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FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-50196
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[LOGO] [LOGO]
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JOINT PROXY STATEMENT/PROSPECTUS
MERGER PROPOSED: YOUR VOTE IS VERY IMPORTANT
The boards of directors of Lightbridge, Inc. and Corsair
Communications, Inc. have agreed upon a merger combining Lightbridge and
Corsair. Under the terms of the merger agreement, which was signed on
October 26, 2000, and amended and restated on November 8, 2000, Lightning Merger
Corporation, a wholly owned subsidiary of Lightbridge, will merge with and into
Corsair and Corsair will become a wholly owned subsidiary of Lightbridge.
Lightbridge will be the surviving publicly traded company.
Assuming that no options to purchase common stock are exercised prior to the
closing of the merger, Lightbridge expects to issue up to an aggregate of
approximately 10,270,000 shares of its common stock to Corsair stockholders. In
connection with the merger, Corsair stockholders will receive 0.5978 shares of
Lightbridge common stock in exchange for each share of Corsair common stock.
Lightbridge common stock is traded on The Nasdaq Stock Market under the symbol
"LTBG."
Completion of the merger is subject to approval of the stockholders of both
companies. A special meeting of Corsair stockholders has been scheduled to vote
on a proposal to adopt the merger agreement and a special meeting of Lightbridge
stockholders has been scheduled to approve issuing the shares of Lightbridge
common stock to be delivered to Corsair stockholders in connection with the
merger and to approve a proposed amendment to Lightbridge's 1996 Incentive and
Non-Qualified Stock Option Plan to increase the number of shares of Lightbridge
common stock that may be issued under the plan by 2,000,000 shares, from
2,350,000 shares to 4,350,000 shares. This amendment will only be effective if
the merger is completed, but the merger may be completed even if the amendment
is not approved. Each of these special meetings will take place on February 7,
2001. Only stockholders of record of Lightbridge and Corsair common stock as of
December 28, 2000 are entitled to vote at the respective meetings.
A copy of the merger agreement is included as Annex A to this document. You
should read this entire document, including the annexes, carefully.
Your vote is very important. Whether or not you plan to attend a special
meeting, please take the time to vote by completing and mailing the enclosed
proxy card or vote by using the Internet or by telephone. If you sign, date and
mail your proxy card without indicating how you want to vote, your proxy will be
counted as a vote in favor of the merger and, if you are a Lightbridge
stockholder, the proposal to amend Lightbridge's 1996 Incentive and
Non-Qualified Stock Option Plan.
FOR A MORE COMPLETE DESCRIPTION OF THE MERGER AND RISK FACTORS YOU MAY WANT
TO CONSIDER IN CONNECTION WITH YOUR VOTE, SEE "THE MERGER" BEGINNING ON PAGE 32
AND "RISK FACTORS" BEGINNING ON PAGE 14.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
DOCUMENT IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------
This document is dated December 28, 2000 and is first being mailed to
stockholders of Lightbridge and Corsair on or about January 3, 2001.
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Sincerely, Sincerely,
/s/ Pamela D. A. Reeve /s/ Thomas C. Meyer
-------------------------------------------- --------------------------------------------
Pamela D. A. Reeve Thomas C. Meyer
PRESIDENT AND CHIEF EXECUTIVE OFFICER PRESIDENT AND CHIEF EXECUTIVE OFFICER
OF LIGHTBRIDGE, INC. OF CORSAIR COMMUNICATIONS, INC.
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CORSAIR COMMUNICATIONS, INC.
3408 HILLVIEW AVENUE
PALO ALTO, CALIFORNIA 94304
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 7, 2001
------------------------
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Corsair
Communications, Inc., a Delaware corporation, will be held on February 7, 2001
at Corsair's executive offices, 3408 Hillview Avenue, Palo Alto, California,
94304 commencing at 8:30 a.m., local time, to consider and vote upon a proposal
to adopt the amended and restated agreement and plan of reorganization dated as
of November 8, 2000 among Lightbridge, Inc., Corsair Communications, Inc. and
Lightning Merger Corporation, a wholly owned subsidiary of Lightbridge.
We will transact no other business at the special meeting, except such
business as may properly be brought before the special meeting or any
adjournment of it.
Stockholders of record at the close of business on December 28, 2000 are
entitled to vote at the special meeting. We will make a list of stockholders
entitled to vote at the special meeting available for inspection at our offices.
Whether you plan to attend the special meeting or not, we ask that you promptly
complete and return the enclosed proxy in the reply envelope or vote by
telephone or by using the Internet. Please see the instructions included with
your proxy card.
By Order of the Board of Directors
/s/ Martin J. Silver
--------------------------------------
Martin J. Silver
SECRETARY
Dated: January 3, 2001
Palo Alto, California
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LIGHTBRIDGE, INC.
67 SOUTH BEDFORD STREET
BURLINGTON, MASSACHUSETTS 01803
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 7, 2001
------------------------
NOTICE IS HEREBY GIVEN THAT a special meeting of stockholders of
Lightbridge, Inc., a Delaware corporation, will be held on February 7, 2001 at
the offices of Foley, Hoag & Eliot LLP, One Post Office Square, Sixteenth Floor,
Boston, Massachusetts 02109, commencing at 10:00 a.m., local time, to consider
and vote upon:
1. a proposal to approve the issuance of Lightbridge common stock to be
delivered in connection with the merger contemplated by the amended and
restated agreement and plan of reorganization dated as of November 8,
2000 among Lightbridge, Inc., Corsair Communications, Inc., and Lightning
Merger Corporation; and
2. a proposal to approve an amendment to Lightbridge's 1996 Incentive and
Non-Qualified Stock Option Plan to increase the number of shares of
common stock that may be issued under the plan by 2,000,000 shares, from
2,350,000 shares to 4,350,000 shares. This amendment will only be
effective if the merger is completed, but the merger may be completed
even if the amendment is not approved.
We will transact no other business at the special meeting, except such
business as may properly be brought before the special meeting or any
adjournment of it.
Stockholders of record at the close of business on December 28, 2000 are
entitled to vote at the special meeting. We will make a list of stockholders
entitled to vote at the special meeting available for inspection at our offices.
Whether you plan to attend the special meeting or not, we ask that you promptly
complete and return the enclosed proxy in the reply envelope or vote by
telephone or by using the Internet. Please see the instructions included with
your proxy card.
By Order of the Board of Directors
/s/ Alexander H. Pyle
--------------------------------------
Alexander H. Pyle
SECRETARY
Dated: January 3, 2001
Burlington, Massachusetts
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TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 3
The companies............................................. 3
The merger................................................ 3
Recommendation of Corsair's board of directors............ 3
Recommendation of Lightbridge's board of directors........ 4
Special meeting of Corsair stockholders................... 4
Special meeting of Lightbridge stockholders............... 4
Ownership of Lightbridge common stock following the
merger.................................................. 4
Management of Lightbridge following the merger............ 5
Stockholder agreements.................................... 5
Interests of Corsair's management and certain stockholders
in the merger........................................... 5
Conditions to the merger.................................. 5
Termination of the merger agreement....................... 5
Expenses and break up fees................................ 6
Opinion of Lightbridge's financial advisor................ 6
Opinion of Corsair's financial advisor.................... 6
Listing on The Nasdaq Stock Market........................ 7
Accounting treatment...................................... 7
Material federal income tax consequences.................. 7
Dissenters' rights........................................ 7
Comparison of rights of Lightbridge stockholders and
Corsair stockholders.................................... 7
Regulatory compliance..................................... 7
Selected historical and pro-forma consolidated financial
information............................................. 8
Comparative per share data................................ 12
Comparative market price and dividend information......... 13
RISK FACTORS................................................ 14
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION............................................... 26
SPECIAL MEETINGS OF STOCKHOLDERS............................ 27
SPECIAL MEETING OF LIGHTBRIDGE STOCKHOLDERS................. 27
Matters for consideration................................. 27
Board of directors' recommendation........................ 27
Record date............................................... 27
Quorum and vote required.................................. 27
Voting of proxies......................................... 28
How to revoke a proxy..................................... 28
Solicitation of proxies and expenses...................... 29
Stock held by Lightbridge directors and officers.......... 29
Dissenters' rights........................................ 29
SPECIAL MEETING OF CORSAIR STOCKHOLDERS..................... 29
Matters for consideration................................. 29
Board of directors' recommendation........................ 29
Record date............................................... 30
Quorum and vote required.................................. 30
Voting of proxies......................................... 30
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How to revoke a proxy..................................... 31
Solicitation of proxies and expenses...................... 31
Stock held by Corsair directors and officers.............. 31
Dissenters' rights........................................ 31
THE MERGER.................................................. 32
Background of the merger.................................. 32
Lightbridge's reasons for the merger; Lightbridge's board
of directors' recommendation............................ 35
Opinion of Lightbridge's financial advisor................ 36
Corsair's reasons for the merger; Corsair's board of
directors' recommendation............................... 41
Opinion of Corsair's financial advisor.................... 42
Interests of Corsair's management and certain stockholders
in the merger........................................... 51
Ownership of Lightbridge common stock following the
merger.................................................. 52
Management of Lightbridge following the merger............ 52
THE MERGER AGREEMENT........................................ 53
General................................................... 53
Conversion of Corsair common stock........................ 53
Treatment of Corsair stock options........................ 53
Exchange of Corsair certificates.......................... 54
Representations and warranties............................ 54
Covenants................................................. 55
No solicitation of transactions........................... 56
Conditions to the merger.................................. 56
Expenses.................................................. 58
Break up fee.............................................. 58
Termination............................................... 58
Amendment................................................. 59
Extension and waiver...................................... 59
Closing and effective time................................ 59
RELATED AGREEMENTS.......................................... 60
Stockholder agreements.................................... 60
Affiliate agreements...................................... 60
RESALE OF LIGHTBRIDGE COMMON STOCK AND LISTING OF
LIGHTBRIDGE COMMON STOCK.................................. 61
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.................... 61
ACCOUNTING TREATMENT........................................ 62
REGULATORY COMPLIANCE....................................... 63
AMENDMENT TO LIGHTBRIDGE'S 1996 INCENTIVE AND NON-QUALIFIED
STOCK OPTION PLAN......................................... 64
General................................................... 64
Background................................................ 64
Plan administration....................................... 64
New plan benefits......................................... 66
Future amendments to the 1996 stock option plan........... 66
Federal income tax information with respect to the 1996
stock option plan....................................... 67
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COMPARISON OF THE RIGHTS OF LIGHTBRIDGE STOCKHOLDERS AND
CORSAIR STOCKHOLDERS...................................... 68
LEGAL MATTERS............................................... 70
EXPERTS..................................................... 70
WHERE YOU CAN FIND MORE INFORMATION......................... 70
INCORPORATION OF DOCUMENTS FILED WITH THE SEC............... 71
INDEX TO PRO FORMA FINANCIAL STATEMENTS..................... P-1
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ANNEXES
Annex A Amended and Restated Agreement and Plan of Reorganization
Annex B Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation to the Lightbridge Board of Directors, dated
October 26, 2000
Annex C Opinion of Broadview International LLC to the Corsair Board
of Directors, dated October 26, 2000
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QUESTIONS AND ANSWERS ABOUT THE MERGER
THE FOLLOWING QUESTIONS AND ANSWERS ARE INTENDED TO ADDRESS BRIEFLY SOME
COMMONLY ASKED QUESTIONS REGARDING THE MERGER. THESE QUESTIONS AND ANSWERS MAY
NOT ADDRESS ALL QUESTIONS THAT MAY BE IMPORTANT TO YOU. PLEASE REFER TO THE MORE
DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS DOCUMENT, THE ANNEXES TO THIS
DOCUMENT AND THE DOCUMENTS INCORPORATED BY REFERENCE IN THIS DOCUMENT.
