<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
Under the Securities Exchange Act of 1934
NETWORK SOLUTIONS, INC.
---------------------------------------------------------------
(Name of Issuer)
COMMON STOCK, PAR VALUE $.001
---------------------------------------------------------------
(Title of Class of Securities)
64121Q102
---------------------------------------------------------------
(CUSIP Number)
DANA L. EVAN, CHIEF FINANCIAL OFFICER
VERISIGN, INC.
1350 CHARLESTON ROAD
MOUNTAIN VIEW, CALIFORNIA 94043-1331
(650) 961-7500
---------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
MARCH 6, 2000
---------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(c), 13d-1(f) or 13d-1(g), check the following box
[_]
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
- ---------------------
CUSIP NO. 64121Q102
- ---------------------
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 SS OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
VeriSign, Inc. I.R.S. ID NO.: 94-3221585
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
Not Applicable (b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
00
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
Not Applicable
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
State of Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 8,150,000
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
8,150,000 (1)
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING Not Applicable
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
Not Applicable
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
8,150,000 (1)
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
22.6%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
CO
- ------------------------------------------------------------------------------
(1) 8,150,000 shares of Network Solutions, Inc. ("NSI") common stock are
subject to a Voting Agreement entered into by VeriSign and a certain
stockholder of NSI (discussed in Items 3 and 4 below). VeriSign expressly
disclaims beneficial ownership of any of the shares of NSI common stock
covered by the Voting Agreement. Based on the number of shares of NSI
common stock outstanding as of March 6, 2000 (as represented by NSI in the
Merger Agreement discussed in Items 3 and 4), the number of shares of NSI
common stock indicated represents approximately 22.6% of the outstanding
NSI common stock.
2
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Item 1. Security and Issuer.
This statement on Schedule 13D (this "Statement") relates to the common
stock of Network Solutions, Inc., a Delaware corporation (sometimes referred to
herein as "Issuer" or "NSI"). The principal executive offices of NSI are
located at 505 Huntmar Park Drive, Herndon, Virginia 20170.
Item 2. Identity and Background.
(a) The name of the corporation filing this statement is VeriSign,
Inc., a Delaware corporation ("VeriSign").
(b) The address of VeriSign's principal business is 1350 Charleston
Road, Mountain View, California 94043-1331.
(c) VeriSign is the leading provider of Internet trust services and
digital certificate solutions needed by websites, enterprises and individuals to
conduct trusted and secure electronic commerce and communications over Internet
protocol-based networks.
(d) Neither VeriSign, nor to VeriSign's knowledge, any person named on
Schedule A attached hereto is required to disclose legal proceedings pursuant to
Item 2(d).
(e) Neither VeriSign, nor to VeriSign's knowledge, any person named on
Schedule A attached hereto is required to disclose legal proceedings pursuant to
Item 2(e).
(f) To VeriSign's knowledge each of the individuals identified on
Schedule A attached hereto is a citizen of the United States.
Set forth on Schedule A is the name, and present principal occupation or
employment, and the name, principal business and address of any corporation or
other organization in which such employment is conducted, of each of the
directors and executive officers of VeriSign as of the date hereof.
Item 3. Source and Amount of Funds or Other Consideration.
As an inducement for VeriSign to enter into the Merger Agreement
described in Item 4 and in consideration thereof, a stockholder of NSI, Science
Applications International Corporation, a Delaware corporation ("SAIC" or the
"Stockholder"), through its wholly-owned subsidiary, SAIC Venture Capital
Corporation ("SVCC") entered into a Voting Agreement (See Item 4). VeriSign did
not pay additional consideration to the Stockholder in connection with the
execution and delivery of the Voting Agreement. In addition, the Stockholder
granted VeriSign an irrevocable proxy.
References to, and descriptions of, the Merger, the Merger Agreement and
the Voting Agreement as set forth herein are qualified in their entirety by
reference to the copies of the Merger Agreement and the Voting Agreement,
respectively, included as Exhibits 1 and 2, respectively, to this Schedule 13D,
and are incorporated herein in their entirety where such references and
descriptions appear.
Item 4. Purpose of Transaction.
(a) - (b) Pursuant to an Agreement and Plan of Merger dated as of March
6, 2000 (the "Merger Agreement"), among VeriSign, Nickel Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of VeriSign
("Merger Sub"), and NSI, and subject to the conditions set forth therein
(including approval by stockholders of VeriSign and NSI), Merger Sub will merge
with and into NSI and NSI will become a wholly-owned subsidiary of VeriSign
(such events constituting the "Merger"). Once the Merger is consummated, Merger
Sub will cease to exist as a corporation and all of the business,
3
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assets, liabilities and obligations of Merger Sub will be merged into NSI with
NSI remaining as the surviving corporation (the "Surviving Corporation").
As a result of the Merger, each outstanding share of NSI common stock,
other than shares owned by Merger Sub, VeriSign or any wholly-owned subsidiary
of VeriSign, will be converted into the right to receive 2.15 shares (1.075
shares after giving effect to the 2-for-1 stock split of NSI's common stock
effected on March 10, 2000) (the "Exchange Ratio") of VeriSign common stock, and
each outstanding option to purchase NSI common stock will be exchanged for an
option to purchase shares of VeriSign common stock according to the Exchange
Ratio.
The Stockholder has, by executing a Voting Agreement, agreed to vote such
portion of the 8,150,000 shares of NSI common stock (the "Shares") beneficially
owned by it as described below.
Pursuant to the Voting Agreement, the Stockholder has agreed, at every
NSI stockholders meeting and on every action or approval by written consent in
lieu of such meeting, to cause the Shares to be voted (i) in favor of adoption
and approval of the Merger Agreement and approval of the Merger and (ii) against
approval of any proposal made in opposition to or in competition with
consummation of the Merger, including, without limitation, any Acquisition
Proposal or Superior Offer (each as defined in the Merger Agreement) or any
action or agreement that would result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement of NSI
under the Merger Agreement or of the Stockholder under the Voting Agreement. The
Stockholder may vote the Shares on all other matters. The Voting Agreement
terminates upon the earlier to occur of (i) such date and time as the Merger
shall become effective in accordance with the terms and provisions of the Merger
Agreement and (ii) such date and time as the Merger Agreement shall have been
terminated pursuant to Article VII thereof. Together with the Voting Agreement,
the Stockholder delivered an irrevocable proxy to VeriSign granting it the right
to vote its shares of NSI common stock in the manner similar to the obligations
of the Stockholder under the Voting Agreement described above.
The purpose of the transactions under the Voting Agreement are to enable
VeriSign and NSI to consummate the transactions contemplated under the Merger
Agreement.
(c) Not applicable.
(d) It is anticipated that upon consummation of the Merger, the
directors of the Surviving Corporation shall be the current directors of Merger
Sub. It is anticipated that the initial officers of the Surviving Corporation
shall be the officers of Merger Sub, until their respective successors are duly
elected or appointed and qualified.
(e) Other than as a result of the Merger described in Item 3 above and
the 2-for-1 stock split of NSI to be effected in March 2000, not applicable.
(f) Not applicable.
(g) Upon consummation of the Merger, the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Merger, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by Delaware Law and such Certificate of Incorporation. Upon
consummation of the Merger, the Bylaws of Merger Sub, as in effect immediately
prior to the Merger, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
(h) - (i) If the Merger is consummated as planned, the NSI common stock
will be deregistered under the Act and delisted from The Nasdaq National Market.
(j) Other than described above, VeriSign currently has no plan or
proposals which relate to, or may result in, any of the matters listed in Items
4(a) - (j) of Schedule 13D (although VeriSign reserves the right to develop such
plans).
4
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References to, and descriptions of, the Merger Agreement and the Voting
Agreement as set forth above in this Item 4 are qualified in their entirety by
reference to the copies of the Merger Agreement and the Voting Agreement,
respectively, included as Exhibits 1 and 2, respectively, to this Schedule 13D,
and are incorporated in this Item 4 in their entirety where such references and
descriptions appear.
Item 5. Interest in Securities of the Issuer.
(a) - (b) As a result of the Voting Agreement, VeriSign may be deemed
to be the beneficial owner of 8,150,000 shares of NSI common stock. Such NSI
common stock constitutes approximately 22.6% of the issued and outstanding
shares of NSI common stock based on the number of shares of NSI common stock
outstanding as of March 6, 2000 (as represented by NSI in the Merger Agreement
discussed in Items 3 and 4). VeriSign may be deemed to have the shared power to
vote the Shares with respect to those matters described above. However, VeriSign
(i) is not entitled to any rights as a stockholder of NSI as to the Shares and
(ii) disclaims any beneficial ownership of the shares of NSI common stock which
are covered by the Voting Agreement.
To the knowledge of VeriSign, Stratton D. Sclavos, President and Chief
Executive Officer of VeriSign, owns options to purchase 46,500 shares of NSI
common stock (93,000 shares after giving effect to the 2-for-1 stock split of
NSI's common stock to be effected in March 2000).
(c) To the knowledge of VeriSign, no transactions in the class of
securities reported have been effected during the past sixty days by any person
named pursuant to Item 2.
(d) To the knowledge of VeriSign, no other person has the right to
receive or the power to direct the receipt of dividends from, or the proceeds
from the sale of, the securities of NSI.
(e) Not Applicable.
Item 6. Contracts, Arrangements, Understanding or Relationships With Respect to
Securities of the Issuer.
Other than the Merger Agreement and the exhibits thereto, including the
Voting Agreement and the Registration Rights Agreement, to the knowledge of
VeriSign, there are no contracts, arrangements, understandings or relationships
among the persons named in Item 2 (including, based on information provided by
representatives of SAIC, SVCC and SAIC's directors and executive officers) and
between such persons and any person with respect to any securities of NSI,
including but not limited to transfer or voting of any of the securities,
finder's fees, joint ventures, loan or option arrangement, puts or calls,
guarantees of profits, division of profits or loss, or the giving or withholding
of proxies.
Item 7. Materials to be Filed as Exhibits.
The following documents are filed as exhibits:
1. Agreement and Plan of Merger, dated March 6, 2000 by and among
VeriSign, Merger Sub and NSI.
2. Voting Agreement, dated March 6, 2000, between VeriSign and SVCC.
5
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: March 14, 2000
VERISIGN, INC.
By: /s/ Dana L. Evan
--------------------------------
Dana L. Evan
Executive Vice President
of Finance and Administration
and Chief Financial Officer
<PAGE>
Schedule A
DIRECTORS AND EXECUTIVE OFFICERS OF VERISIGN, INC.
-------------------------------------------------
The following table sets forth the name, business address and present
principal occupation or employment of each director and executive officer of
VeriSign. Except as indicated below, the business address of each such person
is 1350 Charleston Road, CA 94043-1331.
BOARD OF DIRECTORS
------------------
Name and Business Address Present Principal Occupation
- ------------------------- ----------------------------
D. James Bidzos Vice Chairman of the Board of
c/o RSA Security Inc. Directors, RSA Security, Inc.
36 Crosby Drive
Bedford, MA 01730
Stratton D. Sclavos President and Chief Executive Officer
and Director, VeriSign, Inc.
William Chenevich, Vice Chairman of the Board,
First Star First Star Corporation
777 E. Wisconsin
Milwaukee, WI 53202
Kevin R. Compton General Partner,
Kleiner Perkins Caufield & Byers Kleiner Perkins Caufield & Byers
2750 Sand Hill Road
Menlo Park, CA 94025
David J. Cowan General Partner,
Bessemer Venture Partners Bessemer Venture Partners
535 Middlefield Road
Menlo Park, CA 94025
Timothy Tomlinson Partner,
Tomlinson Zisko Morosoli & Maser LLP Tomlinson Zisko Morosoli & Maser LLP
200 Page Mill Road, 2nd Floor
Palo Alto, CA 94306
EXECUTIVE OFFICERS OF VERISIGN
------------------------------
Name Title
- ---- -----
Stratton D. Sclavos President and Chief Executive Officer
and Director
Dana L. Evan Executive Vice President of Finance
And Administration and Chief Financial
Officer
Quentin P. Gallivan Executive Vice President of Worldwide
Sales
Diana Keith Vice President of Customer Services
Arnold Schaeffer Executive Vice President of Engineering
Richard A. Yarowitch Executive Vice President of
Worldwide Marketing
<PAGE>
EXHIBIT 1
================================================================================
Agreement and Plan of Merger
by and among
VeriSign, Inc.,
Nickel Acquisition Corporation
and
Network Solutions, Inc.
March 6, 2000
================================================================================
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article I THE MERGER................................................... 1
1.1 The Merger................................................. 1
1.2 Effective Time; Closing.................................... 1
1.3 Effect of the Merger....................................... 1
1.4 Certificate of Incorporation; Bylaws....................... 2
1.5 Directors and Officers..................................... 2
1.6 Effect on Capital Stock.................................... 2
1.7 Exchange of Certificates................................... 3
1.8 No Further Ownership Rights in Company Common Stock........ 5
1.9 Restricted Stock........................................... 5
1.10 Tax Consequences........................................... 5
1.11 Taking of Necessary Action; Further Action................. 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY.................... 6
2.1 Organization; Subsidiaries................................. 6
2.2 Company Capitalization..................................... 6
2.3 Obligations With Respect to Capital Stock.................. 7
2.4 Authority; Non-Contravention............................... 8
2.5 SEC Filings; Company Financial Statements.................. 9
2.6 Absence of Certain Changes or Events....................... 9
2.7 Taxes...................................................... 10
2.8 Title to Properties........................................ 11
2.9 Intellectual Property...................................... 12
2.10 Compliance with Laws....................................... 14
2.11 Litigation................................................. 14
2.12 Employee Benefit Plans..................................... 14
2.13 Environmental Matters...................................... 17
2.14 Certain Agreements......................................... 18
2.15 Brokers' and Finders' Fees................................. 19
2.16 Insurance.................................................. 19
2.17 Disclosure................................................. 19
2.18 Board Approval............................................. 20
2.19 Fairness Opinion........................................... 20
2.20 DGCL Section 203 and Rights Agreement Not Applicable....... 20
2.21 Affiliates................................................. 20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...... 20
3.1 Organization of Parent and Merger Sub...................... 21
3.2 Parent and Merger Sub Capitalization....................... 21
3.3 Obligations With Respect to Capital Stock.................. 21
3.4 Authority; Non-Contravention............................... 22
3.5 SEC Filings; Parent Financial Statements................... 23
3.6 Absence of Certain Changes or Events....................... 23
3.7 Taxes...................................................... 24
3.8 Title to Properties........................................ 25
3.9 Intellectual Property...................................... 25
3.10 Compliance with Laws....................................... 26
3.11 Litigation................................................. 26
3.12 Employee Benefit Plans..................................... 27
3.13 Environmental Matters...................................... 29
</TABLE>
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<TABLE>
<S> <C>
3.14 Certain Agreements............................................................... 29
3.15 Brokers' and Finders' Fees....................................................... 30
3.16 Disclosure....................................................................... 30
3.17 Board Approval................................................................... 30
3.18 Fairness Opinion................................................................. 30
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME............................................... 30
4.1 Conduct of Business by Company................................................... 30
4.2 Conduct of Business by Parent.................................................... 32
ARTICLE V ADDITIONAL AGREEMENTS............................................................. 34
5.1 Proxy Statement/Prospectus; Registration Statement; Antitrust and Other Filings.. 34
5.2 Meeting of Company Stockholders.................................................. 34
5.3 Meeting of Parent Stockholders................................................... 36
5.4 No Solicitation.................................................................. 36
5.5 Confidentiality; Access to Information........................................... 38
5.6 Public Disclosure................................................................ 38
5.7 Reasonable Efforts; Notification................................................. 38
5.8 Third Party Consents............................................................. 39
5.9 Stock Options and ESPP........................................................... 39
5.10 Form S-8......................................................................... 40
5.11 Indemnification.................................................................. 40
5.12 Parent Board of Directors........................................................ 40
5.13 Nasdaq Listing................................................................... 40
5.14 Letters of Accountants........................................................... 40
5.15 Takeover Statutes................................................................ 41
5.16 Certain Employee Benefits........................................................ 41
5.17 Tax Matters...................................................................... 41
ARTICLE VI CONDITIONS TO THE MERGER.......................................................... 41
6.1 Conditions to Obligations of Each Party to Effect the Merger..................... 41
6.2 Additional Conditions to Obligations of Company.................................. 42
6.3 Additional Conditions to the Obligations of Parent and Merger Sub................ 43
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER................................................. 44
7.1 Termination...................................................................... 44
7.2 Notice of Termination; Effect of Termination..................................... 45
7.3 Fees and Expenses................................................................ 45
7.4 Amendment........................................................................ 46
7.5 Extension; Waiver................................................................ 46
ARTICLE VIII GENERAL PROVISIONS................................................................ 47
8.1 Non-Survival of Representations and Warranties................................... 47
8.2 Notices.......................................................................... 47
8.3 Interpretation; Certain Defined Terms............................................ 47
8.4 Counterparts..................................................................... 48
8.5 Entire Agreement; Third Party Beneficiaries...................................... 48
8.6 Severability..................................................................... 48
8.7 Other Remedies; Specific Performance............................................. 48
8.8 Governing Law.................................................................... 49
8.9 Rules of Construction............................................................ 49
8.10 Assignment....................................................................... 49
8.11 Waiver Of Jury Trial............................................................. 49
</TABLE>
v
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Index of Exhibits
Exhibit A Form of Voting Agreement
Exhibit B Form of Registration Rights Agreement
vi
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Agreement and Plan of Merger
This Agreement and Plan of Merger (this "Agreement") is made and entered
into as of March 6, 2000, among VeriSign, Inc., a Delaware corporation
("Parent"), Nickel Acquisition Corporation, a Delaware corporation and a wholly
owned first-tier subsidiary of Parent ("Merger Sub"), and Network Solutions,
Inc., a Delaware corporation ("Company").
Recitals
A. The respective Boards of Directors of Parent, Merger Sub and Company
have approved this Agreement, and declared advisable the merger of Merger Sub
with and into Company (the "Merger") upon the terms and subject to the
conditions of this Agreement and in accordance with the General Corporation Law
of the State of Delaware ("Delaware Law").
B. For United States federal income tax purposes, the Merger is intended
to qualify as a "reorganization" pursuant to the provisions of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"). For accounting
purposes, the Merger is intended to be accounted for as a "purchase" under
United States generally accepted accounting principles ("GAAP").
C. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, a
stockholder of Company is entering into a Voting Agreement with Parent in the
form of Exhibit A (the "Voting Agreement").
D. Concurrently with the execution of this Agreement, Parent and a
stockholder of Company are entering into a Registration Rights Agreement in the
form of Exhibit B (the "Registration Rights Agreement").
In consideration of the foregoing and the representations, warranties,
covenants and agreements set forth in this Agreement, the parties agree as
follows:
Article I
The Merger
1.1 The Merger. Upon the terms and subject to the conditions of this
----------
Agreement and the applicable provisions of Delaware Law, at the Effective Time,
Merger Sub shall be merged with and into Company, the separate corporate
existence of Merger Sub shall cease, and Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation").
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
-----------------------
Company and Merger Sub will file a certificate of merger, in such appropriate
form as determined by the parties, with the Secretary of State of the State of
Delaware in accordance with the relevant provisions of Delaware Law (the
"Certificate of Merger") (the time of such filing (or such later time as may be
agreed in writing by Company and Parent and specified in the Certificate of
Merger) being the "Effective Time") as soon as practicable on or after the
Closing Date. The closing of the Merger (the "Closing") shall take place at the
offices of Fenwick & West LLP, Two Palo Alto Square, Palo Alto, California, at a
time and date to be specified by the parties, which shall be no later than the
second business day after the satisfaction or waiver of the conditions set forth
in Article VI, or at such other time, date and location as the parties hereto
agree in writing (the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
--------------------
shall be as provided in this Agreement and the applicable provisions of Delaware
Law. Without limiting the generality of the foregoing, at the Effective Time,
the Surviving Corporation shall possess all the property, rights, privileges,
1-1
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powers and franchises of Company and Merger Sub, and shall be subject to all
debts, liabilities and duties of Company and Merger Sub.
1.4 Certificate of Incorporation; Bylaws.
------------------------------------
(a) At the Effective Time, the Certificate of Incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation of the
Surviving Corporation; provided, however, that at the Effective Time Article I
of the Certificate of Incorporation of the Surviving Corporation shall be
amended to read: "The name of the corporation is `Network Solutions, Inc.'"
(b) At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 Directors and Officers. The initial directors of the Surviving
----------------------
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Company immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.6 Effect on Capital Stock. Subject to the terms and conditions of
-----------------------
this Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, Company or the holders of any of the following
securities:
(a) Conversion of Company Common Stock. Each share of common stock,
----------------------------------
par value $0.001 per share, of Company ("Company Common Stock") issued and
outstanding immediately prior to the Effective Time, other than any shares of
Company Common Stock to be canceled pursuant to Section 1.6(b), will be canceled
and extinguished and automatically converted (subject to Section 1.6(e)) into
the right to receive 2.15 (the "Exchange Ratio") shares of common stock, par
value $0.001 per share, of Parent ("Parent Common Stock") upon surrender of the
certificate representing such share of Company Common Stock in the manner
provided in Section 1.7. No fraction of a share of Parent Common Stock will be
issued by virtue of the Merger, but in lieu thereof, a cash payment shall be
made pursuant to Section 1.7(e). For the avoidance of doubt, following the two-
for-one stock dividend payable on Company Common Stock on March 10, 2000, the
Exchange Ratio will be 1.075.
