting Shares and payment to such stockholder in cash of their appraised
value. Such demand must be received by Printrak or Printrak's transfer agent
within twenty (20) days of the mailing of this Information Statement. The demand
should specify the number of shares held of record by such stockholder and that
the stockholder intends to demand the appraisal of such stockholders' shares. A
copy of Section 262 of the DGCL is attached hereto as APPENDIX C.
5
<PAGE>
THE MERGER
We have attached the Merger Agreement to this document as APPENDIX A. Please
read the Merger Agreement in its entirety. It is the legal document that governs
the Merger.
GENERAL (PAGE 11)
If all conditions to the Merger are satisfied, Acquisition Sub will merge
with and into Printrak, and Printrak will be the surviving corporation. After
the Merger, Printrak will be a wholly-owned subsidiary of Motorola and will not
be a publicly traded company. The Merger Agreement provides that Acquisition
Sub's sole stockholder, Motorola, will receive all outstanding shares of
Printrak Common Stock in exchange for the payment of Merger Consideration equal
to $12.1406, per share, for an aggregate consideration equal to approximately
$160 million.
EFFECT OF MERGER ON YOUR SHARES (PAGE 20)
As a Printrak stockholder, each of your shares of Printrak Common Stock
will, at the time the Merger becomes effective, entitle you to receive $12.1406
if you do not exercise your appraisal rights. All other rights associated with
your status as a holder of Printrak Common Stock shall terminate, including
voting and dividend rights.
SURRENDER OF CERTIFICATES.
You will be notified promptly of the consummation of the Merger and will be
advised of the procedure for surrender of your stock certificates in exchange
for the Merger Consideration, which will be paid promptly after such surrender.
YOU SHOULD NOT SEND IN STOCK CERTIFICATES AT THIS TIME.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the acceptance of the filing of the
certificate of merger with the Secretary of State of Delaware, or such later
time as may be specified in the Merger Agreement. The certificate of merger is
expected to be filed as soon as practicable after the satisfaction or waiver of
each of the conditions to consummation of the Merger, which is expected to occur
as soon as practicable.
REASONS FOR THE MERGER
Printrak's Board of Directors has unanimously approved the Merger Agreement
and the Merger, declared the Merger advisable and believes that the Merger is
fair to and in the best interests of Printrak's stockholders and, prior to the
execution of the written consent of the Majority Stockholders unanimously
recommended that the Majority Stockholders approve of the execution Merger
Agreements and the Merger. In reaching its unanimous determination, the Board
considered a number of factors, including its knowledge of Printrak and the
business, management's assessments, the historical and current value of the
Common Stock, the terms of the Merger Agreement, and the fairness opinion of
Wedbush Morgan Securities. The Board believes that Printrak's current and
potential customers and the overall marketplace are demanding full spectrum
networked public safety solutions, and that Printrak is limited as a stand alone
company in its resources and ability to raise the capital required to execute
the aggressive acquisition strategy necessary to provide such solutions. For
these reasons, among others, the Board believes that there is substantial risk
that in the long-term, as a stand-alone company, Printrak would not produce
stockholder value in excess of the Merger Consideration.
6
<PAGE>
OPINION OF PRINTRAK'S FINANCIAL ADVISOR (PAGES 14-18)
Printrak's board of directors has received a written opinion from Wedbush
Morgan Securities, an investment banking firm, that the consideration to be
received by you in the Merger is fair from a financial point of view. The full
text of Wedbush's written opinion dated August 28, 2000 is attached to this
document as APPENDIX B. We encourage you to read this opinion carefully in its
entirety for a description of the assumptions made, procedures followed, matters
considered and limitations on the review undertaken. Wedbush's opinion is
addressed to the Printrak board and does not constitute a recommendation to any
stockholder with respect to any matters relating to the Merger.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (PAGES 24-25)
The cash you will receive as a result of this Merger may be taxable income
for Federal income tax purposes and also may be taxable under state, local and
foreign tax laws. You are urged to consult your own tax and financial advisors
as to the tax consequences to you of this Merger in light of your particular
circumstances.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE 19)
In considering the Board of Directors' approval of this Merger, you should
be aware that the Board and certain Printrak officers have interests that may
conflict with the best interests of Printrak and you. These interests include
the value of exercisable options held by directors and executive officers of
Printrak, severance agreements entered into by Printrak and certain employees of
Printrak, indemnification and liability insurance to be provided by Motorola for
the benefit of officers and directors of Printrak for six years following the
Merger, the 49.76% ownership of Printrak Common Stock held by our Chief
Executive Officer and Chairman, Richard Giles, and a Consulting Agreement to be
entered into between Motorola and Mr. Giles.
REQUIRED REGULATORY FILINGS AND APPROVALS (PAGES 18-19)
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 requires Printrak
and Motorola to furnish certain information and materials to the Antitrust
Division of the Department of Justice and the Federal Trade Commission and
requires a specified waiting period to expire or be terminated before the Merger
can be completed. Even after the waiting period expires or terminates, the
Antitrust Division of the Department of Justice and the Federal Trade Commission
will have the authority to challenge the Merger on antitrust grounds before or
after the Merger is completed. Printrak and Motorola filed the antitrust
notification and report forms on September 26, 2000 and received early
termination of the waiting period from the Federal Trade Commission effective
October 11, 2000.
In addition, Printrak and Motorola are required to furnish certain
information and materials to the antitrust authorities of Argentina, Brazil, the
Federal Republic of Germany and Romania. Filings were made in Argentina on
September 22, 2000, in Brazil on September 19, 2000 and in the Federal Republic
of Germany on September 27, 2000. German antitrust authorities have one month
after the parties file their application to review the transaction. During that
one month period, they can either approve the transaction or initiate an
examination of the transaction which could take an additional three months,
during which time the parties cannot close the transaction. During this three
month period, the antitrust authorities will either approve the transaction or
prohibit it. Approval may be granted before the initial one month review or
before the additional three month review period. If approved, the antitrust
authorities can not later challenge the transaction under their merger law but
could challenge the transaction under other provisions of their antitrust laws.
Printrak and Motorola intend to make a post-closing filing in Romania as soon as
practicable after the closing.
7
<PAGE>
STOCK OPTIONS, STOCK PLANS AND BONUSES (PAGE 23)
Pursuant to the terms of Printrak's stock option plans and the Merger
Agreement, holders of stock options of Printrak will be entitled to accelerated
vesting of such options to the extent such options would be vested on March 31,
2001. Printrak will pay each holder of options, in exchange for the cancellation
of such options, an amount of cash equal to the product of (i) the excess, if
any, of the Merger Consideration over the per share exercise price of each share
subject to such Printrak Option and (ii) the number of shares subject to such
Printrak Option immediately prior to the Effective Time.
Printrak has also amended certain other stock purchase and compensation
plans, as more fully described herein.
CONDITIONS TO COMPLETION OF THE MERGER (PAGE 22)
The completion of the Merger depends on a number of conditions being
satisfied, including, but not limited to, the following:
- certain related agreements between Motorola and Richard Giles being
entered into;
- the receipt of all necessary governmental consents, including expiration
or termination of applicable waiting periods under U.S. antitrust laws;
- the absence of any order, decree or ruling or any statute or regulation
which would prohibit the Merger or render the Merger illegal;
- each of the key employees identified in the Merger Agreement shall have
executed offer letters in forms satisfactory to Motorola; and
- the absence of material adverse changes to the financial condition or
results of operations of each of Printrak and Motorola other than changes
caused by changes in general economic conditions or conditions generally
affecting the industries in which Printrak and Motorola conduct their
respective operations.
Either Printrak or Motorola may choose to waive a condition to its
obligation to complete the Merger even though that condition has not been
satisfied. In the event that the parties do decide to waive any conditions, the
parties may recirculate this document to disclose the waiver of the condition
and all related disclosures, including the risks to Printrak stockholders
resulting from the waiver.
TERMINATION OF THE MERGER AGREEMENT (PAGE 23)
Printrak and Motorola may agree in writing to terminate the Merger Agreement
and abandon the Merger at any time without completing the Merger. In addition,
either Printrak or Motorola may terminate the Merger Agreement and abandon the
Merger if the Merger has not been consummated prior to December 31, 2000, under
certain circumstances.
In addition, the Merger Agreement may be terminated under the circumstances
summarized below:
- by Motorola or Acquisition Sub, if Printrak or any of the majority
stockholders have materially breached their respective representations and
warranties or materially failed to perform their respective covenants or
agreements and such breach or failure to perform has not been cured prior
to the closing;
- by Printrak if Motorola or Acquisition Sub have materially breached their
representations and warranties or materially failed to perform their
covenants or agreements and such breach or failure to perform has not been
cured prior to the closing;
8
<PAGE>
- by either Motorola, Acquisition Sub or Printrak if all the conditions of
the Merger Agreement have not been satisfied or waived on or before
December 31, 2000, other than as a result of a breach by the terminating
party; or
- by either Motorola or Printrak, if any court or other governmental entity
has issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the Merger and
such order, decree, ruling or other action shall have become final and
nonappealable.
RELATED AGREEMENTS
CONSULTING AGREEMENT (PAGE 22)
In order to induce Motorola to enter into the transaction, and as a
condition to the closing of the Merger, Richard Giles has entered into a
consulting agreement with Motorola that provides, among other things, that he
will perform consulting services to Motorola for a period of six months
following the closing of the Merger, in exchange for certain daily compensation.
NON-COMPETE, NON-SOLICIT, NON-DISCLOSURE AND WAIVER AGREEMENT (PAGE 22)
As a condition to the closing of the Merger, Motorola and Richard Giles,
individually and in his capacity as Trustee of The Giles Living Trust UDT dated
December 17, 1993 and President of The Giles Family Foundation, entered into a
non-compete, non-solicit, non-disclosure and waiver agreement. Under this
agreement, Richard Giles agrees not to compete with Motorola in markets in which
Printrak does business as of the time of the Merger, not to solicit employees of
Printrak and not to disclose confidential, proprietary information of Motorola
or Printrak which is in his possession. Richard Giles under this agreement also
waives his rights to any severance benefits under existing contract rights with
Printrak.
PAYING AGENT AGREEMENT
In order to facilitate the payment of Merger Consideration, Equiserve Trust
Company, N.A., a national banking association with its principal offices in
Boston, Massachusetts, has agreed to act as paying agent under that certain
Paying Agent Agreement between Equiserve Trust Company and Motorola.
ACTION BY WRITTEN CONSENT OF MAJORITY STOCKHOLDERS
DATE OF WRITTEN CONSENT AND MATTERS APPROVED
On August 28, 2000, the Record Date, holders of a majority of the
outstanding shares of Common Stock of Printrak approved the Merger of Panther
Acquisition Corp., a wholly-owned subsidiary of Motorola, with and into
Printrak. Pursuant to the Merger Agreement, Printrak shall survive the Merger as
a wholly-owned subsidiary of Motorola and will no longer be a publicly traded
company.
VOTE REQUIRED
Under Delaware law and Printrak's Certificate of Incorporation, approval of
the Merger holders of a majority of Printrak Common Stock required the
affirmative vote of more than 50% of the total shares issued and outstanding as
of the Record Date, the time of the execution of the Merger Agreement. The
holders of Printrak Common Stock were entitled to one vote for each share of
Printrak Common Stock that they owned on the Record Date. On the Record Date,
11,973,923 shares of Printrak Common Stock were outstanding. Of these shares,
6,217,700 or 51.9% approved the Merger by written consent in lieu of a meeting.
9
<PAGE>
APPROVAL OF THE MERGER AND RECOMMENDATION OF PRINTRAK'S BOARD OF DIRECTORS
ON AUGUST 28, 2000, PRINTRAK'S BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND THE MERGER, DECLARED THAT THE MERGER AGREEMENT AND THE
MERGER ARE ADVISABLE AND DETERMINED THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, PRINTRAK AND ITS STOCKHOLDERS.
STOCK CERTIFICATES
At or after the closing of the Merger, holders of shares of Printrak Common
Stock shall surrender such shares to Equiserve Trust Company to act as paying
agent (the "Paying Agent"). The Paying Agent shall, upon your surrender of each
certificate formerly representing shares of Printrak Common Stock, together with
a properly completed letter of transmittal, pay you the product of $12.1406
multiplied by the number of shares formerly represented by such certificate, in
exchange therefor, and such certificate shall immediately be cancelled. Until
surrendered and exchanged, each certificate shall represent solely the right to
receive the Merger Consideration.
10
<PAGE>
THE MERGER AND RELATED TRANSACTIONS
THE FOLLOWING DESCRIBES CERTAIN ASPECTS OF THE PROPOSED MERGER. THIS SUMMARY
MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND
THE MERGER FULLY, AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE
MERGER, WE URGE YOU TO READ THE MERGER AGREEMENT CAREFULLY. A COPY OF THE MERGER
AGREEMENT IS ATTACHED AS APPENDIX A TO THIS DOCUMENT AND IS INCORPORATED IN THIS
DOCUMENT BY REFERENCE.
GENERAL
The Merger Agreement provides for the Merger of Panther Acquisition Corp., a
wholly-owned subsidiary of Motorola, with and into Printrak, with Printrak to be
the surviving corporation of the Merger. After the Merger, Printrak will be a
wholly-owned subsidiary of Motorola and will no longer be a publicly traded
company. The Merger is expected to be consummated as soon as practicable after
the satisfaction or waiver of each of the conditions to consummation of the
Merger, which are expected to occur as soon as practicable. Upon the
consummation of the Merger, each share of the outstanding Common Stock (other
than Dissenting Shares) will automatically be converted into the right to
receive $12.1406 in cash, without interest and holders of options will be
entitled to receive a cash payment equal to the excess of $12.1406 over the
applicable option exercise price for each share of Common Stock subject to
options. The following discussion in this Information Statement of the Merger,
the Merger Agreement and related agreements is a description of all of the
material terms of the Merger Agreement and such agreements; provided, however,
that such discussions are subject to and qualified in their entirety by
reference to the Merger Agreement and the related agreements. A copy of the
Merger Agreement is attached to this Information Statement as APPENDIX A and
incorporated into this Information Statement by this reference.
CLOSING
The consummation of the Merger and the transactions contemplated thereby
shall constitute the "Closing." Unless otherwise mutually agreed to by Printrak
and Motorola, the Closing shall take place at the offices of Stradling Yocca
Carlson & Rauth in Newport Beach, on or about November 10, 2000, which shall
constitute the "Closing Date." The effective time of the Merger shall be the
close of business on the Closing Date (the "Effective Time").
BACKGROUND OF THE MERGER
From time to time, Printrak's Board of Directors has informally evaluated
strategic alternatives, including the sale of Printrak and other possible
transactions that could strengthen our competitive position with respect to
other designers and manufacturers of computerized criminal justice technology,
particularly computer aided dispatch, or CAD, and automated fingerprint
identification systems, or AFIS. The Merger with Motorola is an extension of
that strategy. Motorola and Printrak have partnered on projects in the past and
competed against each other for customer contracts, and have explored software
licensing arrangements and other possible ventures.
During the summer of 1998, Bob McCall, Corporate VP and GM, Global Portfolio
Management, visited Printrak at its office in Boulder, Colorado. He met with
Michael Lyons, our Vice President of Operations and Steve Lowe to discuss the
technical and economic aspects of Printrak's public safety CAD applications.
Mr. McCall indicated that Motorola was evaluating potential CAD vendors as
possible partners or acquisition targets.
In November 1999, David McNeff, our Senior Vice President of Sales,
Mr. Lyons, Mr. Lowe and other executive officers and technical personnel from
Printrak visited Motorola in Schaumburg, Illinois to discuss certain potential
strategic relationships between Printrak and Motorola.
Subsequent to this meeting, Richard Giles sent Motorola a letter explaining
the market position of Printrak and outlining various possibilities for
relationships between Printrak and Motorola.
11
<PAGE>
On November 17, 1999, Richard Giles, our Chief Executive Officer, visited
Motorola. During this meeting, Motorola expressed interest in an acquisition
transaction involving Printrak, and Mr. Giles indicated that Printrak was
prepared to entertain discussions concerning such a transaction.
On March 3, 2000, Motorola representatives visited Printrak at its
headquarters. Printrak's officers discussed the history of Printrak, markets,
partners, competitors, customers, products, financial results and projections,
and organizational structure. The parties also discussed Motorola's possible
interest in acquiring Printrak. Motorola outlined their operating philosophies
and objectives and the potential strategic benefits of a combination. Following
this meeting, Motorola requested certain data from Printrak relative to markets,
revenues, financial position and operations which was provided during March and
reviewed by Motorola.
On June 1, 2000, Kevin Gilbert of Motorola contacted Richard Giles and
indicated that Motorola's assessment of Printrak's value, and the fact that both
corporations' equity seemed to be currently discounted in the public markets,
indicated that a $110 million to $115 million stock for stock merger would be in
the best interests of both corporations' stockholders. Printrak responded that
such an offer was inadequate and that further discussions could only proceed on
the basis of a much improved offer.
In early June, Printrak contacted Wedbush Morgan Securities, an investment
banking firm, to discuss Motorola's interest in Printrak and the possibility of
retaining Wedbush Morgan Securities to render an opinion to Printrak as to the
fairness to the stockholders of the proposed transaction.
On June 21, 2000, Richard Giles, Dan Crawford and Piet Lesage met with Bob
McCall, Kevin Gilbert and Cindy Cruise of Motorola at its offices in Schaumburg,
Illinois, and Motorola expressed interest in acquiring Printrak at a price range
of between $135 million and $145 million in cash consideration.
On June 24, 2000, the Directors of Printrak discussed Motorola's expression
of interest at length, and concluded that the $145 million price was inadequate.
However, the Board authorized Mr. Giles to continue discussions with Motorola.
Mr. Giles contacted Bob McCall and informed him of the Board's decision.
On July 13, 2000, Motorola delivered by telephone to Mr. Giles an offer to
acquire Printrak for $160 million cash, which offer was subject to Motorola
satisfactorily completing due diligence, to negotiation and execution of
definitive documentation and to other customary conditions.
On July 14, 2000, Richard Giles, on behalf of Printrak, conditionally
accepted the offer made on July 13, 2000 subject to all the conditions discussed
on such date.
On July 18, 2000, Printrak's Board held a meeting to discuss the terms of
the proposed transaction. At such meeting, the Board, together with its legal
advisors, reviewed, among other things, the background of the proposed
transaction, Printrak's long-term outlook and various strategic alternatives
available to Printrak.
On July 24, 2000, Wedbush Morgan Securities was retained by the Board of
Printrak to render an opinion as to the fairness, from a financial point of view
of the consideration to be paid by Motorola to Printrak's stockholders in
connection with the proposed transaction, when such consideration was agreed
upon by the potential parties. No limitations were imposed by the Board on
Wedbush with respect to the investigations made or procedures followed in
rendering its opinion.
Between July 24, 2000 and August 28, 2000, representatives of Printrak and
Motorola negotiated a definitive acquisition agreement, and Motorola reviewed
due diligence materials regarding Printrak.
On August 28, 2000, Printrak's Board of Directors met to consider a proposed
merger agreement and the transactions contemplated thereby. At such meeting,
members of Printrak's senior management, together with Printrak's legal and
financial advisors, reviewed with the Board, among other things, the background
of the proposed transaction, the value presented by the transaction and
Printrak's long-term
12
<PAGE>
outlook and the terms of the merger agreement. Wedbush Morgan Securities then
made a presentation to the Board regarding the value of Printrak and the
fairness of the proposed transaction. At the conclusion of the presentation,
Wedbush Morgan Securities delivered its oral opinion (subsequently confirmed in
writing) that the consideration to be received by Printrak's stockholders in the
Merger was fair to Printrak's stockholders from a financial point of view. The
Board of Directors unanimously approved the final Merger Agreement and the
transactions contemplated thereby. Once approved by the Majority Stockholders,
the parties executed the Merger Agreement and recommended that the Majority
Stockholders execute a written consent approving the Merger Agreement and the
transactions contemplated thereby.
PRINTRAK'S REASONS FOR THE MERGER; RECOMMENDATION OF PRINTRAK'S BOARD OF
DIRECTORS
Printrak's Board of Directors has carefully considered the terms and
conditions of the proposed Merger and determined that the Merger is in the best
interests of, and is on terms fair to, Printrak's stockholders and has
unanimously approved the Merger Agreement and the related agreements and the
transactions contemplated thereby, including the Merger.
In reaching its unanimous determination that the Merger Agreements and the
transactions contemplated thereby, including the Merger, are in the best
interests of, and on terms fair to, Printrak's stockholders, the Board of
Directors considered a number of factors, which taken together supported such
determination, including without limitation the following:
(1) the Board's knowledge of the business, operations, properties,
assets, financial condition and operating results of Printrak, which
provided the background and context for its deliberations and
determinations;
(2) information relating to the financial condition, results of
operations, capital levels, and prospects of Printrak, and management's
assessment of the prospects of Printrak, which led the Board to determine
that there is substantial risk that in the long-term Printrak will not
produce stockholder value in excess of the Merger Consideration;
(3) the presentation by Wedbush Morgan Securities and its opinion that
the cash consideration of $12.1406 per share to be received by the
stockholders pursuant to the Merger Agreement is fair to such stockholders;
(4) the relationship of the Merger Consideration to the historical and
current market prices for our Common Stock preceding the announcement of the
Merger and the Board's belief that the public market's valuation of Printrak
and the broad market for enterprise software used in community safety and
security, may limit the value realizable by Printrak in the public market;
(5) the Board's belief that Printrak's current and potential customers
and the overall marketplace are demanding full spectrum networked public
safety solutions, and that Printrak is limited as a stand alone company in
its resources and ability to raise the capital required to execute the
aggressive acquisition strategy necessary to provide such solutions, thereby
creating substantial risk that in the long-term Printrak would not produce
stockholder value in excess of the Merger Consideration, based on the advice
of senior management, as well as the Board's judgment, after review with
Printrak's management and its outside advisors of alternatives to the
Merger, the uncertain likelihood of success of this strategy and the need
for substantial additional capital to pursue this strategy;
(6) the terms of the Merger Agreement as reviewed by the Board with its
legal advisors; and
(7) the fact that the Merger Consideration is all cash and that the
Merger is not subject to financing contingencies.
The Board of Directors was pursuing Printrak's established business
strategies discussed until Motorola made an offer to acquire Printrak at a price
which the Board did not believe would be offered by any
13
<PAGE>
other party. After detailed consideration, the Board determined that the price
was substantially higher than Printrak's stock price had been in recent months
and that the price was so advantageous to our stockholders that it would be
imprudent not to enter into the Merger Agreement. The Board believed that the
Merger Consideration was above the amount that other potential acquirers would
be willing to pay or that Printrak could expect to otherwise achieve. For these
reasons, the Board did not seek alternatives to the Merger.
The discussion above addresses the material factors considered by Printrak's
directors in their consideration of the Merger. In view of the variety of
factors and the amount of information considered, Printrak's Board did not find
it practicable to, and did not, make specific assessments of, quantify or
otherwise assign relative weights to the specific factors considered in reaching
its determination. The determination was made after consideration of all of the
factors as a whole. In addition, individual members of Printrak's board of
directors may have given different weights to different factors.
The Printrak board has approved the Merger Agreement and the Merger,
declared that the Merger Agreement and the Merger are advisable and determined
that the Merger is fair to, and in the best interests of, Printrak and the
Printrak stockholders.
OPINION OF PRINTRAK'S FINANCIAL ADVISOR
Pursuant to a letter agreement, dated July 24, 2000, Printrak retained
Wedbush Morgan Securities to render a fairness opinion in connection with
Printrak's proposed merger transaction with Motorola. Wedbush Morgan is an
investment banking firm that is regularly engaged as part of its business in the
evaluation of businesses and their securities in connection with mergers and
acquisitions and other corporate transactions. Wedbush Morgan was selected by
Printrak based on Wedbush Morgan's experience, expertise and reputation.
Pursuant to the terms of the agreement with Wedbush Morgan, Printrak
requested that Wedbush Morgan evaluate the fairness, from a financial point of
view, of the consideration to be paid by Motorola to Printrak's stockholders in
connection with the proposed merger. No limitations were imposed by Printrak's
Board of Directors on Wedbush Morgan with respect to the investigations made or
procedures followed in rendering its fairness opinion (the "Opinion"). At a
meeting of Printrak's Board of Directors held on August 28, 2000, prior to the
Board of Directors approving and adopting the Merger Agreement, Wedbush Morgan
delivered its oral and written opinion to the Board of Directors that, as of
August 28, 2000, the proposed consideration to be received by the holders of
shares of Printrak's Common Stock pursuant to the Agreement and Plan of Merger
(the "Merger Agreement") dated August 28, 2000, was fair, from a financial point
of view, to such stockholders. Wedbush Morgan made no recommendation in its
August 28, 2000 Opinion to Printrak or to Printrak's stockholders with respect
to any approval of the proposed transaction. Additionally, Wedbush Morgan did
not make recommendations to Printrak's Board of Directors with respect to the
amount of consideration paid by Motorola.
THE FULL TEXT OF WEDBUSH MORGAN'S OPINION WHICH SETS FORTH THE PROCEDURES
FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND QUALIFICATIONS AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS AN ANNEX TO THIS
INFORMATION STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE. THE SUMMARY OF
THE OPINION OF WEDBUSH MORGAN SET FORTH IN THIS INFORMATION STATEMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. HOLDERS
OF PRINTRAK'S COMMON STOCK ARE URGED TO READ THE OPINION IN ITS ENTIRETY IN
CONNECTION WITH THEIR CONSIDERATION OF THE PROPOSED MERGER. THE OPINION IS
ADDRESSED TO THE BOARD OF DIRECTORS OF PRINTRAK ONLY.
In connection with rendering the Opinion, Wedbush Morgan reviewed, among
other things: (i) the Merger Agreement dated August 28, 2000; (ii) Printrak's
audited consolidated financial statements and
14
<PAGE>
notes thereto and management's discussion and analysis of the financial
condition and results of operations contained in the Annual Reports to
Printrak's stockholders for the three years ended March 31, 2000;
(iii) Printrak's unaudited consolidated financial statements and management's
discussions and analysis of the financial condition and results of operation
contained in the quarterly report on Form 10-Q for the period ended June 30,
2000; (iv) certain forward-looking projections prepared by Printrak's management
for fiscal years ending March 31, 2001 through March 31, 2005; (v) views of
management regarding the past and current business operations, financial
condition and future prospects of Printrak; (vi) the reported market prices and
historical trading activity of Printrak's Common Stock, including a comparison
of certain financial and stock market information for Printrak with similar
information for comparable publicly traded securities and indices; (vii) the
financial terms, to the extent publicly available, of certain recent business
combinations in SIC 1300 "Electronic Technology Sector" (including relevant
subcategories); (viii) the current market environment and the Automated
Fingerprint Identification Market and Computer-Aided Dispatch environments in
particular; and (ix) such other information, studies, analyses, and examinations
as Wedbush Morgan deemed appropriate.