Q: WHAT AM I BEING ASKED TO VOTE UPON?
A: Corsair's board of directors and Lightbridge's board of directors have
approved a merger agreement which provides that Lightbridge will acquire
Corsair by merging Lightbridge's wholly owned subsidiary with Corsair.
Corsair will become a wholly owned subsidiary of Lightbridge and Lightbridge
will be the surviving publicly traded company. Corsair's and Lightbridge's
boards of directors are asking their respective stockholders to provide the
necessary approvals to complete the merger.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: Corsair stockholders will receive 0.5978 shares of Lightbridge common stock
for each share of Corsair common stock owned by them at the closing of the
merger. No fractional shares of Lightbridge common stock will be issued.
Corsair stockholders will receive cash instead of any fractional share to
which they may be entitled.
Lightbridge stockholders will continue to own the shares of Lightbridge
common stock that they currently own.
Q: WHAT DO I NEED TO DO NOW?
A: Please mail your signed proxy card in the enclosed return envelope as soon as
possible, or vote by telephone or using the Internet, so that your shares
may be represented at your special meeting. Please see the instructions
included with your proxy card.
Q: WHAT HAPPENS IF I DON'T VOTE?
A. If you are a Corsair stockholder and you fail to respond, it will have the
same effect as a vote against the merger. If you are a Lightbridge
stockholder and you fail to respond, you will not be deemed to be present at
the Lightbridge special meeting and your shares therefore will not
participate in the votes taken at the special meeting.
If you sign, date and mail your proxy card, but do not indicate how you want
to vote, your proxy will be counted as a vote in favor of the merger and, in
the case of Lightbridge stockholders, in favor of the proposal to amend
Lightbridge's 1996 Incentive and Nonqualified Stock Option Plan.
If you respond and abstain from voting, your proxy will have the same effect
as a vote against the merger-related proposal and, in the case of
Lightbridge stockholders, against the proposal to amend Lightbridge's stock
option plan.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A. If you are a Corsair stockholder and do not provide your broker with
instructions on how to vote your shares held in "street name," your broker
will not be permitted to vote them and you will, in effect, be voting
against the merger. You should therefore be sure to provide your broker with
instructions on how to vote your shares. Please check the instructions
provided by your broker to see if it offers telephone or Internet voting.
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In the case of Lightbridge stockholders, if you do not give voting
instructions to your broker, you will not be deemed to be present at the
Lightbridge special meeting and your shares will not participate in the
votes taken at the special meeting.
Q: WHAT IF I WANT TO CHANGE MY VOTE?
A: A vote can be changed at any time before the proxy is voted at the special
meeting. If you hold your shares in "street name" through a broker, you can
send a written notice to your broker stating that you would like to revoke
your proxy or you can complete and deliver a new proxy to your broker. You
may also appear at the meeting with a signed revocation and a legal proxy
from your broker allowing you to vote your shares in person. If your shares
are held in your own name, and not by your broker, you may revoke your proxy
by completing and delivering a new proxy or by appearing at the special
meeting and voting in person.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working to complete the merger as soon as possible. We expect to
complete the merger promptly following the approval of our stockholders at
the special meetings.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, Corsair stockholders will receive written
instructions for exchanging their stock certificates. Lightbridge
stockholders will keep their current stock certificates.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: As a general matter, neither you, Lightbridge nor Corsair will recognize any
gain or loss for federal income tax purposes in the merger. Tax matters are
very complicated and the tax consequences of the merger to you will depend
on the facts of your own situation. You should consult your tax advisors for
a full understanding of the tax consequences of the merger to you.
Q: WHAT ELSE ARE STOCKHOLDERS BEING ASKED TO VOTE ON AT THE SPECIAL MEETINGS?
A. Lightbridge stockholders will also vote on a proposal to approve an amendment
to Lightbridge's 1996 Incentive and Non-Qualified Stock Option Plan to
increase the number of shares of common stock that may be issued under the
plan by 2,000,000 shares, from 2,350,000 shares to 4,350,000 shares. This
amendment will only be effective if the merger is completed, but the merger
may be completed even if the amendment is not approved.
Q: WHAT VOTE IS REQUIRED TO APPROVE EACH OF THE PROPOSALS?
A. For Lightbridge, the affirmative vote of a majority of the shares of
Lightbridge common stock present or represented by proxy and entitled to
vote at the Lightbridge special meeting is required to approve the issuance
of Lightbridge common stock to be delivered in connection with the merger
and the amendment to Lightbridge's 1996 Incentive and Non-Qualified Stock
Option Plan.
For Corsair, the affirmative vote of the holders of a majority of the
outstanding shares of Corsair's common stock is required to adopt the merger
agreement.
The Lightbridge board of directors recommends that its stockholders vote FOR
the proposal to approve the issuance of Lightbridge common stock to be
delivered in connection with the merger and FOR the proposal to amend
Lightbridge's 1996 Incentive and Nonqualified Stock Option Plan. The Corsair
board of directors recommends that its stockholders vote FOR the proposal to
adopt the merger agreement.
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SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THE
MERGER FULLY, AND FOR MORE COMPLETE DESCRIPTIONS OF THE TERMS OF THE MERGER, YOU
SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT AND THE DOCUMENTS WHICH WE
INCORPORATE BY REFERENCE. PLEASE ALSO REFER TO THE SECTION ENTITLED "WHERE YOU
CAN FIND MORE INFORMATION" ON PAGE 70 AND "INCORPORATION OF DOCUMENTS FILED WITH
THE SEC" ON PAGE 71 FOR SOURCES OF ADDITIONAL INFORMATION. THIS DOCUMENT AND THE
DOCUMENTS THAT WE INCORPORATE BY REFERENCE MAY CONTAIN FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THE RESULTS ANTICIPATED IN ANY FORWARD-LOOKING STATEMENTS AS A
RESULT OF THE FACTORS SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS
DOCUMENT AND THE DOCUMENTS THAT WE INCORPORATE BY REFERENCE.
THE COMPANIES
LIGHTBRIDGE, INC.
67 South Bedford Street
Burlington, Massachusetts 01803
(781) 359-4000
Lightbridge, Inc. provides customer relationship management solutions that
enable communications services providers to initiate and maintain relationships
with their subscribers. Clients ranging from large established carriers to
emerging service providers worldwide rely on Lightbridge's
Telesto-Registered Trademark- network of integrated customer acquisition and
risk management solutions to forge enduring customer relationships.
Lightbridge's traditional and Web-based offerings are designed to facilitate
rapid application approval, minimize fraud and expand the opportunity to retain
high-value customers. Carriers also depend on Lightbridge as a valuable partner,
which can leverage its diverse range of business consulting services to enhance
customer profitability and operational efficiencies.
CORSAIR COMMUNICATIONS, INC.
3408 Hillview Avenue
Palo Alto, California 94304
(650) 842-3300
Corsair Communications, Inc. is a leading provider of system solutions for
the global wireless industry. Corsair's PrePay-TM- billing system provides
wireless telecommunications carriers with a software solution designed to
integrate with the upcoming Wireless Intelligent Network standards. Corsair
believes that PrePay currently serves over 11 million subscribers. Corsair's
PhonePrint-Registered Trademark- system has proven highly effective in reducing
cloning fraud. Corsair believes that PhonePrint has prevented hundreds of
millions of fraudulent call attempts and saved its customers millions of dollars
in fraud losses. Corsair believes that its products can provide a number of
benefits to wireless telecommunications carriers, including reduced costs,
improved cash flow, increased market penetration and improved customer service.
THE MERGER (SEE PAGE 32)
Lightning Merger Corporation, a wholly owned subsidiary of Lightbridge, will
be merged with and into Corsair, with Corsair becoming a subsidiary of
Lightbridge. In the merger, each Corsair stockholder will receive:
- 0.5978 of a share of Lightbridge common stock for each share of Corsair
common stock owned by that stockholder; and
- cash instead of any fractional share.
We incorporate by reference the full text of the merger agreement which is
attached as Annex A to this document. YOU SHOULD READ CAREFULLY THE ENTIRE
MERGER AGREEMENT.
RECOMMENDATION OF CORSAIR'S BOARD OF DIRECTORS (SEE PAGE 29)
Corsair's board of directors believes that the merger is fair to Corsair
stockholders and in their best interest and has unanimously voted to approve the
merger agreement and recommends that its stockholders vote FOR the adoption of
the merger agreement.
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RECOMMENDATION OF LIGHTBRIDGE'S BOARD OF DIRECTORS (SEE PAGE 27)
Lightbridge's board of directors believes that the merger is fair to
Lightbridge stockholders and in their best interest and has unanimously voted to
approve the merger agreement and recommends that its stockholders vote FOR the
issuance of Lightbridge common stock to be delivered in connection with the
merger. Lightbridge's board also unanimously recommends that its stockholders
vote FOR the approval of the amendment to Lightbridge's 1996 Incentive and
Non-Qualified Stock Option Plan.
SPECIAL MEETING OF CORSAIR STOCKHOLDERS (SEE PAGE 29)
TIME, DATE, PLACE AND PURPOSE. Corsair will hold a special meeting of its
stockholders on February 7, 2001 at 8:30 a.m., local time, at Corsair's
executive offices, 3408 Hillview Avenue, Palo Alto, California, 94304. At the
meeting, Corsair stockholders will consider and vote on a proposal to adopt the
merger agreement.
RECORD DATE, QUORUM AND VOTE REQUIRED. Only holders of record of Corsair
common stock at the close of business on December 28, 2000, the record date for
Corsair's special meeting, are entitled to notice of and to vote at the special
meeting. A majority of the shares of Corsair common stock outstanding on the
record date must be present, in person or by proxy, to constitute a quorum at
the special meeting. The merger must be approved by a majority of the
outstanding shares of Corsair common stock. On the record date, there were
17,179,408 outstanding shares of Corsair common stock held by 138 holders of
record.
SPECIAL MEETING OF LIGHTBRIDGE STOCKHOLDERS (SEE PAGE 27)
TIME, DATE, PLACE AND PURPOSE. Lightbridge will hold a special meeting of
its stockholders on February 7, 2001 at 10:00 a.m., local time, at the offices
of Foley, Hoag & Eliot LLP, One Post Office Square, Sixteenth Floor, Boston,
Massachusetts 02109. At the meeting, Lightbridge stockholders will consider and
vote on a proposal to approve the issuance of Lightbridge common stock to be
delivered in connection with the merger and a proposal to approve an amendment
to Lightbridge's 1996 Incentive and Nonqualified Stock Option Plan to increase
the number of shares of common stock that may be issued under the plan by
2,000,000 shares to 4,350,000 shares.
RECORD DATE, QUORUM AND VOTE REQUIRED. Only holders of record of Lightbridge
common stock at the close of business on December 28, 2000, the record date for
Lightbridge's special meeting, are entitled to notice of and to vote at the
special meeting. A majority of the shares of Lightbridge common stock
outstanding on the record date must be present, in person or by proxy, to
constitute a quorum at the special meeting. The issuance of stock in connection
with the merger and the proposed amendment to Lightbridge's 1996 Incentive and
Non-Qualified Stock Option Plan must each be approved by a majority of the votes
cast at the special meeting. On the record date, there were 17,568,093
outstanding shares of Lightbridge common stock held by 159 holders of record.
OWNERSHIP OF LIGHTBRIDGE COMMON STOCK FOLLOWING THE MERGER (SEE PAGE 52)
Assuming that no options to purchase common stock are exercised prior to the
closing of the merger, Lightbridge will issue up to approximately 10,270,000
shares of its common stock to Corsair stockholders in the merger. Following the
merger, existing Lightbridge stockholders will own approximately 63.5%, and
former Corsair stockholders will own approximately 36.5%, of the outstanding
common stock of the combined company. Our calculation of the percentage
ownership of Lightbridge common stock following the merger is based on each
company's outstanding common stock as of September 30, 2000. We used the
treasury method of accounting to calculate the effect of options and warrants.