(b) Cancellation of Company-Owned and Parent-Owned Stock. Each share
----------------------------------------------------
of Company Common Stock held by Company or owned by Merger Sub, Parent or any
direct or indirect wholly owned subsidiary of Company or of Parent immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(c) Stock Options; Employee Stock Purchase Plan. At the Effective
-------------------------------------------
Time, all options to purchase Company Common Stock then outstanding under
Company's 1996 Stock Incentive Plan (the "Company Stock Option Plan") shall be
assumed by Parent in accordance with Section 5.9 of this Agreement. Rights
outstanding under Company's 1997 Employee Stock Purchase Plan (the "Company
ESPP") shall be treated as set forth in Section 5.9 of this Agreement.
(d) Capital Stock of Merger Sub. Each share of common stock, par
---------------------------
value $0.01 per share, of Merger Sub (the "Merger Sub Common Stock"), issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of common stock, $0.01 par
value per share, of the Surviving Corporation. Following the Effective Time,
each certificate evidencing ownership of shares of Merger Sub common stock shall
evidence ownership of such shares of capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
-----------------------------
adjusted to reflect appropriately the effect of any stock split, reverse stock
split, stock dividend (including any dividend or
1-2
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distribution of securities convertible into Parent Common Stock or Company
Common Stock), reorganization, recapitalization, reclassification or other like
change with respect to Parent Common Stock or Company Common Stock occurring on
or after the date hereof and prior to the Effective Time.
1.7 Exchange of Certificates.
------------------------
(a) Exchange Agent. Parent shall select an institution reasonably
--------------
acceptable to Company to act as the exchange agent (the "Exchange Agent") in the
Merger.
(b) Exchange Fund. Promptly after the Effective Time, Parent shall
-------------
make available to the Exchange Agent for exchange in accordance with this
Article I, the shares of Parent Common Stock (such shares of Parent Common
Stock, together with cash in lieu of fractional shares and any dividends or
distributions with respect thereto, are hereinafter referred to as the "Exchange
Fund") issuable pursuant to Section 1.6 in exchange for outstanding shares of
Company Common Stock.
(c) Exchange Procedures. Promptly after the Effective Time, Parent
-------------------
shall instruct the Exchange Agent to mail to each holder of record of a
certificate or certificates ("Certificates") which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock whose
shares were converted into shares of Parent Common Stock pursuant to Section
1.6, (i) a letter of transmittal in customary form (that shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent and
shall contain such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock. Upon surrender of
Certificates for cancellation to the Exchange Agent together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holders of such Certificates shall be entitled to
receive in exchange therefor certificates representing the number of whole
shares of Parent Common Stock into which their shares of Company Common Stock
were converted at the Effective Time, payment in lieu of fractional shares that
such holders have the right to receive pursuant to Section 1.7(e) and any
dividends or distributions payable pursuant to Section 1.7(d), and the
Certificates so surrendered shall forthwith be canceled. Until so surrendered,
outstanding Certificates will be deemed from and after the Effective Time, for
all corporate purposes, to evidence only the ownership of the number of full
shares of Parent Common Stock into which such shares of Company Common Stock
shall have been so converted and the right to receive an amount in cash in lieu
of the issuance of any fractional shares in accordance with Section 1.7(e) and
any dividends or distributions payable pursuant to Section 1.7(d). No interest
will be paid or accrued on any cash in lieu of fractional shares of Parent
Common Stock or on any unpaid dividends or distributions payable to holders of
Certificates. In the event of a transfer of ownership of shares of Company
Common Stock which is not registered in the transfer records of Company, a
certificate representing the proper number of shares of Parent Common Stock may
be issued to a transferee if the Certificate representing such shares of Company
Common Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
------------------------------------------------
other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holders of any unsurrendered Certificates with respect to the
shares of Parent Common Stock represented thereby until the holders of record of
such Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall deliver
to the holders of certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) promptly, the amount of any
cash payable with respect to a fractional share of Parent Common Stock to which
such holder is entitled pursuant to Section 1.7(e) and the amount of dividends
or other distributions with a record date after the Effective Time theretofore
paid with respect to such whole shares of Parent Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole shares of Parent
Common Stock.
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<PAGE>
(e) Fractional Shares. (i) As promptly as practicable following the
-----------------
Effective Time, the Exchange Agent shall determine the excess of (A) the number
of full shares of Parent Common Stock delivered to the Exchange Agent pursuant
to Section 1.7(b), over (B) the aggregate number of full shares of Parent Common
Stock to be distributed to holders of Company Common Stock pursuant to Section
1.7(c) (such excess, the "Excess Shares"). Following the Effective Time, the
Exchange Agent, as agent for the holders of Company Common Stock, shall sell the
Excess Shares at then prevailing prices on the Nasdaq Stock Market in the manner
set forth in paragraph (ii) of this Section 1.7(e).
(ii) The sale of the excess shares by the Exchange Agent shall
be executed on the Nasdaq Stock Market and shall be executed in round lots to
the extent practicable. The Exchange Agent shall use all commercially reasonable
efforts to complete the sale of the Excess Shares as promptly following the
Effective Time as, in the Exchange Agent's reasonable judgment, is practicable
consistent with obtaining the best execution of such sales in light of
prevailing market conditions. Until the net proceeds of such sales have been
distributed to the holders of Company Common Stock, the Exchange Agent will hold
such proceeds in trust for the holders of Company Common Stock. The Exchange
Agent will determine the portion of such net proceeds to which each holder of
Company Common Stock shall be entitled, if any, by multiplying the amount of the
aggregate net proceeds by a fraction the numerator of which is the amount of the
fractional share interest to which such holder of Company Common Stock is
entitled (after taking into account all shares of Parent Common Stock to be
issued to such holder) and the denominator of which is the aggregate amount of
fractional share interests to which all holders of Company Common Stock are
entitled. As soon as practicable after the determination of the amount of cash,
if any, to be paid to holders of Company Common Stock with respect to fractional
share interests, the Exchange Agent shall promptly pay such amounts to such
holders of Company Common Stock in accordance with the terms of Section 1.7(c).
(iii) Notwithstanding the provisions of paragraphs (i) and (ii)
of this Section 1.7(e), Parent may decide, at its option, exercised prior to the
Effective Time, in lieu of the issuance and sale of Excess Shares and the making
of the payments contemplated in such paragraphs, that Parent shall pay to the
Exchange Agent an amount sufficient for the Exchange Agent to pay each holder of
Company Common Stock the amount such holder would have received pursuant to
Section 1.7(e)(ii) assuming that the sales of Parent Common Stock were made at a
price equal to the average of the closing prices of the Parent Common Stock on
the Nasdaq Stock Market for the ten consecutive trading days immediately
following the Effective Time and, in such case, all references herein to the
cash proceeds of the sale of the Excess Shares and similar references shall be
deemed to mean and refer to the payments calculated as set forth in this
paragraph (iii). In such event, Excess Shares shall not be issued or otherwise
transferred to the Exchange Agent pursuant to Sections 1.7(b) or (e).
(f) Required Withholding. Each of the Exchange Agent, Parent and the
--------------------
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Company Common Stock such amounts as may be required
to be deducted or withheld therefrom under the Code or under any provision of
state, local or foreign tax law or under any other applicable Legal Requirement
(as defined in Section 2.2(b)). To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the person to whom such amounts would otherwise have been
paid.
(g) Lost, Stolen or Destroyed Certificates. In the event that any
--------------------------------------
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, certificates
representing the shares of Parent Common Stock into which the shares of Company
Common Stock represented by such Certificates were converted pursuant to Section
1.6, cash for fractional shares, if any, as may be required pursuant to Section
1.7(e) and any dividends or distributions payable pursuant to Section 1.7(d);
provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance of such certificates representing shares of Parent
Common Stock, cash and other distributions, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Parent, the Surviving
1-4
<PAGE>
Corporation or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
(h) No Liability. Notwithstanding anything to the contrary in this
------------
Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation nor
any party hereto shall be liable to a holder of shares of Parent Common Stock or
Company Common Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(i) Termination of Exchange Fund. Any portion of the Exchange Fund
----------------------------
which remains undistributed to the holders of Company Common Stock for six
months after the Effective Time shall be delivered to Parent, upon demand, and
any holders of Company Common Stock who have not theretofore complied with the
provisions of this Section 1.7 shall thereafter look only to Parent for the
shares of Parent Common Stock, any cash in lieu of fractional shares of Parent
Common Stock to which they are entitled pursuant to Section 1.7(e) and any
dividends or other distributions with respect to Parent Common Stock to which
they are entitled pursuant to Section 1.7(d), in each case, without any interest
thereon.
1.8 No Further Ownership Rights in Company Common Stock. All shares of
---------------------------------------------------
Parent Common Stock issued in accordance with the terms hereof (including any
cash paid in respect thereof pursuant to Section 1.7(d) and (e)) shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of Company Common Stock, and there shall be no further registration of transfers
on the records of the Surviving Corporation of shares of Company Common Stock
that were outstanding immediately prior to the Effective Time. If after the
Effective Time Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
1.9 Restricted Stock. If any shares of Company Common Stock that are
----------------
outstanding immediately prior to the Effective Time are unvested or are subject
to a repurchase option, risk of forfeiture or other condition providing that
such shares ("Company Restricted Stock") may be forfeited or repurchased by the
Company upon any termination of the stockholders' employment, directorship or
other relationship with the Company (and/or any affiliate of the Company) under
the terms of any restricted stock purchase agreement or other agreement with the
Company that does not by its terms provide that such repurchase option, risk of
forfeiture or other condition lapses upon consummation of the Merger, then the
shares of Parent Common Stock issued upon the conversion of such shares of
Company Common Stock in the Merger will continue to be unvested and subject to
the same repurchase options, risks of forfeiture or other conditions following
the Effective Time, and the certificates representing such shares of Parent
Common Stock may accordingly be marked with appropriate legends noting such
repurchase options, risks of forfeiture or other conditions. Company shall take
all actions that may be necessary to ensure that, from and after the Effective
Time, Parent is entitled to exercise any such repurchase option or other right
set forth in any such restricted stock purchase agreement or other agreement. A
listing of the holders of Company Restricted Stock, together with the number of
shares and the vesting schedule of Company Restricted Stock held by each, is set
forth in Part 1.9 of the Company Disclosure Letter.
1.10 Tax Consequences. It is intended by the parties hereto that the
----------------
Merger shall constitute a "reorganization" within the meaning of Section 368 of
the Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations.
1.11 Taking of Necessary Action; Further Action. If, at any time after
------------------------------------------
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Company and Merger Sub, the officers and directors of Company
and Merger Sub will take all such lawful and necessary action. Parent shall
cause Merger Sub to perform all of its obligations relating to this Agreement
and the transactions contemplated hereby.
1-5
<PAGE>
Article II
Representations and Warranties of Company
As of the date of this Agreement and as of the Closing Date, except as
disclosed in (i) Company's Annual Report on Form 10-K for the year ending
December 31, 1998 and any Company SEC Reports (as defined below) filed
subsequent to such Form 10-K, and (ii) the disclosure letter delivered by
Company to Parent dated as of the date hereof and certified by a duly authorized
officer of Company (the "Company Disclosure Letter") (each Part of which
qualifies the correspondingly numbered representation, warranty or covenant to
the extent specified therein and such other representations, warranties or
covenants to the extent a matter in such Part is disclosed in such a way as to
make its relevance to such other representation, warranty or covenant readily
apparent), Company represents and warrants to Parent and Merger Sub as follows:
2.1 Organization; Subsidiaries.
--------------------------
(a) Company and each of its 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, and all requisite qualifications to do business as a foreign
corporation, to conduct its business in the manner in which its business is
currently being conducted, except where the failure to be so organized, existing
or in good standing or to have such power, authority or qualifications would
not, individually or in the aggregate, have a Material Adverse Effect (as
defined in Section 8.3) on Company.
(b) Other than as set forth in Part 2.1 of the Company Disclosure
Letter, neither Company nor any of the other corporations identified in Part 2.1
of the Company Disclosure Letter owns any capital stock of, or any equity
interest of any nature in, any corporation, partnership, joint venture
arrangement or other business entity, other than the entities identified in Part
2.1 of the Company Disclosure Letter, except for passive investments in equity
interests of public companies as part of the cash management program of Company.
Neither Company nor any of its subsidiaries has agreed or is obligated to make,
or is bound by any written, oral or other agreement, contract, subcontract,
lease, binding understanding, instrument, note, option, warranty, purchase
order, license, sublicense, insurance policy, benefit plan or legally binding
commitment or undertaking of any nature, as in effect as of the date hereof or
as may hereinafter be in effect under which it may become obligated to make any
future material investment in or material capital contribution to any other
entity. Neither Company, nor any of its subsidiaries, is a general partner of
any general partnership, limited partnership or other similar entity. Part 2.1
of the Company Disclosure Letter indicates the jurisdiction of organization of
each entity listed therein and Company's direct or indirect equity interest
therein.
(c) Company has delivered or made available to Parent a true and
correct copy of the Certificate of Incorporation and Bylaws of Company and
similar governing instruments of each of its subsidiaries, each as amended to
date (collectively, the "Company Charter Documents"), and each such instrument
is in full force and effect. Neither Company nor any of its subsidiaries is in
violation of any of the provisions of the Company Charter Documents.
2.2 Company Capitalization.
----------------------
(a) The authorized capital stock of Company consists solely of
210,000,000 shares of Company Common Stock, of which there were 36,166,801
shares issued and outstanding as of the close of business on March 3, 2000, and
10,000,000 shares of preferred stock, par value $0.001 per share, of which no
shares are issued or outstanding. All outstanding shares of Company Common
Stock are duly authorized, validly issued, fully paid and nonassessable and are
not subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of Company or any agreement or document to which Company
is a party or by which it is bound. As of the date of this Agreement, there are
no shares of Company Common Stock held in treasury by the Company. From and
after the Effective Time, the shares of Parent Common Stock issued in exchange
for any shares of Company Restricted Stock will, without any further act of
Parent, the Company or any other person, become subject to the restrictions,
conditions and
1-6
<PAGE>
other provisions of such Company Restricted Stock, and Parent will automatically
succeed to and become entitled to exercise the Company's rights and remedies
under such Company Restricted Stock.
(b) As of the close of business on March 3, 2000, (i) 4,076,097 shares
of Company Common Stock are subject to issuance pursuant to outstanding options
to purchase Company Common Stock under the Company Stock Option Plan ("Company
Options") for a weighted average aggregate exercise price of approximately
$75.43, (ii) 457,370 shares of Company Common Stock are reserved for future
issuance under the Company ESPP, and (iii) 500,000 shares of Company Common
Stock are reserved for future issuance under the Company's 401(k) Plan. Part
2.2(b) of the Company Disclosure Letter sets forth the following information
with respect to each Company Option outstanding as of the date of this
Agreement: (i) the name of the optionee; (ii) the number of shares of Company
Common Stock subject to such Company Option; (iii) the exercise price of such
Company Option; (iv) the date on which such Company Option was granted or
assumed; (v) the date on which such Company Option expires and (vi) whether the
exercisability of such option will be accelerated in any way by the transactions
contemplated by this Agreement, and indicates the extent of any such
acceleration. Company has made available to Parent an accurate and complete
copy of the Company Stock Option Plan and the form of all stock option
agreements evidencing Company Options. There are no options outstanding to
purchase shares of Company Common Stock other than pursuant to the Company Stock
Option Plan. All shares of Company Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable.
(c) All outstanding shares of Company Common Stock, all outstanding
Company Options, and all outstanding shares of capital stock of each subsidiary
of Company have been issued and granted in compliance with (i) all applicable
securities laws and other applicable material Legal Requirements and (ii) all
material requirements set forth in applicable agreements or instruments. For
the purposes of this Agreement, "Legal Requirements" means any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Entity (as defined
in Section 2.4).
2.3 Obligations With Respect to Capital Stock. Except as set forth in
------------------------------------------
Part 2.3 of the Company Disclosure Letter, there are no equity securities,
partnership interests or similar ownership interests of any class of Company
equity security, or any securities exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Company owns
all of the securities of its subsidiaries identified on Part 2.1 of the Company
Disclosure Letter, free and clear of all claims and Encumbrances, and there are
no other equity securities, partnership interests or similar ownership interests
of any class of equity security of any subsidiary of Company, or any security
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. For purposes of this Agreement, "Encumbrances" means
any lien, pledge, hypothecation, charge, mortgage, security interest,
encumbrance, claim, infringement, interference, option, right of first refusal,
preemptive right, community property interest or restriction of any nature
(including any restriction on the voting of any security, any restriction on the
transfer of any security or other asset, any restriction on the receipt of any
income derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset). Except as set forth in Part 2.2 or Part 2.3 of the
Company Disclosure Letter, there are no subscriptions, options, warrants, equity
securities, partnership interests or similar ownership interests, calls, rights
(including preemptive rights), commitments or agreements of any character to
which Company or any of its subsidiaries is a party or by which it is bound
obligating Company or any of its subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition of, any shares of
capital stock, partnership interests or similar ownership interests of Company
or any of its subsidiaries or obligating Company or any of its subsidiaries to
grant, extend, accelerate the vesting of or enter into any such subscription,
option, warrant, equity security, call, right, commitment or agreement. Except
as contemplated by this Agreement, the Registration Rights Agreement, and the
Registration Rights Agreement between Company and Science Applications
International
1-8
<PAGE>
Corporation, there are no registration rights with respect to any equity
security of any class of Company or with respect to any equity security,
partnership interest or similar ownership interest of any class of any of its
subsidiaries.
2.4 Authority; Non-Contravention.
----------------------------
(a) Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Company, subject only to the approval and
adoption of this Agreement and the approval of the Merger by Company's
stockholders (the "Company Stockholder Approvals") and the filing of the
Certificate of Merger pursuant to Delaware Law. The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock is
sufficient for Company's stockholders to approve and adopt this Agreement and
approve the Merger, and no other approval of any holder of any securities of
Company is required in connection with the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Company and, assuming the due execution and delivery by Parent and Merger Sub,
constitutes the valid and binding obligation of Company, enforceable against
Company in accordance with its terms, except as enforceability may be limited by
bankruptcy and other similar laws affecting the rights of creditors generally
and general principles of equity.
(b) The execution and delivery of this Agreement by Company does not,
and the performance of this Agreement by Company will not, (i) conflict with or
violate the Company Charter Documents, (ii) subject to obtaining the Company
Stockholder Approvals and compliance with the requirements set forth in Section
2.4(c), conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Company or any of its subsidiaries or by which Company or
any of its subsidiaries or any of their respective properties is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair Company's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of an Encumbrance on any of the
properties or assets of Company or any of its subsidiaries pursuant to, any
note, bond, mortgage, indenture, agreement, lease, license, permit, franchise,
concession, or other instrument or obligation to which Company or any of its
subsidiaries is a party or by which Company or any of its subsidiaries or its or
any of their respective assets are bound or affected, except, in the case of
clauses (ii) and (iii), for such conflicts, violations, breaches, defaults,
impairments, or rights which, individually or in the aggregate, would not have a
Material Adverse Effect on Company. Part 2.4(b) of the Company Disclosure
Letter list all consents, waivers and approvals under any of Company's or any of
its subsidiaries' agreements, licenses or leases required to be obtained in
connection with the consummation of the transactions contemplated hereby, which,
if individually or in the aggregate not obtained, would result in a material
loss of benefits to Company, Parent or the Surviving Corporation as a result of
the Merger.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality, foreign or domestic
("Governmental Entity") or other person, is required to be obtained or made by
Company in connection with the execution and delivery of this Agreement or the
consummation of the Merger, except for (i) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which the Company is
qualified to do business, (ii) the filing of the Proxy Statement/Prospectus (as
defined in Section 2.17) with the Securities and Exchange Commission ("SEC") in
accordance with the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the effectiveness of the Registration Statement (as defined in Section
2.17), (iii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal, foreign
and state securities (or related) laws and the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the securities or
antitrust laws of any foreign country, and (iv) such other consents,
authorizations, filings, approvals and registrations which if not obtained or
made would not be material to the Company, Parent or the Surviving Corporation
or have a material adverse effect on the ability of the parties hereto to
consummate the Merger.
<PAGE>
2.5 SEC Filings; Company Financial Statements.
-----------------------------------------
(a) Company has filed all forms, reports and documents required to be
filed by Company with the SEC since the effective date of the registration
statement of Company's initial public offering and has made available to Parent
such forms, reports and documents in the form filed with the SEC. All such
required forms, reports and documents (including those that Company may file
subsequent to the date hereof) are referred to herein as the "Company SEC
Reports." As of their respective dates, the Company SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC thereunder applicable to such Company SEC
Reports and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except to the extent corrected prior to the date of this
Agreement by a subsequently filed Company SEC Report. None of Company's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports (the
"Company Financials"), including each Company SEC Report filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q, 8-K or any successor form under the Exchange Act) and (iii) fairly
presented the consolidated financial position of Company and its subsidiaries as
at the respective dates thereof and the consolidated results of Company's
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements may not contain footnotes and were or are subject
to normal and recurring year-end adjustments. The balance sheet of Company
contained in Company SEC Reports as of September 30, 1999 is hereinafter
referred to as the "Company Balance Sheet." Except as disclosed in the Company
Financials, since the date of the Company Balance Sheet, neither Company nor any
of its subsidiaries has any liabilities required under GAAP to be set forth on a
balance sheet (absolute, accrued, contingent or otherwise) which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Company and its subsidiaries taken as a
whole, except for liabilities incurred since the date of the Company Balance
Sheet in the ordinary course of business consistent with past practices and
liabilities incurred in connection with this Agreement.