In performing its review, Wedbush Morgan assumed and relied upon, without
independent verification, the accuracy and completeness of all of the financial
and other information provided to Wedbush Morgan by Printrak. Wedbush Morgan did
not make an independent evaluation or appraisal of the specific contracts,
backlog, or the likelihood of securing future contracts (relying, where
relevant, on the analyses of Printrak's management). Although Wedbush Morgan did
conduct a physical tour of Printrak's Anaheim and Irvine properties, Wedbush
Morgan was not retained to and did not conduct a physical inspection of any of
the properties or facilities of Printrak. With respect to the financial
projections prepared by and/or reviewed with management of Printrak, Wedbush
Morgan assumed that such projections were reasonably prepared on bases
reflecting the best currently available estimates and judgments of Printrak's
management of the future financial performance of Printrak, and that such
performances would be realized in the amounts and in the time periods currently
estimated. Wedbush Morgan also assumed that there has been no material change in
Printrak's assets, financial condition, results of operations, business or
prospects since the date of the June 30, 2000 financial statements. Wedbush
Morgan further assumed that Printrak will remain as a going concern for all the
periods relevant to its analysis and that all conditions to the Merger Agreement
would be satisfied and not waived.
Certain of the projections reviewed by Wedbush Morgan were prepared by the
management of Printrak. Printrak does not publicly disclose internal management
projections of the type provided to Wedbush Morgan in connection with the review
of the Merger. Such projections were not prepared with a view toward public
disclosure. The projections were based on numerous variables and assumptions
that are inherently uncertain, including, without limitation, factors related to
government spending and general economic and competitive conditions.
Accordingly, actual results could vary significantly from those set forth in
such projections.
Set forth below is a brief summary of the analyses conducted by Wedbush
Morgan in connection with its oral and written opinion dated August 28, 2000.
Such summary does not purport to be a complete description of Wedbush Morgan's
analyses. Preparation of a fairness opinion is a complex process involving
subjective judgments and Wedbush Morgan believes that its analyses must be
considered as a whole. Selecting portions of such analyses and factors
considered therein, without considering all factors and analyses, could create
an incomplete view of the analyses and processes underlying Wedbush Morgan's
Opinion. In performing its analyses, Wedbush Morgan made numerous assumptions
with respect to industry performance, business and economic conditions and
various other matters, many of which cannot be predicted and are beyond the
control of Printrak, Motorola and Wedbush Morgan. Any estimates contained in
Wedbush Morgan's analyses are not necessarily indicative of future results or
values, which may be significantly more or less favorable than such estimates.
Estimates of the values of companies do not purport to be appraisals or
necessarily reflect prices at which such companies or their securities may
15
<PAGE>
actually be sold. Because such estimates are inherently subject to uncertainty,
neither Printrak nor Wedbush Morgan assumes responsibility for their accuracy.
TRANSACTION SUMMARY
Wedbush Morgan analyzed the estimated Merger Consideration of $12.1406 per
share (based on Printrak's management's best estimate provided to Wedbush
Morgan) in cash without interest (the "Consideration") for each share of
Printrak's Common Stock and the implied total transaction value of $160,000,000.
Wedbush Morgan noted that the Merger Consideration (less Printrak's cash of
$13,048,000) represented an enterprise value multiple of 1.34x latest publicly
reported revenue of $108,970,000 of Printrak for the twelve-month period ended
June 30, 2000; an enterprise multiple of 10.5x latest publicly reported EBITDA
of $13,938,000 of Printrak for the twelve-month period ended June 30, 2000; and
an equity value multiple of 21.9x latest publicly reported net income of
$7,292,000 for Printrak for the twelve-month period ended June 30, 2000. The
Consideration represented a premium of 26.1% to the $126.9 million market
capitalization ($10.31/share X 11,809,328 shares outstanding as of July 31,
2000) of Printrak's Common Stock on the fifth trading day (August 21, 2000)
prior to Wedbush Morgan's oral and written presentation to Printrak's Board of
Directors (August 28, 2000), and a premium of 83.7% to the $87.1 million market
capitalization ($7.38/share X 11,809,328 shares outstanding as of July 31, 2000)
of Printrak's Common Stock one month prior thereto (July 28, 2000).
STOCK TRADING HISTORY
Wedbush Morgan reviewed the historical trading prices and the volume of
Printrak's Common Stock, the relationship between the movements in prices of
Printrak's Common Stock to movements in certain indices, including the Standard
and Poor's 500 Index, the Standard and Poor's Small Cap Technology Index and a
comparison composite group of publicly traded companies. The analysis showed
that the closing price of Printrak's Common Stock was between $4.50 and $13.88
for the final trading day of each week July 5, 1996 to August 18, 2000. The
average weekly trading volume for this period was 35,834 shares, with the volume
ranging from 0 to 1,103,700 shares traded. During this same period, on a
relative performance basis (indexed price to beginning of period) Printrak's
Common Stock under-performed the Standard and Poor's 500 index by 72.7%,
under-performed the Standard and Poor's Small Cap Technology index by 38.4%, and
under-performed the comparison composite index by 391.5%.
ANALYSIS OF SELECTED PUBLICLY TRADED COMPARISON COMPANIES
Using publicly available information, Wedbush Morgan compared selected
financial data of Printrak with similar data of selected publicly traded
comparison companies engaged in the following business lines considered by
Wedbush Morgan to be appropriate for comparison to those of Printrak:
(i) identification market (including biometrics/fingerprint identification,
records management, mugshot), (ii) computer-aided dispatch (CAD) market, and
(iii) enterprise solutions/other. Although such companies might compete with
Printrak in one of the above-noted industries, none of the companies competes
across all business lines, nor do such companies have similar management,
makeup, size or combination of business as Printrak.
Wedbush Morgan considered the following companies (the "Comparison
Companies") appropriate for comparison to Printrak: Digital Biometrics, Digital
Descriptor Systems, Inc., ID Technologies Corp., Identix Inc., Imageware
Systems Inc., NEC Corp., Polaroid Corp., SAC Technologies, Safelink Corp.,
Sensar Corp., Viisage Technology Inc., HTE Inc., Intergraph Corp., Litton
Industries Inc., Electronic Data Systems Corp., International Business Machines,
JD Edwards & Co., Lockheed Martin, Lucent Technologies, Motorola Inc., Siemens
AG, Sybase Inc., TRW Inc., Tyler Technologies Inc., and Unisys Corp.
For each of the Comparison Companies, Wedbush Morgan analyzed the following
financial data: (i) the "enterprise value" (defined as market value plus debt
and preferred stock, less cash) as a multiple
16
<PAGE>
of the latest twelve months ("LTM") revenues, which yielded a median multiple of
1.3x; (ii) the "enterprise value" as a multiple of LTM EBITDA (earnings before
interest, taxes, depreciation and amortization), which yielded a median multiple
of 16.6x; (iii) the "enterprise value" as a multiple of LTM EBIT (earnings
before interest and taxes), which yielded a median multiple of 16.3x; (iv) the
"market value" (defined as the number of shares outstanding times the closing
price of the Common Stock on August 21, 2000) as a multiple of net income for
the LTM for which income has been publicly reported, which yielded a median
multiple of 23.8x; and (v) the "market value" as a multiple of 2000 and 2001
estimated earnings per share ("EPS"), which estimates reflected a composite of
research analysts' estimates as reported by the Institutional Brokers Estimate
Service ("IBES"), which yielded median multiples of 35.7x and 14.7x,
respectively. Wedbush Morgan's calculations derived a theoretical equity value
reference range for Printrak of between $158.0 million and $237.2 million.
ANALYSIS OF SELECTED MERGER TRANSACTIONS
Wedbush Morgan reviewed certain publicly available information regarding
selected merger and acquisition transactions: (i) involving companies engaged in
similar businesses to Printrak; (ii) announced between January 1, 1998 and
August 21, 2000; and (iii) with SIC 1300 "Electronic Technology Sector"
(including relevant sub-categories). The selection of the comparison
transactions involved complex considerations and judgments concerning
similarities and differences in financial, operational and other characteristics
of potentially comparable companies. None of the acquired companies utilized in
the selected merger and acquisition comparison valuation was identical to
Printrak and none of the transactions was identical to the Merger.
The transactions deemed appropriate for comparison (the "Comparison Merger
Transactions") involved the following sets of institutions: CAM Commerce
Solutions and MicroBiz Inc., Internet Commerce Corp. and Intercoastal Data
Corp., ADC Telecommunications Inc. and Centrigram Communications Corp., Agilent
Technologies Inc. and Salient 3 Communications Inc. and SAFCO
Technologies Inc., Internet Commerce Corp. and bTrade.com, Siemens AG and Shared
Medical Systems Corp., TransCore Inc. and UNOVA Inc. and Amtech Transportation
Systems, Printrak International Inc. and BAE Systems and Emergency Services
Group, Siemens AG and ENTEX Information Services Inc., Dynatech Corp. and WOI
Group PLC and Husky Technology, New Visual Entertainment Inc. and New Wheel
Technology Inc., Reuters Group PLC and Xerox Corp. and InConcert Inc.,
Anacomp Inc. and Bgin Holdings AG, Anacomp Inc. and Litton Industries Inc. and
Litton Adesso Software, Diebold Inc. and Pioneer Systems Inc., Windward Capital
Partners LP and Anacomp Inc. and Magnetics Solutions Division, Rockwell
International Corp. and ETG, Hypercom Corp. and JTS ChequeOut Solutions Inc.,
Siemens AG and Argon Networks Inc., Siemens AG and Castle Networks Inc.,
NeoMagic Corp. and Robomatix Technologies Ltd. and Associative Computers Ltd.,
Cornerstone Equity Investors LLP and Equitrac Corp., Fonix Corp. and Papyrus
Group of Co's, Ensec International Inc. and Sentech EAS Corp., Polaroid Corp.
and NBS Technologies Inc. and Imaging Services Unit, Quixote Corp. and Digital
Recorders Inc. and Highway Information Systems, UNOVA Inc. Amtech Corp., and
Transportation Systems Group, and Xerox Corp. and Bradley Co.
For each of the Comparison Merger Transactions, Wedbush Morgan analyzed the
total invested capital (defined as market equity plus debt and preferred stock)
as a multiple of (i) LTM publicly reported revenues, which yielded a median
multiple of 1.5x; (ii) total invested capital as a multiple of LTM publicly
reported EBITDA, which yielded a median multiple of 13.6x; and (iii) LTM
publicly reported net income, which yielded a median multiple of 15.91x. Wedbush
Morgan's calculations derived a theoretical equity value reference range for
Printrak of between $116.0 million and $190.1 million.
17
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS
Wedbush Morgan analyzed the value of Printrak utilizing a discounted cash
flow analysis based upon information, including certain projected financial
information, prepared or provided by Printrak's management. This analysis is
based upon historical data and trends and forward-looking projections provided
by Printrak's management for 2001 through 2005, among other things.
Using discounted cash flow analysis, Wedbush Morgan evaluated the future
free cash flow streams that Printrak would produce over the period from the nine
months ending March 31, 2001 through the four fiscal years ending March 31,
2005. In doing so, Wedbush Morgan assumed that Printrak would perform in
accordance with the projection model prepared by and discussed with Printrak's
management. Wedbush Morgan estimated the present value of Printrak's equity
value as of March 31, 2005 by applying growth rates ranging from 5% to 8% and
applied discount rates ranging from 14% to 20%. Based on the foregoing analysis,
Wedbush Morgan derived a theoretical equity value reference range for Printrak
of between $117.7 million and $268.6 million.
In determining the discount rates and growth rates in the cash flow analysis
of Printrak, Wedbush Morgan noted, among other things, factors such as
inflation, prevailing market interest rates, the business risk inherent to
Printrak, the uncertainty of management's forward-looking projections, and rates
of return deemed achievable in comparable investments.
MISCELLANEOUS
Pursuant to the terms of the agreement with Wedbush Morgan, Printrak has
paid Wedbush Morgan a fee of $115,000 for rendering its Opinion. Printrak has
also agreed to reimburse Wedbush Morgan for its reasonable out-of-pocket
expenses incurred in connection with its engagement and to indemnify Wedbush
Morgan and its employees, agents, officers, attorneys, stockholders and any
person who controls or is deemed to control Wedbush Morgan, against certain
liabilities, including liabilities under the federal securities laws.
In the ordinary course of business, Wedbush Morgan and its affiliates may
actively trade the equity securities of Printrak and of Motorola for their own
account and for accounts of customers and, accordingly, may at any time hold a
long or short position in any such securities.
REQUIRED REGULATORY FILINGS AND APPROVALS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the
rules promulgated under the Hart-Scott-Rodino Act, Printrak, Acquisition Sub and
Motorola cannot complete the Merger until they notify and furnish information
regarding the acquisition of Printrak by Acquisition Sub to the Federal Trade
Commission and the Antitrust Division of the U.S. Department of Justice and
satisfy specified waiting period requirements. Printrak and Motorola (as the
sole stockholder of Acquisition Sub) filed notification and report forms under
the Hart-Scott-Rodino Act with the FTC and the Antitrust Division on
September 26, 2000 and received early termination of the waiting period from the
Federal Trade Commission effective October 11, 2000 .
At any time before or after completion of the Merger, the Antitrust Division
or the FTC could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the
consummation of the Merger or seeking divestiture of substantial assets of
Printrak, Acquisition Sub or Motorola. Private parties may also bring actions
under the antitrust laws under certain circumstances. Although Printrak and
Motorola believe that the Merger is legal under the antitrust laws, there can be
no assurance that a challenge to the Merger on antitrust grounds will not be
made or, if such a challenge is made, that it would not be successful.
In addition, Printrak and Motorola are required to furnish certain
information and materials to the antitrust authorities of Argentina, Brazil, the
Federal Republic of Germany, and Romania. Filings were
18
<PAGE>
made in Argentina on September 22, 2000, in Brazil on September 19, 2000 and in
the Federal Republic of Germany on September 27, 2000. German antitrust
authorities have one month after the parties file their application to review
the transaction. During that one month period, they can either approve the
transaction or initiate an examination of the transaction which could take an
additional three months, during which time the parties cannot close the
transaction. During this three month period, the antitrust authorities will
either approve the transaction or prohibit it. Approval may be granted before
the initial one month review or before the additional three month review period.
If approved, the antitrust authorities can not later challenge the transaction
under their merger law but could challenge the transaction under other
provisions of their antitrust laws. Printrak and Motorola intend to make a
post-closing filing in Romania as soon as practicable after the closing.
Printrak is not aware of any other material governmental or regulatory
approval required for completion of the Merger.
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
Following the Merger, Printrak will become a wholly-owned subsidiary of
Motorola. Acquisition Sub and its board of directors will continue the
operations of Printrak.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Board of Directors' approval of this Merger, you should
be aware that the Board and certain Printrak officers have interests that may
conflict with the best interests of Printrak and you.
Printrak previously issued options under various stock option plans to
certain of its directors and executive officers. Under the Merger Agreement,
certain portions of these options will be exercisable prior to the time the
Merger is consummated. Each holder of an option may surrender his option for
cash in an amount per share equal to the difference between the exercise price
of the option and $12.1406, less applicable withholding taxes. The persons below
own the following number of options to purchase our Common Stock and the total
spread between the Merger Consideration and the exercise price of such options
is: Thomas Costales, Chief Financial Officer, Treasurer and Secretary (15,000
shares, $77,100); Daniel Crawford, Executive Vice President (49,000 shares,
$236,170); Piet Lesage, Vice President International Business Development
(19,500 shares, $131,831); John Michael Lyons, Vice President of Operations
(85,555 shares, $514,975.28); David McNeff, Senior Vice President of Sales
(134,442 shares, $772,244); Behnam Bavarian, Vice President of Engineering
(6,000 shares, $29,343); Director Albert Wong (15,000 shares, $131,284); and
Director Peter T. Higgins (10,400 shares, $59,162).
Printrak has entered into severance agreements with David McNeff, Alex
Tichy, Pam Bacchus as well as certain other employees. The Severance Agreements
with David McNeff and Alex Tichy, each dated August 19, 1992, provides that
Mr. McNeff shall receive twelve months severance pay if his employment with
Printrak is terminated and Mr. Tichy shall receive six months severance pay if
his employment with Printrak is terminated. The specified severance compensation
shall not be paid if the termination is for voluntary resignation, termination
for cause, death or disability, as such terms are defined in the Printrak
International Executed Severance Plan.
Printrak and Motorola are obligated to provide certain indemnification to
the present and former directors and officers of Printrak and to maintain,
subject to certain limitations, the directors' and officers' liability insurance
policies that we currently maintain for a six year period after closing.
Beginning after the closing, Motorola's current director's and officer's
insurance will be applicable to Printrak's directors and officers.
Printrak's Chairman and Chief Executive Officer, Richard Giles, was, as of
August 28, 2000, the holder of 49.76% of Printrak's Common Stock. Mr. Giles'
ownership is attributed to him through his positions as trustee or manager of
The Giles Living Trust UDT dated December 17, 1993, The Giles Family Foundation
and the Alexander Giles Education Trust.
19
<PAGE>
THE MERGER AGREEMENT
THE FOLLOWING SUMMARY DESCRIBES CERTAIN ASPECTS OF THE PROPOSED MERGER,
INCLUDING MATERIAL PROVISIONS OF THE MERGER AGREEMENT. THIS SUMMARY MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THE
MERGER FULLY, AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE
MERGER, YOU ARE URGED TO READ THE MERGER AGREEMENT CAREFULLY. A COPY OF THE
MERGER AGREEMENT IS ATTACHED AS APPENDIX A.
STRUCTURE OF THE MERGER
The Merger Agreement provides for the Merger of Panther Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of Motorola, with and into
Printrak, with Printrak surviving the Merger as a wholly-owned subsidiary of
Motorola. The Merger will become effective upon the filing of a certificate of
merger with the Secretary of State of the State of Delaware. It is anticipated
that this filing will be made as soon as practicable after the last of the
conditions to the Merger, as set forth in the Merger Agreement, has been
satisfied or waived.
When the Merger is completed:
- the separate corporate existence of Panther Acquisition Corp. will
terminate;
- the surviving company will be a Delaware corporation named Printrak
International Inc.;
- Printrak will be a wholly-owned subsidiary of Motorola and will no longer
be a publicly traded company;
- the certificate of incorporation and bylaws of Acquisition Sub existing
immediately prior to the Merger will be the certificate of incorporation
and bylaws of the surviving company; provided that the name of the
surviving corporation as set forth in its certificate of incorporation
shall be changed at the Effective Time to Printrak International Inc.; and
- stockholders of Printrak will receive cash in exchange for their shares of
Printrak Common Stock.
Printrak intends to complete the Merger in the fourth quarter of 2000.
MERGER CONSIDERATION
In the Merger, the shares of Printrak Common Stock issued and outstanding
immediately prior to the effective time of the Merger will be converted into the
right to receive $12.1406 per share in cash. In addition, holders of options
which are exercisable under the terms of the Merger Agreement will be entitled
to receive the difference between $12.1406 per share and the exercise price per
share in cash for each such option.
REPRESENTATIONS AND WARRANTIES
Printrak, Acquisition Sub and Motorola each made a number of representations
and warranties in the Merger Agreement regarding matters such as their valid
existence and good standing and their authority to enter into the Merger
Agreement and to consummate the transactions contemplated thereby. The Majority
Stockholders made representations and warranties in the Merger Agreement
regarding matters such as the correctness and completeness of statements
contained in the Merger Agreement, the individual authority of each Majority
Stockholder to enter into the Merger Agreement, the enforceability of the Merger
Agreement against the Majority Stockholders, ownership of shares, litigation
involving the Majority Stockholders and absence of conflicts with applicable law
or agreements to which the Majority Stockholders are a party
In addition, the representations given by Printrak cover the following
topics as they relate to Printrak:
- due organization and good standing of Printrak and its subsidiaries;
20
<PAGE>
- capital structure;
- corporate authority to enter into the Merger Agreement and related matters
and absence of conflicts with organizational documents and material
agreements of Printrak;
- title to assets and sufficiency of the assets owned to carry on its
business;
- reports filed by Printrak with the SEC;
- absence of certain changes since June 30, 2000, the date of Printrak's
most recent balance sheet;
- compliance with applicable laws;
- taxes owed;
- real property owned;
- intellectual property rights owned or licensed and any limitations
thereon;
- material contracts;
- nature and adequacy of insurance policies;
- litigation involving Printrak;
- absence of claims regarding and functionality of, software products;
- employees and consultants employed by Printrak;
- employee benefit matters for Printrak employees;
- international labor matters;
- compliance with environmental, health and safety laws;
- adequacy of Printrak information systems regarding date calculations and
security capabilities; and
- brokers, finders and agents engaged in connection with the Merger.
You are urged to carefully read the representations and warranties of each
of the parties in the Merger Agreement.
Printrak has agreed that, until the consummation of the Merger or the
termination of the Merger Agreement, it will maintain its business, it will not
take certain actions outside the ordinary course of its business without
Motorola's consent and it will use its best efforts to consummate the Merger.
Printrak also has agreed to take certain actions necessary to effect the Merger,
such as filing its Information Statement with the Securities and Exchange
Commission. Also, Printrak agreed to provide Motorola with full access to
information about the Printrak upon Motorola's reasonable request. Printrak has
agreed not to initiate, continue, solicit or encourage any inquiries or the
making of any proposal or offer with respect to a merger, consolidation or
similar transaction involving, or any purchase of all or any significant portion
of the assets or any equity securities of, Printrak or any of its subsidiaries.
CONDUCT OF BUSINESS PRIOR TO THE MERGER
Printrak has agreed to continue to conduct its business and maintain its
business relationships in a manner that is consistent with its ordinary and
usual course of business and not to take certain specified actions that might
materially affect Printrak without Motorola's written consent. Consistent with
this covenant, Printrak has agreed to carry on and to preserve its business and
its relationships with customers, suppliers, employees and others in
substantially the same manner as it has prior to the date of the Merger
Agreement.
21
<PAGE>
ADDITIONAL AGREEMENTS
CONSULTING AGREEMENT
In order to induce Motorola to enter into the transaction, and as a
condition to the closing of the Merger, Richard Giles has entered into a
consulting agreement with Motorola that provides, among other things, that he
will provide certain consulting services to Motorola for a period of six months
following the closing of the Merger, in exchange for certain daily compensation.
NON-COMPETE, NON-SOLICIT, NON-DISCLOSURE AND WAIVER AGREEMENT
As a condition to the closing of the Merger, Motorola and Richard Giles,
individually and in his capacity as Trustee of The Giles Living Trust UDT dated
December 17, 1993 and President of The Giles Family Foundation, entered into a
non-compete, non-solicit, non-disclosure and waiver agreement. Under this
agreement, Richard Giles agrees not to compete with Motorola in markets in which
Printrak does business as of the time of the Merger for a period of two years,
will not solicit employees of Printrak for a period of two years, will not
disclose confidential, proprietary information of Motorola or Printrak which is
in his possession, and waives his rights to any employment compensation due him
under existing contract rights with Printrak.
CONDITIONS TO THE MERGER
The obligations of Printrak, Motorola and Acquisition Sub under the Merger
Agreement are subject to the satisfaction or waiver of certain conditions
described in the Merger Agreement. These conditions include, but are not limited
to:
- the accuracy of representations and warranties in all material respects;
- the performance of and compliance with covenants in all material respects;
- the absence of material adverse changes to the financial condition,
properties, assets, liabilities, businesses or results of operation of
Printrak;
- the absence of any order, decree or ruling or any statute or regulation
which would prohibit the Merger or render the Merger illegal;
- the receipt of all necessary governmental consents, including expiration
or termination of the applicable waiting periods under U.S. antitrust
laws;
- each of the consulting agreement and the non-compete, non-solicit,
non-disclosure and waiver agreement, shall have been executed and shall be
in full force and effect;
- each of the employees identified on Schedule 6.2(f) of the Merger
Agreement shall have executed offer letters and such offer letters shall
be in full force and effect;
- all outstanding debts or liabilities owed to Printrak by any stockholder,
employee or former employee shall have been repaid in full;
- all outstanding indebtedness for borrowed money of Printrak shall have
been repaid in full;
- Printrak shall have obtained all consents required under its leases,
material contracts and insurance policies; and
- the Printrak International Inc. 1994 Stock Option Plan and all options
thereunder shall have terminated.
22
<PAGE>
STOCK OPTIONS, STOCK PLANS AND BONUSES
Pursuant to the terms of Printrak's stock option plans and the Merger
Agreement, holders of stock options of Printrak will be entitled to accelerated
vesting of such options to the extent such options would be vested as of
March 31, 2001. Printrak will pay each holder of Printrak options, in exchange
for the cancellation of such holder's Printrak options, an amount of cash equal
to the product of (i) the excess, if any, of the Merger Consideration over the
per share exercise price of each such Printrak option and (ii) the number of
shares subject to such Printrak option immediately prior to the Effective Time.
On August 28, 2000, Printrak amended its Employee Stock Purchase Plan, or
ESPP, to provide that (i) no participant may increase the portion of his or her
compensation that is withheld under the ESPP after August 28, 2000; (ii) the
ESPP be terminated as of August 30, 2000 with no further withholdings after such
date; (iii) the amounts withheld for each participant under the ESPP as of
August 30, 2000, be used to purchase shares of Printrak's stock prior to the
Effective Time in accordance with the ESPP; and (iv) the shares so purchased be
converted into the right to receive the Merger Consideration at the Effective
Time.
Printrak terminated its Executive Bonus Plan, Executive Severance Plan and
the Voluntary Deferred Compensation Plan effective after August 28, 2000.
Printrak has further provided for the payment of
- legal fees to Stradling Yocca Carlson & Rauth;
- fees of its financial advisor, Wedbush Morgan Securities;
- special bonuses deemed necessary by the Chief Executive Officer to
employees to encourage such employees to stay through the Effective Date,
in an aggregate amount of $30,000; and
- and a special retention bonus and severance plan for Thomas M. Costales as
an incentive to retain Mr. Costales which plan provides for up to six
months severance, as long as Mr. Costales remains with Printrak through
the Effective Date.