This method assumes the exercise of each company's currently exercisable options
and warrants with an exercise price below the current trading value of that
company's shares on The Nasdaq Stock Market and deducts a number of shares
assumed to be
4
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purchased in the open market with the proceeds of the option and warrant
exercises.
MANAGEMENT OF LIGHTBRIDGE FOLLOWING THE MERGER (SEE PAGE 52)
Upon the effectiveness of the merger, Lightbridge's board of directors will
consist of 3 individuals who are currently members of Lightbridge's board,
Torrence C. Harder, Andrew G. Mills and Pamela D.A. Reeve, and 2 individuals who
are currently members of Corsair's board, Rachelle B. Chong and Thomas C. Meyer.
Mr. Meyer will become President and Chief Operating Officer of Lightbridge and
Ms. Reeve will remain Chief Executive Officer. In addition, Lightbridge will
employ several other members of Corsair's management as senior executives.
STOCKHOLDER AGREEMENTS (SEE PAGE 60)
When the merger agreement was signed, the directors and executive officers
of Corsair who hold Corsair common stock entered into stockholder agreements
with Lightbridge and executed irrevocable proxies in favor of Lightbridge, which
require those persons not to dispose of Corsair common stock and authorize
Lightbridge to vote their shares with respect to the merger. The directors and
executive officers of Lightbridge who hold Lightbridge common stock entered into
equivalent stockholder agreements with Corsair and executed equivalent proxies
in favor of Corsair.
INTERESTS OF CORSAIR'S MANAGEMENT AND CERTAIN STOCKHOLDERS IN THE MERGER (SEE
PAGE 51)
In considering your board's recommendation that you vote to adopt the merger
agreement, you should be aware that Corsair's officers and directors may have
interests in the merger that are different from, or in addition to, your
interest in the merger.
CONDITIONS TO THE MERGER (SEE PAGE 56)
We will not complete the merger unless a number of conditions are satisfied
or waived. These include, among others:
- approval by Lightbridge's and Corsair's stockholders;
- expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976;
- registration under the Securities Act of 1933 of the shares of Lightbridge
common stock to be received by Corsair stockholders;
- approval for listing on The Nasdaq Stock Market of the additional shares
of Lightbridge common stock to be issued in the merger;
- receipt of opinions of counsel to Lightbridge and counsel to Corsair that
the merger will constitute a tax-free reorganization for U.S. federal
income tax purposes; and
- receipt of letters from the independent public accountants of Lightbridge
and Corsair regarding the appropriateness of pooling of interests
accounting.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 58)
The merger agreement may be terminated and the merger may be abandoned at
any time prior to completion in the following circumstances:
- by mutual written consent of the parties;
- by either party, upon issuance of a governmental order which would prevent
consummation of the merger, make the merger illegal, prohibit Lightbridge
from owning or operating all or a material portion of Corsair's business,
or require Lightbridge to dispose of or hold separately a material portion
of its or Corsair's business or assets as a result of the merger;
5
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- by either party, if the merger has not been consummated by February 28,
2001, or, if the merger is not consummated solely because the waiting
period under applicable antitrust laws has not expired or terminated, by
March 31, 2001;
- by either party, if Corsair's and/or Lightbridge's stockholders do not
approve their respective merger-related proposals;
- by Corsair, if Lightbridge's representations and warranties become untrue
or if Lightbridge breaches its covenants in a material way;
- by Lightbridge, if Corsair's representations and warranties become untrue
or if Corsair breaches its covenants in a material way;
- by Corsair, if Lightbridge's board of directors amends, withholds or
withdraws its recommendation of the merger, or accepts a superior
acquisition proposal from another company or recommends a superior
acquisition proposal to its stockholders; or
- by Lightbridge, if Corsair's board of directors amends, withholds or
withdraws its recommendation of the merger, or accepts a superior
acquisition proposal from another company or recommends a superior
acquisition proposal to its stockholders.
EXPENSES AND BREAK UP FEES (SEE PAGE 58)
In general, Lightbridge and Corsair will pay their own expenses and will
share the cost of printing and filing this document, except as follows:
- if the merger agreement is terminated due to a material breach, the
breaching party will pay the non-breaching party's expenses up to
$1.5 million; or
- if the merger agreement is terminated because either party's board of
directors adversely alters its recommendation of the merger or its
stockholders do not approve the merger, then that party will pay the other
party's expenses up to $1.5 million.
A break up fee of $3.0 million may be payable under the following
circumstances:
- if either party's board of directors adversely alters its recommendation
of the merger and its stockholders do not approve the merger; or
- if either party's board of directors accepts or approves an unsolicited
acquisition proposal which it deems to be a superior proposal or adversely
alters its recommendation of the merger after receiving the superior
proposal and, if either,
- the superior proposal is completed within 6 months of the board's
action; or
- an agreement for another acquisition proposal is entered into within
6 months of the board's action and that transaction is completed.
Any expenses or break up fees to be paid by one party to the other will be
offset so that in no event will either party receive more than $3.0 million in
expenses or break up fees.
OPINION OF LIGHTBRIDGE'S FINANCIAL ADVISOR (SEE PAGE 36)
In connection with the merger, Lightbridge's board of directors received the
written opinion of Donaldson, Lufkin & Jenrette Securities Corporation,
Lightbridge's financial advisor, that the exchange ratio of 0.5978 of a share of
Lightbridge common stock for each share of Corsair common stock was fair as of
the date of the opinion, from a financial point of view, to Lightbridge. The
full text of the opinion, which is attached to this document as Annex B, is
subject to specified assumptions, limitations and qualifications. LIGHTBRIDGE
ENCOURAGES ITS STOCKHOLDERS TO READ CAREFULLY THIS OPINION IN ITS ENTIRETY.
OPINION OF CORSAIR'S FINANCIAL ADVISOR (SEE PAGE 42)
In connection with the merger, Corsair's board of directors received the
written opinion of Broadview International LLC, Corsair's
6
<PAGE>
financial advisor, that the exchange ratio of 0.5978 of a share of Lightbridge
common stock for each share of Corsair common stock is fair, from a financial
point of view, to Corsair's stockholders. The full text of the opinion, which is
attached to this document as Annex C, contains assumptions made, matters
considered and qualifications and limitations on the scope of Broadview's
review. CORSAIR ENCOURAGES ITS STOCKHOLDERS TO READ CAREFULLY THIS OPINION IN
ITS ENTIRETY.
LISTING ON THE NASDAQ STOCK MARKET (SEE PAGE 61)
Lightbridge will apply to have the shares of Lightbridge common stock issued
in connection with the merger listed on The Nasdaq Stock Market. Lightbridge
common stock is traded on The Nasdaq Stock Market under the symbol "LTBG."
ACCOUNTING TREATMENT (SEE PAGE 62)
Lightbridge and Corsair intend that the merger qualify as a pooling of
interests, which means that, for accounting and financial reporting purposes,
the companies will be treated as if they had always been combined.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 61)
In general, Corsair stockholders who exchange their shares of Corsair common
stock for Lightbridge common stock will not recognize any gain or loss for U.S.
federal income tax purposes in the merger, except for gain or loss arising from
cash received instead of fractional shares. YOU ARE URGED TO CONSULT YOUR OWN
TAX ADVISOR.
DISSENTERS' RIGHTS (SEE PAGE 31)
Corsair stockholders do not have appraisal or dissenters' rights in
connection with the merger.
COMPARISON OF RIGHTS OF LIGHTBRIDGE STOCKHOLDERS AND CORSAIR STOCKHOLDERS (SEE
PAGE 68)
The rights of Corsair stockholders are determined by Delaware law and
Corsair's certificate of incorporation and by-laws. If the merger is completed,
Corsair stockholders will receive shares of Lightbridge common stock. As a
stockholder of Lightbridge, your rights will be governed by Delaware law and
Lightbridge's certificate of incorporation and by-laws. Please see "Comparison
of rights of Lightbridge stockholders and Corsair stockholders" for a comparison
of the material differences of these provisions.
REGULATORY COMPLIANCE (SEE PAGE 63)
Completion of the merger will not occur until we have satisfied the
requirements of applicable laws and regulations. Under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, Lightbridge and Corsair must furnish
specified materials and information to the Antitrust Division of the Department
of Justice and the Federal Trade Commission. Lightbridge and Corsair are
currently preparing the required notification and report forms.
7
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO-FORMA CONSOLIDATED FINANCIAL INFORMATION
Lightbridge and Corsair are providing the following consolidated financial
information to aid you in your analysis of the financial aspects of the merger.
This information is only a summary and you should read it in conjunction with
the historical financial statements and related notes contained in the annual
reports and other information that Lightbridge and Corsair have filed with the
SEC and incorporated into this document by reference.
Lightbridge and Corsair each prepare financial statements on the basis of a
fiscal year ending on December 31. Lightbridge changed its fiscal year end from
September 30 to December 31, effective with the fiscal year ended December 31,
1996. Lightbridge derived its information from the consolidated financial
statements of Lightbridge audited by Deloitte & Touche LLP as of December 31,
1999, 1998, 1997 and 1996, and September 30, 1995 and for each of the years then
ended and as of December 31, 1995 and for the three months then ended, and from
the unaudited financial statements as of and for the nine months ended
September 30, 2000 and 1999. Corsair derived its information from the
consolidated financial statements of Corsair as of December 31, 1999, 1998,
1997, 1996 and 1995 and for each of the years then ended, which were audited by
KPMG LLP, except for the statements of operations, stockholders' equity and cash
flows of Subscriber Computing, Inc., a company acquired by Corsair in a business
combination accounted for as a pooling of interests. Corsair derived the amounts
included for SCI from financial statements audited by Deloitte & Touche LLP.
Corsair also derived information from its unaudited financial statements as of
and for the nine months ended September 30, 2000 and 1999.
The selected historical consolidated financial information for both
Lightbridge and Corsair reflects the effects of recent acquisitions and
non-recurring charges. The consolidated financial statements of Corsair give
retroactive effect to the merger with SCI on June 23, 1998. The consolidated
financial statements of Corsair have been restated for all periods presented as
if Corsair and SCI had always been combined.
The unaudited financial statements include all adjustments, consisting of
normal recurring accruals, which Lightbridge and Corsair consider necessary for
a fair presentation of their respective financial positions and results of
operations for these periods. Operating results for the nine month period ended
September 30, 2000, are not necessarily indicative of results that may be
expected for the entire year ending December 31, 2000, or any other period.
For purposes of the unaudited pro forma consolidated statement of operations
data, Lightbridge's and Corsair's respective consolidated statements of
operations for the nine months ended September 30, 2000 and 1999, and the three
years ended December 31, 1999, 1998 and 1997, have been combined. The selected
unaudited pro forma consolidated balance sheet data gives effect to the merger
as if the transaction occurred on September 30, 2000, and combines the
consolidated balance sheets of Lightbridge and Corsair as of that date. Pro
forma information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position that would
have occurred if the merger had been consummated at the beginning of the periods
indicated, nor is it necessarily indicative of future operating results or
financial position.