(c) Company has heretofore furnished to Parent a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Company with the SEC pursuant to
the Securities Act or the Exchange Act.
2.6 Absence of Certain Changes or Events. Since the date of the Company
------------------------------------
Balance Sheet there has not been: (i) any Material Adverse Effect with respect
to Company, (ii) any declaration, setting aside or payment of any dividend on,
or other distribution (whether in cash, stock or property) in respect of, any of
Company's or any of its subsidiaries' capital stock, or any purchase, redemption
or other acquisition by Company of any of Company's capital stock or any other
securities of Company or its subsidiaries or any options, warrants, calls or
rights to acquire any such shares or other securities except for repurchases
which are not, individually or in the aggregate, material in amount from
employees following their termination pursuant to the terms of their pre-
existing stock option or purchase agreements, (iii) any split, combination or
reclassification of any of Company's or any of its subsidiaries' capital stock,
(iv) any granting by Company or any of its subsidiaries of any increase in
compensation or fringe benefits to any of their officers or employees, or any
payment by Company or any of its subsidiaries of any bonus to any of their
officers or employees, or any granting by Company or any of its subsidiaries of
any increase in severance or termination pay, other than in the ordinary course,
consistent with past practice, or any entry by Company or any of its
subsidiaries into, or material modification or amendment of, any currently
effective employment, severance, termination or indemnification agreement or any
agreement the benefits
1-9
<PAGE>
of which are contingent or the terms of which are materially altered upon the
occurrence of a transaction involving Company of the nature contemplated hereby,
(v) since November 10, 1999, any material modification, amendment or
cancellation of any of the Registry Agreement, dated November 10, 1999, between
Company and the Internet Corporation for Assigned Names and Numbers, a not-for-
profit corporation ("ICANN"), the Registrar Accreditation Agreement, dated
November 10, 1999, between Company and ICANN, and the Cooperative Agreement No.
NCR-92-18742, in each case, as amended, (vi) any material change by Company in
its accounting methods, principles or practices, except as required by
concurrent changes in GAAP, (vii) any material revaluation by Company of any of
its material assets, including writing off notes or accounts receivable other
than in the ordinary course of business, or (viii) any material change in the
pricing of the registration fees Company charges for its registration services.
2.7 Taxes.
-----
(a) Company and each of its subsidiaries have timely filed all
material federal, state, local and foreign returns, estimates, information
statements and reports ("Returns") relating to Taxes required to be filed by or
on behalf of Company and each of its subsidiaries with any Tax authority, such
Returns are true, correct and complete in all material respects, and Company and
each of its subsidiaries have paid all Taxes shown to be due on such Returns.
(b) Company and each of its subsidiaries have withheld with respect to
its employees all federal and state income taxes, Taxes pursuant to the Federal
Insurance Contribution Act ("FICA"), Taxes pursuant to the Federal Unemployment
Tax Act ("FUTA") and other Taxes required to be withheld, except such Taxes
which are not material to Company.
(c) Other than as set forth in Part 2.7(c) of the Company Disclosure
Letter, neither Company nor any of its subsidiaries has been delinquent in the
payment of any material Tax nor is there any material Tax deficiency
outstanding, proposed or assessed against Company or any of its subsidiaries,
nor has Company or any of its subsidiaries executed any unexpired waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(d) No audit or other examination of any Return of Company or any of
its subsidiaries by any Tax authority is presently in progress, nor has Company
or any of its subsidiaries been notified of any request for such an audit or
other examination that is reasonably likely to result in any adjustment that is
material to Company.
(e) No adjustment relating to any Returns filed by Company or any of
its subsidiaries has been proposed in writing formally or informally by any Tax
authority to Company or any of its subsidiaries or any representative thereof
that is reasonably likely to be material to Company.
(f) Neither Company nor any of its subsidiaries has any liability for
unpaid Taxes which has not been accrued for or reserved on the Company Balance
Sheet in accordance with GAAP, whether asserted or unasserted, contingent or
otherwise, which is material to Company, other than any liability for unpaid
Taxes that may have accrued since the date of the Company Balance Sheet in
connection with the operation of the business of Company and its subsidiaries in
the ordinary course.
(g) There is no agreement, plan or arrangement to which Company or any
of its subsidiaries is a party, including this Agreement and the agreements
entered into in connection with this Agreement, covering any employee or former
employee of Company or any of its subsidiaries that, individually or
collectively, would be reasonably likely to give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G, 404 or 162(m) of
the Code.
(h) Neither Company nor any of its subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by Company.
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<PAGE>
(i) Neither Company nor any of its subsidiaries is party to or
has any obligation under any tax-sharing, tax indemnity or tax allocation
agreement or arrangement, other than the Tax Sharing Agreement between Company
and Science Applications International Corporation, a Delaware corporation
("SAIC").
(j) Except as may be required as a result of the Merger, Company
and its subsidiaries have not been and will not be required to include any
adjustment in Taxable income for any Tax period (or portion thereof) pursuant to
Section 481 of the Code or any comparable provision under state or foreign Tax
laws as a result of transactions, events or accounting methods employed prior to
the Closing.
(k) None of Company's or its subsidiaries' assets are tax exempt
use property within the meaning of Section 168(h) of the Code.
(l) Company has not been distributed in a transaction qualifying
under Section 355 of the Code within the last two years, nor has Company
distributed any corporation in a transaction qualifying under Section 355 of the
Code within the last two years.
(m) Company is not aware of any fact, circumstance, plan or
intention on the part of Company that would be reasonably likely to prevent the
Merger from qualifying as a "reorganization" pursuant to the provisions of
Section 368 of the Code.
For the purposes of this Agreement, "Tax" or "Taxes" refers to (i) any and
all federal, state, local and foreign taxes, assessments and other governmental
charges, duties, impositions and liabilities relating to taxes, including taxes
based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts, (ii) any
liability for payment of any amounts of the type described in clause (i) as a
result of being a member of an affiliated consolidated, combined or unitary
group, and (iii) any liability for amounts of the type described in clauses (i)
and (ii) as a result of any express or implied obligation to indemnify another
person or as a result of any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
2.8 Title to Properties.
-------------------
(a) Company owns no real property interests. Part 2.8 of the Company
Disclosure Letter list all real property leases to which Company is a party and
each amendment thereto that is in effect as of the date of this Agreement that
provide for annual payments in excess of $5,000,000. All such current leases
are in full force and effect, are valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default) that would give rise to a material claim
against Company.
(b) Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Encumbrances, except as reflected in the Company
Financials and except for liens for Taxes not yet due and payable and such
Encumbrances which are not material in character, amount or extent.
2.9 Intellectual Property. For the purposes of this Agreement, the
---------------------
following terms have the following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and continuations-
in-part thereof; (ii) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets,
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<PAGE>
proprietary information, know how, technology, technical data and customer
lists, and all documentation relating to any of the foregoing; (iii) all
copyrights, copyrights registrations and applications therefor, and all other
rights corresponding thereto throughout the world; (iv) all industrial designs
and any registrations and applications therefor throughout the world; (v) all
trade names, URLs, logos, common law trademarks and service marks, trademark and
service mark registrations and applications therefor throughout the world; (vi)
all databases and data collections and all rights therein throughout the world;
(vii) all moral and economic rights of authors and inventors, however
denominated, throughout the world, and (viii) any similar or equivalent rights
to any of the foregoing anywhere in the world.
"Company Intellectual Property" shall mean any Intellectual Property
that is owned by, or exclusively licensed to, Company or one of its
subsidiaries.
"Registered Intellectual Property" means all United States,
international and foreign: (i) patents and patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks; (iii) registered copyrights and applications for
copyright registration; and (iv) any other Intellectual Property that is the
subject of an application, certificate, filing, registration or other document
issued, filed with, or recorded by any Governmental Entity.
"Company Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, Company or one of its
subsidiaries.
(a) No material Company Intellectual Property or product or service of
Company is subject to any proceeding or outstanding decree, order, judgment,
agreement, or stipulation restricting in any manner the use, transfer, or
licensing thereof by Company, or which may affect the validity, use or
enforceability of such Company Intellectual Property.
(b) Each material item of Company Registered Intellectual Property is
valid and subsisting, all necessary registration, maintenance and renewal fees
currently due in connection with such Registered Intellectual Property have been
made and all necessary documents, recordations 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, except, in each case, as would not materially
adversely affect such item of Company Registered Intellectual Property.
(c) Company or one of its subsidiaries owns and has good and exclusive
title to, or has license (sufficient for the conduct of its business as
currently conducted) to, each material item of Company Intellectual Property
free and clear of any Encumbrance (excluding licenses and related restrictions).
(d) Neither Company has nor any of its subsidiaries transferred
ownership of, or granted any exclusive license with respect to, any Intellectual
Property that is or was material Company Intellectual Property, to any third
party.
(e) Part 2.9(e) of the Company Disclosure Letter lists (i) all
material contracts, licenses, agreements to which Company is a party with
respect to Company's authority as a registry and registrar for Internet general
top level domains including but not limited to the .com, .net and .org domains,
(ii) all Internet distribution and advertising agreements to which Company is a
party (except for any agreement which, if terminated, would not have a Material
Adverse Effect on Company), and (iii) all contracts, licenses and agreements to
which Company is a party pursuant to which a third party has licensed or
transferred any material Intellectual Property to Company (except for any
contract, license and agreement which, if terminated, would not have a Material
Adverse Effect on Company). There are no material contracts, licenses and
agreements to which Company is a party with respect to the software, hardware,
network and technology infrastructure used in Company's business as currently
conducted which, if terminated, would have a Material Adverse Effect on Company.
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<PAGE>
(f) To Company's knowledge, the operation of the business of Company
as such business currently is conducted, including Company's design,
development, marketing and sale of the products or services of Company
(including with respect to products currently under development) has not and
does not infringe or misappropriate the Intellectual Property of any third party
or, to its knowledge, constitute unfair competition or trade practices under the
laws of any jurisdiction.
(g) Company has not received notice from any third party that the
operation of the business of Company or any act, product or service of Company,
infringes or misappropriates the Intellectual Property of any third party or
constitutes unfair competition or trade practices under the laws of any
jurisdiction, which allegation, if true, would have a Material Adverse Effect on
Company.
(h) Except as set forth in Part 2.9(h) of the Company Disclosure
Letter, to the knowledge of Company, no person has or is infringing or
misappropriating any Company Intellectual Property, which infringement or
misappropriation, individually or in the aggregate, would have a Material
Adverse Effect on Company.
(i) Company and its subsidiaries have taken reasonable steps to
protect Company's and its subsidiaries' rights in Company's and such
subsidiaries' confidential information and trade secrets, except where the
failure to do so would have a Material Adverse Effect on Company.
(j) None of the Company Intellectual Property or product or service of
Company contains any defect in connection with processing data containing dates
in leap years or in the year 2000 or any preceding or following years, which
defects, individually or in the aggregate, would have a Material Adverse Effect
on Company.
(k) Company has obtained requisite authority, governmental approvals
and rights (sufficient for the conduct of its business as currently conducted)
to act as the exclusive registry and a non-exclusive registrar for certain
general Internet top level domains, including but not limited to the .com, .net
and .org domains. The Company Disclosure Letter lists all material contracts,
licenses and agreements to which Company is a party with respect to Company's
authority and obligations as a registry and registrar for Internet general top
level domains including but not limited to the .com, .net and .org domains.
(l) All material contracts, licenses and agreements relating to
Company's authority and obligations as a registry and registrar for Internet
general top level domains including but not limited to the .com, .net and .org
domains, are in full force and effect. The consummation of the transactions
contemplated by this Agreement will neither violate nor result in the breach,
modification, cancellation, termination, or suspension of such contracts,
licenses and agreements. Company and each of its subsidiaries are in material
compliance with, and have not materially breached any term of any of such
contracts, licenses and agreements and, to the knowledge of Company and its
subsidiaries, all other parties to such contracts, licenses and agreements are
in compliance in all material respects with, and have not materially breached
any term of, such contracts, licenses and agreements.
(m) Since November 10, 1999, Company has received no notice from any
United States Governmental Entity or ICANN (i) of any material complaint by a
United States Governmental Entity or ICANN regarding Company's services or
activities related to its role as a registry and registrar for Internet general
top level domains including but not limited to the .com, .net and .org domains;
or (ii) questioning Company's authority to act as the exclusive registry and a
non-exclusive registrar for Internet general top level domains, including but
not limited to the .com, .net and .org domains.
(n) To the Company's knowledge, as of the date of this Agreement,
Company's separation of its registrar and registry computer systems was achieved
without a material failure, which, for purposes of this Section 2.9(n), shall be
defined as uptime availability of less than 99% since the date of the separation
of such systems due to the separation of such systems.
1-13
<PAGE>
2.10 Compliance with Laws.
--------------------
(a) Neither Company nor any of its subsidiaries is in conflict with,
or in default or in violation of (i) any law, rule, regulation, order, judgment
or decree applicable to Company or any of its subsidiaries or by which Company
or any of its subsidiaries or any of their respective properties is bound or
affected, or (ii) any note, bond, mortgage, indenture, agreement, lease,
license, permit, franchise or other instrument or obligation to which Company or
any of its subsidiaries is a party or by which Company or any of its
subsidiaries or its or any of their respective properties is bound or affected,
except for conflicts, violations and defaults that, individually or in the
aggregate, would not have a Material Adverse Effect on Company. To Company's
knowledge, no investigation or review by any Governmental Entity is pending or,
has been threatened in a writing delivered to Company against Company or any of
its subsidiaries, nor, to Company's knowledge, has any Governmental Entity
indicated an intention to conduct an investigation of Company or any of its
subsidiaries. There is no judgment, injunction, order or decree binding upon
Company or any of its subsidiaries which has or could reasonably be expected to
have the effect of prohibiting or materially impairing any material business
practice of Company or any of its subsidiaries, or any acquisition of material
property by Company or any of its subsidiaries.
(b) Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities that
are material to or required for the operation of the business of Company as
currently conducted (collectively, the "Company Permits"), and are in compliance
with the terms of the Company Permits, except where the failure to hold such
Company Permits, or be in such compliance, would not, individually or in the
aggregate, have a Material Adverse Effect on Company.
2.11 Litigation. There are no claims, suits, actions or proceedings
----------
pending or, to the knowledge of Company, threatened against, relating to or
affecting Company or any of its subsidiaries, before any Governmental Entity or
any arbitrator that seeks to restrain or enjoin the consummation of the
transactions contemplated by this Agreement or which could reasonably be
expected, either singularly or in the aggregate with all such claims, actions or
proceedings, to have a Material Adverse Effect on Company or on the Surviving
Corporation following the Merger or have a material adverse effect on the
ability of the parties hereto to consummate the Merger. No director or
executive officer of Company has asserted a claim to seek indemnification from
Company under the Company Charter Documents or any indemnification agreement
between Company and such person.
2.12 Employee Benefit Plans.
----------------------
(a) Definitions. With the exception of the definition of "Affiliate"
-----------
set forth in Section 2.12(a)(i) below (which definition shall apply only to this
Section 2.12), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under
common control with Company within the meaning of Section 414(b), (c), (m) or
(o) of the Code and the regulations issued thereunder;
(ii) "Company Employee Plan" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or stock-
related awards, fringe benefits or other employee benefits or remuneration of
any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of ERISA which is or has been maintained, contributed to, or
required to be contributed to, by Company or any Affiliate for the benefit of
any Employee;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
1-14
<PAGE>
(v) "Employee" shall mean any current, former, or retired
employee, officer, or director of Company or any subsidiary of Company;
(vi) "Employee Agreement" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or similar agreement or contract between Company or any
subsidiary of Company, on the one hand, and any Employee or consultant of
Company or any subsidiary of Company, on the other hand;
(vii) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993,
as amended;
(ix) "International Employee Plan" shall mean each Company
Employee Plan that has been adopted or maintained by Company, whether informally
or formally, for the benefit of Employees outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "Multiemployer Plan" shall mean any "Pension Plan" (as
defined below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
(xiii) "Pension Plan" shall mean each Company Employee Plan which
is an "employee pension benefit plan," within the meaning of Section 3(2) of
ERISA.
(b) Schedule. Part 2.12 of the Company Disclosure Letter contains an
--------
accurate and complete list of each Company Employee Plan and each Employee
Agreement. Company does not have any plan or commitment to establish any new
Company Employee Plan, to modify any Company Employee Plan or Employee Agreement
(except to the extent required by law or to conform any such Company Employee
Plan or Employee Agreement to the requirements of any applicable law, in each
case as previously disclosed to Parent in writing, or as required by this
Agreement), or to enter into any Company Employee Plan or Employee Agreement,
nor does it have any intention or commitment to do any of the foregoing.
(c) Documents. Company has made available to Parent, to the extent
---------
requested by Parent: (i) correct and complete copies of all documents embodying
each Company Employee Plan and each Employee Agreement including all amendments
thereto and written interpretations thereof; (ii) the most recent annual
actuarial valuations, if any, prepared for each Company Employee Plan; (iii) the
most recent annual report (Form Series 5500 and all schedules and financial
statements attached thereto), if any, required under ERISA or the Code in
connection with each Company Employee Plan or related trust; (iv) if the Company
Employee Plan is funded, the most recent annual and periodic accounting of
Company Employee Plan assets; (v) the most recent summary plan description
together with the summary of material modifications thereto, if any, required
under ERISA with respect to each Company Employee Plan; (vi) all IRS
determination, opinion, notification and advisory letters, and rulings relating
to Company Employee Plans and copies of all applications and correspondence to
or from the IRS or the DOL with respect to any Company Employee Plan; (vii) all
material written agreements and contracts relating to each Company Employee
Plan, including, but not limited to, administrative service agreements, group
annuity contracts and group insurance contracts; (viii) all communications
material to any Employee or Employees relating to any Company Employee Plan and
any proposed Company Employee Plans, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules or other events which would result in any
material liability to Company; (ix) all COBRA
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<PAGE>
forms and related notices; and (x) all registration statements and prospectuses
prepared in connection with each Company Employee Plan.
(d) Employee Plan Compliance. Except, in each case, as would not,
------------------------
individually or in the aggregate, result in a material liability to Company: (i)
Company has performed in all material respects all obligations required to be
performed by it under, is not in default or violation of, and has no knowledge
of any default or violation by any other party to, each Company Employee Plan,
and each Company Employee Plan has been established and maintained in all
material respects in accordance with its terms and in compliance with all
applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA or the Code; (ii) each Company Employee Plan intended to
qualify under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code has either received a favorable determination
letter from the IRS with respect to each such Plan as to its qualified status
under the Code or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a determination
letter and make any amendments necessary to obtain a favorable determination
and, to the knowledge of Company, no event has occurred giving rise to a
material likelihood that such Plan would not be treated as qualified by the IRS;
(iii) no "prohibited transaction," within the meaning of Section 4975 of the
Code or Sections 406 and 407 of ERISA, and not otherwise exempt under Section
408 of ERISA, has occurred with respect to any Company Employee Plan; (iv) there
are no actions, suits or claims pending, or, to the knowledge of Company,
threatened or reasonably anticipated (other than routine claims for benefits)
against any Company Employee Plan or against the assets of any Company Employee
Plan; (v) each Company Employee Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
liability to Parent, Company or any of its Affiliates (other than ordinary
administration expenses typically incurred in a termination event); (vi) there
are no audits, inquiries or proceedings pending or, to the knowledge of Company,
threatened by the IRS or DOL with respect to any Company Employee Plan; (vii)
neither Company nor any Affiliate is subject to any penalty or tax with respect
to any Company Employee Plan under Section 402(i) of ERISA or Sections 4975
through 4980 of the Code; and (viii) all contributions due from the Company or
any Affiliate with respect to any of the Company Employee Plans have been made
as required under ERISA or have been accrued on the Company Balance Sheet.
(e) Pension Plans. Neither Company nor SAIC has now, nor has it ever,
-------------
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code,
that would result in material liability to Company.
(f) Multiemployer Plans. At no time has Company or SAIC contributed
-------------------
to or been requested to contribute to any Multiemployer Plan, that would result
in material liability to Company.
(g) No Post-Employment Obligations. No Company Employee Plan
------------------------------
provides, or has any liability to provide, retiree life insurance, retiree
health or other retiree employee welfare benefits to any person for any reason,
except as may be required by COBRA or other applicable statute, and Company has
never represented, promised or contracted (whether in oral or written form) to
any Employee (either individually or to Employees as a group) or any other
person that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute.
(h) Effect of Transaction. Except as expressly contemplated by this
---------------------
Agreement, the execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Company
Employee Plan, Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(i) Employment Matters. Except, in each case, as would not,
------------------
individually or in the aggregate, have a Material Adverse Effect on the Company,
Company and each of its subsidiaries: (i) is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages
1-16
<PAGE>
and hours, in each case, with respect to Employees; (ii) has withheld all
amounts required by law or by agreement to be withheld from the wages, salaries
and other payments to Employees; (iii) has properly classified independent
contractors for purposes of federal and applicable state tax laws, laws
applicable to employee benefits and other applicable laws; (iv) is not liable
for any arrears of wages or any taxes or any penalty for failure to comply with
any of the foregoing; and (v) is not liable for any material payment to any
trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice). There are no
pending, or, to Company's knowledge, threatened material claims or actions
against Company under any worker's compensation policy or long-term disability
policy. To Company's knowledge, no Employee of Company has materially violated
any employment contract, nondisclosure agreement or noncompetition agreement by
which such Employee is bound due to such Employee being employed by Company and
disclosing to Company or using trade secrets or proprietary information of any
other person or entity.