TERMINATION RIGHTS
The Merger Agreement may be terminated and the Merger may be abandoned by
mutual written consent of Printrak, Motorola and Acquisition Sub, or under
certain circumstances, at any time prior to the Merger as summarized below:
- by Printrak if either Motorola or Acquisition Sub has materially breached
their respective representations and warranties or materially failed to
perform their respective covenants and such breach or failure to perform
has not been cured prior to the closing;
- by Motorola or Acquisition Sub, if Printrak has materially breached its
representations and warranties or materially failed to perform its
covenants and such breach or failure to perform has not been cured prior
to the closing;
- by Motorola or Acquisition Sub, if the majority stockholders of Printrak
have materially breached any of their representations and warranties and
such breach has not been cured prior to the closing;
- by either Printrak or Motorola, if all the conditions of the Merger
Agreement have not be satisfied or waived on or before December 31, 2000,
other than as a result of a breach by the terminating party; or
- by either Printrak or Motorola, if an order by a federal or state court
that would make illegal or otherwise prohibit the consummation of the
Merger is issued and becomes final and non-appealable.
23
<PAGE>
INDEMNIFICATION RIGHTS
Motorola and Acquisition Sub have also agreed that if the Merger is
consummated, they will indemnify Printrak's officers, directors and employees,
subject to any limitations imposed by applicable law, for a period of six years
with respect to any claim or liability arising out of or pertaining to (i) any
act or omission occurring prior to the Merger or (ii) the transactions
contemplated by the Merger Agreement to the fullest extent permitted by
applicable law. Motorola has also agreed to honor the existing indemnification
agreements between Printrak and certain of its such officers and directors.
Acquisition Sub has further agreed, for a period of six (6) years following
consummation of the Merger, subject to certain limitations, to provide directors
and officers liability insurance coverage to the persons currently covered by
Printrak's directors and officers liability insurance policy comparable to that
provided to such officers and directors prior to the Merger.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by the parties at any time, provided no
amendment shall be made that requires the approval by the stockholders without
obtaining such approval. All amendments to the Merger Agreement must be in
writing signed by each party. Any inaccuracies in the representations and
warranties or compliance with any of the agreements or conditions contained in
the Merger Agreement may be waived in writing by the party against whom the
waiver is to be effective.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax consequences
to the stockholders of Printrak pursuant to the Merger. The discussion may not
apply to payments to holders of Printrak stock options, to holders of shares of
Printrak common stock received pursuant to the exercise of employee stock
options or otherwise as compensation, or to holders of shares of Printrak Common
Stock who are in special tax situations (such as insurance companies, dealers in
securities, tax-exempt organizations or non-U.S. persons). The discussion is
based on the assumptions that: (i) the shares of the stock constitute capital
assets in the hands of the stockholder, and (ii) the collapsible corporation
rules set forth in Section 341 of the Internal Revenue Code do not apply to
Printrak. The discussion does not address state, local, or foreign tax
considerations.
THE FOLLOWING DISCUSSION IS NOT INTENDED TO BE A COMPLETE ANALYSIS OR
DESCRIPTION OF ALL POTENTIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF
THE MERGER. THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE BASED UPON
CURRENT LAW. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES
SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF
THE RULES DISCUSSED BELOW TO SUCH STOCKHOLDER AND THE PARTICULAR TAX EFFECTS OF
THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS.
The receipt of cash for shares of Printrak Common Stock pursuant to the
Merger (including pursuant to the exercise of dissenters' rights) will be a
taxable transaction for federal income tax purposes (and also may be a taxable
transaction under applicable state, local, foreign and other income tax laws).
In general, for federal income tax purposes, a holder of shares of Printrak
Common Stock will recognize gain or loss equal to the difference between his
adjusted tax basis in such shares converted to cash in the Merger and the amount
of cash received therefor. Gain or loss must be determined separately for each
block of shares (i.e., shares acquired at the same cost in a single transaction)
converted to cash in the Merger. Such gain or loss will be long term capital
gain or loss if, on the effective date of the Merger, such shares were held for
more than one year. Amounts received, if any, with respect to the exercise of
dissenters' rights which are or are deemed to be interest for federal income tax
purposes will be taxed as ordinary income.
24
<PAGE>
Federal tax laws significantly limit the deductibility of capital losses for
federal income tax purposes. For instance, corporate taxpayers can deduct
capital losses only to the extent of capital gains and for individual taxpayers,
capital losses are similarly deductible up to the extent of capital gains, but
may be further deductible up to a maximum of $3,000 in any one taxable year.
Carryovers of unused capital losses to other taxable years may be permitted in
certain circumstances.
Payments in connection with the Merger may be subject to "backup
withholding" at a 31% rate. Backup withholding will generally be required if the
stockholder (a) fails to furnish his social security number or other taxpayer
identification number, or TIN, (b) furnishes an incorrect TIN, (c) fails
properly to report interest or dividends or (d) under certain circumstances,
fails to provide a certified statement, signed under penalties of perjury, that
the TIN provided is his correct number and that he is not subject to backup
withholding. Backup withholding is not an additional tax but merely an advance
payment, which may be refunded to the extent it results in an overpayment of
tax. Certain persons generally are entitled to exemption from backup
withholding, including corporations and financial institutions. Certain
penalties apply for failure to furnish correct information and for failure to
include the reportable payments in income. Each stockholder should consult with
his own tax advisor as to his qualification for exemption from withholding and
the procedure for obtaining such exemption.
ACCOUNTING TREATMENT
Motorola has informed us that it will treat the Merger as a purchase for
accounting purposes.
DELISTING AND DEREGISTRATION OF PRINTRAK COMMON STOCK AFTER THE MERGER
When the Merger is completed, Printrak Common Stock will be delisted from
the Nasdaq Stock Market and will be deregistered under the Securities Exchange
Act.
APPRAISAL RIGHTS UNDER DELAWARE LAW
When the Merger becomes effective, stockholders of Printrak who comply with
the procedures described in Section 262 of the Delaware General Corporation Law,
or DGCL, will potentially be entitled to a judicial appraisal of the fair value
of their shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, and to receive from the surviving
corporation payment of the fair value of their shares in cash.
The following is a brief summary of the statutory procedures that a
dissenting security holder must follow in order to perfect your appraisal rights
under the DGCL. This summary is not intended to be complete and is qualified in
its entirety by reference to Section 262. The text of Section 262 is attached to
this Information Statement as APPENDIX C. If you are considering a demand for
appraisal, you should review the text of Section 262 carefully and should
consult legal counsel.
If you wish to exercise your appraisal rights, you must follow the following
procedure:
(a) A Printrak stockholder electing to exercise his appraisal rights
under Section 262, referred to in this section as a Dissenting Stockholder,
must deliver to Printrak a written demand for appraisal within twenty days
of the mailing of this Information Statement (in other words, not later than
November 10, 2000). The written demand must identify the Dissenting
Stockholder and state that the Dissenting Stockholder intends to demand
appraisal of its shares of Printrak Common Stock. The failure to grant a
written consent for adoption of the Merger Agreement and approval of the
Merger will not constitute a demand for appraisal. A written demand to
exercise appraisal rights needs to be delivered to Printrak
International Inc., 1250 N. Tustin Avenue, Anaheim, California 92807,
Attention: Janet Harmier, by no later than November 10, 2000.
(b) Within 120 calendar days after the Effective Time, Printrak or any
Dissenting Stockholder who has complied with the foregoing notice
requirement and the other requirements of Section 262
25
<PAGE>
may file a petition in the Delaware Court of Chancery demanding a
determination of the fair value of its shares of Printrak Common Stock.
Printrak has no obligation to file a petition and does not currently intend
to do so. As a result, any Dissenting Stockholder who wishes to file a
petition is advised to do so on a timely basis. If a petition for appraisal
is not filed during the 120-day period, all appraisal rights relating to
Printrak Common Stock will terminate. Any Dissenting Stockholder may
withdraw a demand for appraisal at any time within 60 calendar days after
the effective date of the Merger (or thereafter with the written consent of
Printrak).
If a holder of Printrak Common Stock either withdraws its demand for
appraisal or has its appraisal rights terminated as described above, the holder
will only be entitled to receive the consideration for its shares of Printrak
Common Stock that it owns, as provided under the terms of the Merger Agreement.
(c) Within 120 calendar days after the Effective Time, any stockholder
who has complied with the above-described notice requirements and the other
requirements of Section 262 may request in writing a list of the aggregate
number of shares of Printrak Common Stock for which demands for appraisal
under Delaware law have been made and the aggregate number of holders
demanding dissenters' appraisal rights under Delaware law.
If a petition is filed by a Dissenting Stockholder within the 120 day period
described above, Printrak will receive notice from the Court of such filing.
Within 20 calendar days after Printrak receives notice from the Court, Printrak
must file with the office of the Register in Chancery in which the petition was
filed, a list containing the names and addresses of all Printrak stockholders
who have demanded payment for their shares and the names of all Printrak
stockholders who have disagreements with Printrak regarding the value of their
shares of Printrak Common Stock. If a petition is filed by Printrak, the
petition will be accompanied by a similar list. If ordered by the Court, the
Register in Chancery will give notice of the time and place of the hearing by
registered or certified mail to Printrak and to each Printrak stockholder shown
on the list. The notice will also be given by publishing the notice in a
newspaper of general circulation published in Wilmington, Delaware (or any other
location the Court may determine), at least one week before the hearing. The
forms of the notices to be used will be approved by the Court, and all costs
related to the distribution of the notices will be paid by Printrak.
(d) After the Court determines which of the Dissenting Stockholders are
entitled to an appraisal under Section 262, the Court will appraise the
shares of Printrak Common Stock. Following determination by the Court of the
fair value of the shares, Printrak will pay all Dissenting Stockholders the
appraised value of their shares, together with interest, if any, upon
surrender to Printrak of their certificates representing Printrak Common
Stock.
The costs of the appraisal proceeding may be determined by the Court and
charged to the parties as the Court deems equitable in the circumstances. Upon
application of a Dissenting Stockholder, the Court may order all or a portion of
the expenses incurred by any Dissenting Stockholder in connection with the
appraisal proceeding, including reasonable attorneys' fees and the fees and
expenses of experts, to be charged pro rata against the value of all of the
shares entitled to an appraisal.
After the effective date of the Merger, any dissenting shares owned by any
Dissenting Stockholder will cease to exist as shares of Printrak and, instead,
will represent the right to receive the appraised value of those shares
determined in accordance with the appraisal process described above or, if the
Dissenting Stockholder withdraws his or her demand for appraisal within 60
calendar days after the effective date of the Merger (or thereafter with the
written consent of Printrak), the consideration or liquidation preference
payable for such shares in accordance with the Merger Agreement.
The above summary of the provisions of Section 262 of the DGCL is not
intended to be a complete statement of such provisions and is qualified in its
entirety by reference to the full text of Section 262, which appears as
APPENDIX C.
26
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Set forth below is certain information as of August 30, 2000 regarding the
beneficial ownership of Printrak's Common Stock by (i) any person who was known
by Printrak to own more than five percent (5%) of the voting securities of
Printrak, (ii) all directors, (iii) each of the Named Executive Officers
identified in the Summary Compensation Table located within the proxy statement
for our annual meeting, held August 30, 2000, and (iv) all current directors and
executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
CERTAIN BENEFICIAL OWNERS(1) OWNERSHIP(2) CLASS
---------------------------- ------------ ----------
<S> <C> <C>
Richard M. Giles(3)................................... 5,958,200 49.76%
Charles L. Smith(4)................................... 340,500 2.9%
John G. Hardy(5)...................................... 204,227 *
Daniel Driscoll(6).................................... 132,052 *
David L. McNeff(7).................................... 102,477 *
John M. Lyons(8)...................................... 43,456 *
Albert C. Wong(9)..................................... 14,330 *
Peter T. Higgins(10).................................. 5,500 *
All current executive officers and directors as a
group
(7 persons)(11)..................................... 6,800,742 55.8%
</TABLE>
------------------------
* less than 1%
(1) Unless otherwise indicated, the business address of such stockholder is c/o
Printrak International Inc., 1250 North Tustin Avenue, Anaheim, CA 92807.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options, warrants and convertible notes currently exercisable or
convertible, or exercisable or convertible within 60 days of August 28,
2000, are deemed outstanding for computing the percentage of the person
holding such options but are not deemed outstanding for computing the
percentage of any other person. Except as indicated by footnote, and subject
to community property laws where applicable, the persons named in the table
have sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by them.
(3) Includes 81,000 shares owned by the Alexander Giles Education Trust,
Richard Giles Trustee and his son as beneficiary; and 73,000 shares owned
by The Giles Family Foundation, a California non-profit public benefit
corporation, of which Richard Giles shares voting power with his spouse.
Mr. Giles disclaims beneficial ownership of the above-mentioned shares. The
remaining 5,804,200 shares are held by The Giles Living Trust.
(4) Such shares are held by Charles L. Smith and Janet Smith, as Trustees of
the Smith Family Trust, of which Mr. Smith has shared voting power.
(5) Includes 100,000 shares held by John G. Hardy and Irene P. Hardy, as
co-trustees of the John G. Hardy and Irene P. Hardy Family Trust, July 24,
1996, of which Mr. Hardy has shared voting power. Includes 104,227 shares
issuable upon the exercise of an option exercisable within 60 days of
August 28, 2000 by Mr. Hardy.
(6) Includes 132,052 shares issuable upon the exercise of options exercisable
within 60 days of August 28, 2000.
(7) Includes 102,007 shares issuable upon the exercise of options exercisable
within 60 days of August 28, 2000.
(8) Includes 42,505 shares issuable upon the exercise of options exercisable
within 60 days of August 28, 2000.
27
<PAGE>
(9) Includes 1,330 shares held by the Albert Wong and Lia Wong Family Trust.
Includes 13,000 shares issuable upon the exercise of options exercisable
within 60 days of August 28, 2000.
(10) Includes 5,500 shares issuable upon the exercise of options exercisable
within 60 days of August 28, 2000.
(11) Includes an aggregate of 399,291 shares subject to options exercisable
within 60 days of August 28, 2000.
WHERE YOU CAN FIND MORE INFORMATION
Printrak files reports, proxy statements and other information with the
Securities and Exchange Commission. You may read and copy any reports, proxy
statements and other information that Printrak files at the following locations
of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room 7 World Trade Center Citicorp Center Suite 1400
450 Fifth Street, N.W. Suite 1300 500 W. Madison Street
Room 1024 New York, New York 10048 Chicago, Illinois 60661-2511
Washington, D.C. 20549
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. Further information on the operation of the
SEC's Public Reference Room in Washington, D.C. can be obtained by calling the
SEC at 1-800-SEC-0330. The SEC also maintains an internet world wide web site
that contains reports, proxy statements and other information about issuers,
such as Printrak and Motorola, who file electronically with the SEC. The address
of that site is http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
Printrak at:
The National Association of
Securities Dealers
1735 K Street, N.W.
Washington, D.C. 20006
This is an Information Statement of Printrak. Printrak has supplied all
information contained in this document relating to Printrak.
You can obtain copies of Printrak's documents filed under the Securities
Exchange Act of 1934 from the SEC, through the SEC's world wide web site at the
address described above, or from Printrak by requesting them in writing or by
telephone at the following address:
Printrak International Inc.
1250 N. Tustin Ave.
Anaheim, California 92807
Attention: Secretary
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS INFORMATION STATEMENT. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS
INFORMATION STATEMENT. THIS INFORMATION STATEMENT IS DATED OCTOBER 21, 2000. YOU
SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS INFORMATION STATEMENT
IS ACCURATE AS OF ANY DATE OTHER THAN SUCH DATE, AND THE MAILING OF THIS
INFORMATION STATEMENT TO STOCKHOLDERS SHALL NOT CREATE ANY IMPLICATION TO THE
CONTRARY.
28
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
by and among
Motorola, Inc.,
Panther Acquisition Corp.,
Printrak International Inc.
and
the Majority Stockholders listed on Annex A hereto
Dated as of August 28, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
ARTICLE I THE MERGER.................................................. 1
SECTION 1.1. The Merger.................................................. 1
SECTION 1.2. Effective Time; Closing..................................... 1
SECTION 1.3. Effects of the Merger; Subsequent Actions................... 1
SECTION 1.4. Certificate of Incorporation and Bylaws..................... 2
SECTION 1.5. Directors................................................... 2
SECTION 1.6. Officers.................................................... 2
SECTION 1.7. Conversion of Shares........................................ 2
SECTION 1.8. Employee Stock Options; Warrants............................ 3
SECTION 1.9. Stockholder's Consent....................................... 3
ARTICLE II DISSENTING SHARES; EXCHANGE OF SHARES....................... 3
SECTION 2.1. Dissenting Shares........................................... 3
SECTION 2.2. Exchange of Certificates.................................... 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... 5
SECTION 3.1. Organization, Qualification, and Corporate Power............ 5
SECTION 3.2. Capitalization.............................................. 5
SECTION 3.3. Authorization; No Contravention............................. 6
SECTION 3.4. Title to Assets; Asset Sufficiency.......................... 7
SECTION 3.5. Subsidiaries................................................ 8
SECTION 3.6. SEC Reports................................................. 8
SECTION 3.7. Events Subsequent to Most Recent Fiscal Period End.......... 9
SECTION 3.8. Legal Compliance............................................ 10
SECTION 3.9. Tax Matters................................................. 11
SECTION 3.10. Real Property............................................... 13
SECTION 3.11. Intellectual Property....................................... 14
SECTION 3.12. Contracts................................................... 17
SECTION 3.13. Insurance................................................... 19
SECTION 3.14. Litigation.................................................. 19
SECTION 3.15. Software Products........................................... 20
SECTION 3.16. Employees; Independent Contractors.......................... 20
SECTION 3.17. Employee Benefits--United States............................ 21
SECTION 3.18. International Labor Matters................................. 23
SECTION 3.19. International Pensions and Benefits......................... 24
SECTION 3.20. Environmental, Health, and Safety Matters................... 26
SECTION 3.21. Information Systems Integrity............................... 28
SECTION 3.22. Brokers, Finders and Agents................................. 28
SECTION 3.23. Disclosure.................................................. 28
ARTICLE III A REPRESENTATIONS AND WARRANTIES OF THE MAJORITY
STOCKHOLDERS.............................................. 28
SECTION 3A.1. Authorization of Transaction................................ 28
SECTION 3A.2. Ownership of Shares......................................... 29
SECTION 3A.3. Litigation.................................................. 29
SECTION 3A.4. Noncontravention............................................ 29
</TABLE>
i
<PAGE>
TABLE OF CONTENTS (CONTINUED)
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
SECTION 3A.5. Disclosure.................................................. 29
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
SUB....................................................... 29
SECTION 4.1. Organization of Parent and Acquisition Sub.................. 30
SECTION 4.2. Authorization of Transaction................................ 30
SECTION 4.3. Litigation.................................................. 30
SECTION 4.4. Noncontravention............................................ 30
SECTION 4.5. Brokers' Fees............................................... 30
ARTICLE V COVENANTS................................................... 30
SECTION 5.1. Conduct of Business of the Company.......................... 30
SECTION 5.2. Access to Information; Confidentiality Agreement............ 32
SECTION 5.3. Commercially Reasonable Efforts............................. 33
SECTION 5.4. Public Announcements........................................ 33
SECTION 5.5. Indemnification, Insurance.................................. 33
SECTION 5.6. Notification of Certain Matters............................. 34
SECTION 5.7. Employees and Employee Plans--United States................. 34
SECTION 5.8. No Solicitation............................................. 36
SECTION 5.9. Acquisition Sub............................................. 36
SECTION 5.10. FIRPTA Affidavit............................................ 36
SECTION 5.11. Tax Matters................................................. 36
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER.................... 37
SECTION 6.1. Conditions to the Company's, Parent's and Acquisition Sub's
Obligation
to Effect the Merger.................................... 37
SECTION 6.2. Conditions to the Obligations of Parent and Acquisition
Sub....................................................... 37
SECTION 6.3. Conditions to Obligation of the Company..................... 38
ARTICLE VII TERMINATION; AMENDMENT; WAIVER.............................. 38
SECTION 7.1. Termination................................................. 38
SECTION 7.2. Effect of Termination....................................... 39
SECTION 7.3. Fees and Expenses........................................... 39
SECTION 7.4. Amendment................................................... 39
SECTION 7.5. Extension; Waiver........................................... 39
ARTICLE VIII MISCELLANEOUS............................................... 40
SECTION 8.1. Non-Survival of Representations and Warranties.............. 40
SECTION 8.2. Entire Agreement; Assignment................................ 40
SECTION 8.3. Notices..................................................... 40
SECTION 8.4. Governing Law............................................... 41
SECTION 8.5. Parties in Interest......................................... 42
SECTION 8.6. Remedies.................................................... 42
SECTION 8.7. Severability................................................ 42
SECTION 8.8. Interpretation.............................................. 42
SECTION 8.9. Certain Definitions......................................... 42
SECTION 8.10. Counterparts................................................ 43
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of August 28, 2000, is by and among
PRINTRAK INTERNATIONAL INC., a Delaware corporation (the "COMPANY"),
MOTOROLA, INC., a Delaware corporation ("PARENT"), and PANTHER ACQUISITION
CORP., a Delaware corporation ("ACQUISITION SUB") and those certain Majority
Stockholders set forth on Annex A hereto.
WHEREAS, the Board of Directors of Acquisition Sub has approved the merger
(the "MERGER") of Acquisition Sub with and into the Company in accordance with
the General Corporation Law of the State of Delaware (the "DGCL") upon the terms
and subject to the conditions set forth herein;
WHEREAS, pursuant to the Merger, among other things, all of the issued and
outstanding shares of capital stock of the Company shall be converted into the
right to receive their respective portions of the Merger Consideration (as
defined below) as provided herein;
WHEREAS, the Board of Directors of the Company (the "BOARD") has
(i) determined that this Agreement and the transactions contemplated hereby,
including the Merger, are fair to and in the best interests of the stockholders
of the Company, (ii) approved this Agreement and the transactions contemplated
hereby, including the Merger, and (iii) recommended, in satisfaction of all
applicable requirements for Board action under Section 251 of the DGCL in order
for the Merger to be validly approved, that the stockholders of the Company, to
the extent required by applicable law, approve and adopt this Agreement and the
Merger; and
WHEREAS, contemporaneously with the execution of this Agreement, the
Majority Stockholders, as the holders of a majority of the outstanding shares of
the Company's voting stock, have executed and delivered a written consent (the
"STOCKHOLDERS CONSENT") pursuant to Section 228 of the DGCL approving and
adopting this Agreement and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
Company, Parent and Acquisition Sub hereby agree as follows.
ARTICLE I
THE MERGER
SECTION 1.1. THE MERGER. At the Effective Time and upon the terms and
subject to the conditions of this Agreement and the DGCL, Acquisition Sub shall
be merged with and into the Company, whereupon the separate corporate existence
of Acquisition Sub shall cease and the Company shall continue as the surviving
corporation (the "SURVIVING CORPORATION"). At Acquisition Sub's option, subject
to Section 8.2 hereof, the Merger may be structured so that any direct or
indirect wholly owned subsidiary of Parent other than Acquisition Sub is merged
with and into the Company; provided that Parent shall continue to be responsible
for its and Acquisition Sub's obligations hereunder. In the event of such
election, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect such election.
SECTION 1.2. EFFECTIVE TIME; CLOSING. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto will file a certificate of merger, in form and substance satisfactory to
Parent and the Company, with the Secretary of State of the State of Delaware and
make all other filings or recordings required by the DGCL in connection with the
Merger (the "CERTIFICATE OF MERGER"). The Merger shall become effective at such
time (the "EFFECTIVE TIME") as the Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware. Prior to such filing, a closing
(the "CLOSING") shall be held at the place designated by Parent in Chicago,
Illinois for the purpose of confirming the satisfaction or waiver of the
conditions set forth in Article VI. The date on which the Closing occurs is
referred to herein as the "CLOSING DATE."
SECTION 1.3. EFFECTS OF THE MERGER; SUBSEQUENT ACTIONS.
(a) The Merger shall have the effects set forth in the DGCL. Without
limiting the generality of the foregoing, and subject thereto and any other
applicable laws, at the Effective Time, all the properties,
A-1
<PAGE>
rights, privileges, powers and franchises of the Company and Acquisition Sub
shall vest in the Surviving Corporation, and all debts liabilities,
restrictions, disabilities and duties of the Company and Acquisition Sub shall
become the debts, liabilities, restrictions, disabilities and duties of the
Surviving Corporation.
(b) If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of the Company or Acquisition Sub acquired or to be acquired by the Surviving
Corporation as a result of or in connection with the Merger, or otherwise to
carry out this Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of the Company or Acquisition Sub, all such deeds, bills of sale,
assignments, assumption agreements and assurances and to take and do, in the
name and on behalf of each of such corporations or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets of the Surviving Corporation or otherwise to carry out this Agreement.
SECTION 1.4. CERTIFICATE OF INCORPORATION AND BYLAWS.
(a) The Certificate of Incorporation of Acquisition Sub in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until amended in accordance with
applicable law; PROVIDED that the name of the Surviving Corporation as set forth
in its Certificate of Incorporation shall be changed at the Effective Time to
reflect PRINTRAK INTERNATIONAL INC. as the name of the Surviving Corporation.
(b) The Bylaws of Acquisition Sub in effect at the Effective Time shall be
the Bylaws of the Surviving Corporation until amended in accordance with
applicable law.
SECTION 1.5. DIRECTORS. The directors of Acquisition Sub at the Effective
Time shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and By-laws of the
Surviving Corporation and until his or her successor is duly elected and
qualified.
SECTION 1.6. OFFICERS. The officers of the Acquisition Sub at the
Effective Time, and/or any individuals designated by Parent, shall be the
initial officers of the Surviving Corporation, each to hold office in accordance
with the Certificate of Incorporation and Bylaws of the Surviving Corporation
and until his or her successor is duly appointed and qualified.