8
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF LIGHTBRIDGE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS THREE
ENDED YEAR MONTHS
SEPTEMBER 30, YEAR ENDED DECEMBER 31, ENDED ENDED
------------------- ----------------------------------------- SEPT. 30, DEC. 31,
2000 1999 1999 1998 1997 1996 1995 1995
-------- -------- -------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................. $85,651 $65,399 $89,716 $63,352 $40,549 $29,545 $19,350 $ 6,512
Cost of revenues......................... 43,138 30,826 42,876 33,108 19,427 15,986 12,607 3,484
------- ------- ------- ------- ------- ------- ------- -------
Gross profit............................. 42,513 34,573 46,840 30,244 21,122 13,559 6,743 3,028
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Development costs...................... 11,997 9,049 12,659 9,596 6,072 4,380 3,864 1,145
Sales and marketing.................... 6,361 5,747 7,482 6,857 6,041 3,673 1,902 795
General and administrative............. 9,073 8,666 10,877 8,490 4,732 2,769 2,584 701
Amortization of goodwill and acquired
workforce............................ 502 1,044 1,342 2,982 497 -- -- --
Intangible asset impairment............ -- -- -- 7,385 -- -- -- --
Purchased in-process research and
development.......................... -- -- -- -- 4,000 -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses................. 27,933 24,506 32,360 35,310 21,342 10,822 8,350 2,641
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from operations............ 14,580 10,067 14,480 (5,066) (220) 2,737 (1,607) 387
Other income (expense)................... 1,109 903 1,233 682 949 (305) (826) (313)
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes........ 15,689 10,970 15,713 (4,384) 729 2,432 (2,433) 74
Provision for income taxes............... 6,316 5,376 5,568 2,513 892 160 -- 2
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)........................ $ 9,373 $ 5,594 $10,145 $(6,897) $ (163) 2,272 (2,433) 72
======= ======= ======= ======= =======
Accretion of preferred stock dividends... (137) (182) (46)
------- ------- -------
Net income (loss) available for common
stock.................................. $ 2,135 $(2,615) $ 26
======= ======= =======
Basic earnings (loss) per common share... $ 0.55 $ 0.35 $ 0.62 $ (0.44) $ (0.01) $ 0.33 $ (0.40) $ --
======= ======= ======= ======= ======= ======= ======= =======
Shares used in basic per share
calculation............................ 16,935 15,960 16,235 15,834 14,802 6,521 6,508 6,509
======= ======= ======= ======= ======= ======= ======= =======
Diluted earnings (loss) per common
share.................................. $ 0.51 $ 0.32 $ 0.56 $ (0.44) $ (0.01) $ 0.17 $ (0.40) $ --
======= ======= ======= ======= ======= ======= ======= =======
Shares used in diluted per share
calculation............................ 18,501 17,549 17,991 15,834 14,802 13,106 6,508 6,509
======= ======= ======= ======= ======= ======= ======= =======
BALANCE SHEET DATA:
Cash and cash equivalents................ $38,936 $25,752 $35,478 $16,437 $15,716 $27,901 $ 539 $ 58
Working capital (deficit)................ $44,907 $32,153 $36,771 $24,519 $21,186 $30,457 $(3,280) $(1,967)
Total assets............................. $91,161 $68,680 $75,857 $57,777 $63,565 $41,766 $10,214 $11,055
Long-term obligations, less current
portion................................ $ 849 $ 1,251 $ 1,102 $ 1,181 $ 2,221 $ 2,221 $ 3,796 $ 4,515
Redeemable convertible preferred stock... $ -- $ -- $ -- $ -- $ -- $ -- $ 3,131 $ 3,177
Stockholder's equity (deficit)........... $69,525 $51,265 $57,292 $44,447 $50,716 $33,599 $(3,564) $(3,522)
</TABLE>
Other income (expense) consists principally of interest expense for the
years ended December 31, 1996 and September 30, 1995 and for the three months
ended December 31, 1995. Other income (expense) consists principally of interest
income for the nine months ended September 30, 2000 and for the years ended
December 31, 1998 and 1997. For the nine months ended September 30, 1999 and for
the year ended December 31, 1999, other income (expense) consists principally of
interest income and a nonrecurring gain of approximately $415 on the sale of an
investment.
9
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF CORSAIR
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................. $48,417 $48,411 $66,207 $65,218 $60,856 $ 31,216 $15,139
Cost of revenues..................................... 14,788 18,567 24,314 26,562 36,867 24,935 12,716
------- ------- ------- ------- ------- -------- -------
Gross profit......................................... 33,629 29,844 41,893 38,656 23,989 6,281 2,423
Operating costs and expenses:
Research and development........................... 9,348 8,572 11,312 18,289 12,525 8,583 3,421
Sales and marketing................................ 9,623 10,339 13,421 16,775 11,411 7,764 4,274
General and administrative......................... 4,509 5,034 6,606 8,501 9,432 5,282 3,547
Reorganization costs............................... -- 856 856 -- -- -- --
Write-off of capitalized software costs............ -- -- -- -- -- 3,760 --
Merger related expenses............................ -- -- -- 4,191 -- -- --
------- ------- ------- ------- ------- -------- -------
Total operating expenses............................. 23,480 24,801 32,195 47,756 33,368 25,389 11,242
Operating income (loss).............................. 10,149 5,043 9,698 (9,100) (9,379) (19,108) (8,819)
Loss on sale of assets............................... -- (2,176) (2,176) -- -- -- --
Interest income (expense), net....................... 2,871 1,270 1,817 2,460 1,191 (494) 181
------- ------- ------- ------- ------- -------- -------
Income (loss) before income taxes.................... 13,020 4,137 9,339 (6,640) (8,188) (19,602) (8,638)
Income tax expense................................... 4,035 984 498 -- 8 3 2
------- ------- ------- ------- ------- -------- -------
Income (loss) before extraordinary item.............. 8,985 3,153 8,841 (6,640) (8,196) (19,605) (8,640)
Loss on debt extinguishment, net..................... -- -- -- (226) (428) -- --
------- ------- ------- ------- ------- -------- -------
Net income (loss).................................... $ 8,985 $ 3,153 $ 8,841 $(6,866) $(8,624) $(19,605) $(8,640)
======= ======= ======= ======= ======= ======== =======
Basic net income (loss) per share data:
Income (loss) per share before extraordinary item.... $ 0.52 $ 0.18 $ 0.50 $ (0.38) $ (0.82) $ (11.57) $ (5.49)
Extraordinary item................................... -- -- -- (0.01) (0.04) -- --
------- ------- ------- ------- ------- -------- -------
Basic net income (loss) per share.................... $ 0.52 $ 0.18 $ 0.50 $ (0.39) $ (0.86) $ (11.57) $ (5.49)
======= ======= ======= ======= ======= ======== =======
Shares used in basic per share calculation........... 17,266 17,702 17,700 17,749 10,017 1,694 1,573
======= ======= ======= ======= ======= ======== =======
Diluted net income (loss) per share data:
Income (loss) per share before extraordinary item.... $ 0.49 $ 0.17 $ 0.48 $ (0.38) $ (0.82) $ (11.57) $ (5.49)
Extraordinary item................................... -- -- -- (0.01) (0.04) -- --
------- ------- ------- ------- ------- -------- -------
Diluted net income (loss) per share.................. $ 0.49 $ 0.17 $ 0.48 $ (0.39) $ (0.86) $ (11.57) $ (5.49)
======= ======= ======= ======= ======= ======== =======
Shares used in diluted per share calculation......... 18,524 18,677 18,315 17,749 10,017 1,694 1,573
======= ======= ======= ======= ======= ======== =======
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments.... $65,358 $45,306 $52,949 $38,573 $62,953 $ 22,081 $15,569
Working capital...................................... $57,110 $48,768 $51,305 $45,424 $51,321 $ 17,670 $15,145
Total assets......................................... $84,361 $74,473 $76,683 $71,560 $87,539 $ 41,726 $26,707
Long-term liabilities................................ $ -- $ 867 $ 670 $ 1,624 $ 3,164 $ 8,295 $ 8,030
Stockholder's equity................................. $62,566 $53,570 $56,615 $52,114 $57,375 $ 13,651 $13,077
</TABLE>
On June 23, 1998, Corsair acquired Subscriber Computing, Inc. in a merger
accounted for under the pooling of interests method of accounting. Corsair's
consolidated financial statements have been restated to include the financial
position and results of SCI for all periods presented. Due to the fiscal year
end conversion of SCI to that of Corsair, SCI's net revenues of $2.9 million and
net loss of $4.9 million for the three-month period ended December 31, 1997 are
not included in the statement of operations data.
The selected financial data presented above under the caption "Statement of
operations data" for each of the years ended December 31, 1999, 1998, 1997, 1996
and 1995 combines Corsair's statements of operations for each of the years in
the five-year period ended December 31, 1999 with SCI's statements of operations
for each of the years in the three-year period ended September 30, 1997, and the
years ended December 31, 1999 and 1998, respectively, giving effect to the
fiscal year end conversion and the merger as if it had occurred at the beginning
of the earliest period presented on a pooling of interest basis.
10
<PAGE>
SELECTED UNAUDITED COMBINED PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ------------------------------
2000 1999 1999 1998 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
COMBINED CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net revenues.............................. $134,068 $113,810 $155,923 $128,569 $101,405
Operating income (loss)................... 24,729 15,110 24,178 (14,166) (9,599)
Income (loss) before extraordinary item... 18,358 8,747 18,986 (13,763) (8,787)
Basic income (loss) per share data:
Basic income (loss) per share before
extraordinary item.................... $ 0.67 $ 0.33 $ 0.71 $ (0.51) $ (0.40)
======== ======== ======== ======== ========
Shares used in per share calculation.... 27,257 26,542 26,816 26,444 20,790
======== ======== ======== ======== ========
Diluted income (loss) per share data:
Diluted income (loss) per share before
extraordinary item.................... $ 0.62 $ 0.30 $ 0.66 $ (0.51) $ (0.40)
======== ======== ======== ======== ========
Shares used in per share calculation.... 29,575 28,714 28,940 26,444 20,790
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 2000
------------------
<S> <C>
COMBINED CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $104,294
Working capital............................................. $ 95,917
Total assets................................................ $175,522
Long-term obligations....................................... $ 849
Retained earnings (accumulated deficit)..................... $(30,318)
Total stockholder's equity.................................. $125,991
</TABLE>
11
<PAGE>
COMPARATIVE PER SHARE DATA
The following table presents specified historical per share data of
Lightbridge and Corsair and combined per share data on an unaudited pro forma
basis after giving effect to the merger on a pooling of interests basis assuming
the issuance of 0.5978 shares of Lightbridge common stock in exchange for each
share of Corsair common stock. This data is derived from and should be read in
conjunction with the selected historical consolidated financial data included in
this document and separate historical consolidated financial statements of
Lightbridge and Corsair incorporated by reference in this document. The
unaudited pro forma combined financial data are not necessarily indicative of
the operating results that would have been achieved had the transaction been in
effect as of the beginning of the periods presented and should not be construed
as representative of future operations.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ------------------------------
2000 1999 1999 1998 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Historical Lightbridge:
Basic net income (loss) per share..................... $0.55 $0.35 $0.62 $(0.44) $(0.01)
Diluted net income (loss) per share................... $0.51 $0.32 $0.56 $(0.44) $(0.01)
Historical Corsair:
Basic income (loss) per share
Before extraordinary item........................... $0.52 $0.18 $0.50 $(0.38) $(0.82)
Net income (loss)................................... $0.52 $0.18 $0.50 $(0.39) $(0.86)
Diluted income (loss) per share
Before extraordinary item........................... $0.49 $0.17 $0.48 $(0.38) $(0.82)
Net income (loss)................................... $0.49 $0.17 $0.48 $(0.39) $(0.86)
Pro forma combined diluted income (loss) before
extraordinary item:
Per Lightbridge share................................. $0.62 $0.30 $0.66 $(0.51) $(0.40)
Equivalent per Corsair share.......................... $0.37 $0.18 $0.39 $(0.31) $(0.24)
Book value per share:
Historical Lightbridge................................ $3.98 $3.45
Historical Corsair.................................... $3.64 $3.10
Proforma combined per Lightbridge share............... $4.57 $4.13
Proforma equivalent per combined Corsair share........ $2.73 $2.47
</TABLE>
We calculated the pro forma combined diluted income (loss) equivalent per
Corsair share amount by multiplying the pro forma combined diluted income (loss)
per Lightbridge share amount by the exchange ratio of 0.5978 shares of
Lightbridge common stock for each share of Corsair common stock.