(j) Labor. No work stoppage or labor strike against Company is
-----
pending, threatened or reasonably anticipated. Company does not know of any
activities or proceedings of any labor union to organize any Employees. There
are no actions, suits, claims, labor disputes or grievances pending, or, to the
knowledge of Company, threatened relating to any labor, safety or discrimination
matters involving any Employee, including charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in any material liability to Company. Neither
Company nor any of its subsidiaries has engaged in any unfair labor practices
within the meaning of the National Labor Relations Act. Company is not
presently, nor has it been in the past, a party to, or bound by, any collective
bargaining agreement or union contract with respect to Employees and no
collective bargaining agreement is being negotiated by Company.
(k) International Employee Plan. Each International Employee Plan has
---------------------------
been established, maintained and administered in material compliance with its
terms and conditions and with the requirements prescribed by any and all
statutory or regulatory laws that are applicable to such International Employee
Plan. Furthermore, no International Employee Plan has unfunded liabilities,
that as of the Effective Time, will not be offset by insurance or fully accrued.
Except as required by law, no condition exists that would prevent Company or
Parent from terminating or amending any International Employee Plan at any time
for any reason.
2.13 Environmental Matters.
---------------------
(a) Hazardous Material. Except as would not have a Material Adverse
------------------
Effect on Company, no underground storage tanks and no amount of any substance
that has been designated by any Governmental Entity or by applicable federal,
state or local law to be radioactive, toxic, hazardous or otherwise a danger to
health or the environment, including, without limitation, PCBs, asbestos,
petroleum, urea-formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to
the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies (a "Hazardous Material") are present, as a result of the
actions of Company or any of its subsidiaries or any affiliate of Company, or,
to Company's knowledge, as a result of any actions of any third party or
otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water thereof that Company or any of its
subsidiaries has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Except as would not have a
------------------------------
Material Adverse Effect on Company (in any individual case or in the aggregate)
(i) neither Company nor any of its subsidiaries has transported, stored, used,
manufactured, disposed of released or exposed its employees or others to
Hazardous Materials in violation of any law in effect on or before the Closing
Date, and (ii) neither Company nor any of its subsidiaries has disposed of,
transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material (collectively
"Hazardous Materials Activities") in violation of any rule, regulation, treaty
or statute promulgated by any
1-17
<PAGE>
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. Company and its subsidiaries currently hold all
-------
environmental approvals, permits, licenses, clearances and consents
("Environmental Permits") material to and necessary for the conduct of Company's
and its subsidiaries' Hazardous Material Activities and other businesses of
Company and its subsidiaries as such activities and businesses are currently
being conducted.
(d) Environmental Liabilities. No material action, proceeding,
-------------------------
revocation proceeding, amendment procedure, writ or injunction is pending, and
to Company's knowledge, no material action, proceeding, revocation proceeding,
amendment procedure, writ or injunction has been threatened by any Governmental
Entity against Company or any of its subsidiaries in a writing delivered to
Company concerning any Environmental Permit of Company, Hazardous Material or
any Hazardous Materials Activity of Company or any of its subsidiaries. Company
is not aware of any fact or circumstance which reasonably could be expected to
involve Company or any of its subsidiaries in any environmental litigation or
impose upon Company any environmental liability, with such exceptions as would
not have a Material Adverse Effect on Company.
2.14 Certain Agreements. Except as set forth in Part 2.14 of the
------------------
Company Disclosure Letter, neither Company nor any of its subsidiaries is a
party to or is bound by:
(a) any employment or consulting agreement or commitment with any
employee or member of Company's Board of Directors, that, individually or in the
aggregate, is material to Company, other than those that are terminable by
Company or any of its subsidiaries on no more than thirty days notice without
liability or financial obligation, except to the extent general principles of
wrongful termination law may limit Company's or any of its subsidiaries' ability
to terminate employees at will;
(b) any agreement or plan, including any stock option plan, stock
appreciation right plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement;
(c) any material guaranty or any instrument evidencing indebtedness
for borrowed money by way of direct loan or sale of debt securities;
(d) any agreement, obligation or commitment containing covenants
purporting to limit or which effectively limit the Company's or any of its
subsidiaries' freedom to compete in any line of business or in any geographic
area or which would so limit Company or Surviving Corporation or any of its
subsidiaries after the Effective Time that would have a Material Adverse Effect
on Company;
(e) any agreement or commitment currently in force relating to the
disposition or acquisition by Company or any of its subsidiaries after the date
of this Agreement of a material amount of assets not in the ordinary course of
business, or pursuant to which Company has any material ownership or
participation interest in any corporation, partnership, joint venture, strategic
alliance or other business enterprise other than Company's subsidiaries;
(f) any material agreement or commitment with SAIC other than the
Corporate Services Agreement between Company and SAIC; or
(g) any agreement or commitment currently in force providing for
capital expenditures by Company or its subsidiaries in excess of $5,000,000.
The agreements required to be disclosed in the Company Disclosure Letter
pursuant to clauses (a) through (g) above or pursuant to Section 2.9 or are
required to be filed with any Parent SEC Report
1-18
<PAGE>
("Company Contracts") are valid and in full force and effect, except to the
extent that such invalidity would not have a Material Adverse Effect on Company.
Neither Company nor any of its subsidiaries, nor to Company's knowledge, any
other party thereto, is in breach, violation or default under, and neither
Company nor any of its subsidiaries has received written notice that it has
breached, violated or defaulted, any of the terms or conditions of any Company
Contract in such a manner as would have a Material Adverse Effect on Company.
2.15 Brokers' and Finders' Fees. Except for fees payable to J.P.
--------------------------
Morgan & Co. Incorporated and Chase Securities, Inc. pursuant to engagement
letters which have been provided to Parent, Company has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
2.16 Insurance. Company and each of its subsidiaries have policies of
---------
insurance and bonds of the type and in amounts customarily carried by persons
conducting business or owning assets similar to those of the Company and its
subsidiaries. There is no material claim pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies have been paid and the Company and its subsidiaries are otherwise
in compliance in all material respects with the terms of such policies and
bonds. To the knowledge of Company, there has been no threatened termination
of, or material premium increase with respect to, any of such policies.
2.17 Disclosure. The information supplied by Company for inclusion in
----------
the Form S-4 (or any similar successor form thereto) Registration Statement to
be filed by Parent with the SEC in connection with the issuance of Parent Common
Stock in the Merger (the "Registration Statement") shall not at the time the
Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The information supplied by Company
for inclusion or incorporation by reference in the proxy statement/prospectus to
be filed with the SEC as part of the Registration Statement (the "Proxy
Statement/Prospectus") shall not, on the date the Proxy Statement/Prospectus is
mailed to Company's stockholders or to Parent's stockholders, at the time of the
meeting of Company's stockholders (the "Company Stockholders' Meeting") to
consider the Company Stockholder Approvals, at the time of the meeting of
Parent's stockholders (the "Parent Stockholders' Meeting") to consider (1) the
issuance of shares of Parent Common Stock pursuant to the Merger, (2) an
amendment to Parent's Certificate of Incorporation to increase the authorized
number of shares of Parent Common Stock in order to permit the issuance of
shares of Parent Common Stock pursuant to the Merger, and (3) an amendment to
Parent's Bylaws to increase the authorized number of directors of Parent
(collectively, the "Parent Stockholder Approvals") or as of the Effective Time,
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 false or
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders' Meeting or Parent Stockholders' Meeting
which has become false or misleading. The Proxy Statement/Prospectus will
comply as to form in all material respects with the provisions of the Securities
Act, the Exchange Act and the rules and regulations thereunder. If at any time
prior to the Effective Time any event relating to Company or any of its
affiliates, officers or directors should be discovered by Company which is
required to be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement/Prospectus, Company shall promptly inform
Parent. Notwithstanding the foregoing, Company makes no representation or
warranty with respect to any information supplied by Parent or Merger Sub which
is contained in any of the foregoing documents.
2.18 Board Approval. The Board of Directors of Company has, as of the
--------------
date of this Agreement, (i) determined that the Merger is fair to, and in the
best interests of Company and its
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stockholders, and has approved this Agreement and (ii) declared the advisability
of the Merger and recommends that the stockholders of Company approve and adopt
this Agreement and approve the Merger.
2.19 Fairness Opinion. Company's Board of Directors has received
----------------
opinions from J.P. Morgan & Co. Incorporated and Chase Securities, Inc., dated
as of the date hereof, to the effect that, as of the date hereof, the
consideration to be received by Company's stockholders in the Merger is fair to
Company's stockholders from a financial point of view, and will promptly deliver
to Parent copies of such opinions.
2.20 DGCL Section 203 and Rights Agreement Not Applicable. The
----------------------------------------------------
restrictions contained in Section 203 of the Delaware Law applicable to a
"business combination" (as defined in such Section 203) are not applicable to
the execution, delivery or performance of this Agreement or to the consummation
of the Merger by express provision of the Company's Certificate of
Incorporation, duly adopted pursuant to the provisions of Section 203(b)(3) of
the Delaware Law. To Company's knowledge, no other anti-takeover, control share
acquisition, fair price, moratorium or other similar statute or regulation
(each, a "Takeover Statute") applies or purports to apply to this Agreement, the
Merger or the other transactions contemplated hereby. Company is not a party
to, and Company's equity securities will not be affected by, any rights
agreement, "poison pill" or similar plan, agreement or arrangement which would
have an adverse effect on the ability of Parent to consummate the Merger or the
other transactions contemplated hereby.
2.21 Affiliates. Part 2.21 of the Company Disclosure Letter is a
----------
complete list of those persons who may be deemed to be, in Company's reasonable
judgment, affiliates of Company within the meaning of Rule 145 promulgated under
the Securities Act. Except as set forth in the Company SEC Reports, since the
date of the Company's last proxy statement filed with the SEC, no event has
occurred as of the date of this Agreement that would be required to be reported
by the Company pursuant to Item 404 of Regulation S-K promulgated by the SEC.
Article III
Representations and Warranties of Parent and Merger Sub
As of the date of this Agreement and as of the Closing Date, except as
disclosed in (i) Parent's Annual Report on Form 10-K for the year ending
December 31, 1998 and any Parent SEC Reports (as defined below) filed subsequent
to such Form 10-K, and (ii) the disclosure letter delivered by Parent to Company
dated as of the date hereof and certified by a duly authorized officer of Parent
(the "Parent Disclosure Letter") (each Part of which qualifies the
correspondingly numbered representation, warranty or covenant to the extent
specified therein and such other representations, warranties or covenants to the
extent a matter in such Part is disclosed in such a way as to make its relevance
to such other representation, warranty or covenant readily apparent, Parent and
Merger Sub represent and warrant as follows:
3.1 Organization of Parent and Merger Sub.
-------------------------------------
(a) Each of Parent and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority, and all
requisite qualifications to do business as a foreign corporation, to conduct its
business in the manner in which its business is currently being conducted,
except where the failure to be so organized, existing or in good standing or to
have such power, authority or qualifications would not, individually or in the
aggregate, have a Material Adverse Effect on Parent.
(b) Parent has delivered or made available to Company a true and
correct copy of the Certificate of Incorporation and Bylaws of Parent and Merger
Sub, each as amended to date (collectively, the "Parent Charter Documents"), and
each such instrument is in full force and effect. Neither Parent nor Merger Sub
is in violation of any of the provisions of the Parent Charter Documents.
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<PAGE>
3.2 Parent and Merger Sub Capitalization.
------------------------------------
(a) The authorized capital stock of Parent consists solely of 200,000,000
shares of Parent Common Stock, of which there were 114,820,683 shares issued and
outstanding as of the close of business on March 3, 2000, and 5,000,000 shares
of Preferred Stock, par value $0.001 per share, of which no shares are issued or
outstanding. All outstanding shares of Parent Common Stock are duly authorized,
validly issued, fully paid and nonassessable and are not subject to preemptive
rights created by statute, the Certificate of Incorporation or Bylaws of Parent
or any agreement or document to which Parent is a party or by which it is bound.
As of the close of business on March 3, 2000, (i) 17,137,292 shares of Parent
Common Stock are subject to issuance pursuant to outstanding options to purchase
Parent Common Stock, and (ii) 1,748,494 shares of Parent Common Stock are
reserved for future issuance under Parent's 1998 Equity Employee Stock Purchase
Plan. All shares of Parent Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, would be duly authorized, validly issued, fully paid
and nonassessable.
(b) The authorized capital stock of Merger Sub consists of 1,000 shares of
common stock, $0.01 par value, all of which, as of the date hereof, are issued
and outstanding and are held by Parent. All of the outstanding shares of Merger
Sub's common stock have been duly authorized and validly issued, and are fully
paid and nonassessable. Merger Sub was formed for the purpose of consummating
the Merger and has no material assets or liabilities except as necessary for
such purpose.
(c) All outstanding shares of Company Common Stock, all outstanding Company
Options, and all outstanding shares of capital stock of each subsidiary of
Company have been issued and granted in compliance with (i) all applicable
securities laws and other applicable material Legal Requirements and (ii) all
material requirements set forth in applicable agreements or instruments.
(d) The Parent Common Stock to be issued in the Merger, when issued in
accordance with the provisions of this Agreement, will be validly issued, fully
paid and nonassessable.
3.3 Obligations With Respect to Capital Stock. Except as set forth in
-----------------------------------------
Part 3.3 of the Parent Disclosure Letter, there are no equity securities,
partnership interests or similar ownership interests of any class of Parent
equity security, or any securities exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except for
securities Parent owns free and clear of all claims and Encumbrances, directly
or indirectly through one or more subsidiaries, and except for shares of capital
stock or other similar ownership interests of certain subsidiaries of Parent
that are owned by certain nominee equity holders as required by the applicable
law of the jurisdiction of organization of such subsidiaries, as of the date of
this Agreement, there are no equity securities, partnership interests or similar
ownership interests of any class of equity security of any subsidiary of Parent,
or any security exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued,
reserved for issuance or outstanding. Except as set forth in Part 3.2 or Part
3.3 of the Parent Disclosure Letter, there are no subscriptions, options,
warrants, equity securities, partnership interests or similar ownership
interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which Parent or any of its subsidiaries is a
party or by which it is bound obligating Parent or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase,
redeem or otherwise acquire, or cause the repurchase, redemption or acquisition
of, any shares of capital stock, partnership interests or similar ownership
interests of Parent or any of its subsidiaries or obligating Parent or any of
its subsidiaries to grant, extend, accelerate the vesting of or enter into any
such subscription, option, warrant, equity security, call, right, commitment or
agreement.
3.4 Authority; Non-Contravention.
----------------------------
(a) Each of Parent and Merger Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub, subject
only to the
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<PAGE>
Parent Stockholder Approvals and the filing of the Certificate of Merger
pursuant to Delaware Law. The affirmative vote of (i) the holders of a majority
in interest of the stock present or represented by proxy at the Parent
Stockholders' Meeting is sufficient for Parent's stockholders to approve the
issuance of shares of Parent Common Stock pursuant to the Merger, (ii) the
holders of a majority of the outstanding shares of Parent Common Stock is
sufficient for Parent's stockholders to amend Parent's Certificate of
Incorporation to increased the authorized number of shares of Parent Common
Stock in order to permit the issuance of shares of Parent Common Stock pursuant
to the Merger, and (iii) the holders of at least a majority of the voting power
of all of then outstanding shares of Parent Common Stock is sufficient to amend
Parent's Bylaws to increase the authorized number of directors of Parent, and no
other approval of any holder of any securities of Company is required in
connection with the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by each of Parent and Merger Sub
and, assuming the due authorization, execution and delivery by Company,
constitute the valid and binding obligations of Parent and Merger Sub,
respectively, enforceable against Parent and Merger Sub in accordance with their
terms, except as enforceability may be limited by bankruptcy and other similar
laws affecting the rights of creditors generally and general principles of
equity.
(b) The execution and delivery of this Agreement by each of Parent and
Merger Sub does not, and the performance of this Agreement by Parent and Merger
Sub will not, (i) subject to obtaining the Parent Stockholder Approvals,
conflict with or violate the Certificate of Incorporation or Bylaws of Parent or
Merger Sub, (ii) subject to obtaining the Parent Stockholder Approvals and
compliance with the requirements set forth in Section 3.4(c), conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Parent or Merger Sub or by which any of their respective properties is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair Parent's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of; or result in the creation of an Encumbrance on any of the
properties or assets of Parent or Merger Sub pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Parent or Merger Sub is a party or by
which Parent or Merger Sub or any of their respective properties are bound or
affected, except, in the case of clauses (ii) and (iii), for such conflicts,
violations, breaches, defaults, impairments, or rights which, individually or in
the aggregate, would not have a Material Adverse Effect on Parent. Part 3.4(b)
of the Parent Disclosure Letter list all consents, waivers and approvals under
any of Parent's or any of its subsidiaries' agreements, contracts, licenses or
leases required to be obtained in connection with the consummation of the
transactions contemplated hereby, which, if individually or in the aggregate not
obtained, would result in a material loss of benefits to Parent or the Surviving
Corporation as a result of the Merger.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity or other person is required
to be obtained or made by Parent or Merger Sub in connection with the execution
and delivery of this Agreement or the consummation of the Merger, except for (i)
the filing of the Certificate of Merger with the Secretary of State of the State
of Delaware, (ii) the filing of the Proxy Statement/Prospectus and the
Registration Statement with the SEC and a Schedule 13D with regard to the Voting
Agreement in accordance with the Securities Act and the Exchange Act, and the
effectiveness of the Registration Statement, (iii) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal, foreign and state securities (or related)
laws and the HSR Act and the securities or antitrust laws of any foreign
country, and (v) such other consents, authorizations, filings, approvals and
registrations which if not obtained or made would not be material to Parent or
the Surviving Corporation or have a material adverse effect on the ability of
the parties hereto to consummate the Merger.
3.5 SEC Filings; Parent Financial Statements.
----------------------------------------
(a) Parent has filed all forms, reports and documents required to be
filed by Parent with the SEC since the effective date of the registration
statement of Parent's initial public offering, and has made available to Company
such forms, reports and documents in the form filed with the SEC. All such
required forms, reports and documents (including those that Parent may file
subsequent to the date hereof) are referred to herein as the "Parent SEC
Reports." As of their respective dates, the Parent SEC Reports
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<PAGE>
(i) were prepared in accordance with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Parent SEC Reports, and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except to the extent
corrected prior to the date of this Agreement by a subsequently filed Parent SEC
Report. None of Parent's subsidiaries is required to file any forms, reports or
other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports (the
"Parent Financials"), including any Parent SEC Reports filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 1O-Q, 8-K or any successor form under the Exchange Act) and (iii) fairly
presented the consolidated financial position of Parent and its subsidiaries as
at the respective dates thereof and the consolidated results of Parent's
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements may not contain footnotes and were or are subject
to normal and recurring year-end adjustments. The balance sheet of Parent
contained in Parent SEC Reports as of September 30, 1999 is hereinafter referred
to as the "Parent Balance Sheet." Except as disclosed in the Parent Financials,
since the date of the Parent Balance Sheet neither Parent nor any of its
subsidiaries has any liabilities required under GAAP to be set forth on a
balance sheet (absolute, accrued, contingent or otherwise) which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Parent and its subsidiaries taken as a
whole, except for liabilities incurred since the date of the Parent Balance
Sheet in the ordinary course of business consistent with past practices and
liabilities incurred in connection with this Agreement.
(c) Parent has heretofore furnished to Company a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Parent with the SEC pursuant to
the Securities Act or the Exchange Act.
3.6 Absence of Certain Changes or Events. Since the date of the Parent
------------------------------------
Balance Sheet there has not been (i) any Material Adverse Effect with respect to
Parent, (ii) any declaration, setting aside or payment of any dividend on, or
other distribution (whether in cash, stock or property) in respect of, any of
Parent's or any of its subsidiaries' capital stock, or any purchase, redemption
or other acquisition by Parent of any of Parent's capital stock or any other
securities of Parent or its subsidiaries or any options, warrants, calls or
rights to acquire any such shares or other securities except for repurchases
which are not, individually or in the aggregate, material in amount from
employees following their termination pursuant to the terms of their pre-
existing stock option or purchase agreements, (iii) any split, combination or
reclassification of any of Parent's or any of its subsidiaries' capital stock,
(iv) any material change by Parent in its accounting methods, principles or
practices, except as required by concurrent changes in GAAP, or (v) any material
revaluation by Parent of any of its material assets, including writing off notes
or accounts receivable other than in the ordinary course of business.
3.7 Taxes.
-----
(a) Parent and each of its subsidiaries have timely filed all material
Returns relating to Taxes required to be filed by or on behalf of Parent and
each of its subsidiaries with any Tax authority, such Returns are true, correct
and complete in all material respects, and Parent and each of its subsidiaries
have paid all Taxes shown to be due on such Returns.
(b) Parent and each of its subsidiaries have withheld with respect to
its employees all federal and state income taxes, Taxes pursuant to FICA, Taxes
pursuant to FUTA and other Taxes required to be withheld, except such Taxes
which are not material to Parent.
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<PAGE>
(c) Neither Parent nor any of its subsidiaries has been
delinquent in the payment of any material Tax nor is there any material Tax
deficiency outstanding, proposed or assessed against Parent or any of its
subsidiaries, nor has Parent or any of its subsidiaries executed any unexpired
waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax.