SECTION 1.7. CONVERSION OF SHARES. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Acquisition Sub, the
Company or the holder of any of the following securities:
(a) Each share of the Company's common stock, $0.0001 par value per
share (each a "SHARE") issued and outstanding immediately prior to the
Effective Time (other than Shares referred to in Section 1.7(b) hereof and
Dissenting Shares (as hereinafter defined)), shall by virtue of the Merger
and without any action on the part of the holder thereof be converted into
the right to receive an amount equal to $12.1406 per Share in cash, without
interest (the "MERGER CONSIDERATION").
(b) Each Share that is owned by the Company or by any wholly owned
subsidiary of the Company and each Share that is owned by Parent,
Acquisition Sub or any other wholly owned subsidiary of Parent shall be
cancelled and retired and no consideration shall be delivered in exchange
therefor.
(c) Each share of common stock, $0.01 par value per share, of
Acquisition Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and become one validly issued, fully paid and
non-assessable share of common stock, $0.01 par value per share, of the
Surviving Corporation.
A-2
<PAGE>
SECTION 1.8. EMPLOYEE STOCK OPTIONS; WARRANTS. As of the Effective Time,
each holder of outstanding options ("STOCK OPTIONS") to purchase shares of
Company common stock under the Company's stock option plans (the "COMPANY STOCK
OPTION PLANS") listed on Schedule 1.8 will be entitled to receive, and shall
receive (a) additional vesting service under each Stock Option held, as provided
on Schedule 1.8, and (b) in settlement of each Stock Option held, a cash payment
from the Company, to the extent the Stock Option is vested, equal to the product
of (i) the Merger Consideration minus the exercise price per Share subject to
such Stock Option and (ii) the number of Shares subject to such Stock Option. By
virtue of the foregoing treatment of the Stock Options, all Stock Options,
whether vested or unvested, and the Company Stock Option Plans, shall be
cancelled and shall cease to exist. With respect to the warrants listed in
Schedule 1.8, the payments as set forth in Schedule 1.8 will be made by the
Company to such warrant holders. Other than as provided in this Section 1.8,
there shall be no other payments made under any options, warrants, purchase
rights, subscription rights, conversion or exchange rights or other contracts or
commitments that could require the Company to issue, sell or otherwise cause to
become outstanding any capital stock.
SECTION 1.9. STOCKHOLDER'S CONSENT. (a) As soon as practicable after the
date hereof, the Company shall prepare and file with the Securities and Exchange
Commission (the "SEC"), an Information Statement on Schedule 14C (as
supplemented or amended from time to time, the "SCHEDULE 14C") reflecting the
action taken pursuant to the Stockholders Consent and relating to the Merger and
this Agreement, such Schedule 14C to include the information required to be
included pursuant to the rules and regulations of the SEC and shall use its
commercially reasonable efforts, after consultation with Parent, to respond to
any comments made by the SEC with respect to the Schedule 14C and, as promptly
as practicable after satisfying applicable SEC rules and regulations, cause the
Schedule 14C to be mailed to the Company's stockholders. The Schedule 14C, shall
contain a notification conforming to Sections 228(d) and 262(d) of the DGCL
advising stockholders of (i) the Stockholders Consent and (ii) the date by which
the Company must receive the demand for payment in order for Shares to qualify
for the appraisal rights provided for hereunder, which date shall be approved by
Parent. The Schedule 14C, including any amendments or supplements thereto, shall
not, at the time filed with the SEC or as of the date mailed to the Company's
stockholders, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading, except that the Company makes no representation or warranty with
respect to any information provided by Parent specifically for use in the
Schedule 14C. The Schedule 14C shall comply as to form in all material respects
with the provisions of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT").
(b) Provided that this Agreement has not been terminated in accordance with
Article VII, the Majority Stockholders agree not to revoke or withdraw the
Stockholders Consent.
ARTICLE II
DISSENTING SHARES; EXCHANGE OF SHARES
SECTION 2.1. DISSENTING SHARES. Notwithstanding anything in this Agreement
to the contrary, Shares outstanding immediately prior to the Effective Time and
held by a holder who has demanded appraisal for such Shares ("DISSENTING
SHARES") in accordance with Section 262 of the DGCL or, if applicable, Chapter
13 of the California Corporation Code (the "CCC") shall not be converted into a
right to receive the Merger Consideration unless such holder fails to perfect or
withdraws or otherwise loses his right to appraisal. If, after the Effective
Time, such holder fails to perfect or withdraws or loses his right to appraisal,
such Shares shall be treated as if they had been converted as of the Effective
Time into a right to receive the Merger Consideration to which such holder is
entitled, without interest thereon. The Company shall give Parent prompt notice
of any demands received by the Company for appraisal of Shares, and, prior to
the Effective Time, Parent shall have the right to participate in all
negotiations and proceedings
A-3
<PAGE>
with respect to such demands. Prior to the Effective Time, the Company shall
not, except with the prior written consent of Acquisition Sub, make any payment
with respect to, or settle or offer to settle, any such demands.
SECTION 2.2. EXCHANGE OF CERTIFICATES.
(a) Prior to the Effective Time, Parent shall designate a bank or trust
company reasonably acceptable to the Company to act as paying agent (the "PAYING
AGENT") in effecting the payment of the Merger Consideration upon surrender of
certificates (the "CERTIFICATES") that, prior to the Effective Time, represented
Shares. Upon the surrender of each such Certificate formerly representing
Shares, together with a properly completed letter of transmittal, the Paying
Agent shall pay the holder of such Certificate the Merger Consideration
multiplied by the number of Shares formerly represented by such Certificate, in
exchange therefor, and such Certificate shall forthwith be cancelled. Until so
surrendered and exchanged, each such Certificate (other than Certificates
representing Dissenting Shares or Shares held by Parent, Acquisition Sub or the
Company, or any direct or indirect subsidiary thereof) shall represent solely
the right to receive the Merger Consideration. No interest shall be paid or
accrue to the holders of Shares in respect of the Merger Consideration. If the
Merger Consideration (or any portion thereof) is to be delivered to any person
other than the person in whose name the Certificate formerly representing Shares
surrendered in exchange therefor is registered, it shall be a condition to such
exchange that the Certificate so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the person requesting such
exchange shall pay to the Paying Agent any transfer or other Taxes (as defined
herein) required by reason of the payment of the Merger Consideration to a
person other than the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Paying Agent that such tax has been paid or
is not applicable.
(b) Parent or Acquisition Sub shall (i) deposit seventy-five percent (75%)
of the Merger Consideration to which holders of Shares shall be entitled at the
Effective Time pursuant to Section 1.7(a) hereof in trust with the Paying Agent
on the date upon which the Effective Time occurs, and (ii) deposit, or cause to
be deposited the remaining Merger Consideration in trust with the Paying Agent
on a timely basis, as and when the Paying Agent requires after the Effective
Time, PROVIDED that no such deposit shall relieve Parent of its obligation to
pay the Merger Consideration pursuant to Section 1.7(a). Pursuant to irrevocable
instructions, subject to Section 2.2(c) and 2.2(e), Parent shall cause the
Paying Agent to hold the amounts deposited with it for the benefit of the
holders of Shares.
(c) The Merger Consideration shall be invested by the Paying Agent, as
directed by Parent, on a timely basis. Any interest and other income resulting
from such investments shall be paid to Parent.
(d) Promptly after the Effective Time, the Paying Agent shall mail to each
record holder of Certificates that immediately prior to the Effective Time
represented Shares, a form of letter of transmittal and instructions reasonably
acceptable to the Company for use in surrendering such Certificates and
receiving the Merger Consideration in exchange therefor.
(e) Promptly following the date that is six months after the Effective Time,
the Paying Agent shall deliver to Parent all cash and documents in its
possession relating to the transactions described in this Agreement, and the
Paying Agent's duties shall terminate. Thereafter, each holder of a Certificate
formerly representing Shares may surrender such Certificate to the Surviving
Corporation and (subject to applicable abandoned property, escheat and similar
laws) receive in exchange therefor the Merger Consideration, without any
interest thereon. Parent shall remain responsible for payment of the Merger
Consideration with respect thereto.
(f) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Shares. If, after the
Effective Time, Certificates formerly representing Shares are presented to the
Surviving Corporation or the Paying Agent, they shall be cancelled and exchanged
for the
A-4
<PAGE>
Merger Consideration, as provided in this Article II, subject to applicable law
in the case of Dissenting Shares.
(g) Parent or any of its affiliates shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
former holder of Shares or Stock Options such amounts as Parent (or any
affiliate thereof) is required to deduct and withhold with respect to the making
of such payment under the "Code" (as defined herein), or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld by Parent
(or any affiliate thereof) and paid by Parent (or any affiliate thereof) to the
applicable taxing authority, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the former holder of Shares or
Stock Options in respect of which such deduction and withholding was made by
Parent (or any affiliate thereof).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Acquisition Sub that the
statements contained in this Article III are correct and complete as of the date
of this Agreement and, unless such statements shall refer to a date other than
the date of this Agreement, will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout such statement), except as set forth in the
Schedules of Disclosure, which identify exceptions only to specific Sections
referred to therein (the "SCHEDULES OF DISCLOSURE," composed of individual
"SCHEDULES") and which are incorporated herein by this reference. For purposes
of this Article III, references to the Company's "knowledge" shall mean the
actual knowledge of the following individuals: Richard Giles, Thomas Costales,
Dan Crawford, Pam Bacchus, Mike Lyons, David McNeff, Behnam Bavarian, Janet
Harmier and David Gilrain.
SECTION 3.1. ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. The Company
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware. The Company is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the failure to be so qualified could not
reasonably be expected to have a material adverse effect on the business,
financial condition, operations, results of operations or prospects of the
Company and its subsidiaries taken as a whole ("MATERIAL ADVERSE EFFECT"). The
Company and each of its subsidiaries has full corporate power and authority and
all governmental licenses, permits, and authorizations necessary to carry on the
businesses in which it is engaged and in which it presently proposes to engage
and to own and use the properties owned and used by it, except where the failure
to have such licenses, permits, and authorizations would not have a Material
Adverse Effect. Schedule 3.1 lists: (a) the addresses of all sales offices and
any other offices or facilities of the Company and its subsidiaries, including
the addresses and whether there are employees, contractors or sales agents
located at such offices or facilities; (b) all states and other jurisdictions
where the Company and each of its subsidiaries are qualified to transact
business as a foreign corporation; and (c) the directors and officers of the
Company. True and complete copies of the Certificate of Incorporation and Bylaws
of the Company (as amended to date) have been provided to Parent. The minute
books (containing the records of meetings of the stockholders, the board of
directors, and any committees of the board of directors), the stock certificate
books, and the stock record books of the Company are correct and complete in all
material respects and copies of same have been provided to Parent. The Company
is not in default under or in violation of any provision of its Certificate of
Incorporation or Bylaws.
SECTION 3.2. CAPITALIZATION.
(a) As of the date hereof, the entire authorized capital stock of the
Company consists of 20,000,000 Shares of which 11,973,923 shares are issued and
outstanding. As of the date hereof, the number of Shares outstanding on a
fully-diluted basis, assuming the exercise of all outstanding vested and
unvested options, warrants and other rights to purchase securities (the
"Fully-Diluted Shares"), is 13,674,365 Shares. As of
A-5
<PAGE>
the date hereof, Stock Options to purchase an aggregate of 1,650,528 Shares were
outstanding and the weighted average exercise price of such Stock Options was
$6.04 per Share.
(b) All issued and outstanding Shares: (i) have been duly authorized and
validly issued; (ii) are fully paid and non-assessable; and (iii) were issued in
compliance in all material respects with all applicable state and federal laws
concerning the issuance of securities. Except as set forth in Schedule 1.8,
there are no options, warrants, purchase rights, subscription rights, conversion
or exchange rights or other contracts or commitments that could require the
Company to issue, sell or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Company. Except as set forth in, or contemplated by, this Agreement, there are,
to the Company's knowledge, no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the Company.
(c) Except as disclosed in Schedule 3.2(c), there are no outstanding
contractual obligations of the Company (A) restricting the transfer of,
(B) affecting the voting rights of, (C) requiring the repurchase, redemption or
disposition of, or containing any right of first refusal with respect to,
(D) requiring the registration for sale of, or (E) granting any preemptive or
antidilutive rights with respect to, any shares of the Company common stock or
any capital stock of, or other equity interests in, the Company. There are no
outstanding contractual obligations of the Company to provide funds to, or make
any investment (in the form of a loan, capital contribution or otherwise) in,
any person other than wholly-owned Subsidiaries of the Company as listed on
Schedule 3.2(c).
SECTION 3.3. AUTHORIZATION; NO CONTRAVENTION. (a) The Company has the
corporate power and authority to enter into this Agreement and the other
transaction documents to which it is a party and to carry out its obligations
hereunder and thereunder. The execution and delivery of this Agreement and the
transaction documents to which it is a party and the consummation of the
transactions contemplated herein and therein: (i) have been duly authorized by
the board of directors and stockholders of the Company; and (ii) except as set
forth in the immediately preceding clause, require no other corporate
proceedings in order to authorize this Agreement and the other transaction
documents. The Board, at a meeting duly called and held on August 28, 2000,
(i) determined that this Agreement and the transactions contemplated hereby,
including the Merger, are fair to and in the best interests of the stockholders
of the Company, (ii) approved this Agreement and the transactions contemplated
hereby, including the Merger and (iii) recommended in satisfaction of all
applicable requirements for Board action under Section 251 of the DGCL in order
for the Merger to be validly approved that the stockholders of the Company, to
the extent required by applicable law, approve and adopt this Agreement and the
Merger and (iv) set a record date of even date hereof for purposes of the
Stockholders Consent approving and adopting this Agreement and approving the
Merger and the transactions contemplated herein. Such approvals constitute all
Board action required to be taken in connection with this Agreement, the Merger
and the other transactions contemplated hereby by Section 251 of the DGCL in
order for the Merger to be validly approved. The Board has taken all action
necessary with respect to the transactions contemplated hereby so as to render
inapplicable to such transactions, including, without limitation, the Merger,
the restrictions on business combinations contained in Section 203 of the DGCL.
The Shares set forth opposite the name of each Majority Stockholder on Annex A
constitute a majority of the issued and outstanding Shares of the Company as of
the date hereof. The Stockholders Consent constitutes all stockholder action
required to be taken in connection with this Agreement, the Merger and the other
transactions contemplated hereby by Section 251 of the DGCL in order for the
Merger to be validly approved. This Agreement has been duly and validly executed
and delivered by the Company and, assuming it constitutes a valid and binding
agreement of the other parties hereto, constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors generally, or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
A-6
<PAGE>
(b) The Company is neither subject to nor obligated under any charter or
bylaw provision or any governmental license, franchise or permit, nor, to the
knowledge of the Company, subject to any order or decree that would be breached
or violated in any manner by or in conflict with its executing and carrying out
this Agreement and the transactions contemplated herein and under the
transaction documents, except for such breaches, violations or conflicts which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect or affect the ability of the parties under applicable
laws and regulations to consummate the transactions contemplated by this
Agreement. Except for the filing of the Certificate of Merger, any required
officers' certificates with the Secretary of State of the State of Delaware,
appropriate documents with the relevant authorities of other states in which the
Company is qualified to do business and filings, notices, approvals,
confirmations, consents, declarations or decisions required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT")
and required by the Exchange Act (as defined herein) and state securities,
takeover and Blue Sky laws (collectively, the "COMPANY GOVERNMENTAL APPROVALS"),
and except as set forth in Schedule 3.3(c), no consent, approval, authorization
or permit of, or filing with or notification to (i) any person who is a party to
a Material Contract (as defined herein), or (ii) any foreign or domestic
governmental administrative, judicial or regulatory authority ("GOVERNMENTAL
ENTITY") is required to be obtained on the part of the Company or any of its
subsidiaries to permit the execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated herein and to allow
the Surviving Corporation to continue the business activities of the Company as
previously conducted by them, except where the failure to obtain such consent,
approval, authorization, permit, filing or notification would not which,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect or affect the ability of the parties to consummate the
transactions contemplated by this Agreement.
(c) Except as set forth in Schedule 3.3(c), neither the execution and
delivery of this Agreement or the transaction documents, nor the consummation of
the transactions contemplated hereby or thereby, will (i) violate any
constitution, statute, regulation or rule to which the Company is subject,
except for violations, breaches, defaults or other events which, individually or
in the aggregate, would not reasonably be expected to result in a Material
Adverse Effect, to which the Company is subject, (ii) violate any injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Company is subject or any provision
of the certificate of incorporation or bylaws of the Company, or (iii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice or consent under any Material Contract (as
defined herein) to which the Company is a party or by which any of them is bound
or to which any of their assets are subject (or result in the imposition of any
Tax (as defined herein) or Security Interest (as defined herein) upon any of
their assets), except in any such case as would not reasonably be expected to
result in a Material Adverse Effect.
SECTION 3.4. TITLE TO ASSETS; ASSET SUFFICIENCY. (a) Except as set forth
in Schedule 3.4(a), the Company has good title to, or a valid leasehold interest
in or license to, the properties and assets that are used by the Company or are
located on the premises of the Company, all free and clear of all Security
Interests (the "COMPANY ASSETS").
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for Taxes (as defined herein) not yet due and payable,
(c) purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens or encumbrances arising in the ordinary course
of business and not incurred in connection with the borrowing of money.
(b) The Company Assets comprise all of the rights, services, properties and
assets (real, personal and mixed, tangible and intangible) that are used in, or
necessary for the continued conduct of, the Company's business as now being
conducted, except for those assets the absence of which, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
the Company.
A-7
<PAGE>
SECTION 3.5. SUBSIDIARIES.
(a) Each of the Company's subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted
except where the failure to be so organized, existing and in good standing or to
have such power and authority would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(b) Each of the Company and its subsidiaries is duly qualified or licensed
and in good standing to do business in each jurisdiction (including any foreign
country) in which the property owned, leased or operated by it or the nature of
the business conducted by it makes such qualification or licensing necessary,
except where the failure to be so duly qualified or licensed and in good
standing would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(c) The Company has heretofore furnished or made available to Parent
complete and correct copies of the certificate of incorporation and by-laws or
the equivalent organizational documents of each of its subsidiaries listed on
Schedule 3.5 (the "MATERIAL SUBSIDIARIES"), each as amended to the date hereof,
as requested by Parent, except for certain organizational documents of non-U.S.
subsidiaries that will be furnished or made available prior to the Effective
Time. Such certificate of incorporation, by-laws or equivalent organizational
documents are in full force and effect and no other material organizational
documents are applicable to or binding upon the Company or its Material
Subsidiaries. No Material Subsidiary is in violation of any of the provisions of
its certificate of incorporation, by-laws or equivalent organizational
documents.
(d) The Company has heretofore furnished or made available to Parent a
complete and correct list of the subsidiaries of the Company, which list sets
forth the percentage of total capital stock of or other equity interests in such
subsidiaries owned by the Company, directly or indirectly. No subsidiary of the
Company that is not a Material Subsidiary is, individually or when taken
together with all other subsidiaries of the Company that are not Material
Subsidiaries, material to the business of the Company and its subsidiaries taken
as a whole. Except as set forth on Schedule 3.5, no entity in which the Company
owns, directly or indirectly, less than a 50% equity interest is, individually
or when taken together with all other such entities, material to the business of
the Company and its subsidiaries, taken as a whole. No subsidiary of the Company
that is not a Material Subsidiary has any material liabilities.
SECTION 3.6. SEC REPORTS. (a) The Company has filed all required forms,
reports and documents with the SEC since January 1, 1998. The Company has made
available to Parent, in the form filed with the SEC, the Company's (i) Annual
Report on Form 10-K for the year ended March 31, 2000, (ii) Quarterly Report on
Form 10-Q for the quarter ended June 30, 2000, and (iii) all other reports or
registration statements filed by the Company with the SEC since January 1, 1998
(collectively, the "SEC REPORTS"). The SEC Reports were prepared in accordance
with all applicable requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and the Exchange Act. As of their respective dates, none of
the SEC Reports including, without limitation, any financial statements or
schedules included therein, 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. The audited consolidated financial statements
and unaudited condensed consolidated interim financial statements of the Company
included in the SEC Reports fairly present, in conformity with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated in the notes thereto), the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods then ended
(subject to normal year-end adjustments and the lack of footnote disclosure (to
the extent permitted by SEC rules in the case of the SEC Reports) in the case of
any unaudited interim financial statements).
A-8
<PAGE>
(b) Except as disclosed in the SEC Reports filed prior to the date of this
Agreement or as set forth on Schedule 3.6, the Company and its subsidiaries have
no liabilities of any nature (whether accrued, absolute, contingent or
otherwise) which would be required to be reflected, reserved for or disclosed
under generally accepted accounting principles in consolidated financial
statements of the Company (including the notes thereto), except for liabilities
incurred in the ordinary course of business since June 30, 2000 or liabilities
which would not, individually or in the aggregate, have a Material Adverse
Effect or a material adverse effect on the ability of the Company to perform its
obligations hereunder.
SECTION 3.7. EVENTS SUBSEQUENT TO MOST RECENT FISCAL PERIOD END. Since
June 30, 2000 (the "MOST RECENT FISCAL PERIOD END") to the date hereof, except
as disclosed in the SEC Reports filed prior to the date of this Agreement or as
set forth on Schedule 3.7, there has not been any material adverse change, or
any development involving a prospective material adverse change, in or involving
the business, financial condition, operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole (a "MATERIAL
ADVERSE CHANGE"). Without limiting the generality of the foregoing, except as
set forth on Schedule 3.7 and except as otherwise contemplated under this
Agreement, since the Most Recent Fiscal Period End:
(a) the Company has not sold, leased, transferred, assigned or otherwise
disposed of any of its assets, tangible or intangible, other than for a fair
consideration in the ordinary course of business;
(b) the Company has not entered into any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, or licenses)
involving more than $250,000, other than customer contracts entered into in the
ordinary course of business;
(c) no person (including the Company) has accelerated, terminated, modified
in any material respect, or canceled any agreement, contract, lease, or license
(or series of related agreements, contracts, leases, and licenses) involving
more than $250,000 to which the Company is a party or by which it is bound;
(d) the Company has imposed no Security Interest upon any of its assets,
tangible or intangible;
(e) the Company has made no capital expenditure (or series of related
capital expenditures) either involving more than $100,000 or outside the
ordinary course of business;
(f) the Company has made no capital investment in, any loan to, or any
acquisition of the securities or assets of, any other person (other than
wholly-owned subsidiaries);
(g) the Company has neither issued any note, bond, or other debt security
nor created, incurred, assumed, or guaranteed any indebtedness for borrowed
money or capitalized lease obligation either involving more than $50,000 singly
or $250,000 in the aggregate;
(h) the Company has neither delayed nor postponed the payment of accounts
payable or other liabilities outside the ordinary course of business;
(i) the Company has neither canceled, compromised, waived, nor released any
right or claim (or series of related rights and claims) either involving more
than $100,000 or outside the ordinary course of business;
(j) the Company has granted no license or sublicense of any rights under or
with respect to any Intellectual Property other than in the ordinary course of
business;
(k) there has been no change made or authorized in the Certificate of
Incorporation or Bylaws of the Company;
(l) the Company has neither issued, sold, nor otherwise disposed of any of
its capital stock, or granted any options, warrants, or other rights to purchase
or obtain (including upon conversion, exchange, or exercise) any of its capital
stock, other than pursuant to the exercise of stock options or rights under the
Company's Employee Stock Option Plans;
A-9
<PAGE>
(m) the Company has neither declared, set aside, nor paid any dividend or
made any distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased, or otherwise acquired any of its capital stock;
(n) the Company has experienced no damage, destruction, or loss (whether or
not covered by insurance) to its property in excess of $250,000;
(o) the Company has neither made a loan to, nor entered into any other
transaction with, any of its affiliates, directors, officers, employees, the
Company stockholders or any affiliate thereof;
(p) the Company has neither entered into any employment contract or
collective bargaining agreement, written or oral, nor modified the terms of any
existing such contract or agreement;
(q) the Company has neither granted nor agreed to make any increase in the
base compensation payable or to become payable by the Company to any of its
directors, officers, and employees outside the ordinary course of business;
(r) the Company has neither adopted, amended, modified, nor terminated any
bonus, profit sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, and employees (or
taken any such action with respect to any other Employee Benefit Plan (as
defined herein));
(s) the Company has made no other change in employment terms for any of its
directors, officers, and tier one employees listed on Schedule 6.2(f) outside
the ordinary course of business;
(t) the Company has neither made nor pledged to make any charitable or other
capital contribution outside the ordinary course of business;
(u) there has been no other occurrence, event, incident, action, failure to
act, or transaction outside the ordinary course of business involving the
Company;
(v) the Company has made no change in the accounting methods or practices it
follows, whether for general financial or tax purposes, or any change in
depreciation or amortization policies or rates adopted therein other than
changes required by changes in GAAP;
(w) the Company has suffered no dispute involving any employee that may
reasonably be expected to have a Material Adverse Effect;
(x) the Company has neither received any notice of violation of any law,
rule or regulation, of any Governmental Entity, nor received any claim for
damages arising out of actual or alleged negligence or other tort, or breach of
contract (whether or not fully covered by insurance) which could reasonably be
expected to have a Material Adverse Effect; and
(y) the Company has neither committed nor agreed, in writing or otherwise,
to any of the forgoing.
SECTION 3.8. LEGAL COMPLIANCE. Except as disclosed on Schedule 3.8, each
of the Company and its predecessors and affiliates has complied in all respects
with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, provincial and foreign governments (and all agencies
thereof including, without limitation, any related to exporting or importing
goods), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply, except where the failure to comply which
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company. Neither the Company nor, to the
Company's knowledge, any other person, has made any payment to, or conferred any
benefit, directly or indirectly, on suppliers, customers, employees, or agents
of suppliers or customers, or officials or employees of any government or agency
or instrumentality of any government (domestic or
A-10
<PAGE>
foreign) or any political parties or candidates for office, that is or was
unlawful under any applicable law, including without limitation the United
States Foreign Corrupt Practices Act, as amended.
SECTION 3.9. TAX MATTERS. (a) Except as disclosed in Schedule 3.9(a), the
Company and its subsidiaries have timely filed all Tax Returns (as defined
below) that they were required to file, all such Tax Returns were true, correct
and complete in all respects and were prepared and filed in accordance with
applicable laws and regulations. Except as disclosed on Schedule 3.9(a), all
Taxes owed by the Company and its subsidiaries (whether or not shown on any Tax
Return) have been paid. Except as disclosed in Schedule 3.9(a), neither the
Company nor any of its subsidiaries currently is the beneficiary of any
extension of time within which to file any Tax Return. Neither the Company nor
any of its subsidiaries has received a claim made by an authority in writing in
a jurisdiction where the Company or subsidiary does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction. There are no liens on any
of the assets of either the Company or any of its subsidiaries that arose in
connection with any failure (or alleged failure) to pay any Tax. All unpaid
Taxes have been fully and properly accrued on the audited financial statements
included in the SEC Reports.