We computed the historical book value per share by dividing stockholders'
equity by the number of shares of common stock outstanding at September 30, 2000
and December 31, 1999. We computed the pro forma combined book value per share
by dividing pro forma stockholders' equity by the pro forma number of shares of
Lightbridge common stock outstanding as of September 30, 2000 and December 31,
1999, assuming the merger had occurred as of those dates. We calculated the pro
forma equivalent combined book value per Corsair share by multiplying the pro
forma combined book value per Lightbridge share by the exchange ratio of 0.5978
shares of Lightbridge common stock for each share of Corsair common stock.
12
<PAGE>
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION
The following table presents the high and low closing prices of Lightbridge
and Corsair common stock, as reported in published financial sources, for the
periods indicated. Closing prices have been rounded to the nearest full cent.
<TABLE>
<CAPTION>
LIGHTBRIDGE CORSAIR
COMMON STOCK COMMON STOCK
------------------- -------------------
QUARTER HIGH LOW HIGH LOW
------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
2000
Fourth Quarter (through December 28, 2000).................. $17.88 $ 7.13 $ 8.75 $ 4.00
Third Quarter............................................... 27.50 9.00 28.25 7.81
Second Quarter.............................................. 24.50 15.25 28.75 14.00
First Quarter............................................... 28.81 16.69 32.25 7.00
1999
Fourth Quarter.............................................. 33.25 15.38 12.00 6.88
Third Quarter............................................... 19.88 11.88 8.06 4.19
Second Quarter.............................................. 12.56 4.75 5.00 3.88
First Quarter............................................... 7.25 4.63 6.22 3.69
1998
Fourth Quarter.............................................. 6.22 3.13 6.25 2.63
Third Quarter............................................... 9.25 3.38 11.00 2.63
Second Quarter.............................................. 19.25 8.41 21.19 6.50
First Quarter............................................... 20.25 10.00 22.25 14.00
</TABLE>
The following table presents the high, low and closing per share sale prices
for shares of Lightbridge common stock and Corsair common stock on The Nasdaq
Stock Market as of October 25, 2000, the last full day of trading before
Lightbridge and Corsair publicly announced the execution of the merger
agreement, and as of December 28, 2000, the most recent practicable date prior
to the mailing of this document to our stockholders.
<TABLE>
<CAPTION>
LIGHTBRIDGE COMMON STOCK CORSAIR COMMON STOCK
------------------------------ ------------------------------
HIGH LOW CLOSING HIGH LOW CLOSING
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
October 25, 2000............................ $17.00 $15.50 $15.63 $ 7.19 $ 6.88 $ 6.94
December 28, 2000........................... 11.50 10.50 11.34 6.86 6.13 6.56
</TABLE>
On the date the merger is completed and on the date a Corsair stockholder
receives a Lightbridge stock certificate in exchange for a Corsair stock
certificate(s), the price of a share of Lightbridge common stock may differ from
the prices listed above. We urge you to obtain current price quotations for
shares of Lightbridge common stock and Corsair common stock before voting on the
merger.
Neither Lightbridge nor Corsair has declared or paid any cash dividends on
its respective capital stock. Lightbridge currently anticipates that it will
retain future earnings, if any, to fund the development and growth of its
business and therefore does not expect to pay any cash dividends in the
foreseeable future. The terms of Lightbridge's existing borrowing arrangements
and bank lines of credit prohibit Lightbridge from declaring or paying cash
dividends on its common stock.
13
<PAGE>
RISK FACTORS
In considering whether to adopt the merger agreement, you should consider
carefully the risks associated with the merger and with ownership of Lightbridge
common stock following the merger. The risks and uncertainties described below
are not the only risks that will face the combined company. If one or more of
these risks occurs, the combined company's results of operations, financial
condition or prospects will suffer and the price of the combined company's stock
is likely to fall. The value of your investment in the combined company could
decline as a result.
RISKS RELATED TO THE MERGER
IF LIGHTBRIDGE AND CORSAIR DO NOT SUCCESSFULLY INTEGRATE THEIR RESPECTIVE
BUSINESSES, WE MAY NOT REALIZE THE EXPECTED BENEFITS FROM THE MERGER.
The merger of Lightbridge and Corsair involves the combination of two
companies that have previously operated independently. Lightbridge and Corsair
entered into the merger agreement with the expectation that the merger will
result in benefits to the combined company. However, integrating the operations
of Corsair with those of Lightbridge after the merger may be difficult, time
consuming and costly. Lightbridge experienced difficulties in integrating Coral
Systems, Inc. following Lightbridge's acquisition of that company in November
1997, and Corsair experienced similar difficulties with respect to its
acquisition of Subscriber Computing, Inc. in June 1998. Any failure by
Lightbridge and Corsair to integrate their operations successfully could have a
material adverse effect on the business of the combined company. The
difficulties involved in integrating the companies, which could be substantial,
include the following:
- management and key personnel could be distracted from the day-to-day
business of the combined company;
- the business cultures of the two companies could prove to be incompatible;
- managing the combined company's geographically dispersed operations could
be difficult and costly;
- implementing common systems and procedures, especially information and
accounting systems, could be costly and time consuming; and
- key officers' technical, sales and customer support personnel may not be
satisfied or happy in the combined company and may elect to leave.
THE NUMBER OF SHARES OF LIGHTBRIDGE COMMON STOCK TO BE ISSUED FOR EACH SHARE OF
CORSAIR COMMON STOCK IS FIXED, AND WILL NOT BE ADJUSTED IF LIGHTBRIDGE'S STOCK
PRICE DECLINES.
The ratio at which Corsair common stock will be converted into Lightbridge
common stock is fixed at 0.5978, and this ratio will not be adjusted in the
event of any increase or decrease in the market price of Lightbridge common
stock. The market price of Lightbridge common stock at the time the merger is
effective may vary from its price on the date of this document and its price on
the date of the Lightbridge and Corsair stockholder meetings. This variation
could be the result of a number of factors, including:
- changes in the business, operations or prospects of Lightbridge;
- the timing of completion of the merger;
- the prospects of the merger and post-merger operations;
- market assessments of the likelihood that the merger will be completed;
- regulatory considerations; or
- general market and economic conditions.
14
<PAGE>
As a result, the market value of the Lightbridge common stock that Corsair
stockholders receive for their shares is not certain. In considering whether or
not to approve the merger, stockholders of Corsair should obtain current market
quotations for Lightbridge common stock.
THE DIRECTORS AND OFFICERS OF CORSAIR MAY HAVE INTERESTS IN THE MERGER THAT ARE
DIFFERENT FROM THOSE OF OTHER CORSAIR STOCKHOLDERS.
In considering the recommendation of Corsair's board of directors to adopt
the merger agreement, Corsair stockholders should recognize that some of
Corsair's directors and officers may have interests that differ from those of
other Corsair stockholders because of employment arrangements, indemnification
and liability insurance and other reasons. These reasons are described more
fully under the heading "The Merger--Interests of Corsair's management and
certain stockholders in the merger."
Control of the combined company after the merger will be held by a limited
number of stockholders, many of whom are presently Lightbridge stockholders.
These stockholders will be able to exercise significant influence over all
matters requiring stockholder approval and thereby limit the power of other
stockholders to influence corporate action.
As a result of the merger, the former stockholders of Corsair will own
approximately 36.5% of the outstanding voting stock of the combined company. In
addition, as of December 28, 2000, several of Corsair's directors and officers
also hold options to purchase shares of Corsair common stock which will be
assumed by Lightbridge and represent options to acquire 1,181,052 shares of
Lightbridge common stock. Approximately 7.37% of the outstanding voting stock of
the combined company will be held by stockholders who are currently directors
and officers of Lightbridge. These stockholders will be able to exercise
significant influence over all matters requiring stockholder approval, including
the election of directors and the approval of significant corporate
transactions. This concentration of ownership may also potentially delay or
prevent a change in control of Lightbridge.
RISKS RELATED TO LIGHTBRIDGE AND CORSAIR AS A COMBINED COMPANY
IF WE LOSE ONE OR MORE OF OUR LARGER CLIENTS OUR OPERATING RESULTS COULD SUFFER
DRAMATICALLY.
Lightbridge's and Corsair's sales are concentrated among a few major
clients. In the years ended December 31, 1997, 1998 and 1999, Lightbridge's
three largest clients accounted for approximately 43%, 42%, and 56%,
respectively, of Lightbridge's total revenues. Corsair's three largest clients
during its fiscal years ended December 31, 1997, 1998 and 1999, accounted for
approximately 33%, 32% and 52%, respectively, of Corsair's total revenues. In
particular, AT&T Wireless Services, Inc. accounted for approximately 29%, 17%
and 18% of Lightbridge's total revenues in 1997, 1998 and 1999, respectively,
and Sprint Spectrum L.P. accounted for approximately 15% and 33% of
Lightbridge's total revenues in 1998 and 1999, respectively. Ericsson Radio
Systems AB accounted for 43% of Corsair's total revenues in 1999. In 1998,
BellSouth Cellular Corporation and GTE Mobilnet Service Corporation each
accounted for 10% or more of Corsair's total revenues, and collectively
accounted for over 23% of Corsair's total revenues for that year.
The loss of any one or more of these clients or a reduction in orders by
them could materially reduce the revenues that would otherwise be generated by
the combined company. The combined company's revenues and earnings may fluctuate
significantly from quarter to quarter, based on the actions of a single
significant client. We expect that most of our revenues will continue to come
from a relatively small number of clients for the foreseeable future, although
the companies that comprise our largest clients in any given quarter may change
from quarter to quarter.
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OUR REVENUES ARE UNCERTAIN BECAUSE OUR CONTRACTS DO NOT REQUIRE OUR CLIENTS TO
PURCHASE SPECIFIED AMOUNTS OF OUR PRODUCTS OR SERVICES.
Our client contracts generally extend for terms of between one and five
years and frequently do not require our clients to purchase any particular type
or quantity of our products or services, or to pay any minimum amount for
products or services. Therefore, our current clients may not continue to utilize
our products or services at levels similar to previous years or at all, and may
not generate significant revenues in future periods. If any of our major clients
terminates or significantly reduces its purchases from us for any reason, our
business could be seriously damaged. Our business could also be harmed if we are
unable to collect, or experience delays in collecting, payments from any of our
major clients.
OUR REVENUES ARE CONCENTRATED IN THE WIRELESS TELECOMMUNICATIONS INDUSTRY.
We currently derive almost all of our revenues from companies in the
wireless telecommunications industry. While we will seek to expand our client
base to other types of telecommunications providers, both domestically and
internationally, and to clients in other industries, we expect that
telecommunications companies will continue to account for a substantial majority
of our revenues for the foreseeable future. Although the wireless industry has
experienced significant growth in recent years, we believe that the growth rate
of the domestic wireless industry may begin to slow as the industry matures. As
a result, our success depends on a number of factors, including the following:
- continued demand for our products and services by domestic companies in
the wireless telecommunications industry;
- the number of carriers seeking to implement prepaid billing services;
- continued growth of the domestic cellular and personal communications
services, or PCS, markets;
- our ability to develop and market new products and services to new and
existing clients;
- our ability to increase sales of our products and services overseas; and
- our ability to increase sales of our products and services to competitive
local exchange carriers and other new classes of clients.
Recently some of our clients have completed or announced mergers with other
clients. We currently are unable to predict the effect, if any, that these
consolidations will have on the nature and quantity of products and services we
will provide to these clients.
IF WE DO NOT CONTINUE TO ENHANCE OUR EXISTING PRODUCTS AND SERVICES, AND DEVELOP
NEW PRODUCTS AND SERVICES, WE WILL NOT BE ABLE TO COMPETE EFFECTIVELY IN OUR
INDUSTRY.