(d) No audit or other examination of any Return of Parent or any
of its subsidiaries by any Tax authority is presently in progress, nor has
Parent or any of its subsidiaries been notified of any request for such an audit
or other examination that is reasonably likely to result in any adjustment that
is material to Parent.
(e) No adjustment relating to any Returns filed by Parent or any
of its subsidiaries has been proposed in writing formally or informally by any
Tax authority to Company or any of its subsidiaries or any representative
thereof that is reasonably likely to be material to Parent.
(f) Neither Parent nor any of its subsidiaries has any liability
for unpaid Taxes which has not been accrued for or reserved on the Parent
Balance Sheet in accordance with GAAP, whether asserted or unasserted,
contingent or otherwise, which is material to Parent, other than any liability
for unpaid Taxes that may have accrued since the date of the Parent Balance
Sheet in connection with the operation of the business of Parent and its
subsidiaries in the ordinary course.
(g) There is no agreement, plan or arrangement to which Parent or
any of its subsidiaries is a party, including this Agreement and the agreements
entered into in connection with this Agreement, covering any employee or former
employee of Parent or any of its subsidiaries that, individually or
collectively, would be reasonably likely to give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G, 404 or 162(m) of
the Code. There is no contract, agreement, plan or arrangement to which Parent
is a party or by which it is bound to compensate any individual for excise taxes
paid pursuant to Section 4999 of the Code.
(h) Neither Parent nor any of its subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by Parent.
(i) Neither Parent nor any of its subsidiaries is party to or has
any obligation under any tax-sharing, tax indemnity or tax allocation agreement
or arrangement.
(j) Except as may be required as a result of the Merger, Parent
and its subsidiaries have not been and will not be required to include any
adjustment in Taxable income for any Tax period (or portion thereof) pursuant to
Section 481 of the Code or any comparable provision under state or foreign Tax
laws as a result of transactions, events or accounting methods employed prior to
the Closing.
(k) None of Parent's or its subsidiaries' assets are tax exempt
use property within the meaning of Section 168(h) of the Code.
(l) Parent has not been distributed in a transaction qualifying
under Section 355 of the Code within the last two years, nor has Parent
distributed any corporation in a transaction qualifying under Section 355 of the
Code within the last two years.
(m) Parent is not aware of any fact, circumstance, plan or
intention on the part of Parent that would be reasonably likely to prevent the
Merger from qualifying as a "reorganization" pursuant to the provisions of
Section 368 of the Code.
3.8 Title to Properties. Parent has good and valid title to, or, in the
-------------------
case of leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for use
in its business, free and clear of any Encumbrances, except as reflected in the
Parent
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<PAGE>
Financials and except for liens for Taxes not yet due and payable and such
Encumbrances which are not material in character, amount or extent.
3.9 Intellectual Property. For the purposes of this Agreement, the
---------------------
following terms have the following definitions:
"Parent Intellectual Property" shall mean any Intellectual Property
that is owned by, or exclusively licensed to, Parent or one of its subsidiaries.
"Parent Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, Parent or one of its
subsidiaries.
(a) No material Parent Intellectual Property or product or service of
Parent is subject to any proceeding or outstanding decree, order, judgment,
agreement, or stipulation restricting in any manner the use, transfer, or
licensing thereof by Parent, or which may affect the validity, use or
enforceability of such Parent Intellectual Property.
(b) Each material item of Parent Registered Intellectual Property is
valid and subsisting, all necessary registration, maintenance and renewal fees
currently due in connection with such Registered Intellectual Property have been
made and all necessary documents, recordations 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 except, in each case, as would not materially
adversely affect such item of Parent Registered Intellectual Property.
(c) Parent or one of its subsidiaries owns and has good and exclusive
title to, or has license (sufficient for the conduct of its business as
currently conducted and as proposed to be conducted) to, each material item of
Parent Intellectual Property free and clear of any Encumbrance (excluding
licenses and related restrictions).
(d) Neither Parent nor any of its subsidiaries have transferred
ownership of, or granted any exclusive license with respect to, any Intellectual
Property that is or was material Parent Intellectual Property, to any third
party.
(e) To Parent's knowledge, the operation of the business of Parent as
such business currently is conducted, including Parent's design, development,
marketing and sale of the products or services of Parent (including with respect
to products currently under development) has not, does not and will not infringe
or misappropriate the Intellectual Property of any third party or, to its
knowledge, constitute unfair competition or trade practices under the laws of
any jurisdiction.
(f) Parent has not received notice from any third party that the
operation of the business of Parent or any act, product or service of Parent,
infringes or misappropriates the Intellectual Property of any third party or
constitutes unfair competition or trade practices under the laws of any
jurisdiction, which allegation, if true, would have a Material Adverse Effect on
Parent.
(g) To the knowledge of Parent, no person has or is infringing or
misappropriating any material Parent Intellectual Property, which infringement
or misappropriation, individually or in the aggregate, would have a Material
Adverse Effect on Parent.
(h) Parent and its subsidiaries have taken reasonable steps to protect
Parent's and its subsidiaries' rights in Parent's and such subsidiaries'
confidential information and trade secrets, except where the failure to do so
would have a Material Adverse Effect on Parent.
(i) None of the Parent Intellectual Property or product or service of
Parent contains any significant defect in connection with processing data
containing dates in leap years or in the year 2000
1-25
<PAGE>
or any preceding or following years, which defects, individually or in the
aggregate, would have a Material Adverse Effect on Parent.
3.10 Compliance with Laws.
--------------------
(a) Neither Parent nor any of its subsidiaries is in conflict with, or
in default or in violation of (i) any law, rule, regulation, order, judgment or
decree applicable to Parent or any of its subsidiaries or by which Parent or any
of its subsidiaries or any of their respective properties is bound or affected,
or (ii) any note, bond, mortgage, indenture, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which Parent or any of its subsidiaries or its or
any of their respective properties is bound or affected, except for conflicts,
violations and defaults that, individually or in the aggregate, would not have a
Material Adverse Effect on Parent. No investigation or review by any
Governmental Entity is pending or, to Parent's knowledge, has been threatened in
a writing delivered to Parent against Parent or any of its subsidiaries, nor, to
Parent's knowledge, has any Governmental Entity indicated an intention to
conduct an investigation of Parent or any of its subsidiaries. There is no
judgment, injunction, order or decree binding upon Parent or any of its
subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any material business practice of Parent or
any of its subsidiaries, or any acquisition of material property by Parent or
any of its subsidiaries.
(b) Parent and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities that are material
to or required for the operation of the business of Parent as currently
conducted (collectively, the "Parent Permits"), and are in compliance with the
terms of the Parent Permits, except where the failure to hold such Parent
Permits, or be in such compliance, would not, individually or in the aggregate,
have a Material Adverse Effect on Parent.
3.11 Litigation. There are no claims, suits, actions or proceedings
----------
pending or, to the knowledge of Parent, threatened against, relating to or
affecting Parent or any of its subsidiaries, before any Governmental Entity or
any arbitrator that seeks to restrain or enjoin the consummation of the
transactions contemplated by this Agreement or which could reasonably be
expected, either singularly or in the aggregate with all such claims, actions or
proceedings, to have a Material Adverse Effect on Parent or have a material
adverse effect on the ability of the parties hereto to consummate the Merger.
No director or executive officer of the Parent has asserted a claim to seek
indemnification from the Parent under Parent Charter Documents or any
indemnification agreements between Parent and such person.
3.12 Employee Benefit Plans.
----------------------
(a) Definitions. With the exception of the definition of "Affiliate"
-----------
set forth in Section 3.12(a)(i) below (which definition shall apply only to this
Section 3.12), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under
common control with Parent within the meaning of Section 414(b), (c), (m) or (o)
of the Code and the regulations issued thereunder;
(ii) "Parent Employee Plan" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or stock-
related awards, fringe benefits or other employee benefits or remuneration of
any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of ERISA which is or has been maintained, contributed to, or
required to be contributed to, by Parent or any Affiliate for the benefit of any
Employee;
(iii) "Parent Employees" shall mean any current, former or
retired employee, officer or director or any subsidiary of Parent;
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(iv) "International Parent Employee Plan" shall mean each Parent
Employee Plan that has been adopted or maintained by Parent, whether informally
or formally, for the benefit of Employees outside the United States;
(v) "Multiemployer Plan" shall mean any "Pension Plan" (as defined
below) which is a "multiemployer plan," as defined in Section 3(37) of ERISA;
(vi) "Pension Plan" shall mean each Parent Employee Plan which is
an "employee pension benefit plan," within the meaning of Section 3(2) of ERISA.
(b) Schedule. Part 3.12 of the Parent Disclosure Letter contains an
--------
accurate and complete list of each Parent Employee Plan. Parent does not have
any plan or commitment to establish any new Parent Employee Plan, to modify any
Parent Employee Plan (except to the extent required by law or to conform any
such Parent Employee Plan to the requirements of any applicable law, in each
case as previously disclosed to Parent in writing, or as required by this
Agreement), or to enter into any Parent Employee Plan, nor does it have any
intention or commitment to do any of the foregoing.
(c) Documents. Parent has made available to Company, to the extent
---------
requested by Company: (i) correct and complete copies of all documents
embodying each Parent Employee Plan including all amendments thereto and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Parent Employee Plan; (iii) the most recent annual report
(Form Series 5500 and all schedules and financial statements attached thereto),
if any, required under ERISA or the Code in connection with each Parent Employee
Plan or related trust; (iv) if the Parent Employee Plan is funded, the most
recent annual and periodic accounting of Parent Employee Plan assets; (v) the
most recent summary plan description together with the summary of material
modifications thereto, if any, required under ERISA with respect to each Parent
Employee Plan; (vi) all IRS determination, opinion, notification and advisory
letters, and rulings relating to Parent Employee Plans and copies of all
applications and correspondence to or from the IRS or the DOL with respect to
any Parent Employee Plan; and (vii) all registration statements and prospectuses
prepared in connection with each Parent Employee Plan.
(d) Employee Plan Compliance. Except, in each case, as would not,
------------------------
individually or in the aggregate, result in a material liability to Parent, (i)
Parent has performed in all material respects all obligations required to be
performed by it under, is not in default or violation of, and has no knowledge
of any default or violation by any other party to, each Parent Employee Plan,
and each Parent Employee Plan has been established and maintained in all
material respects in accordance with its terms and in compliance with all
applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA or the Code; (ii) each Parent Employee Plan intended to qualify
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code has either received a favorable determination letter
from the IRS with respect to each such Plan as to its qualified status under the
Code or has remaining a period of time under applicable Treasury regulations or
IRS pronouncements in which to apply for such a determination letter and make
any amendments necessary to obtain a favorable determination and, to the
knowledge of Parent, no event has occurred giving rise to a material likelihood
that such Plan would not be treated as qualified by the IRS; (iii) no
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of
ERISA, has occurred with respect to any Parent Employee Plan; (iv) there are no
actions, suits or claims pending, or, to the knowledge of Parent, threatened or
reasonably anticipated (other than routine claims for benefits) against any
Parent Employee Plan or against the assets of any Parent Employee Plan; (v) each
Parent Employee Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance with its terms, without liability to Parent or
any of its Affiliates (other than ordinary administration expenses typically
incurred in a termination event); (vi) neither Parent nor any Affiliate is
subject to any penalty or tax with respect to any Parent Employee Plan under
Section 402(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) Pension Plans. Parent does not now, nor has it ever, maintained,
-------------
established, sponsored, participated in, or contributed to, any Pension Plan
which is subject to Title IV of ERISA or Section 412 of the Code, that would
result in material liability to Parent.
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(f) Multiemployer Plans. At no time has Parent contributed to or been
-------------------
requested to contribute to any Multiemployer Plan, that would result in material
liability to Parent.
(g) No Post-Employment Obligations. No Parent Employee Plan provides,
------------------------------
or has any liability to provide, retiree life insurance, retiree health or other
retiree employee welfare benefits to any person for any reason, except as may be
required by COBRA or other applicable statute, and Parent has never represented,
promised or contracted (whether in oral or written form) to any Parent Employee
(either individually or to Parent Employees as a group) or any other person that
such Parent Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute.
(h) Effect of Transaction. Except as expressly contemplated by this
---------------------
Agreement, the execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Parent
Employee Plan, trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any Parent Employee.
(i) Employment Matters. Except, in each case, as would not,
------------------
individually or in the aggregate, have a Material Adverse Effect on the Parent,
Parent and each of its subsidiaries is in compliance in all material respects
with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees.
(j) Labor. No work stoppage or labor strike against Parent is
-----
pending, threatened or reasonably anticipated. Parent does not know of any
activities or proceedings of any labor union to organize any Parent Employees.
There are no actions, suits, claims, labor disputes or grievances pending, or,
to the knowledge of Parent, threatened relating to any labor, safety or
discrimination matters involving any Parent Employee, including charges of
unfair labor practices or discrimination complaints, which, if adversely
determined, would, individually or in the aggregate, result in any material
liability to Parent. Neither Parent nor any of its subsidiaries has engaged in
any unfair labor practices within the meaning of the National Labor Relations
Act. Parent is not presently, nor has it been in the past, a party to, or bound
by, any collective bargaining agreement or union contract with respect to Parent
Employees and no collective bargaining agreement is being negotiated by Parent.
(k) International Parent Employee Plan. No International Parent
----------------------------------
Employee Plan has unfunded liabilities, that as of the Effective Time, will not
be offset by insurance or fully accrued.
3.13 Environmental Matters.
---------------------
(a) Hazardous Material. Except as would not have a Material Adverse
------------------
Effect on Parent, no underground storage tanks and no amount of any Hazardous
Materials are present, as a result of the actions of Parent or any of its
subsidiaries or any affiliate of Parent, or, to Parent's knowledge, as a result
of any actions of any third party or otherwise, in, on or under any property,
including the land and the improvements, ground water and surface water thereof
that Parent or any of its subsidiaries has at any time owned, operated, occupied
or leased.
(b) Hazardous Materials Activities. Except as would not have a
------------------------------
Material Adverse Effect on Parent (in any individual case or in the aggregate)
(i) neither Parent nor any of its subsidiaries has transported, stored, used,
manufactured, disposed of released or exposed its employees or others to
Hazardous Materials in violation of any law in effect on or before the Closing
Date, and (ii) neither Parent nor any of its subsidiaries has disposed of;
transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material in violation of any
rule, regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
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(c) Permits. Parent and its subsidiaries currently hold all
-------
Environmental Permits material to and necessary for the conduct of Parent's and
its subsidiaries' Hazardous Material Activities and other businesses of Parent
and its subsidiaries as such activities and businesses are currently being
conducted.
(d) Environmental Liabilities. No material action, proceeding,
-------------------------
revocation proceeding, amendment procedure, writ or injunction is pending, and
to Parent's knowledge, no material action, proceeding, revocation proceeding,
amendment procedure, writ or injunction has been threatened by any Governmental
Entity against Parent or any of its subsidiaries in a writing delivered to
Parent concerning any Environmental Permit of Parent, Hazardous Material or any
Hazardous Materials Activity of Parent or any of its subsidiaries. Parent is
not aware of any fact or circumstance which reasonably could be expected to
involve Parent or any subsidiaries in any environmental litigation or impose
upon Parent any material environmental liability, with such exceptions as would
not have a Material Adverse Effect on Parent.
3.14 Certain Agreements. Except as set forth in Part 3.14 of the Parent
------------------
Disclosure Letter, neither Parent nor any of its subsidiaries is a party to or
is bound by:
(a) any agreement, obligation or commitment containing covenants
purporting to limit or which effectively limit the Parent's or any of its
subsidiaries' freedom to compete in any line of business or in any geographic
area or granting any exclusive distribution or other exclusive rights; or
(b) any agreement or commitment currently in force relating to the
disposition or acquisition by Parent or any of its subsidiaries after the date
of this Agreement of a material amount of assets not in the ordinary course of
business, or pursuant to which Parent has any material ownership or
participation interest in any corporation, partnership, joint venture, strategic
alliance or other business enterprise other than Parent's subsidiaries.
The agreements required to be disclosed in the Parent Disclosure Letter
pursuant to clauses (a) and (b) above or pursuant to Section 3.9 or are required
to be filed with any Parent SEC Report ("Parent Contracts") are valid and in
full force and effect, except to the extent that such invalidity would not have
a Material Adverse Effect on Parent. Neither Parent nor any of its
subsidiaries, nor to Parent's knowledge, any other party thereto, is in breach,
violation or default under, and neither Parent nor any of its subsidiaries has
received written notice that it has breached, violated or defaulted, any of the
terms or conditions of any Parent Contract in such a manner as would have a
Material Adverse Effect on Parent.
3.15 Brokers' and Finders' Fees. Except for fees payable to Morgan
--------------------------
Stanley & Co. Incorporated, Parent has not incurred, nor will it incur, directly
or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
3.16 Disclosure. The information supplied by Parent for inclusion in
----------
the Registration Statement shall not at the time the Registration Statement is
filed with the SEC and at the time it becomes effective under the Securities Act
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The information supplied by Parent for inclusion in the Proxy
Statement/Prospectus shall not, on the date the Proxy Statement/Prospectus is
mailed to Company's stockholders or to Parent's stockholders, at the time of the
Company Stockholders' Meeting, at the time of the Parent Stockholders' Meeting
or as of the Effective Time, 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 false or misleading, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Company Stockholders' Meeting or the Parent
Stockholders' Meeting which has become false or misleading. The Registration
Statement and Proxy Statement/Prospectus will comply as to form in all material
respects with the provisions of the Securities Act and the rules and regulations
thereunder. If at any time prior to the Effective Time, any event relating to
Parent or any of its
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affiliates, officers or directors should be discovered by Parent which is
required to be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement/Prospectus, Parent shall promptly inform
Company. Notwithstanding the foregoing, Parent makes no representation or
warranty with respect to any information supplied by Company which is contained
in any of the foregoing documents.
3.17 Board Approval. The Board of Directors of Parent has, as of the
--------------
date of this Agreement, (i) determined that the Merger is fair to, and in the
best interests of Parent and its stockholders, and has approved this Agreement
and (ii) recommends that the stockholders of Parent approve each of the Parent
Stockholder Approvals.
3.18 Fairness Opinion. Parent's Board of Directors has received a
----------------
written opinion from Morgan Stanley & Co. Incorporated, dated as of the date
hereof, to the effect that, as of the date hereof, the Exchange Ratio is fair to
Parent from a financial point of view, and has delivered to Company a copy of
such opinion.
Article IV
Conduct Prior to the Effective Time
4.1 Conduct of Business by Company. During the period from the date of
------------------------------
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Company and each of its
subsidiaries shall, except to the extent that Parent shall otherwise consent in
writing, carry on its business in the usual, regular and ordinary course, in
substantially the same manner as heretofore conducted and in compliance in all
material respects with all applicable laws and regulations, pay its debts and
Taxes when due subject to good faith disputes over such debts or Taxes, pay or
perform other material obligations when due, and use its commercially reasonable
efforts consistent with past practices and policies to (i) preserve intact its
present business organization, (ii) keep available the services of its present
officers and employees and (iii) preserve its relationships with customers,
suppliers, licensors, licensees, and others with which it has business dealings.
In addition, during that period Company will promptly notify Parent of any
material event involving its business or operations consistent with the
agreements contained herein.