(b) The Company and each of its subsidiaries has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder, or other third
party and any other Person (as defined in Section 8.9(f) below) performing
services for the Company under any arrangement.
(c) Except as disclosed in Schedule 3.9(c), there is no pending assessment,
asserted deficiency or any dispute or claim concerning any Tax liability of the
Company or any of its subsidiaries that has been claimed or raised by any
authority in writing, or of which the Company or any of its subsidiaries has
received notice. Schedule 3.9(c) lists all federal, state, local, and foreign
income Tax Returns of the Company filed with respect to the Company or any of
its subsidiaries for taxable periods ended on or after March 31, 1997, indicates
those Tax Returns of the Company that have been audited, and indicates those Tax
Returns of the Company that currently are the subject of audit.
(d) The Company has delivered to Parent correct and complete copies of all
federal income Tax Returns of the Company and each of its subsidiaries for tax
years commencing on and after April 1, 1996, and any examination reports, and
statements of income-tax deficiencies assessed against, or agreed to, by the
Company or any of its subsidiaries since April 1, 1996.
(e) Neither the Company nor any of its subsidiaries has waived any statute
of limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(f) Neither the Company nor any of its subsidiaries has filed any consent
under the Internal Revenue Code of 1986, as amended (the "CODE"), Section 341(f)
concerning collapsible corporations. Neither the Company nor any of its
subsidiaries has made any payments or provided any benefits, is obligated to
make any payments or provide any benefits, or is a party to any agreement that
under certain circumstances could obligate it to make any payments or provide
any benefits that will not be fully deductible under Section 162(m) or 280G of
the Code or similar provisions of applicable law. The Company is not and has not
been a United States real property holding corporation within the meaning of
Code Section 897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). Neither the Company nor any of its subsidiaries has taken any
position on any Tax Return of the Company or any of its subsidiaries that would
require disclosure under Code Section 6662 or any similar provision of
applicable law. Neither the Company nor any of its subsidiaries is a party to
any Tax allocation or sharing agreement or similar arrangement with any other
party. Neither the Company nor any of its subsidiaries (A) has ever been a
member of an affiliated group filing a consolidated federal income Tax Return or
(B) has any liability for the Taxes of any other person under Treas. Reg.
Section 1.1502-6 (or any similar provision of state, local, or foreign law), as
a transferee or successor, by contract, or otherwise.
A-11
<PAGE>
(g) Except as indicated in Schedule 3.9(g), neither the Company nor any of
its subsidiaries maintains or ever has maintained a permanent establishment (as
defined under applicable law) in any location outside of the United States and
neither the Company nor any of its subsidiaries has ever received notice to the
contrary from any foreign governmental authority. Neither the Company nor any of
its subsidiaries owes or has ever owed Taxes to any foreign authority outside
the jurisdiction of its organization or formation.
(h) Neither the Company nor any of its subsidiaries is under any contractual
obligation to pay any tax obligation of any other person or to indemnify any
other person with respect to any Tax.
(i) Neither the Company nor any of its subsidiaries is a party to any joint
venture, partnership or other arrangement that could be treated as a partnership
for federal income Tax purposes.
(j) Neither the Company nor any of its subsidiaries has executed or filed
with any Tax authority (whether federal, state, local or foreign) any agreement
or other document extending or having the effect of extending the period for
assessment, reassessment or collection of any Taxes, and no power of attorney
granted by the Company or any of its subsidiaries with respect to any Taxes is
currently in force.
(k) The Company and each of its subsidiaries has, at all times since its
inception, used the accrual method of accounting. Neither the Company nor any of
its subsidiaries has agreed to or been required to make any adjustments by
reason of a change in accounting methods that affects any taxable year ending
after the Closing Date. Neither the Internal Revenue Service ("IRS") nor any
other agency has proposed any such adjustment or change in accounting methods
that affects any taxable year ending after the Closing Date. Neither the Company
nor any of its subsidiaries has any application pending with any Tax authority
requesting permission for any changes in accounting methods that relate to its
business or operations and that affects any taxable year ending after the
Closing Date.
(l) No asset of the Company or of any of its subsidiaries is subject to the
alternative depreciation system under Code Section 168(g). No portion of the
cost of any asset of the Company or of any of its subsidiaries has been financed
directly or indirectly from the proceeds of any tax-exempt state or local
government obligation described in Code Section 103(a). None of the assets of
the Company or of any of its subsidiaries is property that the Company or any of
its subsidiaries is required to treat as being owned by any other person
pursuant to the safe harbor lease provisions of former Code Section 168(f)(8).
(m) Except as disclosed on Schedule 3.9(m), during the past five years,
neither the Company nor any of its subsidiaries has been a party to: (i) any
transaction that has been reported as a reorganization within the meaning of
Code Section 368, or (ii) any transaction, either as a distributing corporation
or controlled corporation, that has been reported to qualify for tax-free
treatment under Code Section 355.
(n) Neither the Company nor any of its subsidiaries has ever been an S
corporation within the meaning of Sections 1361 and 1362 of the Code.
(o) Except as disclosed in Schedule 3.9(o), there are no outstanding rulings
of, or requests for rulings with, any Tax authority expressly addressed to the
Company or any of its subsidiaries that are, or if issued would be, binding upon
the Company or any of its subsidiaries after the Closing Date.
(p) Except as disclosed in Schedule 3.9(p), neither the Company nor any of
its subsidiaries will have any taxable income or gain as a result of prior
intercompany transactions that have been deferred and that will be taxed as a
result of the changes in ownership contemplated by this Agreement.
(q) Except as disclosed in Schedule 3.9(q), neither the Company nor any its
subsidiaries has any excess loss account with respect to the stock of any other
corporation.
(r) Except as disclosed in Schedule 3.9(r), neither the Company nor any of
its subsidiaries has, in a manner that would be binding on either the Company or
its subsidiaries after the Closing Date, executed,
A-12
<PAGE>
become subject to, or entered into any closing agreement pursuant to Code
Section 7121 or any similar provision of applicable law.
(s) Except as disclosed on Schedule 3.9(s), none of the subsidiaries of the
Company is an entity organized (i) in a foreign jurisdiction or (ii) pursuant to
a foreign law.
"TAX" or "TAXES" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, estimated, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add on
minimum, estimated, or other tax or customs duty of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not
and including any transferee or secondary liability in respect of any tax
(whether by law, contractual agreement or otherwise) and any liability in
respect of any tax as a result of being a member of any affiliated,
consolidated, combined, unitary, or similar group.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
SECTION 3.10. REAL PROPERTY.
(a) Except as disclosed on Schedule 3.10(a), the Company does not own, and
has never owned, any real property, and it has no outstanding options or rights
of first refusal to purchase any real property, or any portion thereof or
interest therein.
(b) Schedule 3.10(b) lists and describes briefly all real property leased or
subleased to the Company. The Company has delivered to Parent correct and
complete copies of the leases and subleases listed on Schedule 3.10(b) (as
amended to date). With respect to each lease and sublease listed on
Schedule 3.10(b):
(i) the lease or sublease, as modified or amended, is legal, valid,
binding, enforceable, and in full force and effect and will continue to be
legal, valid, binding, enforceable and in full force and effect on identical
terms immediately following the consummation of the Merger; subject to laws
of general application relating to public policy, bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief and other equitable remedies and subject further to
receipt of the consent of the landlords of such premises as listed on
Schedule 3.10(b); the landlord of any premises leased or subleased to the
Company will not be entitled to recapture such leased or subleased space
upon the Merger;
(ii) to the knowledge of the Company, no party to the lease or sublease
is in breach or default, and no event has occurred which, with notice or
lapse of time, would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iii) to the knowledge of the Company, no party to the lease or sublease
has repudiated any provision thereof;
(iv) there are no material disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(v) with respect to each sublease, the representations and warranties
set forth in subsections (i) through (iv) above are true and correct with
respect to the underlying lease;
(vi) the Company has not subleased, licensed, assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold;
A-13
<PAGE>
(vii) with respect to the Company's leased facility located at 1250 North
Tustin Avenue, Anaheim, California 92807 (the "PRINCIPAL LOCATION") the
monthly rent and all other charges due under such lease are current and will
have been paid in full through Closing;
(viii) to the knowledge of the Company, all facilities leased or subleased
thereunder have received all approvals of Governmental Entities (including
licenses and permits) required in connection with the operation thereof and
have been operated and maintained in accordance with applicable laws, rules,
and regulations;
(ix) all facilities leased or subleased thereunder are supplied with
utilities and other services necessary for the operation of said facilities;
(x) there are no parties (other than the Company) in possession of such
leased property, other than tenants under any leases disclosed on
Schedule 3.10(b) who are in possession of space to which they are entitled;
and
(xi) the Company has received no notice of any pending condemnation
proceedings, lawsuits, or administrative actions relating to the property or
other matters affecting materially and adversely the current use, occupancy,
or value thereof, and to the knowledge of the Company, none are threatened.
SECTION 3.11. INTELLECTUAL PROPERTY. (a) Certain Definitions
"COMPANY INTELLECTUAL PROPERTY" means (i) the Registered Intellectual
Property; (ii) any and all other Intellectual Property that is owned by the
Company or its subsidiaries, including the Company Software and the Unregistered
Intellectual Property; and (iii) any and all Intellectual Property of third
parties that is exclusively licensed to the Company or its subsidiary.
"COMPANY SOFTWARE" means all computer software, including all enhancements,
versions, releases and updates of such computer software, developed by or for
the Company or any of its subsidiaries as of the Closing Date, and any other
computer software regardless of the computer software's stage of development.
Company Software includes all source code, object code, firmware, development
tools, files, records and data, and all media on which any of the foregoing is
recorded. For purposes of clarification, Company Software does not include
computer software that is licensed under the Excluded Licenses.
"EXCLUDED LICENSES" means contracts, licenses, or other agreements currently
in effect relating to any Intellectual Property that constitutes: (i) "shrink
wrap" software; or (ii) third party software generally available to the public
at a cost of less than Ten Thousand Dollars ($10,000).
"INTELLECTUAL PROPERTY" means any or all of the following and all rights in,
arising out of, or associated therewith, whether registered or unregistered, as
applicable: (i) United States and foreign patents and applications therefor and
all reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) inventions and discoveries (whether or not
patentable and whether disclosed or undisclosed), disclosures on inventions,
trade secrets, proprietary information, know-how, technical data and customer
lists, and all documentation relating to any of the foregoing;
(iii) copyrights, copyright registrations and applications therefor and all
other corresponding rights thereto throughout the world; (iv) industrial designs
and any registrations and applications therefor throughout the world; (v) trade
names, logos, common law trademarks and service marks, and trademark and service
mark registrations and applications therefor and all goodwill associated with
the foregoing throughout the world; (vi) data bases and data collections and all
rights therein throughout the world; (vii) all Web addresses, sites and domain
names; (viii) computer software; (ix) any similar corresponding or equivalent
rights to any one of the foregoing; and (x) all documentation directly related
to any of the foregoing.
"REGISTERED INTELLECTUAL PROPERTY" means all of the following items of
Intellectual Property owned by the Company or any of its subsidiaries:
(i) United States and foreign patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent to use applications or other registrations related to trade
identity and trademarks; (iii) registered copyrights and
A-14
<PAGE>
applications for copyright registration; (iv) mask work registrations and
applications to register mask works; (v) all Web addresses, sites and domain
names; and (vi) any other Intellectual Property that is the subject of an
application, certificate or registration filed with, issued by, or recorded by,
any state, government, or other public legal authority.
"UNREGISTERED INTELLECTUAL PROPERTY" means all Company Intellectual
Property, other than the Registered Intellectual Property and Company Software,
that is relevant to conducting the business as now being conducted including:
(i) disclosures on inventions; (ii) trade secrets, documented know-how,
proprietary processes, and other documented proprietary information relevant to
conducting the business of the Company; (iii) unregistered trademarks; and
(iv) all unregistered Web addresses, sites and domain names.
(b) Schedule 3.11(b) contains a complete list and description (showing in
each case the registered or other owner, registration, application or issue date
and number, if any) of all Registered Intellectual Property.
(c) Schedule 3.11(c) contains a list of all Company Intellectual Property.
(d) The Company or any of its subsidiaries (i) owns all rights, title, and
interest in all Company Intellectual Property free and clear of any encumbrance,
including ownership of pending and accrued causes of action for patent,
trademark, or copyright infringement, misappropriation, and unfair business
practice and has the sole and exclusive right to bring actions for infringement
and misappropriation of such Company Intellectual Property, and (ii) owns free
and clear of any encumbrances or otherwise has the right to all Intellectual
Property necessary to conduct the business of the Company or any of its
subsidiaries as it is currently conducted, including its design, development,
manufacture, and sale of its products, services and Company Software (including
those products, services and Company Software currently under development).
(e) Each item of Registered Intellectual Property is valid and subsisting;
all necessary registration, maintenance or annuity, and renewal fees in
connection with such item of Registered Intellectual Property have been made;
all necessary documents and certificates in connection with such Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Registered Intellectual
Property; and all patent, trademark, service mark and copyright applications set
forth in Schedule 3.11(b) have been duly filed.
(f) All employees, agents, consultants, contractors, or other persons who
have contributed to or participated in the creation or development of any
Company Intellectual Property, including Computer Software: (i) made such
contribution pursuant to and within the scope of employment with the Company or
any of its subsidiaries as an employee or otherwise as a party to a
"work-for-hire" agreement under which Company or any of its subsidiaries is
deemed to be the owner and/or author, as applicable, of all right, title, and
interest therein; or (ii) have executed a written assignment or other agreement
to assign in favor of Company or any of its subsidiaries legally transferring to
Company or any of its subsidiaries all right, title and interest in such Company
Intellectual Property and ownership of all pending and accrued causes of action
relating thereto.
(g) Except as set forth in Schedule 3.11(g), all employees and non-employees
(including interns, trainees, independent contractors to the Company or any of
its subsidiaries, vendors, customers, joint-venturers, and other potential
claimants) who have had access to any Company Intellectual Property, including
Company Software, have executed a confidentiality agreement substantially in the
form attached hereto as Exhibit B-1 or Exhibit B-2, prior to receipt of the
Company confidential/proprietary information.
(h) Schedule 3.11(h) contains a list of the Company Software. Except as set
forth in Schedule 3.11(h): (i) the Company and its subsidiaries have complete
and exclusive right, title and interest in and to the Company Software (in whole
and in part); (ii) no third party has any interest in, or right to compensation
from the Company or any of its subsidiaries by reason of, the use, exploitation,
or sale of the Company
A-15
<PAGE>
Software; (iii) none of the Company Software contains any source code or
portions of source code (including any "canned program" or "free-ware") created
by any party other than the authors of the Company Software on behalf of the
Company or any of its subsidiaries; (iv) the Company Software is not subject by
agreement to any transfer, assignment, site, equipment, or other operational
limitation, and no situation, matter, or agreement exists that would prevent
Company or any of its subsidiaries or the Surviving Corporation from making any
change to the Company Software or combining it with other software in a lawful
manner; (v) the Company and its subsidiaries have maintained and protected the
Company Software with appropriate proprietary notices (including, without
limitation, the notice of copyright in accordance with the requirements of 17
U.S.C. Section 401), confidentiality and non-disclosure agreements and such
other measures as are reasonably necessary to protect the proprietary, trade
secret or confidential information contained therein; (vi) the Company Software
is eligible for protection and registration under applicable U.S. copyright law
and has not been forfeited to the public domain; (vii) the Company and its
subsidiaries have copies of all releases or separate versions of the Company
Software so that the same may be subject to registration in the United States
Copyright Office; (viii) to the knowledge of Company and its subsidiaries
without further inquiry, the Company Software does not infringe any copyright or
other Intellectual Property rights of any other person; (ix) any Company
Software includes the source code, system documentation, statements of
principles of operation and schematics, as well as any pertinent commentary,
explanation, program (including compilers), workbenches, tools, and higher level
(or "proprietary") language used for the development, maintenance,
implementation and use thereof, so that a trained computer programmer could
develop, maintain, support, compile and use all releases or separate versions of
the same that are currently subject to maintenance obligations by Company or any
of its subsidiaries; (x) there are no agreements or arrangements in effect with
respect to the marketing, distribution, licensing or promotion of the Company
Software by any other person; and (xi) neither the Company nor any of its
subsidiaries has any source code for the Company Software or other Company
Intellectual Property in escrow; and (xii) neither the Company nor any of its
subsidiaries has received notice of, and neither the Company nor any of its
subsidiaries has knowledge of, any complaint, assertion, threat, or allegation
inconsistent with the preceding statements in this paragraph.
(i) Except as set forth in Schedule 3.11(i), no claims of any kind have been
made by the Company or any of its subsidiaries against any third party that, and
neither the Company nor any of its subsidiaries has knowledge that, any third
party infringes, or has previously infringed, misappropriates, or has previously
misappropriated any Company Intellectual Property.
(j) No claims of any kind have been made or asserted by any party against
the Company or any of its subsidiaries, to the knowledge of the Company, against
or to the Company's employees, agents or contractors, customers, vendors,
suppliers, or distributors claiming or alleging that the Company or any of its
products (including products currently under development), services, or methods
of operation infringe, have infringed, contribute to the infringement or induce
the infringement of, misappropriate the Intellectual Property of any third
party, violate the right of any Person (including rights of privacy or
publicity), or constitute unfair competition, nor is the Company or any of its
subsidiaries aware of or on notice of any such infringement, misappropriation or
violation. To the Company's knowledge, (i) neither the Company nor any of its
subsidiaries has infringed any Intellectual Property right of any third party or
breached any obligation of confidentiality owed to a third party, and (ii) the
continued operation of the Company's business consistent with past practices
will not infringe any Intellectual Property rights of a third party.
(k) No Company Intellectual Property or product or service of the Company or
any of its subsidiaries is subject to any outstanding decree, order, judgment,
or stipulation restricting in any manner the use or licensing thereof by the
Company or any of its subsidiaries.
(l) Schedule 3.11(l) contains a list (showing in each case the parties
thereto and the material terms thereof) of all contracts, licenses, assignments,
software escrows, and other agreements to which the Company or any of its
subsidiaries is a party relating to any Intellectual Property licensed or
assigned to the Company or any of its subsidiaries (collectively the "COMPANY
LICENSES") other than Excluded
A-16
<PAGE>
Licenses. Except as set forth in Schedule 3.11(l): (i) the Company Licenses
listed in Schedule 3.11(l) are in full force and effect; (ii) the consummation
of the transactions contemplated by this Agreement will neither violate nor
result in the breach, modification, cancellation, termination, or suspension of
the Company Licenses listed in Schedule 3.11(l); (iii) the Company and its
subsidiaries are in compliance with and has not breached any term of, the
Company Licenses listed in Schedule 3.11(l); and (iv) to the Company's
knowledge, all other parties to the Company Licenses listed in Schedule 3.11(l)
are in compliance with, and have not breached any term of such Company Licenses.
Except as disclosed in Schedule 3.11(l), following the Closing Date, the
Surviving Corporation will be permitted to exercise all of its rights under the
Company Licenses listed in Schedule 3.11(l) without the payment of any
additional amounts or consideration other than ongoing fees, royalties or
payments that the Company or any of its subsidiaries would otherwise be required
to pay.
(m) Except as set forth in Schedule 3.11(m) and other than end-user
licenses, neither the Company nor any of its subsidiaries has: (i) licensed, or
otherwise authorized any third party reseller, or original equipment
manufacturer (OEM) to make, have made, use or sell, copy, distribute, modify,
reverse engineer, decompile, prepare derivatives of, or disclose, any Company
Intellectual Property including the Company Software; (ii) conveyed, disclosed,
or licensed to any third party any proprietary or trade secret information as
"trade secret" is defined in the Uniform Trade Secrets Act, under circumstances
that could reasonably be expected to cause a Material Adverse Effect on the
Company; and (iii) by any of its acts or omissions (or by acts or omissions of
its directors, officers, employees, or agents) caused any proprietary rights in
the Company Intellectual Property, including the Company Software, to be
diminished, or adversely affected to any material extent.
(n) Schedule 3.11(n) lists all contracts, licenses, software escrows, and
other agreements between the Company or any of its subsidiaries and any other
person wherein or whereby the Company or any of its subsidiaries has agreed to
assume, or assumed, any obligation or duty to indemnify, hold harmless or
otherwise assume or incur any obligation or liability with respect to the
infringement by the Company or any of its subsidiaries or such other person of
the Intellectual Property rights of any other person; provided, however, that
the foregoing only applies to agreements for which the Company's or any of its
subsidiaries' obligations are continuing as of the date of this Agreement and
where compliance with such obligations could reasonably be expected cause a
Material Adverse Effect on the Company.
(o) Except as set forth on Schedule 3.11(o), there are no contracts,
licenses, software escrows, and other agreements between the Company or any of
its subsidiaries and any other person with respect to the Company Intellectual
Property with respect to which the Company has received notice of any dispute
that could be reasonably considered to be a material dispute regarding the scope
of such agreement, or performance under such agreement including with respect to
any payments to be made or received by the Company or any of its subsidiaries
thereunder.
(p) No government funding or university or college facilities were used in
the development of any Company Intellectual Property in a manner that would give
such government or university or college any interest in the Company
Intellectual Property.
(q) To the knowledge of the Company, (i) no product, service, or publication
of the Company or any of its subsidiaries, (ii) no material published or
distributed by the Company or any of its subsidiaries, and (iii) no conduct or
statement of the Company or any of its subsidiaries, constitutes obscene
material, a defamatory statement or material, or violates any rights, including
rights of publicity or privacy, of any person.
SECTION 3.12. CONTRACTS. Schedule 3.12 lists the following currently
effective contracts and other agreements to which the Company is a party and the
performance of which will involve consideration in excess of $50,000
(collectively, the "MATERIAL CONTRACTS"), with the exception of (i) Sections
3.12 (g) and 3.12(t) which shall not be limited in dollar amount and
(ii) Section 3.12(m) which shall be limited as stated therein:
A-17
<PAGE>
(a) any agreement relating to indebtedness, liability for borrowed money or
the deferred purchase price of property (excluding trade payables in the
ordinary course of business) or any guarantee or other contingent liability in
respect of any indebtedness or obligation of any person (other than the
endorsement of negotiable instruments for collection in the ordinary course of
business);
(b) any agreement that contain restrictions with respect to payment of
dividends or any other distribution in respect of the equity of the Company;
(c) any letters of credit or similar arrangements relating to the Company;
(d) any agreement concerning a partnership or joint venture;
(e) any employment agreements with any employee of the Company or its
subsidiaries or other person on a consulting basis (other than agreements
terminable by the Company on an at-will basis without any liability to the
Company);
(f) any management, consulting or advisory agreements, or severance plans or
arrangements for any present or former employee of the Company;
(g) any non-disclosure agreements and non-compete agreements binding present
and former employees of the Company;
(h) any agreement under which the Company is lessee of or holds or operates
any property, real or personal;
(i) any agreement under which the Company is lessor of or permits any third
party to hold or operate any property, real or personal;
(j) any agreement relating to the acquisition or divestiture of the capital
stock or other equity securities, assets or business of any person involving the
Company or pursuant to which the Company has any liability, contingent or
otherwise;
(k) any powers of attorney granted by or on behalf of the Company;
(l) any agreement, other than agreements entered into in the ordinary course
of business consistent with past practice, which prevents the Company from
disclosing confidential information or which prohibits the Company from freely
engaging in business anywhere in the world;
(m) any sales agreement relating to the Company's products with annual
payments in excess of $500,000 and any agency or distribution agreements
relating to the Company's products;
(n) any warranty, guaranty or other similar undertaking (i) with respect to
a contractual performance extended by the Company which involves annual payments
in excess of $500,000 or (ii) extended by the Company for a period exceeding one
year;
(o) any agreement with any of the Company stockholders or affiliates;
(p) any agreement under which it currently has outstanding any advance or
loan to any of its directors, officers and employees;
(q) any agreement pursuant to which the Company has agreed to shift or
allocate the liability of the Company or any other person for Taxes;
(r) any other agreement which is filed (or required to be filed) as an
exhibit to the Company's SEC Reports;
(s) any agreement with any federal government office or agency, any general
service administration (GSA) agreement, or any agreement with any state or local
government agency funded in any part by federal funds, in each case specifically
designated as such in Schedule 3.12; and
A-18
<PAGE>
(t) any agreement in which there is currently a default, including, but not
limited to any Record Management Systems contracts.
The Company has delivered to Parent a correct and complete copy of each
written agreement listed on Schedule 3.12 (as amended to date) and a written
summary setting forth the terms and conditions of each oral agreement referred
to on Schedule 3.12. With respect to each such agreement: (i) the agreement is
legal, valid, binding, enforceable, and in full force and effect and will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms immediately following the consummation of the Merger, subject
to laws of general application relating to public policy, bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive relief and other equitable remedies; (ii) the Company is not and, to
the knowledge of the Company, no other party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under the
agreement, except where the same would not reasonably be expected to have a
Material Adverse Effect; (iii) except as disclosed in Schedule 3.12, neither the
Company nor any other party has repudiated any provision of the agreement; and
(iv) the Company neither has nor currently is making any payments, including
payment of liquidated damages, under any such agreements for failure to perform
thereunder.
SECTION 3.13. INSURANCE. Schedule 3.13 sets forth the following
information with respect to each insurance policy and/or self-insurance plan,
including, without limitation, property, casualty, workers compensation
insurance programs and surety, to which the Company has been a party, a named
insured, established claim reserves, qualified as a "self-insurer," joined a
state fund or risk sharing pool or is otherwise the beneficiary of coverage at
any time:
(a) the name, address, and telephone number of each broker, agent or other
representative providing policies and/or services;
(b) the name of the insurer, the name of the policyholder, and the name of
each covered insured;
(c) the policy number, the period of coverage and type, i.e. occurrence,
claims made or other basis; and
(d) the amount/policy limits for each policy or program.