The telecommunications industry has been changing rapidly as a result of
increasing competition, technological advances and evolving industry practices
and standards. Carriers in the telecommunications market have also been changing
quickly as the result of consolidation among existing carriers and the rapid
entrance of new carriers into the market. In order to remain competitive and
successfully address the evolving needs of our clients, we must continue to
commit a significant portion of our personnel, financial resources, research and
development spending and customer support to the following goals:
- identifying and anticipating emerging technological and market trends;
- enhancing our current products and services;
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- developing new products and services that address changing client needs,
business practices and technical requirements;
- integrating our current and future products; and
- creating and maintaining interfaces to changing third party systems.
We must achieve these goals in a timely and cost effective manner and
successfully market our new and enhanced products and services. In the past,
Lightbridge and Corsair have experienced delays in developing new products and
enhancing existing products and, on occasion, each company has postponed
scheduled delivery dates for products. If we are unable to enhance and expand
our products and services quickly and efficiently, our business and operating
results could be adversely affected.
WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR GROWTH.
Lightbridge's and Corsair's operations have expanded rapidly in recent
years. This expansion has created significant demands on each company's
executive, operational, development and financial personnel and other resources.
If we achieve future growth in our business, we may experience further strain on
our management, financial and other resources. Our future operating results will
depend on the ability of our officers and key employees to manage changing
business conditions, and integrate the operations of each business. We cannot
assure you that we will be able to successfully manage the growth and expansion
of the business.
OUR FUTURE OPERATING RESULTS WILL DEPEND ON THE SUCCESS OF OUR PREPAY PRODUCTS.
PrePay, a prepaid metered billing solution product, will account for a
majority of Corsair's revenues in 2000. As a result, our future operating
results will depend to a significant extent on the demand for and market
acceptance of PrePay. Currently, PrePay has only been commercially deployed on
networks which use Ericsson switching equipment and only carriers that have
deployed Ericsson's infrastructure equipment are potential clients for PrePay.
In order to expand its potential client base, Corsair recently introduced its
PrePay Open product, making PrePay compatible with other infrastructure
equipment; however, this product has only been used under testing arrangements
and has not yet gained market acceptance. We can not assure you that the rate of
adoption of the PrePay system will increase or that the PrePay Open product will
gain market acceptance. If PrePay does not gain market acceptance, our future
operating results will be adversely affected.
OUR FUTURE SALES AND REVENUES MAY BE UNCERTAIN BECAUSE OF RELIANCE ON THIRD
PARTIES FOR MARKETING AND DISTRIBUTION.
Corsair's PrePay product is marketed primarily through its distribution
agreement with Ericsson, and sold commercially only by Ericsson. Corsair's
PhonePrint product is marketed primarily through Corsair's direct sales efforts;
however, Corsair has entered into PhonePrint distribution agreements with, among
others, Motorola, Ericsson and Aurora. We intend to continue to market and
distribute these products through these and other relationships. We also intend
to enter into additional distributor and sales and marketing arrangements for
sales of these and other products outside of the United States. There are no
minimum purchase obligations applicable to any existing distributor or other
sales and marketing partners and we do not expect to have any guarantees of
continuing orders for our products in the future. Failure by existing and future
distributors or other sales and marketing partners to generate significant
revenues could have a material adverse effect on our business, operating results
and financial condition.
In addition, distributors and other sales and marketing partners may become
competitors, either by developing a competitive product themselves or by
distributing a competitive offering. For example, Ericsson may evaluate and seek
to distribute or acquire alternative vendor's prepaid products which
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compete with PrePay. Competition from existing and future distributors or other
sales and marketing partners would significantly harm sales of our products.
UNLESS AN ALTERNATIVE APPLICATION FOR OUR PHONEPRINT PRODUCT IS DEVELOPED FOR
WIRELESS CARRIERS OPERATING IN DIGITAL MODE, OUR REVENUES FROM THE PHONEPRINT
PRODUCT WILL CONTINUE TO DECLINE.
Corsair's PhonePrint product is a cloning fraud prevention system. There
will be limited demand for PhonePrint systems in the future because wireless
services operating in digital mode are typically capable of automatically
establishing the validity of a phone each time it attempts to access the
wireless telecommunications network. We are not aware of any information that
suggests that cloners have been able to break these authentication encryption
technologies. Unless the encryption technologies are broken by cloners, we do
not believe that operators of digital networks will purchase third party radio
frequency fingerprinting solutions for cloning fraud such as PhonePrint.
Industry experts project that the number of analog phones and analog networks
will ultimately decline in favor of digital alternatives, therefore, our
revenues from this product will probably continue to decline in the future.
WE FACE SIGNIFICANT COMPETITION FOR A LIMITED SUPPLY OF QUALIFIED SOFTWARE
ENGINEERS AND CONSULTANTS.
Our business will depend on the services of skilled software engineers who
can develop, maintain and enhance our products and consultants who can undertake
complex client projects. Only highly qualified, highly educated personnel have
the training and skills necessary to perform these tasks successfully. In order
to maintain the competitiveness of our products and to meet client requirements,
we will need to attract, motivate and retain a significant number of software
engineers and consultants. Qualified personnel are in short supply and we will
face significant competition for these employees, not only from our competitors
but also clients and other enterprises. Other employers may offer software
engineers and consultants significantly greater compensation and benefits or
more attractive career paths or geographic locations than we will be able to
offer. Any failure to hire, train and retain a sufficient number of qualified
personnel will seriously damage our business.
OUR FUTURE SUCCESS DEPENDS ON THE CONTINUED SERVICES OF KEY EXECUTIVE OFFICERS
FROM EACH COMPANY.
Our future success will depend to a significant degree on the skills,
experience and efforts of our executive officers, particularly Pamela D.A.
Reeve, Lightbridge's President and Chief Executive Officer, and Thomas C. Meyer,
Corsair's President and Chief Executive Officer. After the merger, Ms. Reeve
will serve as our Chief Executive Officer and Mr. Meyer will serve as our
President and Chief Operating Officer. We will not have any employment contracts
requiring Ms. Reeve, Mr. Meyer or any of our other executive officers to
continue their employment for any period of time, and we do not maintain
key-person life insurance on any of our executive officers other than Ms. Reeve.
If we lose the services of one or more of these persons, we may be unable to
successfully implement our planned business objectives and our future operations
may be adversely affected.
WE FACE COMPETITION FROM A BROAD RANGE OF VENDORS.
The market for products and services provided to telecommunications carriers
is highly competitive and subject to rapid change. This market is also
fragmented by a large number of companies currently offering one or more
products or services which compete with our products and services.
Lightbridge's current competitors include:
- software vendors that provide one or more customer acquisition, retention
or fraud detection solutions, including GTE Corporation's TSI division,
Systems/Link, Magnum Software Systems, HNC Software and SLP Infoware;
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- telecommunications equipment vendors that market software-based solutions
to complement their hardware offerings, such as Compaq, Ericsson and
Northern Telecom;
- service providers that offer customer acquisition, retention or fraud
detection services in connection with other services, including Equifax,
LHS Group and Amdocs;
- information technology departments within larger carriers that have the
ability to provide products and services that are competitive with those
products and services that Lightbridge currently offers; and
- consulting firms that may offer competitive services or the ability to
develop customized solutions for customer acquisition, retention or fraud
detection, such as American Management, Andersen Consulting, CAP Gemini
Ernst & Young and Deloitte & Touche.
Corsair's current competitors include:
- vendors that provide alternative prepaid billing products, including
post-call systems, handset-based systems and adjunct switch systems, such
as GTE Telecommunications Services, Boston Communications Group, Brite
Voice Systems, Comverse Technology, Glenayre Technologies, National
Telemanagement, Telemac Cellular, Systems/Link, Prairie Systems, ORGA
Kartensysteme, SEMA Group, Logica, Alcatel USA, Priority Call Management,
Lucent Technologies, Compaq (Tandem Division) and Northern Telecom;
- vendors that provide radio frequency-based cloning fraud prevention
systems, such as Cellular Technical Services Company; and
- a number of alternative technologies, including profilers, personal
identification numbers and authentication, provided by companies such as
GTE Telecommunications Services, Authentix Network and Systems/Link.
Because competitors can easily penetrate our market, we anticipate
additional competition from other established and new companies. In addition,
competition may intensify as competitors establish cooperative relationships
among themselves or alliances with large software companies.
Many of our current and potential competitors have significantly greater
financial, marketing, technical and other competitive resources than we will
have. As a result, these competitors may be able to adapt more quickly to new or
emerging technologies and changes in client requirements, or may be able to
devote greater resources to the promotion and sale of our products and services.
In addition, in order to meet client requirements, we will often work
cooperatively with companies that are, in other circumstances, our competitors.
The need to work cooperatively with such companies may limit our ability to
compete aggressively with these companies in other circumstances.
A FAILURE OF OR DAMAGE TO OUR COMPUTER AND TELECOMMUNICATIONS SYSTEM WOULD
IMPAIR OUR ABILITY TO CONDUCT TRANSACTION AND SUPPORT SERVICES AND HARM OUR
BUSINESS OPERATIONS.
Lightbridge's transaction and support services use complex computer and
telecommunications systems. Our business could be significantly harmed if these
systems fail or suffer damage from fire, natural disaster, power loss,
telecommunications failure or similar events. Most of our computer and
telecommunications equipment used for transaction processing will be located at
our Burlington and Waltham sites in Massachusetts and, as a result, may be
vulnerable to a natural disaster. In addition, the growth of our client base, a
significant increase in transaction volume or an expansion of our facilities may
strain the capacity of our computers and telecommunications systems and lead to
degradations in performance or system failure. Many of our agreements with
carriers contain levels of service commitments which we might be unable to
fulfill in the event of a natural disaster or a major system failure. Our
property and business interruption insurance might not be adequate to compensate
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us for any losses that may occur in the event of a natural disaster or system
failure. It is also possible that insurance might cease to be available to us on
commercially reasonable terms, or at all.
OUR RELIANCE ON SUPPLIERS AND VENDORS COULD ADVERSELY AFFECT OUR ABILITY TO
PROVIDE OUR SERVICES AND PRODUCTS TO OUR CLIENTS ON A TIMELY AND COST-EFFICIENT
BASIS.
We rely to a substantial extent on third parties to manufacture and provide
some of our equipment, software, systems and services. In some circumstances, we
rely on a single supplier or limited group of suppliers. Our reliance on outside
vendors subjects us to risks, including a potential inability to obtain an
adequate supply of required components and reduced control over quality, pricing
and timing of delivery of components. For example, in order to provide our
credit verification service, we need access to third-party credit information
databases provided to us by outside vendors. Similarly, delivery of our
activation services often require the availability and performance of
third-party billing systems which are also supplied by outside vendors. If for
any reason, we were unable to access these databases or billing systems, our
ability to process credit verification transactions could be impaired.
In addition, our business is materially dependent on services provided by
various local and long distance telecommunications providers. A significant
increase in the cost of telecommunications services that we cannot recover
through an increase in the price of our services, or any significant
interruption in telecommunications services, could seriously harm our business.
From time to time, we must also rely upon third parties to develop and
introduce components and products to enable us, in turn, to develop new products
and product enhancements on a timely and cost-effective basis. For example, we
must rely on the development efforts of third party wireless infrastructure
providers in order to allow our PrePay product to integrate with both existing
and future generations of the infrastructure equipment. We may not be able to
obtain access, in a timely manner, to third-party products and development
services necessary to enable us to develop and introduce new and enhanced
products. We may not be able to obtain third-party products and development
services on commercially reasonable terms or replace third-party products in the
event the products become unavailable, obsolete or incompatible with future
versions of our products.
OUR SOFTWARE MAY CONTAIN DEFECTS.