In addition, except as permitted by the terms of this Agreement, and except
as contemplated by this Agreement or provided in Schedule 4.1 of the Company
Disclosure Letter, without the prior written consent of Parent, during the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement pursuant to its terms or the Effective Time,
Company shall not do any of the following and shall not permit its subsidiaries
to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of such
plans;
(b) Grant any severance or termination pay to any officer or employee
except (i) pursuant to written agreements in effect, or policies existing, on
the date hereof and as previously disclosed in writing to Parent, (ii) in an
amount not to exceed four months base pay of the terminated person or (iii) as
consented to by Parent, whose consent shall not be unreasonably withheld or
delayed, or adopt any new severance plan;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the material Company
Intellectual Property, other than non-exclusive licenses in the ordinary course
of business and consistent with past practice;
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<PAGE>
(d) Except for the two-for-one stock dividend payable on Company
Common Stock on March 10, 2000, declare, set aside or pay any dividends on or
make any other distributions (whether in cash, stock, equity securities or
property) in respect of any capital stock of Company or split, combine or
reclassify any capital stock of Company or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for any
capital stock of Company;
(e) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Company or its subsidiaries, except repurchases of
unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber any
shares of capital stock or any securities convertible into shares of capital
stock, or subscriptions, rights, warrants or options to acquire any shares of
capital stock or any securities convertible into shares of capital stock, or
enter into other agreements or commitments of any character obligating it to
issue any such shares or convertible securities, other than the issuance
delivery and/or sale of (i) shares of Company Common Stock pursuant to the
exercise of Company Options, (ii) shares of Company Common Stock issuable to
participants in the Company ESPP, (iii) shares of Company Common Stock issuable
to participants in the Company's 401(k) Plan, in the case of (i), (ii) and
(iii), consistent with the terms thereof, and (iv) pursuant to grants of Company
Options to newly hired employees, upon promotions of existing employees, or as
part of Company's annual option grant program, in each case, in the ordinary
course of business, consistent with past practice, and not to exceed in the
aggregate pursuant to this clause (iv), 500,000 shares of Company Common Stock;
(g) Cause, permit or propose any amendments to its Certificate of
Incorporation, Bylaws or other charter documents (or similar governing
instruments of any of its subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof; or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to the
business of Company or enter into any material joint ventures, strategic
relationships or alliances; provided, that Company shall not be prohibited under
this clause (h) from (i) making or agreeing to make debt or equity investments
which do not exceed (A) the lesser of (x) 20% of the fully diluted ownership of
the entity or (y) $10 million, individually, or (B) $100 million, in the
aggregate, or (ii) making or agreeing to make acquisitions which do not (A)
exceed $200 million per acquisition, (B) exceed $500 million in the aggregate
(which valuations shall be determined upon the signing of agreements regarding
such transactions), or (C) which could reasonably be expected to delay the
Merger or the other transactions contemplated hereby; provided, further, that
Company shall provide written notice to Parent prior to signing any agreement
regarding any such acquisition;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of Company;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of Company, enter
into any "keep well" or other agreement to maintain any financial statement
condition or enter into any arrangement having the economic effect of any of the
foregoing other than (i) in the ordinary course of business, consistent with
past practice or (ii) pursuant to existing credit facilities, in the ordinary
course of business;
(k) Except as required to comply with any Legal Requirement, adopt or
amend any employee benefit plan or employee stock purchase or employee stock
option plan, or enter into any employment contract (other than offer letters and
letter agreements entered into in the ordinary course of business consistent
with past practice providing for compensation and other benefits generally
commensurate with similarly situated employees) or collective bargaining
agreement, pay any special
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<PAGE>
bonus or special remuneration to any director or employee, or increase the
salaries or wage rates or fringe benefits (including rights to severance or
indemnification) of its directors, officers, employees or consultants other than
in the ordinary course of business, consistent with past practice, or change in
any material respect any management policies or procedures that are material to
the business of Company; provided, that any unilateral amendment by SAIC of any
employee benefit plan in which Company participates shall not be a violation of
this Section 4.1(k);
(1) Make any material capital expenditures other than capital
expenditures contained in the capital budget of Company approved by Company
prior to the date of this Agreement;
(m) Modify, amend or terminate any Company Contract to which Company
or any subsidiary thereof is a party or waive, release or assign any material
rights or claims thereunder, in each case, in a manner that could reasonably be
expected to materially adversely affect the Company;
(n) Enter into any licensing or other agreement with regard to the
acquisition, distribution or licensing of any material Intellectual Property
other than licenses, distribution or other similar agreements entered into in
the ordinary course of business consistent with past practice;
(o) Materially revalue any of its assets or, except as required by
GAAP, make any change in accounting methods, principles or practices;
(p) Materially change the pricing of the registration fees Company
charges for its registration services; or
(q) Agree in writing or otherwise to take any of the actions described
in Section 4.1 (a) through (p) above.
4.2 Conduct of Business by Parent. During the period from the date of
-----------------------------
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Parent and each of its
subsidiaries shall, except to the extent that Company shall otherwise consent in
writing, carry on its business in the usual, regular and ordinary course, in
substantially the same manner as heretofore conducted and in compliance in all
material respects with all applicable laws and regulations, pay its debts and
Taxes when due subject to good faith disputes over such debts or Taxes, pay or
perform other material obligations when due, and use its commercially reasonable
efforts consistent with past practices and policies to (i) preserve intact its
present business organization, (ii) keep available the services of its present
officers and employees and (iii) preserve its relationships with customers,
suppliers, licensors, licensees, and others with which it has business dealings.
In addition, during that period Parent will promptly notify Company of any
material event involving its business or operations consistent with the
agreements contained herein.
In addition, except as permitted by the terms of this Agreement, and except
as contemplated by this Agreement or provided in Schedule 4.2 of the Parent
Disclosure Letter, without the prior written consent of Company, during the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement pursuant to its terms or the Effective Time,
Parent shall not do any of the following and shall not permit its subsidiaries
to do any of the following:
(a) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock of Parent or split, combine or reclassify any capital stock
of Parent or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for any capital stock of Parent;
(b) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Parent or its subsidiaries, except repurchases of
unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
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<PAGE>
(c) Cause, permit or propose any amendments to its Certificate of
Incorporation, Bylaws or other charter documents (or similar governing
instruments of any of its subsidiaries);
(d) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof; or otherwise acquire or agree to
acquire any assets which are material, individually or in the aggregate, to the
business of Parent or enter into any material joint ventures, strategic
relationships or alliances; provided, that Parent shall not be prohibited under
this clause (h) from (i) making or agreeing to make debt or equity investments
which do not exceed (A) the lesser of (x) 20% of the fully diluted ownership of
the entity or (y) $10 million, individually, or (B) $100 million, in the
aggregate, or (ii) making or agreeing to make acquisitions which do not (A)
exceed $200 million per acquisition, (B) exceed $500 million in the aggregate
(which valuations shall be determined upon the signing of agreements regarding
such transactions), or (C) which could reasonably be expected to delay the
Merger or the other transactions contemplated hereby; provided, further, that
Parent shall provide written notice to Company prior to signing any agreement
regarding any such acquisition;
(e) Enter into any licensing or other agreement with regard to the
acquisition, distribution or licensing of any material Intellectual Property
other than licenses, distribution or other similar agreements entered into in
the ordinary course of business consistent with past practice;
(f) Except as required by GAAP, make any change in accounting methods,
principles or practices; or
(g) Agree in writing or otherwise to take any of the actions described
in Section 4.2 (a) through (f) above.
Article V
Additional Agreements
5.1 Proxy Statement/Prospectus; Registration Statement; Antitrust and
-----------------------------------------------------------------
Other Filings.
- -------------
(a) As promptly as practicable after the execution of this Agreement,
Company and Parent will prepare and file with the SEC, the Proxy
Statement/Prospectus and Parent will prepare and file with the SEC the
Registration Statement in which the Proxy Statement/Prospectus will be included
as a prospectus. Each of Company and Parent will respond to any comments of the
SEC, will use its respective commercially reasonable efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing and each of Company and Parent will cause the
Proxy Statement/Prospectus to be mailed to its respective stockholders at the
earliest practicable time after the Registration Statement is declared effective
by the SEC. Promptly after the date of this Agreement, each of the Company and
Parent will prepare and file (i) with the United States Federal Trade Commission
and the Antitrust Division of the United States Department of Justice
Notification and Report Forms relating to the transactions contemplated herein
as required by the HSR Act, as well as comparable pre-merger notification forms
required by the merger notification or control laws and regulations of any
applicable jurisdiction, as agreed to by the parties (the "Antitrust Filings")
and (ii) any other filings required to be filed by it under the Exchange Act,
the Securities Act or any other federal, state or foreign laws relating to the
Merger and the transactions contemplated by this Agreement (the "Other
Filings"). The Company and Parent each shall promptly supply the other with any
information which may be required in order to effectuate any filings pursuant to
this Section 5.1.
(b) Each of the Company and Parent will notify the other promptly upon
the receipt of any comments from the SEC or its staff or any other government
officials in connection with any filing
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<PAGE>
made pursuant hereto and of any request by the SEC or its staff or any other
government officials for amendments or supplements to the Registration
Statement, the Proxy Statement/Prospectus or any Antitrust Filings or Other
Filings or for additional information and will supply the other with copies of
all correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Proxy
Statement/Prospectus, the Merger or any Antitrust Filing or Other Filing. Each
of the Company and Parent will cause all documents that it is responsible for
filing with the SEC or other regulatory authorities under this Section 5.1 to
comply in all material respects with all applicable requirements of law and the
rules and regulations promulgated thereunder. Whenever any event occurs which is
required to be set forth in an amendment or supplement to the Proxy
Statement/Prospectus, the Registration Statement or any Antitrust Filing or
Other Filing, the Company or Parent, as the case may be, will promptly inform
the other of such occurrence and cooperate in filing with the SEC or its staff
or any other government officials, and/or mailing to stockholders of the Company
and/or Parent, such amendment or supplement.
5.2 Meeting of Company Stockholders.
-------------------------------
(a) Promptly after the date hereof, Company will take all action
necessary in accordance with the Delaware Law and its Certificate of
Incorporation and Bylaws to convene the Company Stockholders' Meeting to be held
as promptly as practicable, and in any event (to the extent permissible under
applicable law) within 45 days after the declaration of effectiveness of the
Registration Statement, for the purpose of voting upon approval and adoption of
this Agreement and approval of the Merger. Subject to Section 5.2(c), Company
will use its commercially reasonable efforts to solicit from its stockholders
proxies in favor of the adoption and approval of this Agreement and the approval
of the Merger and will take all other action necessary to secure the vote or
consent of its stockholders required by the rules of the Nasdaq Stock Market or
Delaware Law to obtain such approvals. Notwithstanding anything to the contrary
contained in this Agreement, Company may adjourn or postpone the Company
Stockholders' Meeting to the extent necessary to ensure that any necessary
supplement or amendment to the Proxy Statement/Prospectus is provided to
Company's stockholders in advance of a vote on the Merger and this Agreement or,
if as of the time for which Company Stockholders' Meeting is originally
scheduled (as set forth in the Proxy Statement/Prospectus) there are
insufficient shares of Company Common Stock represented (either in person or by
proxy) to constitute a quorum necessary to conduct the business of the Company
Stockholders' Meeting. Company shall ensure that the Company Stockholders'
Meeting is called, noticed, convened, held and conducted, and that all proxies
solicited by the Company in connection with the Company Stockholders' Meeting
are solicited, in compliance with the Delaware Law, its Certificate of
Incorporation and Bylaws, the rules of the Nasdaq Stock Market and all other
applicable legal requirements. Company's obligation to call, give notice of,
convene and hold the Company Stockholders' Meeting in accordance with this
Section 5.2(a) shall not be limited to or otherwise affected by the
commencement, disclosure, announcement or submission to Company of any
Acquisition Proposal or Superior Offer, or by any withdrawal, amendment or
modification of the recommendation of the Board of Directors of Company with
respect to this Agreement or the Merger.
(b) Subject to Section 5.2(c): (i) the Board of Directors of Company
shall recommend that Company's stockholders vote in favor of and adopt and
approve this Agreement and approve the Merger at the Company Stockholders'
Meeting; (ii) the Proxy Statement/Prospectus shall include a statement to the
effect that the Board of Directors of Company has recommended that Company's
stockholders vote in favor of and adopt and approve this Agreement and the
Merger at the Company Stockholders' Meeting; and (iii) neither the Board of
Directors of Company nor any committee thereof shall withdraw, amend or modify,
or propose or resolve to withdraw, amend or modify in a manner adverse to
Parent, the recommendation of the Board of Directors of Company that Company's
stockholders vote in favor of and adopt and approve this Agreement and the
Merger.
(c) Nothing in this Agreement shall prevent the Board of Directors of
the Company from withholding, withdrawing, amending or modifying its
recommendation in favor of the Merger if (i) a Superior Offer (as defined below)
is made to the Company and is not withdrawn, (ii) the Company shall have
provided written notice to Parent (a "Notice of Superior Offer") advising Parent
that the Company has received a Superior Offer, specifying all of the material
terms and conditions of such Superior Offer
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<PAGE>
and identifying the person or entity making such Superior Offer, (iii) Parent
shall not have, within three business days of Parent's receipt of the Notice of
Superior Offer, made an offer that the Company's Board of Directors by a
majority vote determines in its good faith judgment (based on the written advice
of a financial advisor of national standing) to be at least as favorable to
Company's stockholders as such Superior Offer (it being agreed that the Board of
Directors of Company shall convene a meeting to consider any such offer by
Parent promptly following the receipt thereof), (iv) the Board of Directors of
Company concludes in good faith, after consultation with its outside counsel,
that, in light of such Superior Offer, the withholding, withdrawal, amendment or
modification of such recommendation is required in order for the Board of
Directors of Company to comply with its fiduciary obligations to Company's
stockholders under applicable law and (v) Company shall not have violated any of
the restrictions set forth in Section 5.4 or this Section 5.2. Company shall
provide Parent with at least two business days prior notice (or such lesser
prior notice as provided to the members of the Company's Board of Directors but
in no event less than twenty-four hours) of any meeting of the Company's Board
of Directors at which Company's Board of Directors is reasonably expected to
consider any Acquisition Proposal (as defined in Section 5.4) to determine
whether such Acquisition Proposal is a Superior Offer. Nothing contained in this
Section 5.2(c) shall limit the Company's obligation to hold and convene the
Company Stockholders' Meeting (regardless of whether the recommendation of the
Board of Directors of Company shall have been withdrawn, amended or modified).
For purposes of this Agreement, "Superior Offer" shall mean an unsolicited, bona
fide written offer made by a third party to consummate any of the following
transactions: (i) a merger or consolidation involving Company pursuant to which
the stockholders of Company immediately preceding such transaction hold less
than 50% of the equity interest in the surviving or resulting entity of such
transaction or (ii) the acquisition by any person or group (including by way of
a tender offer or an exchange offer or a two step transaction involving a tender
offer followed with reasonable promptness by a merger involving the Company),
directly or indirectly, of ownership of 100% of the then outstanding shares of
capital stock of the Company, on terms that the Board of Directors of the
Company determines, in its reasonable judgment (based on the written advice of a
financial advisor of national standing) to be more favorable to the Company
stockholders than the terms of the Merger; provided, however, that any such
offer shall not be deemed to be a "Superior Offer" if any financing required to
consummate the transaction contemplated by such offer is not committed and is
not likely in the reasonable judgment of the Company's Board of Directors (based
on the advice of its financial advisor) to be obtained by such third party on a
timely basis.
(d) Nothing contained in this Agreement shall prohibit the Company or
its Board of Directors from taking and disclosing to its stockholders a position
contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act.
5.3 Meeting of Parent Stockholders.
------------------------------
(a) Promptly after the date hereof, Parent will take all action
necessary in accordance with the Delaware Law and its Certificate of
Incorporation and Bylaws to convene the Parent Stockholders' Meeting to be held
as promptly as practicable, and in any event (to the extent permissible under
applicable law) within 45 days after the declaration of effectiveness of the
Registration Statement, for the purpose of voting upon the Parent Stockholder
Approvals. Parent will use its commercially reasonable efforts to solicit from
its stockholders proxies in favor of the approval of the Parent Stockholder
Approvals and will take all other action necessary to secure the vote or consent
of its stockholders required by the rules of the Nasdaq Stock Market or Delaware
Law to obtain such approvals. Notwithstanding anything to the contrary
contained in this Agreement, Parent may adjourn or postpone the Parent
Stockholders' Meeting to the extent necessary to ensure that any necessary
supplement or amendment to the Proxy Statement/Prospectus is provided to
Parent's stockholders in advance of a vote on the Parent Stockholder Approvals
or, if as of the time for which Parent Stockholders' Meeting is originally
scheduled (as set forth in the Proxy Statement/Prospectus) there are
insufficient shares of Parent Common Stock represented (either in person or by
proxy) to constitute a quorum necessary to conduct the business of the Parent
Stockholders' Meeting. Parent shall ensure that the Parent Stockholders'
Meeting is called, noticed, convened, held and conducted, and that all proxies
solicited by Parent in connection with the Parent Stockholders' Meeting are
solicited, in compliance with the Delaware Law, its Certificate of Incorporation
and Bylaws, the rules of the Nasdaq Stock Market and all other applicable legal
requirements.
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(b) (i) The Board of Directors of Parent shall recommend that Parent's
stockholders approve the Parent Stockholder Approvals at the Parent
Stockholders' Meeting; (ii) the Proxy Statement/Prospectus shall include a
statement to the effect that the Board of Directors of Parent has recommended
that Parent's stockholders approve the Parent Stockholder Approvals at the
Company Stockholders' Meeting; and (iii) neither the Board of Directors of
Parent nor any committee thereof shall withdraw, amend or modify, or propose or
resolve to withdraw, amend or modify in a manner adverse to Company, the
recommendation of the Board of Directors of Parent that Parent's stockholders
approve the Parent Stockholder Approvals.
(c) Nothing contained in this Agreement shall prohibit Parent or its
Board of Directors from taking and disclosing to its stockholders a position
contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act.
5.4 No Solicitation.
---------------
(a) From and after the date of this Agreement until the Effective Time
or termination of this Agreement pursuant to Article VII, Company and its
subsidiaries will not, nor will they authorize or permit any of their respective
officers, directors, affiliates or employees or any investment banker, attorney
or other advisor or representative retained by any of them to, directly or
indirectly, (i) solicit, initiate, encourage or induce the making, submission or
announcement of any Acquisition Proposal (as hereinafter defined), (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any non-public information with respect to, or take any other action to
facilitate any inquiries or the making of any Acquisition Proposal, (iii) engage
in discussions with any person with respect to any Acquisition Proposal, except
as to the existence of these provisions, (iv) approve, endorse or recommend any
Acquisition Proposal or (v) enter into any letter of intent or similar document
or any contract, agreement or commitment contemplating or otherwise relating to
any Acquisition Proposal; provided, however, that notwithstanding the foregoing,
prior to the approval of this Agreement and the Merger at the Company
Stockholders' Meeting, this Section 5.4(a) shall not prohibit Company from
furnishing nonpublic information regarding Company and its subsidiaries to, or
entering into discussions or negotiations with, any person or group who has
submitted (and not withdrawn) to Company an unsolicited, written, bona fide
Acquisition Proposal that the Board of Directors of Company reasonably concludes
(based on the written advice of a financial advisor of national standing) may
constitute a Superior Offer if (1) neither Company nor any representative of
Company and its subsidiaries shall have violated any of the restrictions set
forth in this Section 5.4, (2) the Board of Directors of Company concludes in
good faith, after consultation with its outside legal counsel, that such action
is required in order for the Board of Directors of Company to comply with its
fiduciary obligations to Company's stockholders under applicable law, (3) prior
to furnishing any such nonpublic information to, or entering into any such
discussions with, such person or group, Company gives Parent written notice of
the identity of such person or group and all of the material terms and
conditions of such Acquisition Proposal and of Company's intention to furnish
nonpublic information to, or enter into discussions with, such person or group,
and Company receives from such person or group an executed confidentiality
agreement containing terms at least as restrictive with regard to Company's
confidential information as the Confidentiality Agreement, (4) Company gives
Parent at least two business days advance notice of its intent to furnish such
nonpublic information or enter into such discussions, and (5) contemporaneously
with furnishing any such nonpublic information to such person or group, Company
furnishes such nonpublic information to Parent (to the extent such nonpublic
information has not been previously furnished by the Company to Parent).
Company and its subsidiaries will immediately cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Acquisition Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding two
sentences by any officer, director or employee of Company or any of its
subsidiaries or any investment banker, attorney or other advisor or
representative of Company or any of its subsidiaries shall be deemed to be a
breach of this Section 5.4 by Company.
For purposes of this Agreement, "Acquisition Proposal" shall mean any offer
or proposal by a third party relating to: (A) any acquisition or purchase from
the Company by any person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) of more than a
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20% interest in the total outstanding voting securities of the Company or any of
its subsidiaries or any tender offer or exchange offer that if consummated would
result in any person or "group" (as defined under Section 13(d) of the Exchange
Act and the rules and regulations thereunder) beneficially owning 20% or more of
the total outstanding voting securities of the Company or any of its
subsidiaries or any merger, consolidation, business combination or similar
transaction involving the Company pursuant to which the stockholders of the
Company immediately preceding such transaction hold less than 80% of the equity
interests in the surviving or resulting entity of such transaction; (B) any
sale, lease (other than in the ordinary course of business), exchange, transfer,
license (other than in the ordinary course of business), acquisition, or
disposition of more than 50% of the assets of the Company; (C) any sale, lease,
exchange, transfer, license or disposition to a third party of either of the
"registry" or "registrar" businesses of Company; or (D) any liquidation or
dissolution of the Company.
(b) In addition to the obligations of Company set forth in paragraph
(a) of this Section 5.4, Company as promptly as reasonably practicable shall
advise Parent orally and in writing of any request for non-public information
which Company reasonably believes would lead to an Acquisition Proposal or of
any Acquisition Proposal, or any inquiry with respect to or which Company
reasonably should believe would lead to any Acquisition Proposal, the material
terms and conditions of such request, Acquisition Proposal or inquiry, and the
identity of the person or group making any such request, Acquisition Proposal or
inquiry. Company will keep Parent informed as promptly as reasonably
practicable in all material respects of the status and details (including
material amendments or proposed amendments) of any such request, Acquisition
Proposal or inquiry.
5.5 Confidentiality; Access to Information.
--------------------------------------
(a) The parties acknowledge that Company and Parent have previously
executed a mutual confidentiality agreement, dated as of March 3, 2000 (the
"Confidentiality Agreement"), which Confidentiality Agreement will continue in
full force and effect in accordance with its terms.
(b) Access to Information. Company will afford Parent and its
---------------------
accountants, counsel and other representatives reasonable access during normal
business hours to the properties, books, records and personnel of Company during
the period prior to the Effective Time to obtain all information concerning the
business, including the status of product development efforts, properties,
results of operations and personnel of Company, as Parent may reasonably
request. Parent will afford Company and its accountants, counsel and other
representatives reasonable access during normal business hours to the
properties, books, records and personnel of Parent during the period prior to
the Effective Time to obtain all information concerning the business, including
the status of product development efforts, properties, results of operations and
personnel of Parent, as Company may reasonably request. No information or
knowledge obtained in any investigation pursuant to this Section 5.5 will affect
or be deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger.
5.6 Public Disclosure. Parent and Company will consult with each other,
-----------------
and to the extent practicable, agree, before issuing any press release or
otherwise making any public statement with respect to the Merger, this Agreement
or an Acquisition Proposal and will not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
law or any listing agreement with a national securities exchange. The parties
have agreed to the text of the joint press release announcing the signing of
this Agreement.