(e) With respect to each such insurance policy and self-insurance plan
described on Schedule 3.13, to the knowledge of the directors of the Company:
(i) the policy is legal, valid, binding, enforceable, and in full force and
effect; (ii) the policy will continue to be legal, valid, binding, enforceable,
and in full force and effect on identical terms following the consummation of
the Merger; (iii) neither the Company nor any other party to the policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (iv) neither the Company
nor any other party to the policy has repudiated any provision thereof. The
Company is and at all times prior hereto has been covered by insurance in scope
and amount customary and reasonable for the businesses in which it is or has
been engaged. To the knowledge of the Company, no litigation is being handled by
an insurer of the Company which has a significant settlement or judgment value
that may not be covered by insurance.
SECTION 3.14. LITIGATION. Except as disclosed in the SEC Reports filed
prior to the date hereof or on Schedule 3.14, there is no action, suit, claim,
investigation or proceeding pending against, or to the knowledge of the Company,
threatened against, the Company or any of its subsidiaries or any of their
respective properties before any court or arbitrator or any administrative,
regulatory or governmental body, or any agency or official which, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect or a material adverse effect on the ability of the Company to perform its
obligations hereunder. Except as disclosed in the SEC Reports filed prior to the
date of this Agreement or on Schedule 3.14, there is no action, suit, claim,
investigation or proceeding pending against, or to the
A-19
<PAGE>
knowledge of the Company, threatened against, the Company or any of its
subsidiaries or any of their respective properties before any court or
arbitrator or any administrative, regulatory or governmental body, or any agency
or official which alleges criminal action or inaction. Except as disclosed in
the SEC Reports filed prior to the date of this Agreement or on Schedule 3.14,
neither the Company nor any of its subsidiaries nor any of their respective
properties is subject to any order, writ, judgment, injunction, consent
agreement, decree, determination or award having, or which would reasonably be
expected to have, a Material Adverse Effect or which would prevent or materially
delay the consummation of the transactions contemplated hereby or otherwise have
a material adverse effect on the ability of the Company to perform its other
obligations hereunder.
SECTION 3.15. SOFTWARE PRODUCTS. (a) The Company and its subsidiaries are
in conformity with all applicable contractual commitments and all express and
implied warranties with regard to all the Company Software and any other
software products that the Company or any of its subsidiaries has sold or
licensed and all warranty/maintenance service that the Company or any of its
subsidiaries has agreed to provide.
(b) No claim has been made or asserted by any third party against the
Company or any of its subsidiaries or, to the Company's knowledge, against any
customer of the Company or any of its subsidiaries related to any breach of any
such commitment or warranty or other than claims that would be the subject of
routine warranty/maintenance items with respect to the Company Software or any
other software products that the Company or any of its subsidiaries has sold or
licensed.
(c) There are no material defects in the Company Software or to the
Company's knowledge any other software products that the Company or any of its
subsidiaries has sold or licensed, and there are no errors in any accompanying
design documentation provided to a licensee or customer, which defects or errors
would in any material respect affect such licensee's or customer's use of such
software or the functioning of such software in accordance with the published
specifications for such software, other than defects or errors that would be the
subject of routine warranty/maintenance items.
(d) The Company Software and to the Company's knowledge, any other software
products that the Company or any of its subsidiaries has sold or licensed have
all the material features described in the user manuals made available to the
Company's or any of its subsidiaries' customers, other than routine
warranty/maintenance items.
(e) Except as disclosed in Schedule 3.15, the Company Software and, to the
Company's knowledge any other software, does not intentionally contain any back
door, time bomb, Trojan horse, worm, drop-dead device, virus (as these terms are
commonly used in the computer software industry), or other software routines or
hardware components designed to permit unauthorized access, to disable or erase
software, hardware, or data, or to perform any other similar type of functions.
SECTION 3.16. EMPLOYEES; INDEPENDENT CONTRACTORS.
(a) Except as disclosed on Schedule 3.16(a), and to the knowledge of the
Company, no officer, or group of employees on the U.S. payroll, has any plans to
terminate employment with the Company or any subsidiary. The Company and each
subsidiary is neither a party to, nor bound by, any collective bargaining
agreement, nor has the Company or any subsidiary experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes with respect to employees on the U.S. payroll. The Company and each
subsidiary has neither committed any unfair labor practice nor violated any
applicable laws relating to employment or employment practices, including those
relating to prices, wages and hours, discrimination in employment, collective
bargaining and the payment of social security and taxes and is not liable for
any arrears of wages or any tax or any penalty for failure to comply with any of
the foregoing. Except as set forth on Schedule 3.16(a), there is not currently
and there has not been within the previous three (3) years, any claim against
the Company or any subsidiary based on actual or alleged wrongful termination of
an employee or any claim based on race, age, sex, disability or other harassment
or discrimination, nor any reasonable basis for any such claim. No
organizational effort has been or is
A-20
<PAGE>
currently being made or threatened by or on behalf of any labor union with
respect to employees of the Company or any subsidiary.
(b) Except as disclosed on Schedule 3.16(b), the Company has not made any
promises for the payment of any bonuses, backpay or other remuneration to any
employees, contractors, interns or other persons for their work on behalf of
such entity.
(c) Schedule 3.16(c) contains a list of all employment, consulting and
severance agreements or arrangements to which the Company or any subsidiary is a
party or by which the Company or any subsidiary is bound. The Company has
delivered to Parent a correct and complete copy of each written agreement listed
on Schedule 3.16(c) (as amended to date).
SECTION 3.17. EMPLOYEE BENEFITS--UNITED STATES. (a) Schedule 3.17 lists
each employee benefit plan that the Company or any ERISA Affiliate maintains or
has maintained, or to which the Company or any ERISA Affiliate contributes or
has contributed, or is or has been obligated to contribute for employees on the
U.S. payroll (each an "EMPLOYEE BENEFIT PLAN"). The term "EMPLOYEE BENEFIT PLAN"
shall include:
(i) any "employee benefit plan" (as defined in section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"));
(ii) any retirement or deferred compensation plan, incentive
compensation plan, stock option plan, stock purchase plan, or other stock
incentive or compensation plan, unemployment compensation plan, vacation
pay, severance pay, bonus or benefit arrangement, insurance or
hospitalization program or any other fringe benefit arrangements for any
current or former employee, director, consultant or agent, whether pursuant
to contract, arrangement, custom or informal understanding, which does not
constitute an employee benefit plan described in subparagraph (i) above; or
(iii) any employment agreement or consulting agreement.
For purposes of this Agreement, the term "ERISA AFFILIATE" means, with respect
to the Company, any U.S. corporation, trade or business which has one or more
employees on the U.S. payroll and which, together with the Company, is a member
of a controlled group of corporations or a group of trades or businesses under
common control within the meaning of section 414 of the Code.
(b) A true and correct copy of each of the plans, arrangements, and
agreements listed on Schedule 3.17 (referred to hereinafter as "EMPLOYEE BENEFIT
PLANS"), and all contracts relating thereto, or to the funding thereof,
including, without limitation, all trust agreements, insurance contracts,
administration contracts, investment management agreements, subscription and
participation agreements, and recordkeeping agreements, each as in effect on the
date hereof, has been made available to the Parent. In the case of any Employee
Benefit Plan which is not in written form, the Parent has been supplied with an
accurate description of such Employee Benefit Plan as in effect on the date
hereof. A true and correct copy of the most recent annual report, actuarial
report, accountant's opinion of the plan's financial statements, summary plan
description and IRS determination letter with respect to each Employee Benefit
Plan, to the extent applicable, and a current schedule of assets (and the fair
market value thereof assuming liquidation of any asset which is not readily
tradable) held with respect to any funded Employee Benefit Plan has been
supplied to the Parent, and there have been no material changes in the financial
condition in the respective plans from that stated in the annual reports and
actuarial reports supplied.
(c) Except as otherwise scheduled, each such Employee Benefit Plan (and each
related trust, insurance contract, or fund) complies and since its inception has
complied, in form and in operation, with its own terms and with the applicable
requirements of ERISA, the Code, and other applicable laws, rules and
regulations, except where the failure to comply (individually, or together with
all such other failures as to that Employee Benefit Plan) would not have a
Material Adverse Effect on the Company, and no event has occurred that will or
could cause any of such Employee Benefit Plans to fail to comply with such terms
or requirements.
A-21
<PAGE>
(d) All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports, PBGC 1s, and Summary Plan Descriptions) have
been filed or distributed appropriately with respect to each such Employee
Benefit Plan.
(e) All contributions (including all employer contributions and employee
salary reduction contributions or other contributions) that are due have been
paid to each such Employee Benefit Plan that is an employee pension benefit plan
(as defined in Section 3(2) of ERISA) and all contributions for any period
ending on or before the Effective Time that are not yet due have been paid to
each such employee pension benefit plan or accrued in accordance with the past
custom and practice of the Company. All premiums or other payments for all
periods ending on or before the Effective Time have been paid with respect to
each such Employee Benefit Plan that is an employee welfare benefit plan (as
defined in section 3(1) of ERISA).
(f) Except as otherwise scheduled, each Employee Benefit Plan which is an
employee pension benefit plan is the subject of a favorable determination letter
issued by the IRS with respect to the qualified status of such plan under
section 401(a) of the Code and the tax-exempt status of any trust which forms a
part of such plan under section 501(a) of the Code; all amendments to any such
plan for which the remedial amendment period (within the meaning of
section 401(b) of the Code and applicable regulations) has expired are covered
by a favorable IRS determination letter; and no event has occurred which will or
could give rise to disqualification of any such plan under such sections or to a
tax under section 511 of the Code.
(g) No Employee Benefit Plan is subject to title IV of ERISA or Section 412
of the Code, or is a multi-employer plan (as defined in section 3(37) of ERISA).
(h) To the knowledge of the Company, there have been no prohibited
transactions (as defined in Section 406 of ERISA and Section 4975 of the Code)
with respect to any such Employee Benefit Plan, and no fiduciary (as defined in
Section 3(21) of ERISA) has any material liability (nor has any event occurred
which will or could give rise to any material liability) for breach of fiduciary
duty or any other failure to act or comply with applicable law in connection
with the administration or investment of the assets of any such Employee Benefit
Plan. No claim, action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand with respect to the administration or the investment
of the assets of any such Employee Benefit Plan is pending or, to the knowledge
of the Company, threatened. The Company has no knowledge of any basis for any
such claim, action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand.
(i) To the best knowledge of the Company, there is no pending or threatened
claim against or under any Employee Benefit Plan to which the Company
contributes or has contributed or is or has been obligated to contribute, or
which the Company maintains, other than claims for benefits in the ordinary
course of business.
(j) None of the Company or any ERISA Affiliate has any liability or
contingent liability for providing, under any Employee Benefit Plan or
otherwise, any post-retirement medical or life insurance benefits, other than
statutory liability for providing group health plan continuation coverage under
Part 6 of Title I of ERISA and section 4980B of the Code.
(k) Except as contemplated by Section 1.8 hereof or as set forth on
Schedule 3.17, the transactions contemplated by this Agreement will not entitle
any employee or former employee of the Company or an ERISA Affiliate to any type
of payment or benefit under any such Employee Benefit Plan, or to any payment or
benefit that would be an "excess parachute payment" under Code Section 280G.
(l) None of the assets of any Employee Benefit Plan are invested in employer
securities or employer real property as defined in Section 407(d) of ERISA, nor
in a trust described in Section 501(a)(9) or subject to the terms of
Section 501(c)(9) of the Code.
A-22
<PAGE>
(m) There have been no acts or omissions by the Company or any of its ERISA
Affiliate which have given rise to or may give rise to fines, penalties, taxes
or related charges under section 502 of ERISA or Chapters 43, 47, 68 or 100 of
the Code for which the Company or any ERISA Affiliate may be liable.
(n) No event, condition or circumstance exists that could result in a
material increase in the benefits provided under any Employee Benefit Plan or
the expense of maintaining any Employee Benefit Plan from the level of benefits
or expense incurred for the most recent fiscal year ended before the Closing. No
event, condition or circumstance exists that would prevent the amendment or
termination of any Employee Benefit Plan.
(o) The Company has provided Parent with copies of spreadsheets indicating
the number of option shares held by each optionee and the number of such option
shares which are currently vested, the number which would be vested at the
Effective Time of the Merger and the number which would not be vested at the
Effective Time of the Merger.
(p) Neither the Company nor any ERISA Affiliate maintains, or has any
liability to any individual with respect to, any deferred compensation plan.
SECTION 3.18. INTERNATIONAL LABOR MATTERS. For purposes of this Section,
"FOREIGN EMPLOYEE" means any person who is employed under a contract of
employment, or under an employment relationship, or under a contract for the
provision of services, with the Company or a subsidiary, outside of the U.S. or
on a non-U.S. payroll. Except as disclosed on Schedule 3.18:
(a) CONTRACTS. There are no contracts of employment, employment
relationships or contracts for the provision of services of a Foreign Employee
(whether or not in writing). There are no other material terms relating to any
contracts of any Foreign Employee (whether or not in writing) including, but not
limited to any salaries, wages, bonuses, commission schemes, pensions, benefits
schemes, holidays, sickness/incapacity, notice of termination, termination
indemnities or payments, redundancy payments, worker flexibility, and
restrictive covenants. There is no Foreign Employee whose employment cannot be
terminated lawfully with less than three (3) months' notice or a termination
indemnity equal to three (3) months' salary and benefits. There have been no
changes to any of the terms and conditions of any Foreign Employee which are
connected with this Agreement or which are connected with any previous transfer
of an undertaking in which any Foreign Employee was employed or engaged.
(b) TRADE UNIONS AND WORKS COUNCILS. There are no collective agreements or
arrangements (whether or not in writing) between any trade union or works
council or other employee representative body representing any Foreign Employee.
There are no collective negotiations or consultations with any trade union or
works council or other employee representative body in respect of any Foreign
Employee still in progress or any commitments made by the Company or a
subsidiary connected with such negotiations. There are no works councils or
other employee representative body or trade union representation operating at
the Company or a subsidiary in respect of any Foreign Employee. There has been
no request either for the establishment of a works council or other employee
representative body or for the recognition of a trade union or union delegates
in respect of any Foreign Employee. The obligations of the Company and its
subsidiaries to inform, consult or negotiate with any trade union or works
council (whether on a local, group or European level) or other employee
representative body representing any Foreign Employee have been complied with.
All notices to be served on any Foreign Employee or any trade union or works
council or other employee representative body representing any Foreign Employee,
or any local/regional or national authority or board have been served within
prescribed timescales. There is no re-organization, redundancy or re-structuring
program of the business of the Company or its subsidiaries which has been
announced to any Foreign Employee or any trade union or works council or other
employee representative body representing any Foreign Employee.
(c) DISPUTES, CLAIMS, LITIGATION AND INQUIRIES. There is no current or
likely industrial dispute with any trade union or works council or other
employee representative body representing any Foreign Employee,
A-23
<PAGE>
or with any such Foreign Employees themselves. There are no mediation or
arbitration, conciliation or court awards or orders applicable to the Company or
its subsidiaries in respect of any trade union or works council or other
employee representative body representing any Foreign Employee, or to any such
Foreign Employees themselves. There are no Foreign Employees whose proposed or
past termination of employment is still subject to any prior approval,
confirmation or ratification of any local or central authority or board, or any
court of competent jurisdiction. There is no actual or threatened litigation
relating to any Foreign Employee, nor any facts or matters which are likely to
give rise to any such litigation (although not yet threatened or commenced) in
respect of any employment or health and safety related issue whether or not the
opposing party in such litigation or potential litigation is any Foreign
Employee, or any trade union or works council or other employee representative
body representing any Foreign Employee, or any recruitment or employment agency,
or any supplier of services or benefits applicable to any Foreign Employee.
There has been no actual or threatened dismissal of any Foreign Employee, or any
resignation by any Foreign Employee in circumstances which could give rise to a
claim against the Company or any subsidiary. There have been no informal or
formal inquiries into the polices, practices or dealings of the Company or its
subsidiaries by any agency of authority in respect of any discrimination of any
past, present or prospective Foreign Employees. There are no persons who, having
ceased to be employed or engaged by the Company or its subsidiaries, are
entitled to be reinstated or re-employed by the Company or its subsidiaries
either by the order of any court or labor authority or board of competent
jurisdiction or under any prevailing laws or regulations. The Company's and its
subsidiaries' polices and practices in respect of existing or prospective
employees do not contravene any laws on discrimination based on sex, religious
or political beliefs, age, disability, race, national or ethnic origin,
nationality, or sexual orientation.
(d) PAYMENTS. There are no retention, loyalty, change of ownership or other
similar bonuses or other payments due to or payable to any Foreign Employee that
are either (i) triggered by this Agreement, or (ii) payable after the Effective
Time. All taxes and social security payments (including all penalties and
interest) in respect of any Foreign Employee due up to the Effective Time have
been fully discharged by the Company and its subsidiaries. All salary, wages,
bonuses, commissions, incentives, other remuneration, holiday pay, sick pay,
maternity/paternity pay, leave of absence pay, pensions and all other benefits
in respect of the Foreign Employees which are due up to the Effective Time have
been fully discharged by the Company and its subsidiaries. There are no payments
or other benefits (other than pensions or other retirement benefits) due to any
person who was previously employed or engaged by the Company and its
subsidiaries.
SECTION 3.19. INTERNATIONAL PENSIONS AND BENEFITS.
(a) DEFINITIONS. In this Section:
(i) "AUSTRALIAN BENEFITS PLANS" means those life insurance, health
insurance and long term disability plans maintained for the benefit of
Foreign Employees resident in Australia;
(ii) "AUSTRALIAN PENSION PLAN" means those pension and retirement
plans maintained for the benefit of Foreign Employees resident in
Australia;
(iii) "FOREIGN EMPLOYEES" means any current or former employee,
director or officer of the Company or any subsidiary who is or was
employed on a non-U.S. payroll;
(iv) "MEMBERS" means the Foreign Employees who are entitled to
benefit under the UK Pension Plan and the UK Benefits Plans or any of
them and all those persons who are spouses, children and dependants
thereof;
(v) "PLANS" means the UK Pension Plan, the UK Benefits Plans, the
Australian Pension Plan and the Australian Benefits Plans and any other
retirement, death, disability, medical, dental, sickness, illness or
health plans or arrangements existing outside the U.S. for any Foreign
Employee which the Company or subsidiary has any legal or moral
obligation to fund, pay for or contribute to;
A-24
<PAGE>
(vi) "PSO" means the Pension Schemes Office of the Inland Revenue in
the UK;
(vii) "UK PENSION PLAN" means the Printrak Group Personal Pension Plan
administered by, and invested with, the Eagle Star Insurance Company;
(viii) "UK BENEFITS PLANS" means:
(aa) The Printrak UK Life Assurance Plan providing death in
service benefits of a lump sum of three times annual basic salary;
(bb) The Printrak UK Long Term Disability Plan;
(cc) The Printrak UK Health Insurance Plan, comprising a Private
Medical Insurance plan insured with the Royal & Sun Alliance, a
Dental Treatment Reimbursement Plan and an Optical Treatment
Reimbursement Plan; and
(dd) The Printrak UK Critical Illness Plan.
(ix) "1988 ACT" means the UK Income and Corporation Taxes Act 1988;
(b) DISCLOSURE OF INFORMATION. Full particulars of the Plans have been fully
and fairly disclosed to the Parent prior to the date of this Agreement,
including without prejudice to the generality of the foregoing: (i) all
governing plan documentation and all amendments made to them; (ii) all booklets
and announcements to, and correspondence with, the Foreign Employees in
connection with the Plans or benefits payable from them; (iii) all policies,
endorsements and details of insurance premiums; (iv) full membership data,
including details of all Foreign Employees who are subject to the UK earnings
cap and any equivalent in Australia or any other country outside the U.S.;
(v) details of all external advisers, consultants and brokers used by the
Company in connection with the Plans; (vi) the contributions and premiums paid
by the Company or any of its subsidiaries to the Plans in each of the last three
years; and all information which has been made available to Parent or its
advisers on or before the date of this Agreement is true, complete and accurate.
(c) ESTABLISHMENT. The Plans are all established under, comply fully and
have at all times complied fully with all applicable primary and secondary
legislation and all other applicable laws of the relevant jurisdiction relative
to pension and employee benefit plans and arrangements and have all been
operated in accordance with all applicable requirements of all relevant
governmental bodies and agencies in the relevant jurisdiction. The UK Pension
Plan is exempt approved under Chapter IV of Part XIV of the 1988 Act for the
purposes of the PSO and there is no reason why such approval should be
withdrawn. No event or transaction has taken place in relation to the UK Pension
Plan whose validity is dependent upon the approval of the PSO without that
approval having been obtained. The Australian Pension Plan is fully
tax-qualified under the relevant national and state legislative and Inland
Revenue requirements of Australia and there is no reason why such
tax-qualification should be withdrawn.
(d) FINANCE AND INVESTMENT. The assets, investments or policies held by the
Plans are sufficient to satisfy the liabilities and obligations (both current
and contingent) which the Plans have to the Foreign Employees as at the date of
this Agreement. All employer and employee contributions and premiums due as at
the date of this Agreement to the Plans or any insurance company have been
deducted and paid to the Plans or insurance company, if applicable, within all
relevant time periods.
(e) EXERCISE OF DISCRETIONS. No undertakings or assurances have been given
or implied to any of the Foreign Employees as to the introduction, continuance,
increase or improvement of any retirement, death, disability, illness, sickness,
medical or health benefits (whether or not there is any legal obligation to do
so) or as to the enhancement of any such benefits on the happening of a given
set of circumstances. No discretion has been exercised under the Plans to
provide a benefit which would not otherwise already be provided for under the
Plans and no power to augment or provide new benefits has been exercised. No
A-25
<PAGE>
discretion has been exercised under the Plans to admit to membership any Foreign
Employee who would not otherwise have been eligible for admission to membership.
(f) INSURANCE. All benefits payable on the death, disability, illness or
sickness of any Foreign Employee are fully insured and all premiums due to the
insurance company as at the date of this Agreement have been paid in full and on
time and each such person has been covered for such insurance by an insurance
company of repute at normal rates and on normal terms for persons in good
health.
(g) EXTERNAL ADVISORS. All consulting, actuarial, trusteeship, administrator
and other fees, charges and expenses of whatever nature with respect to the
Plans have been paid in full and on time and no services have been rendered for
which an account or invoice has not been delivered to and paid by the Company as
at the date of this Agreement.
(h) DISPUTES. There are no pending claims for incapacity or ill-health
pensions or benefits and there are no current disputes concerning such benefits.
There are no complaints, arbitrations, claims (other than routine claims to
benefits), actions or suits in progress, pending or threatened by any of the
Foreign Employees and there is no fact or circumstance likely to give rise to
any such proceedings.
(i) THE EMPLOYER. The Company and its subsidiaries the only employers for
the time being participating in the Plans. Except for the Plans, the Company and
its subsidiaries are not party to or contributing to or have any current or
future obligation to pay or contribute to any retirement benefits, pension,
sickness, health, disability, medical, accident or life assurance plan,
arrangement or fund whether in the United Kingdom, Australia or elsewhere
overseas relating to any of their Foreign Employees or those claiming through
them or under them, or any legal or ex-gratia obligation or obligation
established by custom to provide any retirement, death, disability, health,
medical, accident or sickness pension, benefit or payment to or in respect of
any such person or any person claiming through them. No proposal has been
announced or implied to establish or contribute to any other such plan,
arrangement or fund.
SECTION 3.20. ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
(a) Solely with respect to the business conducted by the Company, each of
the Company and its respective predecessors and affiliates has complied and is
in compliance with all Environmental, Health, and Safety Requirements (as
defined below).
(b) Without limiting the generality of the foregoing, each of the Company
and its respective affiliates has obtained and complied with, and is in
compliance with, all permits, licenses and other authorizations that are
required pursuant to Environmental, Health, and Safety Requirements for the
occupation of its facilities and leased locations and the operation of its
business; a list of all such permits, licenses and other authorizations is set
forth on the attached Schedule 3.20.
(c) The Company has not received any written notice, report or other
information regarding any actual or alleged violation by the Company of
Environmental, Health, and Safety Requirements, or any liabilities or potential
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
of the Company, including any investigatory, remedial or corrective obligations,
relating to the Company or its facilities or any third party facilities arising
under Environmental, Health, and Safety Requirements.
(d) The Company has not caused the following to exist or be operated at any
property or facility leased or subleased by the Company or its respective
predecessors, and to the knowledge of the Company, none of the following exists
at any property or facility leased or subleased by the Company or its respective
predecessors: (i) underground storage tanks, (ii) asbestos-containing material
in any form or condition, (iii) materials or equipment containing
polychlorinated biphenyls, or (iv) landfills, surface impoundments, or disposal
areas.
(e) Neither the Company nor its respective predecessors or affiliates has
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any substance, including without limitation
any hazardous substance, or owned or operated any property or facility (and to
the
A-26
<PAGE>
knowledge of the Company no such property or facility is contaminated by any
such substance) in a manner that has given or would give rise to liabilities,
including any liability for response costs, corrective action costs, personal
injury, property damage, natural resources damages or attorney fees, pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), Resource Conservation and Recovery Act, as amended
("RCRA"), the Solid Waste Disposal Act, as amended ("SWDA") or any other
Environmental, Health, and Safety Requirements.
(f) Neither this Agreement nor the consummation of the transaction that is
the subject of this Agreement will result in any obligations for site
investigation or cleanup, or notification to, or consent of, government agencies
or third parties, pursuant to any of the so-called "transaction-triggered" or
"responsible property transfer" Environmental, Health, and Safety Requirements.
(g) The Company has not, either expressly or by operation of law, assumed or
undertaken any liability, including without limitation any obligation for
corrective or remedial action, of any other person relating to Environmental,
Health, and Safety Requirements.
(h) No facts, events or conditions relating to the past or present
facilities, properties or operations of the Company will prevent, hinder or
limit in any way the Company's continued compliance with Environmental, Health,
and Safety Requirements, give rise to any investigatory, remedial or corrective
obligations pursuant to Environmental, Health, and Safety Requirements, or give
rise to any other liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) pursuant to Environmental, Health, and Safety
Requirements, including without limitation any relating to onsite or offsite
releases or threatened releases of hazardous materials, substances or wastes,
personal injury, property damage or natural resources damage.
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" shall mean all federal,
state, local and foreign statutes, regulations, ordinances and other provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation, each as amended and as now in
effect.