The software we develop and use may contain errors. Although both companies
currently test their software extensively before it is released or used to
provide services to clients, we cannot be certain that errors in the software
will not be found in the future. Any errors may harm our business in several
ways, including the following:
- we may suffer a loss of revenue if we are unable to provide error-free
products or services to our clients;
- we may incur additional unexpected expenses to fix or otherwise resolve
the error; or
- our clients may terminate our agreement.
OUR FOREIGN SALES AND OPERATIONS SUBJECT US TO UNIQUE RISKS AND CONCERNS WHICH
COULD NEGATIVELY IMPACT OUR BUSINESS OVERALL.
After the merger, our international revenues will represent a significant
portion of our total revenues. We also intend to further expand our sales
efforts internationally. In addition to the risks generally associated with
sales and operations in the U.S., sales to clients outside the U.S. and
operations in foreign countries present us with many additional risks, including
the following:
- the imposition of financial and operational controls and regulatory
restrictions by foreign governments;
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- the need to comply with a wide variety of complex U.S. and foreign import
and export laws and treaties;
- political and economic instability, such as the economic downturn in Asia
in 1998, which may lead to reduced demand for our products and services;
- changes in tariffs, taxes and other barriers may reduce our ability to
sell our solutions or may reduce the profitability of those solutions;
- longer payment cycles and increased difficulties in collecting accounts
receivable;
- fluctuations in interest and currency exchange rates, which may reduce our
earnings if we denominate arrangements with international clients in the
currency of the country in which our products or services are provided, or
with respect to arrangements with international clients that are U.S.
dollar-denominated, which may make our systems less price-competitive;
- changes in technology standards, such as interfaces between products, that
are developed by European or other foreign groups may require additional
development efforts on our part or may change the buying behavior of some
of our clients;
- reduced protection for intellectual property rights in some countries;
- difficulties in managing a global network of distributors or
representatives and in staffing and managing foreign subsidiary
operations;
- costs and risks of localizing systems in foreign countries;
- additional complications and expenses related to supporting products
overseas; and
- the possibility that our purchase agreements may be governed by foreign
laws which may differ significantly from U.S. laws, which may limit our
ability to enforce our rights under these agreements.
IF WE ARE UNABLE TO ACQUIRE COMPLEMENTARY BUSINESSES, OUR FUTURE GROWTH WILL BE
LIMITED.
A key element of our growth strategy is to acquire businesses, technologies
or products that expand and complement our business. We believe acquisitions are
necessary for us to continue to grow at a desirable rate, and we will continue
to evaluate possible acquisition opportunities in the future. Even if we are
able to identify suitable companies or businesses to buy, we may not be able to
purchase any of these companies at favorable prices, or at all, due to any
number of reasons. If we are unable to make acquisitions, we may not be able to
meet or exceed our historical levels of growth and earnings.
OUR SUCCESS DEPENDS IN PART ON OUR ABILITY TO OBTAIN PATENTS FOR, OR OTHERWISE
PROTECT, OUR PROPRIETARY TECHNOLOGIES.
We rely on a combination of copyright, patent, trademark and trade secret
laws, license and confidentiality agreements, and software security measures to
protect our proprietary rights. We have a limited number of patents in the U.S.
and abroad, and have pending applications for additional patents, but we cannot
be certain that:
- any additional patents will be issued on those applications;
- the claims allowed will be sufficiently broad to protect our technology;
- any of our patents now or hereafter acquired will protect our business
against competitors that develop similar technology or products;
- the rights granted under our patents will provide competitive advantages;
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- any of our patents will be held valid if subsequently challenged or
subjected to reexamination or reissue; or
- others will not claim rights in our patents or our proprietary
technologies.
Patents issued and patent applications filed relating to products used in
the wireless telecommunications industry are numerous and it may be the case
that current and potential competitors and other third parties have filed or
will file applications for, or have received or will receive, patents or obtain
additional proprietary rights relating to products used or proposed to be used
by us. We may not be aware of all patents or patent applications that may
materially affect our ability to make, use or sell any current or future
products. U.S. patent applications are confidential while pending in the U.S.
Patent and Trademark Office, and patent applications filed in foreign countries
are often first published six months or more after filing.
The laws of some countries in which our products are licensed do not protect
our products and intellectual property rights to the same extent as U.S. laws.
We generally enter into non-disclosure agreements with our employees and clients
and restrict access to, and distribution of, our proprietary information.
Nevertheless, we may be unable to deter misappropriation of our proprietary
information or detect unauthorized use of and take appropriate steps to enforce
our intellectual property rights. Our competitors also may independently develop
technologies that are substantially equivalent or superior to our technology.
Much of our know-how and other proprietary technology are not covered by
patent or similar protection, and in many cases cannot be so protected. If we
cannot obtain patent or other protection for our proprietary software and other
proprietary intellectual property rights, other companies could more easily
enter our markets and compete successfully against us.
WE MAY BECOME A PARTY TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS WHICH COULD
HARM OUR BUSINESS.
From time to time, we may be forced to respond to or prosecute intellectual
property infringement claims to protect our rights or defend a client's rights.
These claims, regardless of merit, may consume valuable management time, result
in costly litigation or cause product shipment delays, all of which could
seriously harm our business and operating results. Furthermore, parties making
such claims may be able to obtain injunctive or other equitable relief that
could effectively block our ability to make, use, sell or otherwise practice our
intellectual property, whether or not patented or described in pending patent
applications, or to further develop or commercialize our products in the U.S.
and abroad and could result in the award of substantial damages against us. We
may be required to enter into royalty or licensing agreements with third parties
claiming infringement by us of their intellectual property in order to settle
these claims. These royalty or licensing agreements, if available, may not have
terms that are acceptable to us. In addition, if we are forced to enter into a
license agreement with terms that are unfavorable to us, our operating results
would be materially harmed.
THE TELECOMMUNICATIONS INDUSTRY IS SUBJECT TO GOVERNMENT REGULATION AND LEGAL
UNCERTAINTIES WHICH COULD HARM OUR BUSINESS.
Our telecommunications carrier clients are regulated at both the federal and
state levels, and our international clients are subject to regulation by their
own countries. Government regulation could harm our business in several ways,
for example, by:
- decreasing the rate of growth of the wireless industry or other segments
of the telecommunications market;
- affecting the development of emerging telecommunications markets;
- limiting the number of potential clients for our products and services;
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- introducing new requirements that would force us to modify our products or
services; or
- increasing competition in the industry, which could subject us to
increased pricing pressures.
In addition, in making credit evaluations of consumers, our clients are
subject to detailed state and federal requirements, including the Fair Credit
Reporting Act and the Equal Credit Opportunity Act. Although most of our
products and services, other than the ProFile product, are not directly subject
to these requirements, we must take these requirements into account in order to
meet our clients' needs. If we fail to adhere to these requirements in a timely
or accurate manner, we could incur liability or suffer a loss of business.
Legislation affecting the telecommunications industry may cause changes in the
wireless telecommunications industry, including the entrance of new competitors
and industry consolidation, which could in turn increase pricing pressures on
us, decrease demand for our products, increase our cost of doing business or
otherwise have a material adverse effect on our business, operating results and
financial condition. If the recent trend toward privatization and deregulation
of the wireless telecommunications industry outside of the U.S. were to halt or
be reversed, or if currently deregulated international markets were to reinstate
comprehensive government regulation of wireless telecommunications services, our
business would suffer.
RISKS RELATED TO YOUR INVESTMENT
WE WILL LIKELY BE SUBJECT TO SUBSTANTIAL PRICE AND VOLUME FLUCTUATIONS OF OUR
COMMON STOCK WHICH MAY PREVENT OUR STOCKHOLDERS FROM RESELLING THEIR SHARES AT A
PROFIT.
The market price and trading volume of our common stock after the merger
could be highly volatile and could be subject to wide fluctuations. As a result,
our stockholders may be unable to sell their shares of our common stock at or
above the price at which they acquired the shares. The market price of our
common stock may fluctuate significantly in response to the following factors:
- actual or anticipated variations in our quarterly operating results;
- our level of operating expenses;
- changes in securities analysts' predictions of our future financial
performance;
- announcements by us or our competitors of significant products, service
offerings, contracts, acquisitions or strategic partnerships;
- regulatory announcements;
- developments with respect to patents or proprietary rights;
- conditions and trends in the wireless telecommunications and other
industries;
- adoption of new accounting standards affecting the wireless
telecommunications industry; and
- general market and economic conditions.
In addition, the stock market has recently experienced extreme price and
volume fluctuations that have particularly affected the market prices of equity
securities of many companies in the telecommunications industry and that often
have been unrelated or disproportionate to the operating performance of these
companies. These market fluctuations, as well as general economic, political and
market conditions such as recessions or international currency fluctuations may
adversely affect the market price of our common stock. In the past, following
periods of volatility in the market price of the securities of companies in the
telecommunications industry, securities class action litigation has often been
instituted against those companies. If any of our stockholders were to institute
a lawsuit against us, we would incur substantial costs defending the lawsuit.
The lawsuit could also divert the time, attention and resources of our
management.
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WE MAY EXPERIENCE CHANGES IN OUR ANTICIPATED QUARTERLY RESULTS OF OPERATION
WHICH MAY CAUSE THE PRICE OF OUR COMMON STOCK TO FLUCTUATE.
Our operating results are difficult to predict and may fluctuate
significantly from quarter to quarter. If our operating results fall below the
expectations of investors or public market analysts, the price of our common
stock could fall dramatically. Our common stock price could also fall
dramatically if investors or public market analysts reduce their estimates of
our future quarterly operating results, whether as a result of information we
disclose, industry trends or other factors.
Factors that are likely to cause our revenues and operating results to vary
significantly from quarter to quarter include many of the other risk factors
discussed in this document, as well as the following:
- Seasonal and retail trends, including promotional activities undertaken by
wireless carriers, may affect demand for our products and services and, as
a result, cause our revenues to fluctuate.
- A carrier's decision to deploy our products typically involves a
significant commitment of capital by the carrier and approval by its
senior management. Consequently, the timing of purchases is subject to
uncertainties and delays frequently associated with significant
expenditures, and we are not able to accurately forecast future sales of
our products. In addition, purchases of our products can involve testing,
integration, implementation and support requirements. For these and other
reasons, the sales cycle associated with the purchase of our products
typically ranges from 3 to 18 months and is subject to a number of risks
over which we have little control, including the carrier's budgetary and
spending constraints and internal decision-making processes. The delay of
one or more large orders could cause our quarterly revenues to fall
substantially below expectations.
- We ship our software products within a short period after receipt of an
order, and we usually do not have a material backlog of unfilled orders
for software products. Consequently, our revenues from software licenses
in any quarter depend substantially on the orders booked and shipped in
that quarter. As a result, a delay in the consummation of a license
agreement may cause our revenues to fall below expectations for that
quarter.
- Our consulting service revenues can fluctuate based on the timing of
projects we perform for our clients. Many of our consulting engagements
are of a limited duration, so it can be difficult for us to forecast
consulting services revenues accurately more than a few months in advance.
- We are in the process of developing a number of new products and services.
If we do not complete development efforts on schedule, or if we are not
able to market our new products and services successfully, our revenues
could fall substantially below expectations.
Because of the relatively fixed nature of most of our costs, including
personnel and facilities costs, any unanticipated shortfall in revenues in any
quarter would have a material adverse impact on our operating results in that
quarter and would likely result in substantial adverse fluctuations in the price
of our common stock.
As a result of these factors, we believe that quarter-to-quarter comparisons
of our results of operations are not necessarily meaningful. You should not rely
on our quarterly results of operations to predict our future performance.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS MAY DISCOURAGE POTENTIAL
TAKEOVER ATTEMPTS.
Provisions of our certificate of incorporation after the merger and Delaware
law could be used by incumbent management to make it more difficult for a third
party to acquire control of us, even if the change in control might be
beneficial to our stockholders. This could discourage potential takeover
attempts and could adversely affect the market price of our common stock.