5.7 Reasonable Efforts; Notification.
--------------------------------
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including using reasonable efforts to accomplish the following: (i)
the taking of all reasonable acts necessary to cause the conditions precedent
set forth in
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Article VI to be satisfied, (ii) the obtaining of all necessary actions or
nonactions, waivers, consents, approvals, orders and authorizations from
Governmental Entities and the making of all necessary registrations,
declarations and filings (including registrations, declarations and filings with
Governmental Entities, if any) and the taking of all reasonable steps as may be
necessary to avoid any suit, claim, action, investigation or proceeding by any
Governmental Entity, (iii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iv) the defending of any suits, claims, actions,
investigations or proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed and (v) the execution or
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement.
Notwithstanding anything in this Agreement to the contrary, neither Parent nor
any of its affiliates shall be under any obligation to make proposals, execute
or carry out agreements or submit to orders providing for the sale or other
disposition or holding separate (through the establishment of a trust or
otherwise) of any assets or categories of assets of Parent, any of its
affiliates or Company or the holding separate of the shares of Company Common
Stock (or shares of stock of the Surviving Corporation) or imposing or seeking
to impose any limitation on the ability of Parent or any of its subsidiaries or
affiliates to conduct their business or own such assets or to acquire, hold or
exercise full rights of ownership of the shares of Company Common Stock (or
shares of stock of the Surviving Corporation).
(b) Each of Company and Parent will give prompt notice to the other of
(i) any notice or other communication from any person alleging that the consent
of such person is or may be required in connection with the Merger, (ii) any
notice or other communication from any Governmental Entity in connection with
the Merger, (iii) any litigation relating to, involving or otherwise affecting
Company, Parent or their respective subsidiaries that relates to the
consummation of the Merger. Company shall give prompt notice to Parent of any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate, or any failure of Company to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 6.3 would not be satisfied, provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement. Parent shall give prompt notice to Company of any
representation or warranty made by it or Merger Sub contained in this Agreement
becoming untrue or inaccurate, or any failure of Parent or Merger Sub to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement, in each case, such
that the conditions set forth in Section 6.2 would not be satisfied, provided,
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
5.8 Third Party Consents. As soon as practicable following the date
--------------------
hereof, Parent and Company will each use its commercially reasonable efforts to
obtain any material consents, waivers and approvals under any of its or its
subsidiaries' respective agreements, contracts, licenses or leases required to
be obtained in connection with the consummation of the transactions contemplated
hereby.
5.9 Stock Options and ESPP.
----------------------
(a) At the Effective Time, each outstanding Company Option, whether or
not then exercisable, will be assumed by Parent. Each Company Option so assumed
by Parent under this Agreement will continue to have, and be subject to, the
same terms and conditions set forth in the Company Stock Option Plan immediately
prior to the Effective Time (including, without limitation, any repurchase
rights or vesting provisions), except that (i) each Company Stock Option will be
exercisable (or will become exercisable in accordance with its terms) for that
number of whole shares of Parent Common Stock equal to the product of the number
of shares of Company Common Stock that were issuable upon exercise of such
Company Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounded down to the nearest whole number of shares of Parent
Common Stock and (ii) the per share exercise price for the shares of Parent
Common Stock issuable upon exercise of such assumed Company Option will be equal
to the quotient determined by dividing the exercise price per share of Company
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<PAGE>
Common Stock at which such Company Option was exercisable immediately prior to
the Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.
Continuous employment with Company or its subsidiaries shall be credited to the
optionee for purposes of determining the vesting of all assumed Company Options
after the Effective Time.
(b) It is intended that Company Options assumed by Parent shall
qualify following the Effective Time as incentive stock options as defined in
Section 422 of the Code to the extent Company Options qualified as incentive
stock options immediately prior to the Effective Time and the provisions of this
Section 5.9 shall be applied consistent with such intent.
(c) Company shall take all actions necessary pursuant to the terms of
the Company ESPP in order to shorten the Participation Period(s) under such plan
which includes the Effective Time (the "Current Offerings") such that a new
purchase date for each such Participation Period shall occur prior to the
Effective Time and shares shall be purchased by Company ESPP participants prior
to the Effective Time. The Current Offerings shall expire immediately following
such new purchase date, and the Company ESPP shall terminate immediately prior
to the Effective Time. Subsequent to such new purchase date, Company shall take
no action, pursuant to the terms of the Company ESPP, to commence any new
offering period.
5.10 Form S-8. Parent agrees to file a registration statement on Form S-8
--------
for the shares of Parent Common Stock issuable with respect to assumed Company
Options as soon as is reasonably practicable, but in no event more than five
business days, after the Effective Time and shall maintain the effectiveness of
such registration statement thereafter for so long as any of such options or
other rights remain outstanding.
5.11 Indemnification.
---------------
(a) From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of Company
pursuant to any indemnification agreements between Company and its directors and
officers as of the Effective Time (the "Indemnified Parties") and any
indemnification provisions under Company's Certificate of Incorporation or
Bylaws as in effect on the date hereof. The Certificate of Incorporation and
Bylaws of the Surviving Corporation will contain provisions with respect to
exculpation and indemnification that are at least as favorable to the
Indemnified Parties as those contained in the Certificate of Incorporation and
Bylaws of Company as in effect on the date hereof, which provisions will not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who, immediately prior to the Effective Time, were directors,
officers, employees or agents of Company, unless such modification is required
by law.
(b) For a period of six years after the Effective Time, Parent will
cause the Surviving Corporation to maintain in effect, if available, directors'
and officers' liability insurance covering those persons who are currently
covered by Company's directors' and officers' liability insurance policy on
terms comparable to those applicable to the current directors and officers of
Company; provided, however, that in no event will Parent or the Surviving
Corporation be required to expend in excess of 200% of the annual premium
currently paid by Company for such coverage (or such coverage as is available
for such 200% of such annual premium).
(c) This Section 5.11 shall survive the consummation of the Merger, is
intended to benefit Company, the Surviving Corporation and each Indemnified
Party, shall be binding on all successors and assigns of the Surviving
Corporation and Parent, and shall be enforceable by the Indemnified Parties.
5.12 Parent Board of Directors. Parent will submit to its stockholders
-------------------------
for consideration at the Parent Stockholders' Meeting an amendment to Parent's
Bylaws to increase the authorized number of members of the Parent Board of
Directors to a number to be determined by the Parent Board of Directors from
time to time, provided, that for three years following the Effective Time, any
increase in the actual number of directors to a total of more than nine will
require the affirmative vote of 80% of the directors
1-39
<PAGE>
then in office. The Board of Directors of Parent will take all actions
reasonably necessary such that, effective upon the Effective Time, three persons
mutually agreed upon by Parent's Board of Directors and Company's Board of
Directors (the "New Directors") shall be appointed to Parent's Board of
Directors, one of each of whom shall be appointed to Class I, Class II and Class
III of Parent's Board of Directors, such designation to be made by mutual
agreement of Parent's Board of Directors and Company's Board of Directors.
Parent will use its best efforts to fulfill the conditions set forth in Section
6.2(e).
5.13 Nasdaq Listing. Parent agrees to authorize for listing on the Nasdaq
--------------
Stock Market the shares of Parent Common Stock issuable, and those required to
be reserved for issuance, in connection with the Merger, effective upon official
notice of issuance.
5.14 Letters of Accountants. Company and Parent shall use their respective
----------------------
reasonable efforts to cause to be delivered to Parent letters of Company's and
Parent's independent accountants, respectively, dated no more than two business
days before the date on which the Registration Statement becomes effective (and
satisfactory in form and substance to Parent), that is customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement.
5.15 Takeover Statutes. If any Takeover Statute is or may become
-----------------
applicable to the Merger or the other transactions contemplated by this
Agreement, each of Parent and Company and their respective Boards of Directors
shall grant such approvals and take such lawful actions as are necessary to
ensure that such transactions may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise act to eliminate or
minimize the effects of such statute and any regulations promulgated thereunder
on such transactions.
5.16 Certain Employee Benefits.
-------------------------
(a) As soon as practicable after the execution of this Agreement, Company
and Parent shall confer and work together in good faith to agree upon mutually
acceptable employee benefit and compensation arrangements (and terminate Company
Employee Plans immediately prior to the Effective Time if appropriate). In
addition, Company agrees that it and its subsidiaries shall terminate any and
all severance, separation, retention and salary continuation plans, programs or
arrangements (other than contractual agreements disclosed on the Company
Disclosure Letter) prior to the Effective Time.
(b) Employees of the Company and its subsidiaries will be granted credit
for all service with the Company, its subsidiaries and with SAIC and its
Affiliates under each Company employee benefit plan, program or arrangement of
Parent or its Affiliates in which such Employees are eligible to participate for
all purposes, except for purposes of benefit accrual under a defined benefit
pension plan. If Employees become eligible to participate in a medical, dental
or health plan of Parent or its Affiliates, Parent will cause such plan to (i)
waive any preexisting condition exclusions and waiting period limitations for
conditions covered under the applicable medical, dental or health plans
maintained or contributed to by Company (but only to the extent corresponding
exclusions and limitations were satisfied by such Employees under the applicable
medical, dental or health plans maintained or contributed to by Company); and
(ii) credit any deductible or out of pocket expenses incurred by the Employees
and their beneficiaries under such plans during the portion of the calendar year
prior to such participation.
(c) Company and Parent agree to work diligently and cooperate to separate
the benefit plans of SAIC and Company.
5.17 Tax Matters. Each of Parent, Merger Sub and Company agrees that it
-----------
will not take any action, or fail to take any action, which action or failure to
act would be reasonably likely to cause the Merger to fail to qualify as a
"reorganization" pursuant to the provisions of Section 368 of the Code.
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<PAGE>
Article VI
Conditions to the Merger
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) Company Stockholder Approval. This Agreement shall have been
----------------------------
approved and adopted, and the Merger shall have been approved, by the requisite
vote of the stockholders of Company under applicable law and the Company Charter
Documents.
(b) Parent Stockholder Approval. The issuance of shares of Parent
---------------------------
Common Stock pursuant to the Merger, and the amendment to Parent's Certificate
of Incorporation to increase the authorized number of shares of Parent Common
Stock in order to permit the issuance of shares of Parent Common Stock pursuant
to the Merger, shall have been approved by the requisite vote of the
stockholders of Parent under applicable law and the Parent Charter Documents.
(c) Registration Statement Effective; Proxy Statement. The SEC shall
-------------------------------------------------
have declared the Registration Statement effective. No stop order suspending
the effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose, and no similar proceeding in
respect of the Proxy Statement/Prospectus, shall have been initiated or
threatened in writing by the SEC.
(d) No Order; HSR Act. No Governmental Entity shall have enacted,
-----------------
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger. All
waiting periods, if any, under the HSR Act relating to the transactions
contemplated hereby will have expired or been terminated.
(e) Nasdaq Listing. The shares of Parent Common Stock to be issued in
--------------
the Merger shall have been approved for listing on the Nasdaq Stock Market,
subject to official notice of issuance.
(f) Consents. (i) All required approvals or consents of any
--------
Governmental Entity or other person in connection with the Merger and the
consummation of the other transactions contemplated hereby shall have been
obtained (and all relevant statutory, regulatory or other governmental waiting
periods, shall have expired) unless the failure to receive any such approval or
consent would not be reasonably likely, directly or indirectly, to result in a
Material Adverse Effect on Parent and its subsidiaries (including, for the
purposes of this condition, Company and its subsidiaries), taken as a whole, and
(ii) all such approvals and consents which have been obtained shall be on terms
that are not reasonably likely, directly or indirectly, to result in a Material
Adverse Effect on Parent and its subsidiaries (including, for the purposes of
this condition, Company and its subsidiaries), taken as a whole.
6.2 Additional Conditions to Obligations of Company. The obligation of
-----------------------------------------------
Company to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Company:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Parent and Merger Sub contained in this Agreement, disregarding
all qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect or any similar standard or qualification, shall be true
and correct at and as of the Closing Date as if made at and as of the Closing
Date (other than representations and warranties that address matters only as of
a certain date, which shall be true and correct as of such date), except where
the failure of such representations or warranties to be true or correct would
not have, individually or in the aggregate, a Material Adverse Effect on Parent.
It is understood that, for purposes of determining the accuracy of such
representations and warranties, any update of or modification to the Parent
Disclosure Letter made or purported to have been made after the execution of
this Agreement
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<PAGE>
shall be disregarded. Company shall have received a certificate with respect to
the foregoing signed on behalf of Parent by the Chief Executive Officer or Chief
Financial Officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
------------------------
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date, and Company shall have received a certificate to such
effect signed on behalf of Parent by the Chief Executive Officer or Chief
Financial Officer of Parent.
(c) Material Adverse Effect. No Material Adverse Effect with respect
-----------------------
to Parent shall have occurred since the date of this Agreement and be
continuing.
(d) Tax Opinion. Company shall have received an opinion of Davis Polk
-----------
& Wardwell, dated as of the Closing Date, in form and substance reasonably
satisfactory to it, on the basis of the facts, representations and assumptions
set forth or referred to in such opinion, that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and that each of
Parent and Company will be a party to the reorganization within the meaning of
Section 368(a) of the Code. The parties to this Agreement agree to make such
reasonable representations as requested by such counsel for the purpose of
rendering such opinions.
(e) Parent Board of Directors. All actions necessary in order for the
-------------------------
New Directors to become members of the Parent Board of Directors upon the
Effective Time shall have occurred, and, if such actions included an amendment
to Parent's Bylaws, such amendment shall have been approved at the Parent
Stockholders' Meeting and shall be substantially as described in Section 5.12.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
-----------------------------------------------------------------
The obligations of Parent and Merger Sub to consummate and effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of each of
the following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Company contained in this Agreement, disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect or any similar standard or qualification, shall be true
and correct at and as of the Closing Date as if made at and as of the Closing
Date (other than representations and warranties that address matters only as of
a certain date, which shall be true and correct as of such date), except where
the failure of such representations or warranties to be true or correct would
not have, individually or in the aggregate, a Material Adverse Effect on
Company. It is understood that, for purposes of determining the accuracy of
such representations and warranties, any update of or modification to the
Company Disclosure Letter made or purported to have been made after the
execution of this Agreement shall be disregarded. Parent shall have received a
certificate with respect to the foregoing signed on behalf of Company by the
Chief Executive Officer or Chief Financial Officer of Company.
(b) Agreements and Covenants. Company shall have performed or
------------------------
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date, and Parent shall have received a certificate to such effect signed on
behalf of Company by the Chief Executive Officer or Chief Financial Officer of
Company.
(c) Material Adverse Effect. No Material Adverse Effect with respect
-----------------------
to Company shall have occurred since the date of this Agreement and be
continuing.
(d) Tax Opinion. Parent shall have received an opinion of Fenwick &
-----------
West LLP, dated as of the Closing Date, in form and substance reasonably
satisfactory to it, on the basis of the facts, representations and assumptions
set forth or referred to in such opinion, that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and that each of
Parent and Company will be a party to the reorganization within the meaning of
Section 368(a) of the Code. The parties to this
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<PAGE>
Agreement agree to make such reasonable representations as requested by such
counsel for the purpose of rendering such opinions.
(e) No Restraints. There shall not be instituted or pending any
-------------
action or proceeding by any Governmental Entity (i) seeking to restrain,
prohibit or otherwise interfere with the ownership or operation by Parent or any
of its subsidiaries of all or any portion of the business of Company or any of
its subsidiaries or of Parent or any of its subsidiaries or to compel Parent or
any of its subsidiaries to dispose of or hold separate all or any portion of the
business or assets of Company or any of its subsidiaries or of Parent or any of
its subsidiaries, (ii) seeking to impose or confirm limitations on the ability
of Parent or any of its subsidiaries effectively to exercise full rights of
ownership of the shares of Company Common Stock (or shares of stock of the
Surviving Corporation) including the right to vote any such shares on any
matters properly presented to stockholders or (iii) seeking to require
divestiture by Parent or any of its subsidiaries of any such shares.
Article VII
Termination, Amendment and Waiver
7.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time, whether before or after the requisite approvals of the
stockholders of Company or Parent:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and Company;
(b) by either Company or Parent if the Merger shall not have been
consummated by September 15, 2000 for any reason; provided, however, that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Merger to occur on or before such date and
such action or failure to act constitutes a breach of this Agreement;
(c) by either Company or Parent if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action, in any case having
the effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, which order, decree, ruling or other action is final and nonappealable;
(d) by either Company or Parent, if the approval and adoption of this
Agreement, and the approval of the Merger, by the stockholders of Company shall
not have been obtained by reason of the failure to obtain the required vote at a
meeting of Company stockholders duly convened therefore or at any adjournment
thereof; provided, however, that the right to terminate this Agreement under
this Section 7.1(d) shall not be available to Company where the failure to
obtain the Company stockholder approval shall have been caused by (i) the action
or failure to act of Company and such action or failure to act constitutes a
material breach by Company of this Agreement or (ii) a breach of the Voting
Agreement by any party thereto other than Parent;
(e) by either Company or Parent, if the approval of the issuance of
shares of Parent Common Stock pursuant to the Merger, and the amendment to
Parent's Certificate of Incorporation to increase the authorized number of
shares of Parent Common Stock in order to permit the issuance of shares of
Parent Common Stock pursuant to the Merger by the stockholders of Parent shall
not have been obtained by reason of the failure to obtain the respective
required votes at a meeting of Parent stockholders duly convened therefore or at
any adjournment thereof; provided, however, that the right to terminate this
Agreement under this Section 7.1(e) shall not be available to Parent where the
failure to obtain the Parent stockholder approvals shall have been caused by the
action or failure to act of Parent and such action or failure to act constitutes
a material breach by Parent of this Agreement;
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<PAGE>
(f) by Parent (at any time prior to the adoption and approval of this
Agreement and the Merger by the required vote of the stockholders of Company) if
a Triggering Event (as defined below) shall have occurred;
(g) by Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or if
any representation or warranty of Parent shall have become untrue, in either
case such that the conditions set forth in Section 6.2(a) or Section 6.2(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that if such
inaccuracy in Parent's representations and warranties or breach by Parent is
curable by Parent through the exercise of its commercially reasonable efforts,
then Company may not terminate this Agreement under this Section 7.1(g) for 30
days after delivery of written notice from Company to Parent of such breach,
provided Parent continues to exercise commercially reasonable efforts to cure
such breach (it being understood that Company may not terminate this Agreement
pursuant to this paragraph (g) if such breach by Parent is cured during such 30-
day period, or if Company shall have materially breached this Agreement); or
(h) by Parent, upon a breach of any representation, warranty, covenant
or agreement on the part of Company set forth in this Agreement, or if any
representation or warranty of Company shall have become untrue, in either case
such that the conditions set forth in Section 6.3(a) or Section 6.3(b) would not
be satisfied as of the time of such breach or as of the time such representation
or warranty shall have become untrue, provided that if such inaccuracy in
Company's representations and warranties or breach by Company is curable by
Company through the exercise of its commercially reasonable efforts, then Parent
may not terminate this Agreement under this Section 7.1(h) for 30 days after
delivery of written notice from Parent to Company of such breach, provided
Company continues to exercise commercially reasonable efforts to cure such
breach (it being understood that Parent may not terminate this Agreement
pursuant to this paragraph (h) if such breach by Company is cured during such
30-day period, or if Parent shall have materially breached this Agreement).
For the purposes of this Agreement, a "Triggering Event" shall be
deemed to have occurred if: (i) the Board of Directors of Company or any
committee thereof shall for any reason have withdrawn or shall have amended or
modified in a manner adverse to Parent its recommendation in favor of the
adoption and approval of the Agreement or the approval of the Merger; (ii)
Company shall have failed to include in the Proxy Statement/Prospectus the
recommendation of the Board of Directors of Company in favor of the adoption and
approval of the Agreement and the approval of the Merger; (iii) the Board of
Directors of Company fails to reaffirm its recommendation in favor of the
adoption and approval of the Agreement and the approval of the Merger within 10
business days after Parent requests in writing that such recommendation be
reaffirmed at any time following the public announcement of an Acquisition
Proposal; (iv) the Board of Directors of Company or any committee thereof shall
have approved or publicly recommended any Acquisition Proposal; (v) Company
shall have entered into any letter of intent of similar document or any
agreement, contract or commitment accepting any Acquisition Proposal; (vi)
Company shall have materially breached any of the provisions of Sections 5.2 or
5.4; or (vii) a tender or exchange offer relating to securities of Company shall
have been commenced by a person unaffiliated with Parent, and Company shall not
have sent to its securityholders pursuant to Rule 14e-2 promulgated under the
Securities Act, within 10 business days after such tender or exchange offer is
first published sent or given, a statement disclosing that Company recommends
rejection of such tender or exchange offer.
7.2 Notice of Termination; Effect of Termination. Any proper
--------------------------------------------
termination of this Agreement under Section 7.1 above will be effective
immediately upon the delivery of written notice of the terminating party to the
other parties hereto. In the event of the termination of this Agreement as
provided in Section 7.1, this Agreement shall be of no further force or effect,
except (i) as set forth in this Section 7.2, Section 7.3 and Article 8, each of
which shall survive the termination of this Agreement, and (ii) nothing herein
shall relieve any party from liability for any willful breach of this Agreement.
No termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
7.3 Fees and Expenses.
-----------------
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<PAGE>
(a) General. Except as set forth in this Section 7.3, all fees and
-------
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; provided, however, that Parent and Company
shall share equally all fees and expenses, other than attorneys' and accountants
fees and expenses, incurred in relation to the printing and filing with the SEC
of the Proxy Statement/Prospectus (including any preliminary materials related
thereto) and the Registration Statement (including financial statements and
exhibits) and any amendments or supplements thereto.