A-27
<PAGE>
SECTION 3.21. INFORMATION SYSTEMS INTEGRITY. (a) None of the firmware or
software that the Company or any of its subsidiaries provides to its customers
has limitations concerning calculation and manipulation of dates, including
century, millennium and leap year calculations, which make the firmware or
software unfit for its intended purposes.
(b) None of the firmware or software that the Company or any of its
subsidiaries uses in the conduct of its business has limitations concerning
calculation and manipulation of dates, including century, millennium and leap
year calculations, which make the firmware or software unfit for its intended
purposes.
(c) None of the firmware or software produced by a third-party and licensed
by the Company to its customers has limitations concerning calculation and
manipulation of dates, including century, millennium and leap year calculations,
which make the firmware or software unfit for its intended purposes.
(d) The Company has adopted information protection and security policies,
standards and guidelines of the type customarily maintained by similar companies
in similar businesses in order to maintain the integrity, availability and
confidentiality of information systems and networks (e.g. protection from
viruses and other malicious software, data backup and recovery) for the
management and operation of its computers and information systems networks.
SECTION 3.22. BROKERS, FINDERS AND AGENTS. Other than with respect to
Wedbush Morgan Securities, the Company has no liability to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement. Wedbush Morgan Securities has delivered its
written opinion, dated prior to or as of the date of this Agreement, which
states that the Merger Consideration to be received by the stockholders of the
Company in the Merger is fair, from a financial point of view, to the
stockholders of the Company. The Company has been authorized by Wedbush Morgan
Securities to permit inclusion of such opinion (or a reference thereto) on
Schedule 14C. The Company has provided a copy of such opinion to Parent.
SECTION 3.23. DISCLOSURE. None of the representations or warranties of the
Company contained herein, none of the information contained in the Schedules
referred to in Article III, and none of the other information or documents
furnished to Parent or any of its representatives by the Company or its
representatives pursuant to the terms of this Agreement, is false or misleading
in any material respect or omits to state a fact herein or therein necessary to
make the statements herein or therein not misleading in any material respect.
ARTICLE III A
REPRESENTATIONS AND WARRANTIES OF THE MAJORITY STOCKHOLDERS
Each of the Majority Stockholders represent and warrant to Parent and
Acquisition Sub that the statements contained in this Article IIIA are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and though the Closing Date were
substituted for the date of this Agreement throughout such statement). Each
Majority Stockholder shall be deemed to have made representations and warranties
only with respect to itself and the Shares set forth opposite its name on Annex
A and shall not be deemed to have made any representation or warranty with
respect to any other Majority Stockholder. For purposes of this Article IIIA,
the "Trustee" shall refer to: (i) with respect to The Giles Family Foundation,
Richard M. Giles and Oliva Giles, President and Secretary thereof, (ii) with
respect to the Giles Living Trust UDT Dated December 17, 1993, Richard M. Giles,
Trustee thereunder and, (iii) with respect to The Smith Family Revocable Trust
Dated October 2, 1992, Charles Smith and Janet Smith, Trustees thereunder.
SECTION 3A.1. AUTHORIZATION OF TRANSACTION. The execution, delivery, and
performance of this Agreement and any instruments or agreements contemplated
herein to be executed by Trustee on behalf of Majority Stockholder, including
but not limited to the Stockholders Consent, and the consummation of the
A-28
<PAGE>
transactions contemplated hereby and thereby, have been adopted and approved in
accordance with the applicable procedures of Majority Stockholder. Trustee has
all requisite power and authority to execute and deliver this Agreement, on
behalf of the Majority Stockholder and to perform all of the obligations imposed
upon the Majority Stockholder hereunder. This Agreement constitutes the valid
and legally binding agreement of Trustee and Majority Stockholder, enforceable
in accordance with its terms except as the enforceability hereof may be limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws relating to the enforcement of creditors' rights generally
and by general principals of equity. The Majority Stockholder need not give any
notice to, make any filing with, or obtain any authorization, consent or
approval of any Governmental Entity in order to consummate the transactions
contemplated by the Agreement. Trustee is the sole representative of the
Majority Stockholder with full power and authority to act on behalf of the
Majority Stockholder without the consent of any person.
SECTION 3A.2. OWNERSHIP OF SHARES. The Majority Stockholder is the lawful
record and beneficial owner of the Shares set forth opposite its name (the
"MAJORITY SHARES") on Annex A hereto, free and clear of all Liens, no other
person has an interest, beneficial or otherwise, in the Majority Shares and no
consent of any other person is required for the execution, delivery and
performance by the Trustee or Majority Stockholder of its obligations under this
Agreement or the Stockholders Consent. Without limiting the foregoing, no person
has any rights with respect to the Majority Shares pursuant to the Merger under
any community property or similar legal provision or concept.
SECTION 3A.3. LITIGATION. There are no actions, suits or proceedings
pending or, to Trustee's knowledge, threatened against or affecting Trustee, the
Majority Shares or the assets of Majority Stockholder in any court or before any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality which, if adversely determined, would impair,
restrict or materially delay the ability of Trustee to perform Trustee's and
Majority Stockholder's obligations under this Agreement or would make this
Article untrue in any material respect.
SECTION 3A.4. NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement and the Stockholders Consent, nor the consummation of the
transactions contemplated hereby and thereby, will: (a) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which Trustee or Majority Stockholder is subject or any provision of
its Declaration of Trust, trust agreement, articles of incorporation or bylaws,
as applicable; or (b) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
either Trustee or Majority Stockholder is a party or by which it is bound or to
which any of its assets is subject.
SECTION 3A.5. DISCLOSURE. None of the representations or warranties of the
Majority Stockholders contained herein and none of the other information or
documents furnished to Parent or any of its representatives by the Majority
Stockholders or their representatives pursuant to the terms of this Agreement,
is false or misleading in any material respect or omits to state a fact herein
or therein necessary to make the statements herein or therein not misleading in
any material respect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB
PARENT AND ACQUISITION SUB EACH REPRESENT AND WARRANT TO THE COMPANY THAT
THE STATEMENTS CONTAINED IN THIS ARTICLE IV ARE CORRECT AND COMPLETE AS OF THE
DATE OF THIS AGREEMENT AND WILL BE CORRECT AND COMPLETE AS OF THE CLOSING DATE
(AS THOUGH MADE THEN AND AS THOUGH THE CLOSING DATE WERE SUBSTITUTED FOR THE
DATE OF THIS AGREEMENT THROUGHOUT THIS ARTICLE IV).
A-29
<PAGE>
SECTION 4.1. ORGANIZATION OF PARENT AND ACQUISITION SUB. Parent and
Acquisition Sub are corporations duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
SECTION 4.2. AUTHORIZATION OF TRANSACTION. The execution, delivery, and
performance of this Agreement and any instruments or agreements contemplated
herein to be executed by either Parent or Acquisition Sub, and the consummation
of the transactions contemplated hereby and thereby, have been adopted and
approved in accordance with applicable corporate procedures of each of Parent
and Acquisition Sub. Each of Parent and Acquisition Sub has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of each of Parent and
Acquisition Sub, enforceable in accordance with its terms and conditions,
subject to laws of general application relating to public policy, bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief and other equitable remedies. Other than the
Parent Governmental Approvals (as defined in Section 5.3 below) neither Parent
nor Acquisition Sub need give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any Governmental Entity in order to
consummate the transactions contemplated by this Agreement.
SECTION 4.3. LITIGATION.
There is no action, suit, proceeding, or investigation pending, or to the
knowledge of Parent or Acquisition Sub, threatened, against or related to Parent
or Acquisition Sub or their respective properties or businesses that would be
reasonably likely to adversely affect or restrict the ability of either Parent
or Acquisition Sub to consummate the transactions contemplated by this
Agreement; and there is no basis, to the knowledge of Parent or Acquisition Sub,
for any such action that may result in such effect and is probable of assertion.
SECTION 4.4. NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will: (a) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which either Parent or Acquisition Sub is
subject or any provision of its charter or bylaws; or (b) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument, or
other arrangement to which either Parent or Acquisition Sub is a party or by
which it is bound or to which any of its assets is subject, which (in either
case of clause (a) or clause (b)), would have a material adverse effect on the
business, financial condition, operations, results of operations or prospects of
the Parent or the Acquisition Sub ("PARENT MATERIAL ADVERSE EFFECT").
SECTION 4.5. BROKERS' FEES. Neither Parent nor Acquisition Sub has any
liability to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS
SECTION 5.1. CONDUCT OF BUSINESS OF THE COMPANY. Except as otherwise
expressly provided in this Agreement or consented to by Parent, during the
period from the date hereof to the Effective Time, the Company and its
subsidiaries will each conduct its operations according to its ordinary course
of business and the Company and its subsidiaries will each use its commercially
reasonable efforts to preserve intact its business organization, to keep
available the services of its officers and employees and to maintain existing
relationships with licensors, licensees, suppliers, bankers, insurers,
contractors, distributors, customers and others having business relationships
with it. Without limiting the generality of the foregoing, and except as
specifically contemplated by this Agreement or disclosed in the SEC Reports
filed prior to the date of this
A-30
<PAGE>
Agreement or as set forth on Schedule 5.1, prior to the Effective Time, neither
the Company nor any of its subsidiaries will, without the prior written consent
of Parent:
(a) amend or propose to amend its certificate of incorporation or by-laws or
equivalent organizational documents;
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities or equity equivalents (including, without
limitation, stock appreciation rights and any bonds, debentures, notes or other
indebtedness of the Company or its subsidiaries having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of the Company may vote), except as required
by the First Amended Printrak International Inc. Employee Stock Purchase Plan
(the "COMPANY EMPLOYEE STOCK PURCHASE PLAN") or by option agreements as in
effect as of the date hereof, or except as contemplated by Section 1.8, amend
any of the terms of any such securities or agreements outstanding as of the date
hereof;
(c) effect any reorganization or recapitalization or split, combine or
reclassify any shares of its capital stock, declare, set aside or pay any
dividend or other distribution (whether in cash, stock, or property or any
combination thereof) in respect of its capital stock or redeem, repurchase or
otherwise acquire any of its securities or any securities of its subsidiaries;
(d) (i) incur any indebtedness for borrowed money (except for short term
indebtedness incurred in the ordinary course of business pursuant to existing
lines of credit) or issue any debt securities or, except in the ordinary course
of business, assume, guarantee or endorse the obligations of any other person,
except for intercompany indebtedness between the Company and its wholly owned
subsidiaries or between any of the Company's wholly owned subsidiaries;
(ii) make any loans, advances or capital contributions to, or investments in,
any other person (other than to wholly owned subsidiaries of the Company) except
in the ordinary course of business; (iii) pledge or otherwise encumber shares of
capital stock of the Company or any of its subsidiaries except in the ordinary
course of business; (iv) enter into or invest in any derivative financial
instruments except in the ordinary course of business consistent with the
Company's current investment and risk management policies (it being understood
that the Company shall continue its current investment and risk management
policies); or (v) mortgage or pledge any of its assets, tangible or intangible,
or except in the ordinary course of business, create or suffer to exist any
Security Interest thereupon, provided that, notwithstanding anything to the
contrary and without limiting the generality of the foregoing, no transaction
described in clauses (iv) and (v) shall be permitted without Parent's consent
for any such transaction (or series of related transactions) the value of which
is in excess of $20 million;
(e) except as contemplated by Section 5.7 hereof or as required to fulfill
the Company's obligations under Section 1.8 hereof, enter into, adopt or (except
as may be required by law) amend or terminate any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation right,
restricted stock, performance unit, stock equivalent, stock purchase agreement,
pension, retirement, deferred compensation, employment, severance or other
employee benefit agreement, trust, plan, fund or other arrangement for the
benefit or welfare of any director, officer or employee, or (except, in the case
of employees who are not officers or directors, for normal compensation
increases in the ordinary course of business that, in the aggregate, do not
result in a material increase in benefits or compensation expense to the
Company) increase in any manner the compensation or benefits of any director,
officer or employee or pay any benefit not required by any plan or arrangement
as in effect as of the date hereof (including, without limitation, the granting
of stock options, restricted stock, stock appreciation rights, "phantom" stock
rights or performance units);
(f) sell, lease or otherwise dispose of, or grant any Security Interest with
respect to any assets (including technology assets) or properties of the Company
and its subsidiaries, or enter into any contract, agreement, commitment or
transaction with respect to the foregoing that are, individually or in the
A-31
<PAGE>
aggregate, material to any of the Company and its subsidiaries, taken as a
whole, except for dispositions of excess or obsolete assets and sales of
inventories in the ordinary course of business;
(g) change any of the accounting principles or practices used by it, except
as may be required as a result of a change in law, SEC guidelines or generally
accepted accounting principles;
(h) (i) acquire (by merger, consolidation, acquisition of stock or assets
(including technology assets) or otherwise) any corporation, partnership or
other business organization or division thereof, (ii) authorize any new capital
expenditure or expenditures which, individually, is in excess of $500,000 or, in
the aggregate, are in excess of $1,000,000; (iv) settle any litigation for
amounts in excess of the greater of $200,000 individually or $1,000,000 in the
aggregate or, with respect to any litigation as to which reserves have been
recorded on the books of the Company, the amount reserved for such litigation;
or (v) enter into or amend any contract, agreement, commitment or arrangement
with respect to any of the foregoing;
(i) make, revoke or amend any Tax election; settle or compromise any Tax
liability; or execute any waiver of restrictions on assessment or collection of
any tax;
(j) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business or in
accordance with their terms, or reflected or reserved against in the
consolidated financial statements (or the notes thereto) of the Company and its
consolidated subsidiaries or incurred in the ordinary course of business;
(k) (i) terminate, modify, amend or waive compliance with any material
provision of any of the Material Contracts, or fail to take any reasonable
action necessary to preserve the material benefits of any Material Contracts to
the Company or any of its subsidiaries, where the same would reasonably be
expected to have a Material Adverse Effect or (ii) negotiate or enter into any
agreement which, if such agreement is entered into, would be a Material
Contract, other than customer contracts in the ordinary course of business
(unless such agreement is identified on Schedule 5.1(k));
(l) enter into any new agreements with, or commitments to, insurance brokers
or advisers extending beyond one year or extend any insurance policy beyond one
year (including, for the avoidance of doubt, the directors' and officers'
liability insurance policies referred to in Section 5.5);
(m) enter into any new employment arrangements with any new officers,
directors or managers, or employees other in the ordinary course of business,
without Parent's written consent or modify, change, alter or amend any existing
employment agreements without Parent's written consent;
(n) treat, store, dispose of, arrange for or permit the disposal of,
transport, handle, or release any substance, including without limitation any
hazardous substance, or own or operate any property or facility in a manner that
would give rise to liabilities, including any liability for response costs,
corrective action costs, personal injury, property damage, natural resources
damages or attorney fees, pursuant to CERCLA, RCRA, SWDA or any other
Environmental, Health, and Safety Requirements; or
(o) take, or agree in writing or otherwise to take, any of the actions
described above in Section 5.1, or take, or agree in writing or otherwise to
take any action that would make any representation or warranty in Article 3
hereof materially untrue or incorrect.
SECTION 5.2. ACCESS TO INFORMATION; CONFIDENTIALITY AGREEMENT.
(a) Between the date hereof and the Effective Time, the Company will give
each of Parent and Acquisition Sub and their counsel, financial advisors,
auditors, and other authorized representatives reasonable access during normal
business hours to all management employees, plants, offices, warehouses and
other facilities and to all books and records of the Company and its
subsidiaries, will permit each of Parent and Acquisition Sub and their
respective counsel, financial advisors, auditors and other authorized
representatives to make such inspections as Parent or Acquisition Sub may
reasonably require and will
A-32
<PAGE>
cause the Company's officers and those of its subsidiaries to furnish Parent or
Acquisition Sub or their representatives with such financial and operating data
and other information with respect to the business and properties of the Company
and any of its subsidiaries as Parent or Acquisition Sub may from time to time
reasonably request, in all such cases, however, subject to existing
confidentiality and similar non-disclosure obligations and preservation of
attorney client work product privileges. Without limiting the generality of the
foregoing but subject to the limitations contained therein, the Company shall
provide to Parent all information in respect of the Company and its business
that Parent shall from time to time reasonably request to enable Parent or its
affiliates to comply with all legal and regulatory provisions.
(b) The parties agree that the provisions of the Confidentiality Agreement
dated as of October 25, 1999 between Parent and the Company (the
"CONFIDENTIALITY AGREEMENT") shall remain binding and in full force and effect
and that the terms of the Confidentiality Agreement are incorporated herein by
reference and that all information provided by the Company pursuant to this
Section 5.2 shall be subject to such agreement; provided, however, that any
consents from the Company necessary under the Confidentiality Agreement for
Parent and Acquisition Sub to consummate the transactions contemplated by this
Agreement shall be deemed to have been made. The parties shall comply with, and
shall cause their respective officers, directors, employees, representatives,
agents or affiliates, including any investment bankers, attorneys, or
accountants (collectively, "REPRESENTATIVES") to comply with, all of their
respective obligations under the Confidentiality Agreement until consummation of
the Merger.
SECTION 5.3. COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use its
commercially reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things reasonably necessary, proper or advisable
on their part under this Agreement or laws and regulations to consummate and
make effective the transactions contemplated by this Agreement. Without limiting
the generality of the foregoing, Parent, Acquisition Sub, and the Company shall
cooperate with one another (i) in the preparation and filing of any required
filings in connection with (a) the Company Governmental Approvals, (b) with
respect to Parent or Acquisition Sub, filings, notices, approvals,
confirmations, consents, declarations or decisions relating to the filing of the
Certificate of Merger in accordance with DGCL, required by the HSR Act and
required by the Exchange Act and state securities, takeover and Blue Sky laws
(collectively, the "PARENT GOVERNMENTAL APPROVALS") and (c) any other applicable
laws; (ii) in determining whether action by or in respect of, or filing with,
any Governmental Entity is required, proper or advisable or any actions,
consents, waivers or approvals are required to be obtained from parties to any
contracts, in connection with the transactions contemplated by this Agreement;
(iii) in taking all action reasonably necessary, proper or advisable to secure
any necessary consents, approvals or waivers from third parties, including under
existing debt obligations of the Company and its subsidiaries or to amend the
notes, indentures or agreements relating to such existing debt obligations to
the extent required by such notes, indentures or agreements, or to redeem or
repurchase such debt obligations; (iv) in contesting any pending legal
proceeding, whether judicial or administrative, relating to the Merger including
seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed; (v) executing any additional
instruments necessary to consummate the transactions contemplated hereby and
(vi) in seeking timely to obtain any such actions, consents and waivers and to
make any such filings. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party hereto shall take all such
necessary action.
SECTION 5.4. PUBLIC ANNOUNCEMENTS. Parent and Acquisition Sub, on the one
hand, and the Company, on the other hand, will consult with each other before
issuing any press release with respect to the transactions contemplated by this
Agreement, and shall not issue any such press release or make any such public
statement prior to such consultation (and affording the other party or parties
an opportunity to comment thereon), except as may be required by applicable law
or by applicable rules of any securities exchange.
SECTION 5.5. INDEMNIFICATION, INSURANCE.
A-33
<PAGE>
(a) From and after the Effective Time, Parent and Acquisition Sub shall
indemnify and hold harmless each person who is, or has been at any time prior to
the date hereof or who becomes prior to the Effective Time, an officer, director
or employee of the Company or any of its subsidiaries (collectively, the
"INDEMNIFIED PARTIES" and individually, the "INDEMNIFIED PARTY") against all
losses, liabilities, expenses, claims or damages in connection with any claim,
suit, action, proceeding or investigation based in whole or in part on the fact
that such Indemnified Party is or was a director, officer or employee of the
Company or any of its subsidiaries or as trustee or fiduciaries of any plan for
the benefit of employees and arising out of acts or omissions occurring prior to
and including the Effective Time (including but not limited to the transactions
contemplated by this Agreement) to the fullest extent permitted by applicable
law, for a period of not less than six years following the Effective Time;
provided that in the event any claim or claims are asserted or made within such
six-year period, all rights to indemnification in respect of any such claim or
claims shall continue until final disposition of any and all such claims. Parent
shall cause the Certificate of Incorporation and Bylaws of the Surviving
Corporation and its subsidiaries to include provisions for the limitation of
liability of directors and indemnification of the Indemnified Parties to the
fullest extent permitted under the DGCL and shall not permit the amendment of
such provisions in any manner adverse to the Indemnified Parties, as the case
may be, without the prior written consent of such persons, for a period of six
years from and after the date hereof.
(b) For six years after the Effective Time, the Surviving Corporation shall
cause to be maintained the current policies of directors' and officers'
liability insurance maintained by the Company (provided that the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions which are substantially equivalent) with respect
to matters occurring prior to the Effective Time, to the extent such policies
are available; provided, that in no event shall the Surviving Corporation be
required to expend, in order to maintain or procure insurance coverage pursuant
to this Section 5.5(b), any amount per annum greater than 150% of the current
annual premiums paid by the Company for such insurance and if the Surviving
Corporation is unable to obtain the insurance required by this Section 5.5, it
shall obtain as much comparable insurance as possible for an annual premium
equal to such maximum amount.
(c) After the Effective Time, Parent and the Surviving Corporation will
fulfill and honor in all respects the obligations of the Company pursuant to the
indemnification agreements with the Company's officers and directors as in
existence on the date hereof. Such indemnification agreements have been provided
to Parent.
(d) The Indemnified Parties are intended third party beneficiaries of this
Section 5.5 to the extent such provisions benefit any such Indemnified Party.
SECTION 5.6. NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent or Acquisition Sub, and Parent or Acquisition Sub shall
give prompt notice to the Company, upon becoming aware of (i) the occurrence or
nonoccurrence of any event, the occurrence or nonoccurrence of which has
resulted in, or could reasonably be expected to result in, any condition to the
Merger set forth in Article VI, not being satisfied, (ii) the failure of such
party to comply with any covenant or agreement to be complied with by it
pursuant to this Agreement which has resulted in, or could reasonably be
expected to result in, any condition to the Merger set forth in Article VI, not
being satisfied and (iii) the occurrence, or nonoccurrence, of any event the
occurrence, or nonoccurrence, of which would cause any representation or
warranty contained in this Agreement to be untrue or inaccurate, which has
resulted in, or could be reasonably expected to result in any condition to
Merger not to be satisfied. The delivery of any notice pursuant to this
Section 5.6 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
SECTION 5.7. EMPLOYEES AND EMPLOYEE PLANS--UNITED STATES.
(a) Except as may be otherwise agreed to by Parent and the Company, the
Company stock option plans, stock purchase plans, or other stock incentive or
compensation plans shall terminate as of the
A-34
<PAGE>
Effective Time. Prior to the Effective Time, the Board (or, if appropriate, any
committee thereof) shall adopt such resolutions or take such other actions as
are required to (i) effect the transactions contemplated by Section 1.8 hereof
and (ii) with respect to any stock option, stock appreciation or other stock
benefit plan of the Company or any of its subsidiaries not addressed by the
preceding clause, ensure that the Company will not take any action to accelerate
the vesting of any award under any such plan and following the Effective Time,
no participant therein shall have any right thereunder to acquire any capital
stock of the Surviving Corporation or any subsidiary thereof.
(b) Between the date of this Agreement and the Effective Time, the Company
shall reasonably cooperate with Parent and Acquisition Sub in structuring
transactions (including those described in Section 1.8 with respect to Stock
Options) so as to optimize the tax treatment of the Company, Parent and
Acquisition Sub in connection therewith.
(c) As soon as possible after the execution of this Agreement, but in any
event at least three days prior to the Closing, the Board of Directors of the
Company shall adopt resolutions terminating the Printrak International Inc.
401(k) Plan (the "COMPANY 401(K) PLAN") effective as of the date those
resolutions are adopted, and authorizing the officers of the Company to take
such actions as they reasonably deem necessary or advisable to implement the
termination of the plan, secure any necessary or advisable governmental
approvals, and (subject to said approvals and any other reasonable conditions)
provide for the transfer of electing participants' account balances thereunder
to the Motorola 401(k) Profit Sharing Plan (the "MOTOROLA 401(K) PLAN").
(d) Subject to the provisions of the next following sentence, Company
Employees shall be granted credit for years of service with the Company and its
ERISA Affiliates and any predecessors for purposes of eligibility, participation
and vesting entitlement (but, except to the extent otherwise provided in this
Agreement, not for purposes of, among other things, benefit accrual) under the
Motorola 401(k) plan to the same extent such service was recognized under the
Company 401(k) Plan as of the Closing Date (including any such service prior to
the Closing Date that would have been recognized under the Company 401(k) Plan
but for the prior termination of the Company 401(k) Plan). Company Employees (as
defined herein) on the Closing Date shall be eligible to become participants in
the Motorola 401(k) Plan as of the Closing Date; provided, that such Company
Employees who were eligible for employer matching contributions under the
Company 401(k) Plan on the Closing Date (or such earlier date as the Company
401(k) Plan was terminated) shall be eligible for employer matching
contributions under the Motorola 401(k) Plan upon becoming participants therein
without regard to the length of their recognized prior period of service.
Notwithstanding any other provision in this Agreement, Company Employees shall
not receive credit for service with the Company, its ERISA Affiliates or its
predecessors for purposes of the Motorola, Inc. Pension Plan.
(e) Subject to the provisions of this subparagraph (e), in the case of
Company Employees who are eligible and elect to become participants effective as
of the Closing Date in any Parent employee welfare benefit plan (as such term is
defined in Section 3(1) of ERISA) providing medical (including vision, hearing
and prescription drug benefits), dental, life or disability benefits, such
Parent employee welfare benefit plans shall provide such benefits without any
waiting periods, without evidence of insurability and without application of any
pre-existing condition limitations, except to the extent applicable under the
comparable employee welfare benefit plan of the Company immediately prior to the
Closing Date. The Parent shall give all such Company Employees full credit for
service with the Company and its ERISA Affiliates and any predecessors for
purposes of all employee benefit welfare plans and similar fringe benefit
programs to the same extent such service was recognized under the Company's
comparable plans and programs immediately prior to the Closing Date.
Notwithstanding any other provision in this Agreement, Company Employees shall
not receive credit for service with the Company, its ERISA Affiliates or its
predecessors for purposes of the Motorola Retiree Health Benefits Plan or the
Motorola Milestones Plan.