(b) Company Payments. In the event that this Agreement is terminated
----------------
by Parent or Company, as applicable, pursuant to Sections 7.1(d), 7.1(f) or
7.1(h), the Company shall promptly, but in no event later than two days after
the date of such termination, pay Parent a fee equal to $425 million in
immediately available funds (the "Termination Fee"); provided, that in the case
of a termination under Sections 7.1(d) or 7.1(h) prior to which no Triggering
Event has occurred, (i) such payment shall be made only if (A) following the
date of this Agreement and prior to the termination of this Agreement, a person
has publicly announced an Acquisition Proposal and (B) within nine months
following the termination of this Agreement, either a Company Acquisition (as
defined below) is consummated, or the Company enters into an agreement providing
for a Company Acquisition and such Company Acquisition is later consummated with
the person (or another person controlling, controlled by, or under common
control with, such person) with whom such agreement was entered into (regardless
of when such consummation occurs if the Company has entered into such an
agreement within such nine-month period), and (ii) such payment shall be made
promptly, but in no event later than two days after the consummation of such
Company Acquisition (regardless of when such consummation occurs if the Company
has entered into such an agreement within such nine-month period). Company
acknowledges that the agreements contained in this Section 7.3(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Parent would not enter into this Agreement.
Accordingly, if the Company fails to pay in a timely manner the amounts due
pursuant to this Section 7.3(b), and, in order to obtain such payment, Parent
makes a claim that results in a judgment against the Company for the amounts set
forth in this Section 7.3(b), Company shall pay to Parent its reasonable costs
and expenses (including reasonable attorneys' fees and expenses) in connection
with such suit, together with interest on the amounts set forth in this Section
7.3(b) at the prime rate of The Chase Manhattan Bank in effect on the date such
payment was required to be made. Payment of the fees described in this Section
7.3(b) shall not be in lieu of damages incurred in the event of breach of this
Agreement.
For the purposes of this Agreement, "Company Acquisition" shall mean
any of the following transactions (other than the transactions contemplated by
this Agreement); (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company pursuant to which the stockholders of the Company immediately preceding
such transaction hold less than 50% of the aggregate equity interests in the
surviving or resulting entity of such transaction, (ii) a sale or other
disposition by the Company of assets representing in excess of 50% of the
aggregate fair market value of the Company's business immediately prior to such
sale, or of either of the "registry" or "registrar" businesses of Company, or
(iii) the acquisition by any person or group (including by way of a tender offer
or an exchange offer or issuance by Company), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of 50% of the voting power of the then outstanding shares
of capital stock of the Company; provided, that, notwithstanding the foregoing,
a Company Acquisition shall not include a spin-off or other distribution of
either the "registry" or "registrar" businesses of Company to Company's
stockholders.
7.4 Amendment. Subject to applicable law, this Agreement may be amended
---------
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of Parent and Company.
7.5 Extension; Waiver. At any time prior to the Effective Time any
-----------------
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a
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<PAGE>
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. Delay in exercising any
right under this Agreement shall not constitute a waiver of such right.
Article VIII
General Provisions
8.1 Non-Survival of Representations and Warranties. The representations
----------------------------------------------
and warranties of Company, Parent and Merger Sub contained in this Agreement
shall terminate at the Effective Time, and only the covenants that by their
terms survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given upon delivery either personally or by
commercial delivery service, or sent via facsimile (receipt confirmed) to the
parties at the following addresses or facsimile numbers (or at such other
address or facsimile numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
VeriSign, Inc.
1350 Charleston Road
Mountain View, California 94043
Attention: Chief Financial Officer
Facsimile No.: 650-961-7300
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, California 94306
Attention: Gordon K. Davidson
Douglas N. Cogen
Facsimile No.: 650-494-1417
(b) if to Company, to:
Network Solutions, Inc.
505 Huntmar Park Drive
Herndon, Virginia 20170
Attention: General Counsel
Facsimile No.: 703-742-0069
with a copy to:
Davis Polk & Wardwell
1600 El Camino Real
Menlo Park, California 94025
Attention: William S. Rosoff
David W. Ferguson
Facsimile No.: 650-752-2111
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<PAGE>
8.3 Interpretation; Certain Defined Terms.
-------------------------------------
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement unless otherwise indicated. The words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When reference is
made herein to "the business of" an entity, such reference shall be deemed to
include the business of all direct and indirect subsidiaries of such entity.
Reference to the subsidiaries of an entity shall be deemed to include all direct
and indirect subsidiaries of such entity.
(b) For purposes of this Agreement, the term "knowledge" means with
respect to a party hereto, with respect to any matter in question, that any of
the executive officers of such party has actual knowledge of such matter, after
reasonable inquiry of such matter. For purposes of this definition, the
"executive officers" of Company shall be those person listed on Part 8.3(b) of
the Company Disclosure Letter.
(c) For purposes of this Agreement, the term "Material Adverse Effect"
when used in connection with an entity means any change, event, circumstance or
effect that is or is reasonably likely to be materially adverse to the business,
assets (including intangible assets), capitalization, financial condition,
operations or results of operations of such entity taken as a whole with its
subsidiaries, except to the extent that any such change, event, circumstance or
effect results from (i) changes in general economic conditions, (ii) changes
affecting the industry generally in which such entity operates (provided that
such changes do not affect such entity in a substantially disproportionate
manner) or (iii) changes in the trading prices for such entity's capital stock.
(d) For purposes of this Agreement, the term "person" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
(e) For purposes of this Agreement, "subsidiary" of a specified entity
will be any corporation, partnership, limited liability company, joint venture
or other legal entity of which the specified entity (either alone or through or
together with any other subsidiary) owns, directly or indirectly, 50% or more of
the stock or other equity or partnership interests the holders of which are
generally entitled to vote for the election of the Board of Directors or other
governing body of such corporation or other legal entity.
8.4 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement, its
-------------------------------------------
Exhibits and the documents and instruments and other agreements among the
parties hereto as contemplated by or referred to herein, including the Company
Disclosure Letter and the Parent Disclosure Letter (a) constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, it being understood that
the Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as specifically provided in Section 5.11.
8.6 Severability. In the event that any provision of this Agreement
------------
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto.
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<PAGE>
The parties further agree to replace such void or unenforceable provision of
this Agreement with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of such void or
unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise
------------------------------------
provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.8 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
8.9 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of its
----------
rights, interests, or obligations hereunder without the prior written consent of
the other parties hereto. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Any purported assignment in
violation of this Section shall be void.
8.11 Waiver Of Jury Trial. EACH OF PARENT, COMPANY AND MERGER SUB HEREBY
--------------------
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, COMPANY OR MERGER SUB IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
* * * * *
1-48
<PAGE>
In Witness Whereof, the parties hereto have caused this Agreement and Plan
of Merger to be executed by their duly authorized respective officers as of the
date first written above.
VERISIGN, INC.
By: /s/ Stratton D. Sclavos
-----------------------
Name: Stratton D. Sclavos
Title: President and Chief
Executive Officer
NICKEL ACQUISITION CORPORATION
By: /s/ Stratton D. Sclavos
-----------------------
Name: Stratton D. Sclavos
Title: President
NETWORK SOLUTIONS, INC.
By: /s/ James Rutt
--------------
Name: James Rutt
Title: Chief Executive Officer
1-49
<PAGE>
EXHIBIT 2
Voting Agreement
This Voting Agreement (the "Agreement") is made and entered into as of
March 6, 2000, between VeriSign, Inc., a Delaware corporation ("Parent"), and
the undersigned stockholder ("Stockholder") of Network Solutions, Inc., a
Delaware corporation ("Company").
Recitals
A. Concurrently with the execution of this Agreement, Parent, Company and
Nickel Acquisition Corporation, a Delaware corporation and a wholly-owned first-
tier subsidiary of Parent ("Merger Sub"), are entering into an Agreement and
Plan of Merger (the "Merger Agreement") which provides for the merger of Merger
Sub with and into Company (the "Merger"). Pursuant to the Merger, shares of
common stock of Company, par value $0.001 per share ("Company Common Stock")
will be converted into shares of Parent Common Stock on the basis described in
the Merger Agreement. Capitalized terms used but not defined herein shall have
the meanings set forth in the Merger Agreement.
B. Stockholder is the record holder of such number of outstanding shares
of Company Common Stock as is indicated on the final page of this Agreement.
C. As a material inducement to enter into the Merger Agreement, Parent
desires Stockholder to agree, and Stockholder is willing to agree, to vote the
Shares (as defined below), and such other shares of capital stock of Company
over which Stockholder has voting power, so as to facilitate consummation of the
Merger.
In consideration of the foregoing and the representations, warranties,
covenants and agreements set forth in this Agreement, the parties agree as
follows:
1. Agreement To Vote Shares
1.1 Definitions. For purposes of this Agreement:
-----------
(a) Shares. The term "Shares" shall mean all issued and
------
outstanding shares of Company Common Stock owned of record or beneficially by
Stockholder or over which Stockholder exercises voting power, in each case, as
of the record date for persons entitled (i) to receive notice of, and to vote at
the meeting of the stockholders of Company called for the purpose of voting on
the matters referred to in Section 1.2, or (ii) to take action by written
consent of the stockholders of Company with respect to the matters referred to
in Section 1.2. Stockholder agrees that any shares of capital stock of Company
that Stockholder purchases or with respect to which Stockholder otherwise
acquires beneficial ownership or over which Stockholder exercises voting power
after the execution of this Agreement and prior to the date of termination of
this Agreement pursuant to Section 6 below shall be subject to the terms and
conditions of this Agreement to the same extent as if they constituted Shares on
the date hereof.
(b) Subject Securities. The term "Subject Securities" shall
------------------
mean: (i) all securities of Company (including all shares of Company Common
Stock and all options, warrants and other rights to acquire shares of Company
Common Stock beneficially owned by Stockholder as of the date of this Agreement;
and (ii) all additional securities of Company (including all additional shares
of Company Common Stock and all additional options, warrants and other rights to
acquire shares of Company Common Stock) of which Stockholder acquires ownership
during the period from the date of this Agreement through the earlier of
termination of this Agreement pursuant to Section 3 below or the record date for
the meeting at which stockholders of Company are asked to vote upon approval of
the Merger
<PAGE>
Agreement and the Merger.
(c) Transfer. Stockholder shall be deemed to have effected a
--------
"Transfer" of a security if Stockholder directly or indirectly: (i) sells,
pledges, encumbers, transfers or disposes of, or grants an option with respect
to, such security or any interest in such security; or (ii) enters into an
agreement or commitment providing for the sale, pledge, encumbrance, transfer or
disposition of, or grant of an option with respect to, such security or any
interest therein.
1.2 Agreement to Vote Shares. Stockholder hereby covenants and
------------------------
agrees that, during the period commencing on the date hereof and continuing
until the first to occur of (i) such date and time as the Merger shall become
effective in accordance with the terms and provisions of the Merger Agreement
(the "Effective Time") and (ii) termination of this Agreement in accordance with
its terms, at any meeting (whether annual or special and whether or not an
adjourned or postponed meeting) of the stockholders of Company, however called,
or in connection with any written consent of the stockholders of Company,
Stockholder will appear at the meeting or otherwise cause the Shares to be
counted as present thereat for purposes of establishing a quorum and vote or
consent (or cause to be voted or consented) the Shares:
(1) in favor of the approval and adoption of the Merger Agreement and
the approval of the Merger and the other actions contemplated by the Merger
Agreement and any actions required in furtherance thereof;
(2) against approval of any proposal made in opposition to or in
competition with the consummation of the Merger, including, without
limitation, any Acquisition Proposal or Superior Offer (each as defined in
the Merger Agreement) or any action or agreement that would result in a
breach in any respect of any covenant, representation or warranty or any
other obligation or agreement of Company under the Merger Agreement or of
the Stockholder under this Agreement.
Stockholder further agrees not to enter into any agreement or understanding
with any person the effect of which would be inconsistent with or violative of
any provision contained in this Section 1.2.
1.3. Transfer and Other Restrictions. (a) Prior to the termination
-------------------------------
of this Agreement, Stockholder agrees not to, directly or indirectly:
(i) except pursuant to the terms of the Merger Agreement, offer
for sale, Transfer or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to or consent to
the offer for sale Transfer or other disposition of any or all of the
Subject Securities or any interest therein except as provided in Section
1.2 hereof;
(ii) grant any proxy, power of attorney, deposit any of the
Subject Securities into a voting trust or enter into a voting agreement or
arrangement with respect to the Subject Securities except as provided in
this Agreement; or
(iii) take any other action that would make any representation
or warranty of Stockholder contained herein untrue or incorrect or have the
effect of preventing or disabling Stockholder from performing its
obligations under this Agreement.
(b) To the extent Stockholder is, as of the date hereof, party to a
contract or agreement that requires Stockholder to Transfer Shares to another
person or entity (excluding a contract or agreement pledging Shares to Company),
Stockholder will not effect any such Transfer unless and until the transferee
agrees to be bound by and executes an agreement in the form of this Agreement
with respect to the Shares to be Transferred. Nothing herein shall prohibit
Stockholder from exercising (in accordance with the terms
<PAGE>
of the option or warrant, as applicable) any option or warrant Stockholder may
hold; provided that the securities acquired upon such exercise shall be deemed
Shares.
1.4 Irrevocable Proxy. Concurrently with the execution of this
-----------------
Agreement, Stockholder agrees to deliver to Parent a proxy in the form attached
hereto as Exhibit I (the "Proxy"), which shall be irrevocable, with respect to
the Shares, subject to the other terms of this Agreement.
2. Representations and Warranties of Stockholder
(a) Stockholder is the record and beneficial owner of, or Stockholder
exercises voting power over, the shares of Company Common Stock indicated on the
final page of this Agreement, which, on and as of the date hereof, are free and
clear of any Encumbrances that would adversely affect the ability of Stockholder
to carry out the terms of this Agreement. The number of Shares set forth on the
signature pages hereto are the only Shares beneficially owned by such
Stockholder and, except as set forth on such signature pages, the Stockholder
holds no options to purchase or rights to subscribe for or otherwise acquire any
securities of the Company and has no other interest in or voting rights with
respect to any securities of the Company.
(b) Stockholder has the requisite power and authority to enter into
this Agreement and to consummate the transaction contemplated by this Agreement.
The execution and delivery of this Agreement by such Stockholder and the
consummation by such Stockholder of the transactions contemplated by this
Agreement have been duly authorized by all necessary action. This Agreement has
been duly executed and delivered by such Stockholder and constitutes a valid and
binding obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms, except (i) as the same may be limited by applicable
bankruptcy, insolvency, moratorium or similar laws of general application
relating to or affecting creditors' rights, and (ii) for the limitations imposed
by general principles of equity. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation which would result in the
creation of any Encumbrance upon any of the Shares owned by such Stockholder
under, any provision of applicable law or regulation or of any agreement,
judgment, injunction, order, decree, or other instrument binding on such
Stockholder or any Shares owned by such Stockholder. No consent, approval,
order or authorization of any Governmental Entity is required by or with respect
to such Stockholder in connection with the execution and delivery of this
Agreement by such Stockholder or the consummation by such Stockholder of the
transactions contemplated by this Agreement, except (i) for applicable
requirements, if any, of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder, and (ii) where the failure to obtain such
consents, approvals, orders or authorizations would not prevent or materially
delay the performance by Stockholder of its obligations under this Agreement.
If this Agreement is being executed in a representative or fiduciary capacity,
the person signing this Agreement has full power and authority to enter into and
perform such Agreement.
3. Termination
This Agreement shall terminate and shall have no further force or effect as
of the first to occur of (i) the Effective Time and (ii) such date and time as
the Merger Agreement shall have been validly terminated pursuant to Article VII
thereof.
4. Miscellaneous
4.1 Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
<PAGE>
4.2 Binding Effect and Assignment. This Agreement and all of the
-----------------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
of the parties without prior written consent of the other. Any purported
assignment in violation of this Section shall be void.
4.3 Amendments and Modification. This Agreement may not be modified,
---------------------------
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
4.4 Specific Performance; Injunctive Relief. The parties hereto
---------------------------------------
acknowledge that Parent will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Parent upon any such violation, Parent
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Parent at law
or in equity.
4.5 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed duly given upon delivery either by commercial
delivery service, or sent via facsimile (receipt confirmed) to the parties at
the following address or facsimile numbers (or at such other address or
facsimile numbers for a party as shall be specified by like notice):
If to Parent:
VeriSign, Inc.
1350 Charleston Road
Mountain View, California 94043-1331
Attn: Chief Financial Officer
Facsimile: 650-961-7300
with a copy to:
Fenwick & West LLP
Two Palo Alto Square
Palo Alto, California 94306
Attn: Gordon K. Davidson
Douglas N. Cogen
Facsimile: 650-494-1417
<PAGE>
If to Stockholder, to the address for notice set forth on the last
page hereof.
with a copy to:
SAIC Venture Capital Corporation
3753 Howard Hughes Parkway
Las Vegas, Nevada 89109
Attn: Ira J. Miller
President
Any party hereto may by notice so given provide and change its address for
future notices hereunder. Notice shall conclusively be deemed to have been
given when personally delivered or when deposited in the mail in the manner set
forth above.
4.6 Governing Law. This Agreement shall be governed by and construed
-------------
exclusively in accordance with the laws of the State of Delaware, excluding that
body of law relating to conflict of laws.
4.7 Entire Agreement. This Agreement and the Plan constitute and
----------------
contains the entire agreement and understanding of the parties with respect to
the subject matter hereof and supersede any and all prior negotiations,
correspondence, agreements, understandings, duties or obligations between the
parties respecting the subject matter hereof.
4.8 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
4.9 Captions. The captions to sections of this Agreement have been
--------
inserted for identification and reference purposes only and shall not be used to
construe or interpret this Agreement.
* * * * *
<PAGE>
In Witness Whereof, the parties hereto have caused this Voting Agreement to
be executed by their duly authorized respective officers as of the date first
above written.
VERISIGN, INC.
By: /s/ Stratton D. Sclavos
------------------------------------------
Name: Stratton D. Sclavos
Title: President and Chief Executive Officer
Stockholder:
SAIC VENTURE CAPITAL CORPORATION
By: /s/ Douglas Scott
------------------------------------------
Name: Douglas Scott
Title: Director
Stockholder's Address for Notice:
3753 Howard Hughes Parkway, Suite 200
Las Vegas, Nevada 89109
Attn: Ira J. Miller
President
Outstanding Shares of Company Common
Stock Beneficially Owned by
Stockholder:
8,150,000
--------------------
<PAGE>
Exhibit I
Irrevocable Proxy
The undersigned stockholder (the "Stockholder") of Network Solutions, Inc.,
a Delaware corporation (the "Company"), hereby irrevocably appoints and
constitutes the members of the Board of Directors of VeriSign, Inc., a Delaware
corporation ("Parent"), and each such Board member (collectively the
"Proxyholders"), the agents, attorneys and proxies of the undersigned, with full
power of substitution and resubstitution, to the full extent of the
undersigned's rights with respect to the shares of capital stock of Company
which are listed below (the "Shares"), and any and all other shares or
securities issued or issuable in respect thereof on or after the date hereof and
prior to the date this proxy terminates, to vote the Shares as follows: the
agents and proxies named above are empowered at any time prior to termination of
this proxy to exercise all voting and other rights (including, without
limitation, the power to execute and deliver written consents with respect to
the Shares) of the undersigned at every annual, special or adjourned meeting of
Company stockholders, and in every written consent in lieu of such a meeting, or
otherwise, (i) in favor of adoption of the Agreement and Plan of Merger (the
"Merger Agreement") among Parent, Nickel Acquisition Corporation and Company,
and the approval of the merger of Nickel Acquisition Corporation with and into
Company (the "Merger"), and (ii) against approval of any proposal made in
opposition to or in competition with consummation of the Merger, including,
without limitation, any Acquisition Proposal or Superior Offer (each as defined
in the Merger Agreement) or any action or agreement that would result in a
breach in any respect of any covenant, representation or warranty or any other
obligation or agreement of Company under the Merger Agreement or of the
Stockholder under the Voting Agreement.
The Proxyholders may not exercise this proxy on any other matter. The
Stockholder may vote the Shares on all such other matters. The proxy granted by
the Stockholder to the Proxyholders hereby is granted as of the date of this
Irrevocable Proxy in order to secure the obligations of the Stockholder set
forth in Section 1 of the Voting Agreement, and is irrevocable and coupled with
an interest in such obligations and in the interests in Company to be purchased
and sold pursuant the Merger Agreement.
This proxy will terminate upon the termination of the Voting Agreement in
accordance with its terms. Upon the execution hereof, all prior proxies given
by the undersigned with respect to the Shares and any and all other shares or
securities issued or issuable in respect thereof on or after the date hereof are
hereby revoked and no subsequent proxies will be given until such time as this
proxy shall be terminated in accordance with its terms. Any obligation of the
undersigned hereunder shall be binding upon the successors and assigns of the
undersigned. The undersigned stockholder authorizes the Proxyholders to file
this proxy and any substitution or revocation of substitution with the Secretary
of the Company and with any Inspector of Elections at any meeting of the
stockholders of the Company.
This proxy is irrevocable and shall survive the insolvency, incapacity,
death or liquidation of the undersigned. Dated: March 6, 2000.
/s/ Douglas Scott
-------------------------------------------
Signature
___________________________________________
Name (and Title) Douglas Scott, Director
Shares of Company Common Stock beneficially owned: 8,150,000