A-35
<PAGE>
(f) Subject to subparagraph (c) and (d) above, Company Employees shall be
transferred to the Parent's payroll immediately (or as soon as practicable)
after the Closing Date and shall be eligible for all of the employee benefit
plans and programs offered to similarly situated employees of the Parent. Active
participation by Company Employees in Employee Benefit Plans (as defined in
Section 3.17(a) above) shall cease effective as of the Closing.
(g) For purposes of this Section 5.7, "COMPANY EMPLOYEES" shall mean each
person who is (i) an employee of the Company or its subsidiaries, (ii) assigned
to work in the business of the Company or its subsidiaries, and (iii) on a
United States payroll immediately prior to the Closing Date. Each such person
shall be listed on Schedule 5.7(g)(i). Each person who is (i) an employee of the
Company or its subsidiaries, (ii) assigned to work in the business of the
Company or its subsidiaries, and (iii) not on a United States payroll
immediately prior to the Closing Date shall be listed on Schedule 5.7(g)(ii).
SECTION 5.8. NO SOLICITATION.
(a) Neither the Company, nor any of its Representatives, shall directly or
indirectly, (a) agree to any public or private offering or sale of any Shares
other than pursuant to the Company Employee Stock Purchase Plan or Stock Option
Plans, (b) solicit, initiate, encourage or knowingly facilitate any inquiries or
the making of any proposals or offers from any person or entity (other than
Parent and its representatives) concerning any transfer or sale of assets not in
the ordinary course of business, acquisition of Shares (whether pursuant to a
private or public sale or otherwise), acquisition, business combination,
amalgamation, change of control or other similar transaction involving the
Company, its subsidiaries or Shares, (c) have any discussion with or provide any
confidential information or data to any person or entity relating to any such
inquiry, proposal or offer, (d) approve or recommend, or propose publicly to
approve or recommend, any such proposal or offer, or (e) approve or recommend,
or propose to approve or recommend, or execute or enter into, any letter of
intent, agreement in principal, merger agreement, acquisition agreement, option
agreement or other similar agreement or propose publicly or agree to do any of
the foregoing related to any such proposal or offer. The Company shall promptly
advise Parent of, and communicate to Parent in writing the terms and conditions
of (and the identity of the person or entity making), any such inquiry, proposal
or offer received.
SECTION 5.9. ACQUISITION SUB. Parent will take all action necessary to
cause Acquisition Sub to perform its obligations hereunder and to consummate the
Merger on the terms and conditions set forth herein.
SECTION 5.10. FIRPTA AFFIDAVIT. The Company will use commercially
reasonable efforts to cause each person who holds five percent (5%) or more of
the stock of the Company to deliver an affidavit stating, under penalties of
perjury, such person's U.S. taxpayer identification number and that such person
is not a "foreign person" as defined in Code Section1445.
SECTION 5.11. TAX MATTERS.
(a) Between the date hereof and the Effective Time, the Company and its
subsidiaries shall prepare and file on or before the due date therefor all Tax
Returns required to be filed by the Company or its subsidiaries on or before the
Effective Time, and shall pay all Taxes (including estimated Taxes) due on such
Tax Returns or which are otherwise required to be paid at any time prior to or
during such period. Such Tax Returns shall be prepared in accordance with the
most recent Tax practices as to elections and accounting methods, except for new
elections that may be made therein that were not previously available, which
shall be made subject to Parent's consent.
(b) Between the date hereof and the Effective Time, to the extent that the
Company or any of its subsidiaries has knowledge of the commencement or
scheduling of any Tax Audit, the assessment of any Tax, the issuance of any
notice of Tax due or any bill for collection of any Tax, or the commencement or
scheduling of any other administrative or judicial proceeding with respect to
the determination, assessment or collection of any Tax of the Company or any of
its subsidiaries, the Company shall provide prompt
A-36
<PAGE>
notice to Parent of such matter, setting forth information describing any
asserted Tax liability in reasonable detail and including copies of any notice
or other documentation received from the applicable Tax authority with respect
to such matters.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.1. CONDITIONS TO THE COMPANY'S, PARENT'S AND ACQUISITION SUB'S
OBLIGATION TO EFFECT THE MERGER. The respective obligations of Company, Parent
and Acquisition Sub to effect the Merger are subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) any waiting period applicable to the Merger under the HSR Act shall have
terminated or expired and the other Company Governmental Approvals and Parent
Governmental Approvals, the failure of which to obtain would be reasonably
expected to have a Material Adverse Effect or Parent Material Adverse Effect
(collectively, "REQUIRED APPROVALS"), shall have been obtained or satisfied, as
the case may be, on terms satisfactory to Parent in its reasonable discretion;
provided that this condition may not be asserted by the Company with respect to
any Required Approval if the potential penalty for any failure to receive such
Required Approval will be borne only by Parent or Acquisition Sub; and
(b) no statute, rule, regulation, executive order, decree, ruling,
injunction or other order shall have been enacted, entered, promulgated or
enforced by any court or other Governmental Entity of competent jurisdiction
that prohibits the Merger or makes the Merger illegal.
SECTION 6.2. CONDITIONS TO THE OBLIGATIONS OF PARENT AND ACQUISITION
SUB. The obligations of Parent and Acquisition Sub to effect the Merger are
also subject to the satisfaction or waiver by Parent at or prior to the
Effective Time of the following conditions:
(a) each of the representations and warranties of the Company set forth in
this Agreement, disregarding all qualifications and exceptions contained therein
relating to materiality, shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date (except to the extent that such representations and warranties speak as of
another date, in which case such representations and warranties shall be true
and correct as of such other date), and except where the failure of such
representations and warranties to be true and correct would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect; and
Parent and Acquisition Sub shall have received a certificate of the chief
executive officer and the chief financial officer of the Company to such effect;
(b) the Company shall have performed or complied with all agreements and
covenants required to be performed by it under this Agreement at or prior to the
Closing Date that are qualified as to materiality or Material Adverse Effect and
shall have performed or complied in all material respects with all other
material agreements and covenants required to be performed by it under this
Agreement at or prior to the Closing Date that are not so qualified, and Parent
and Acquisition Sub shall have received a certificate of the chief executive
officer and the chief financial officer of the Company to such effect;
(c) the Company shall have fully complied with the applicable provisions of
the DGCL and, if applicable, the CCC with respect to dissenters' rights of the
Company stockholders and holders of less than ten percent (10%) of the Company
Shares shall have asserted any dissenters' rights under the DGCL or, if
applicable, the CCC;
(d) since the date of the execution of this Agreement (which includes the
Schedules of Disclosure) there shall not have occurred (i) a Material Adverse
Change; (ii) a federal or state legislative or regulatory change materially and
adversely affecting Company's business or its products or services;
(iii) damage to Company's assets by fire, flood, casualty, act of God or the
public enemy or other cause, regardless of insurance coverage for such damage
which could reasonably be expected to have a Material Adverse
A-37
<PAGE>
Effect; or (iv) an event or condition which could reasonably be expected to
result in a Material Adverse Effect;
(e) each of the Consulting Agreement and the Non-Compete, Non-Solicit,
Non-Disclosure and Waiver Agreement, between the parties identified on
Schedule 6.2(e) and dated the date hereof, shall have been executed and shall be
in full force and effect;
(f) each of the employees identified on Schedule 6.2(f) shall have executed
offer letters, in form and substance reasonably satisfactory to Parent, which
offer letters shall be in full force and effect;
(g) all outstanding debts or liabilities owed to the Company by any
stockholder of the Company, its employees or former employees, including those
debts or liabilities described on Schedule 3.7(m) shall have been repaid in
full;
(h) all outstanding indebtedness for borrowed money of the Company shall
have been repaid in full;
(i) each of the representations and warranties of the Majority Stockholders
set forth in this Agreement shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date;
(j) Company shall have obtained all consents disclosed on Schedule 3.3(c);
(k) The Printrak International Incorporated 1994 Stock Option Plan (the
"1994 PLAN") shall have been terminated and all options thereunder shall have
been terminated; and
(l) the Company shall have completed the requests set forth in
Schedule 6.2(l).
SECTION 6.3. CONDITIONS TO OBLIGATION OF THE COMPANY. The respective
obligation of Company to effect the Merger is also subject to the satisfaction
or waiver by the Company at or prior to the Effective Time of the following
conditions:
(a) each of the representations and warranties of Parent and Acquisition Sub
set forth in this Agreement, disregarding all qualifications and exceptions
contained therein relating to materiality, shall be true and correct as of the
date of this Agreement and as of the Closing Date as though made on and as of
the Closing Date (except to the extent that such representations and warranties
speak as of another date, in which case such representations and warranties
shall be true and correct as of such other date), and except where the failure
of such representations and warranties to be true and correct would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; and the Company shall have received a certificate of a senior
executive officer of Parent and Acquisition Sub to such effect; and
(b) Parent and Acquisition Sub shall have performed or complied with all
agreements and covenants required to be performed by them under this Agreement
at or prior to the Closing Date that are qualified as to materiality and shall
have performed or complied in all material respects with all other material
agreements and covenants required to be performed by them under this Agreement
at or prior to the Closing Date that are not so qualified, and the Company shall
have received a certificate of a senior executive officer of Parent and
Acquisition Sub to such effect.
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
SECTION 7.1. TERMINATION. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, notwithstanding
approval thereof by the stockholders of the Company:
(a) by mutual written consent of Parent, Acquisition Sub and the Company;
A-38
<PAGE>
(b) by Parent or the Company if any court or other Governmental Entity of
competent jurisdiction shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become final
and nonappealable; or
(c) by Parent or the Company if the Merger shall not have been consummated
by December 31, 2000 (the "TERMINATION DATE"); provided, however, that the
Termination Date shall be extended by 60 days if the sole reason for the failure
to consummate the Merger is the failure to obtain Required Approvals described
in Section 6.1(a); provided further however, that the right to terminate this
Agreement under this Section 7.1(c) shall not be available to any party whose
failure to fulfill any obligation under this Agreement (including without
limitation such party's obligations set forth in Section 5.3) has been the cause
of, or resulted in, the failure of the Effective Time to occur on or before the
Termination Date; or
(d) by Parent or Acquisition Sub if the Company shall have breached or
failed to perform any of its representations, warranties, covenants or other
agreements contained in this Agreement, such that the conditions set forth in
Section 6.2(a) or (b) are not capable of being satisfied on or before the
Termination Date; or
(e) by Parent or Acquisition Sub if any of the Majority Stockholders shall
have breached or failed to perform any of its representations, warranties,
covenants or other agreements contained in this Agreement, such that the
conditions set forth in Section 6.2(i) are not capable of being satisfied on or
before the Termination Date; or
(f) by the Company if Parent or Acquisition Sub shall have breached or
failed to perform any of their representations, warranties, covenants or other
agreements contained in this Agreement, such that the conditions set forth in
Section 6.3(a) or (b) are not capable of being satisfied on or before the
Termination Date.
SECTION 7.2. EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto, other than the provisions of this Section 7.2 and Sections
5.2(b) and 7.3 and Article VIII which shall survive the termination hereof. The
termination of this Agreement shall not relieve any party from liability for any
willful breach of any covenant contained in this Agreement.
SECTION 7.3. FEES AND EXPENSES. Each party shall bear its own expenses and
costs in connection with this Agreement and the transactions contemplated
hereby.
SECTION 7.4. AMENDMENT. This Agreement may be amended by action taken by
the Company, Parent and Acquisition Sub at any time provided no amendment shall
be made that requires the approval by the Company's stockholders without
obtaining such approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
SECTION 7.5. EXTENSION; WAIVER. At any time prior to the Effective Time,
the Company, on the one hand, and Parent and Acquisition Sub, on the other hand,
may (i) extend the time for the performance of any of the obligations or other
acts of the other party, (ii) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document, certificate
or writing delivered pursuant hereto, or (iii) waive compliance by the other
party with any of the agreements or conditions contained herein. Any agreement
on the part of any party hereto 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 hereto to assert any of its rights hereunder shall not
constitute a waiver of such rights. No delay on the part of any party hereto in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party hereto of any right,
power or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other
A-39
<PAGE>
right, power or privilege hereunder. Unless otherwise provided, the rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies which the parties hereto may otherwise have at law or in equity.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations, warranties, covenants and other agreements in this Agreement or
in any instrument delivered pursuant to this Agreement, including any rights
arising out of any breach of such representations, warranties, covenants and
other agreements, shall survive the Effective Time, except for those covenants
and agreements contained herein and therein that by their terms apply or are to
be performed in whole or in part after the Effective Time and this
Article VIII. Each party hereto agrees that, except for the representations and
warranties contained in this Agreement, (i) none of the Company, Parent or
Acquisition Sub or any of their respective officers, directors, employees,
affiliates, agents, financial or legal advisors or other representatives makes
any other representations or warranties, whatsoever, oral or written, express or
implied, and each hereby disclaims any other representations and warranties made
by itself or any of its officers, directors, employees, affiliates, agents,
financial and legal advisors or other representatives, with respect to the
execution and delivery of this Agreement, the documents and the instruments
referred to herein, or the transactions contemplated hereby or thereby,
notwithstanding the delivery or disclosure to the other party or the other
party's representatives of any documentation or other information with respect
to any one or more of the foregoing, and (ii) none of the parties hereto is
relying on any disclosure, statement, representation or warranty, oral or
written, express or implied, made by any other party hereto or such party's
officers, directors, employees, affiliates, agents, financial or legal advisors
or other representatives.
SECTION 8.2. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including the
Schedules and all agreements referred to herein), and the Confidentiality
Agreement (i) constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and supersede all other prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof and (ii) shall not be assigned by operation of law or
otherwise.
SECTION 8.3. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by
facsimile, overnight courier or by registered or certified mail (postage
prepaid, return receipt requested), to the other party as follows:
If to Parent or Acquisition Sub:
Motorola, Inc.
1303 E. Algonquin Road
Schaumburg, Illinois 60196-8890
Attn: General Counsel
Fax: 847-576-3628
With copies to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attn: Edward S. Best
Fax: 312-701-7711
A-40
<PAGE>
If to Company:
Printrak International Inc.
1250 North Tustin Avenue
Anaheim, CA 92807
Attn: Chief Financial Officer
Fax: 714-666-1055
With copies to:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
Attn: Bruce Feuchter, Esq.
Fax: 949-725-4100
If to Majority Stockholders
The Smith Family Revocable Trust Dated October 2, 1992
18683 Santa Isadora
Fountain Valley, CA 92708
Attn: Charles L. Smith
Fax: 714-967-6319
Giles Living Trust UDT Dated December 17, 1993
12801 Panorama Crest
Santa Ana, California 92705
Attn: Richard M. Giles
Fax: 714-731-7517
The Giles Family Foundation
12801 Panorama Crest
Santa Ana, California 92705
Attn: Richard M. Giles
Fax: 714-731-7517
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
SECTION 8.4. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Delaware without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Delaware. The parties
hereto hereby irrevocably and unconditionally consents to submit to the
exclusive jurisdiction of the courts of the States of Delaware and of the United
States of America located in the State of Delaware or any appellate court
thereof (the "DELAWARE COURTS") for any litigation arising out of or relation to
this Agreement and the transactions contemplated hereby (and agrees not to
commence any litigation relating thereto except in such Delaware Courts), waives
any objection to the laying of venue of any such litigation in the Delaware
Court that such litigation brought therein has been brought in an inconvenient
forum. Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Each party to this Agreement irrevocably consents to service of process in the
manner provided for notices in Section 8.3. Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.
A-41
<PAGE>
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH
WAIVERS, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH
WAIVERS, (iii) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 8.4.
SECTION 8.5. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns, and, except as provided in Article I (other than
Section 1.8) and Section 5.5 nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any rights, benefits or
remedies or any nature whatsoever under or by reason of this Agreement.
SECTION 8.6. REMEDIES. The parties hereto agree that irreparable damage
would occur in the event any provision of this agreement was not performed in
accordance with the terms hereof or otherwise breached and that the parties
shall be entitled to specific performance of the terms hereof or to an
injunction to prevent such breach, in addition to any other remedy at law or in
equity.
SECTION 8.7. SEVERABILITY. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity and enforceability of the other provisions hereof. If
any provision of this Agreement, or the application thereof to any person or
entity or any circumstance, is invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid and
unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other persons, entities or circumstances shall
not be affected by such invalidity or unenforceability, nor shall such
invalidity or unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
SECTION 8.8. INTERPRETATION. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement. When a reference is made
in this Agreement to Sections, Exhibits or Schedules, such reference shall be to
a Section of or Exhibit or Schedule to this Agreement unless otherwise
indicated. It is understood and agreed that neither the specifications of any
dollar amount in this Agreement nor the inclusion of any specific item in the
Schedules or Exhibits is intended to imply that such amounts or higher or lower
amounts, or the items so included or other items, are or are not material, and
neither party shall use the fact or setting or such amounts or the fact of the
inclusion of such item in the Schedules or Exhibits in any dispute or
controversy between the parties as to whether any obligation, item or matter is
or is not material for purposes hereof.
SECTION 8.9. CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
(a) "affiliate" of a person means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person;
(b) "business day" shall mean any day other than a Saturday, Sunday or
federal holiday;
A-42
<PAGE>
(c) "control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the management policies of a
person, whether through the ownership of stock, as trustee or executor, by
contract or credit arrangement or otherwise;
(d) "generally accepted accounting principles" or "GAAP" shall mean the
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession in the
United States, in each case applied on a basis consistent with the manner in
which the audited financial statements for the fiscal year of the Company ended
March 31, 1998 were prepared;
(e) "including" means including, without limitation;
(f) "person" means an individual, corporation, partnership, association,
trust, unincorporated organization, Governmental Entity, other entity or group
(as defined in Section 13(d)(3) of the Exchange Act); and
(g) "subsidiary" or "subsidiaries" of any person means any corporation,
partnership, joint venture or other legal entity of which such person (either
alone or through or together with any other subsidiary), owns, directly or
indirectly, 50% or more of the stock or other equity interests the holder of
which is generally entitled to vote for the election of the board of directors
or other governing body of such corporation, partnership, joint venture or other
legal entity.
SECTION 8.10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
[Remainder of this page intentionally left blank]
A-43
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement and Plan
of Merger to be executed on its behalf by its representatives thereunto duly
authorized, all as of the day and year first above written.
MOTOROLA, INC.
By: /s/ Carl F. Koenemann
Name: Carl F. Koenemann
Title: Executive Vice President and
Chief
Financial Officer - Corporate
Finance
PANTHER ACQUISITION CORP.
By: /s/ Carl F. Koenemann
Name: Carl F. Koenemann
Title: Vice President
[Signatures continue on next page]
A-44
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement and Plan
of Merger to be executed on its behalf by its representatives thereunto duly
authorized, all as of the day and year first above written.
PRINTRAK INTERNATIONAL, INC.
By: /s/ Richard M. Giles
Name: Richard M. Giles
Title: Chief Executive Officer
[Signatures continue on next page]
A-45
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement and Plan
of Merger to be executed on its behalf by its representatives thereunto duly
authorized, all as of the day and year first above written.
<TABLE>
<S> <C> <C>
GILES LIVING TRUST UDT
DATED DECEMBER 17, 1993
By: /s/ RICHARD M. GILES
-----------------------------------------
Richard M. Giles,
TRUSTEE
THE GILES FAMILY FOUNDATION
By: /s/ RICHARD M. GILES
-----------------------------------------
Richard M. Giles,
TRUSTEE
Attested:
By: /s/ OLIVA GILES
-----------------------------------------
Oliva Giles,
SECRETARY
</TABLE>
[Signatures continue on next page]
A-46
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement and Plan
of Merger to be executed on its behalf by its representatives thereunto duly
authorized, all as of the day and year first above written.
<TABLE>
<S> <C> <C>
THE SMITH FAMILY REVOCABLE TRUST
DATED OCTOBER 2, 1992
By: /s/ CHARLES SMITH
-----------------------------------------
Charles Smith,
CO-TRUSTEE
By: /s/ JANET SMITH
-----------------------------------------
Janet Smith,
CO-TRUSTEE
</TABLE>
[Signatures continue on next page]
A-47
<PAGE>
ANNEX A
MAJORITY STOCKHOLDERS
<TABLE>
<CAPTION>
NAME OF STOCKHOLDER NUMBER OF SHARES OWNED
------------------- ----------------------
<S> <C>
The Smith Family Revocable Trust Dated October 2, 1992...... 340,500
Giles Living Trust UDT Dated December 17, 1993.............. 5,804,200
The Giles Family Foundation................................. 73,000
TOTAL................................................... 6,217,700
</TABLE>
<PAGE>
SCHEDULE 6.2(L)
CONDITIONS TO CLOSE
1. Company shall have increased its reserves for incurred but nor reported
medical claims by $265,000.
2. Company shall have increased its inventory reserve by $470,000.
<PAGE>
APPENDIX B
OPINION OF WEDBUSH MORGAN SECURITIES
<PAGE>
1000 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA 90017-2465
MAILING ADDRESS: P.O. BOX 30014, LOS ANGELES, CALIFORNIA 90030-0014
<TABLE>
<S> <C>
WEDBUSH MORGAN (213) 688-4545
SECURITIES FAX (213) 688-6642
INVESTMENT BANKERS SINCE 1925
</TABLE>
August 28, 2000
Board of Directors
Printrak International, Inc.
1250 North Tustin Avenue
Anaheim, CA 92807
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding shares (the "Shareholders") of common
stock (the "Shares"), of Printrak International, Inc. ("Printrak") of the
consideration to be received by the Shareholders pursuant to the terms of the
Agreement and Plan of Merger dated as of August 28, 2000 (the "Merger
Agreement") between Motorola, Inc. ("Motorola") and Printrak. There could be
significant impact on the value if the Merger Agreement differs from the terms
and conditions proposed.
Pursuant to the Merger Agreement, Printrak will be merged with and into
Motorola (the "Merger") in a cash transaction valued at $160 million (the
"Merger Consideration").
Wedbush Morgan Securities is an investment banking firm and a member of the
New York Stock Exchange and other principal stock exchanges in the United
States, and is regularly engaged as part of its business in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, private placements, secondary distributions of listed
and unlisted securities, and valuations for corporate, estate and other
purposes.
For purposes of this opinion and in connection with our review of the
Merger, we have reviewed, among other things: (i) the Merger Agreement;
(ii) Printrak's audited consolidated financial statements and notes thereto and
management's discussion and analysis of the financial condition and results of
operations contained in the Annual Report to Shareholders for each of the three
years ended March 31, 2000; (iii) Printrak's unaudited consolidated financial
statements and management's discussion and analysis of the financial condition
and results of operations contained in the quarterly report on Form 10-Q for the
period ended June 30, 2000; (iv) certain forward-looking projections prepared by
Printrak's management for fiscal years ending March 31, 2001 through March 31,
2005; (v) views of management regarding the past and current business
operations, financial condition and future prospects of Printrak; (vi) the
reported market prices and historical trading activity of Printrak common stock,
including a comparison of certain financial and stock market information for
Printrak with similar information for comparable publicly traded securities and
indices; (vii) the financial terms, to the extent publicly available, of certain
recent business combinations in the public safety and criminal justice
management industry; (viii) the current market environment and the Automated
Fingerprint Identification Market and Computer-Aided Dispatch environments in
particular; and (ix) such other information, studies, analyses, and examinations
as we deemed appropriate.
MEMBER NEW YORK STOCK EXCHANGE
B-1
<PAGE>
<TABLE>
<S> <C>
Board of Directors August 28, 2000
Printrak International, Inc. Page 2 of 2
</TABLE>
We have relied upon and assumed without independent verification the
accuracy and completeness of all of the financial and other information provided
to us by Printrak. We did not make an independent evaluation of the specific
contracts (relying, where relevant, on the analyses and estimates of Printrak's
management). While we did conduct a physical tour of Printrak's Anaheim and
Irvine properties, we were not retained to and we did not conduct a physical
inspection of any of the properties or facilities of Printrak. With respect to
financial projections prepared by and reviewed with management, we have assumed
that they were reasonably prepared on bases reflecting the best currently
available estimates and judgments of management of the future financial
performance of Printrak, and that such performance will be realized in the
amounts and in the time periods currently estimated. We have also assumed that
there has been no material change in Printrak's assets, financial condition,
results of operations, business or prospects since the date of the last
financial statements. We further assumed that all conditions to the Merger will
be satisfied and not waived.
Our opinion is based on economic, market and other conditions as in effect
on, and the information made available to us as of, the date hereof. Events
occurring after the date hereof could materially affect the assumptions used in
preparing this opinion. Additionally, there could be significant impact on the
value if the Merger Agreement differs from the terms and conditions proposed. We
have not undertaken to reaffirm or revise this opinion or otherwise comment upon
any events occurring after the date hereof.
In the ordinary course of our business, we may actively trade the common
stock of Printrak and/or Motorola for our own account and for the accounts of
our customers and, accordingly, may at any time hold a long or short position in
Printrak and/or Motorola common stock.
It is understood that this letter is for the information of the Board of
Directors of Printrak and may not be used for any other purpose without our
prior written consent.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that, as of the date hereof, the Merger
Consideration to be received by the Shareholders in the Merger is fair, from a
financial point of view, to the Shareholders.
Very truly yours,
/S/ WEDBUSH MORGAN SECURITIES
WEDBUSH MORGAN SECURITIES INC.
B-2
<PAGE>
APPENDIX C
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to sec. 228 of this
title shall be entitled to an appraisal by the Court of Chancery of the fair
value of the stockholder's shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to sec.
251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec.
264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to sec. 251,
252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
C-1
<PAGE>
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections
(d) and (e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder's shares. Such demand will
be sufficient if it reasonably informs the corporation of the identity of
the stockholder and that the stockholder intends thereby to demand the
appraisal of such stockholder's shares. A proxy or vote against the merger
or consolidation shall not constitute such a demand. A stockholder electing
to take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228 or
sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for
any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of
a constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights
may, within 20 days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders on
or within 10 days after such effective date; provided, however, that if such
second notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
C-2
<PAGE>
therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record
date that shall be not more than 10 days prior to the date the notice is
given, provided, that if the notice is given on or after the effective date
of the merger or consolidation, the record date shall be such effective
date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day
next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day or
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on
C-3
<PAGE>
the list filed by the surviving or resulting corporation pursuant to subsection
(f) of this section and who has submitted such stockholder's certificates of
stock to the Register in Chancery, if such is required, may participate fully in
all proceedings until it is finally determined that such stockholder is not
entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
C-4