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In particular, we may issue preferred stock in the future without
stockholder approval, upon terms determined by our board of directors. The
rights of holders of our common stock would be subject to, and may be adversely
affected by, the rights of holders of any of our preferred stock issued in the
future. The issuance of preferred stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, a majority of our outstanding stock.
We have adopted a stockholder rights plan that may deter or delay attempts to
acquire us or to accumulate shares of our common stock. Except for the
stockholder rights plan, we do not have present plans to designate or issue any
shares of preferred stock.
OUR STOCK PRICE COULD BE NEGATIVELY AFFECTED BY AN INCREASE IN SHARES OF OUR
COMMON STOCK OUTSTANDING AFTER THE MERGER.
Assuming that no options to purchase Corsair common stock are exercised
prior to the closing of the merger, Lightbridge will issue approximately
10,270,000 shares of its common stock to Corsair stockholders in connection with
the merger. Except for approximately 248,220 shares of Lightbridge common stock
that will be held by affiliates of Corsair upon completion of the merger, all of
these shares will be immediately tradable in the public market. Sales into the
public market of a substantial number of shares of Lightbridge's common stock
after the merger, or the perception that sales could occur, could have an
adverse effect on the market price of Lightbridge's common stock.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
We may make forward-looking statements in this document and in the documents
we incorporate by reference, all of which are subject to risks and
uncertainties. Forward-looking statements contain information concerning
possible or assumed future business success or financial results, and include,
but are not limited to, statements as to expectations regarding:
- future revenue opportunities;
- Lightbridge's integration of Corsair's business;
- future expense levels, including selling, research and development,
general and administrative expenses, and capital expenditures;
- enhancements to existing products and the development of new products and
services;
- strategic relationships;
- future capital needs;
- the emergence of new technologies;
- management changes or the loss of key employees;
- industry trends, including the rate of growth of the telecommunications
industry; and
- future financial results.
When we use words like "believe," "expect," "anticipate" or similar words,
those statements are forward-looking statements.
You should note that an investment in shares of Lightbridge's common stock
involves risks and uncertainties that affect the combined company's future
business success or financial results. Actual results could differ materially
from those anticipated expressly or implicitly in these forward-looking
statements as a result of many factors, including those set forth in "Risk
Factors" and elsewhere in this document and the documents incorporated by
reference.
We believe that it is important to communicate our expectations to you.
However, there may be events in the future that we are not able to predict
accurately or over which we have no control. We undertake no obligation to
update any forward-looking statements we may make. You should be aware that the
occurrence of the events described in the risk factors and elsewhere in this
document and the documents we incorporate by reference could materially and
adversely affect the combined company's business, financial condition and
operating results.
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SPECIAL MEETINGS OF STOCKHOLDERS
We are sending you this document in order to provide you with important
information regarding the merger and in connection with the solicitation of
proxies by your company's board of directors for use at the special meeting of
its stockholders and at any adjournment or postponement of that special meeting.
The special meetings are scheduled to be held at the times and places described
below.
SPECIAL MEETING OF LIGHTBRIDGE STOCKHOLDERS
MATTERS FOR CONSIDERATION
The Lightbridge special meeting of stockholders is scheduled to be held on
February 7, 2001, at 10:00 a.m., local time, at the offices of Foley, Hoag &
Eliot LLP, One Post Office Square, Sixteenth Floor, Boston, Massachusetts 02109,
to consider and vote upon:
- a proposal to approve the issuance of Lightbridge common stock to be
delivered in connection with the merger; and
- a proposal to approve an amendment to Lightbridge's 1996 Incentive and
Non-Qualified Stock Option Plan to increase the number of shares of common
stock that may be issued under the plan by 2,000,000 shares, from
2,350,000 shares to 4,350,000 shares. The amendment will only be effective
if the merger is completed, but the merger may be completed even if the
amendment is not approved. See "Amendment to Lightbridge's 1996 Incentive
and Non-Qualified Stock Option Plan" for a more complete description of
this proposal and the option plan.
Lightbridge stockholders will also consider any other matters that may properly
come before the special meeting or any adjournment or postponement of the
special meeting.
BOARD OF DIRECTORS' RECOMMENDATION
After careful consideration, Lightbridge's board of directors has
unanimously approved the merger agreement and the merger and recommends a vote
FOR approval of the issuance of Lightbridge common stock in connection with the
merger and FOR approval of the amendment to Lightbridge's 1996 Incentive and
Non-Qualified Stock Option Plan.
RECORD DATE
The record date for determining the Lightbridge stockholders entitled to
vote at the special meeting is December 28, 2000. Only holders of record of
Lightbridge common stock as of the close of business on that date are entitled
to vote at the special meeting. Each share of Lightbridge common stock entitles
the holder to one vote on each proposal and on all other matters properly
brought before the special meeting. Lightbridge has no other class of
outstanding voting securities. As of the record date, there were 18,390,173
shares of Lightbridge common stock outstanding and eligible to be voted at the
special meeting.
QUORUM AND VOTE REQUIRED
In order to conduct business at Lightbridge's stockholders meeting, a quorum
must be present. A majority of the outstanding shares of Lightbridge common
stock entitled to vote, whether present in person or represented by proxy, will
constitute a quorum for the transaction of business at the special meeting. If a
quorum is not present at the special meeting, the special meeting will be
adjourned or postponed to solicit additional proxies. No shares voted against
the proposals will be voted in favor of an adjournment or postponement.
Lightbridge's stockholders will be entitled to one vote for each share of
Lightbridge common stock held of record at the close of business on the record
date. A majority of the votes cast at the special meeting must be voted for the
proposals to approve the issuance of
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Lightbridge common stock to be delivered in connection with the merger and to
amend Lightbridge's 1996 Incentive and Non-Qualified Stock Option Plan in order
for the proposals to pass.
VOTING OF PROXIES
GENERAL. Shares represented by a proxy will be voted at the special meeting
as specified in the proxy. Materials accompanying this document provide
instructions for voting by telephone or by using the Internet.
PROXIES WITHOUT VOTING INSTRUCTIONS. Proxies that are properly signed and
dated but which do not contain voting instructions will be voted FOR approval of
the issuance of Lightbridge common stock in connection with the merger and FOR
approval of the amendment to Lightbridge's 1996 Incentive and Non-Qualified
Stock Option Plan.
ABSTENTIONS. Lightbridge will count a properly executed proxy marked
"ABSTAIN" for purposes of determining whether there is a quorum present, but the
shares represented by that proxy will not be voted at the special meeting.
Because the affirmative vote of a majority of the votes cast by Lightbridge
stockholders is required for approval of the proposals, if you mark your proxy
"ABSTAIN" it will have the effect of a vote against approval of the issuance of
Lightbridge common stock in connection with the merger and against amendment of
Lightbridge's 1996 Incentive and Non-Qualified Stock Option Plan.
BROKER NON-VOTES. If your shares are held by your broker, your broker will
vote your shares for you only if you provide instructions to your broker on how
to vote your shares. You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares. Your broker cannot
vote your shares of Lightbridge common stock without specific instructions from
you. Because the affirmative vote of a majority of the votes cast is required
for approval of the proposals, if you do not instruct your broker how to vote,
your shares will not participate in the votes taken at the special meeting.
VOTING SHARES IN PERSON THAT ARE HELD THROUGH BROKERS. If you hold
Lightbridge common stock in the name of a broker or other nominee and wish to
vote those shares in person at the special meeting, you must obtain from the
nominee holding the Lightbridge common stock in the nominee's name a properly
executed legal proxy, identifying you as a Lightbridge stockholder, authorizing
you to act on behalf of the nominee at the special meeting and identifying the
number of shares with respect to which the authorization is granted.
OTHER MATTERS. If you sign and return the enclosed proxy card, you grant
authority to the persons named in the proxy to vote in their discretion on any
other matters that may properly come before the special meeting or any
adjournment or postponements thereof. Lightbridge's management does not
presently know of any other matters to be brought before the special meeting. As
to other matters that may be properly brought before the special meeting, unless
otherwise provided in Lightbridge's certificate of incorporation or by-laws or
by statute, the matter will be approved if a majority of the votes cast are in
favor of the matter.
HOW TO REVOKE A PROXY
Signing the enclosed proxy card will not prevent you from voting in person
at the Lightbridge special meeting or otherwise revoking your proxy. You may
revoke a proxy at any time prior to the special meeting in the following ways:
- filing with Lightbridge, before the vote at the special meeting, a written
notice of revocation bearing a later date than the proxy;
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- executing a later dated proxy relating to the same shares and delivering
it to Lightbridge before the vote at the special meeting; or
- attending the special meeting and voting in person at the special meeting,
although attending the Lightbridge special meeting will not by itself
constitute a revocation of proxy.
You should send any written notice of revocation or subsequent proxy to
Lightbridge, Inc., Attn: Secretary, 67 South Bedford Street, Burlington,
Massachusetts 01803 or hand deliver the notice of revocation or subsequent proxy
to Lightbridge's Secretary before the vote at the Lightbridge special meeting.
SOLICITATION OF PROXIES AND EXPENSES
This solicitation is made on behalf of the board of directors of Lightbridge
and its costs, including the cost of mailing this document and the form of proxy
card, will be paid by Lightbridge. Lightbridge has retained Corporate Investor
Communications, Inc. to assist in the solicitation of proxies by Lightbridge.
Lightbridge will pay CIC a fee of $7,500, plus reimbursement of specified
out-of-pocket expenses, and will indemnify CIC against losses arising out of its
proxy soliciting services on behalf of Lightbridge. In addition to solicitation
by mail, CIC and Lightbridge may request that Lightbridge's directors, officers
or employees solicit proxies from stockholders by telephone, in person or by
other means. These persons will not receive additional compensation, although
they will be reimbursed for the reasonable, out-of-pocket expenses they incur in
connection with this solicitation. CIC and Lightbridge will also make
arrangements with brokerage firms, fiduciaries, and other nominees who hold
shares of record to forward solicitation materials to the beneficial owners of
those shares. Lightbridge will reimburse those brokerage firms, fiduciaries, and
other nominees for their reasonable out-of-pocket expenses in connection with
this solicitation.
STOCK HELD BY LIGHTBRIDGE DIRECTORS AND OFFICERS
As of December 28, 2000, the directors and executive officers of Lightbridge
owned 1,782,969 shares of Lightbridge common stock. This figure represents 10.1%
of the outstanding shares of Lightbridge common stock. LIGHTBRIDGE'S DIRECTORS
AND EXECUTIVE OFFICERS WHO OWN SHARES OF LIGHTBRIDGE COMMON STOCK HAVE ENTERED
INTO STOCKHOLDER AGREEMENTS AGREEING TO VOTE THEIR SHARES IN FAVOR OF APPROVAL
OF THE ISSUANCE OF LIGHTBRIDGE COMMON STOCK IN CONNECTION WITH THE MERGER AND
HAVE EXECUTED PROXIES WITH RESPECT TO THEIR SHARES IN FAVOR OF CORSAIR.
DISSENTERS' RIGHTS
Holders of Lightbridge common stock are not entitled to dissenters' rights
in connection with the transactions contemplated by the merger agreement.
SPECIAL MEETING OF CORSAIR STOCKHOLDERS
MATTERS FOR CONSIDERATION
The Corsair special meeting of stockholders is scheduled to be held on
February 7, 2001, at 8:30 a.m., local time, at Corsair's executive offices, 3408
Hillview Avenue, Palo Alto, California 94304 to consider and vote upon a
proposal to adopt the merger agreement.
Corsair stockholders will also consider any other matters that may properly come
before the special meeting or any adjournment or postponement of the special
meeting.
BOARD OF DIRECTORS' RECOMMENDATION
After careful consideration, the Corsair board of directors has unanimously
approved the merger and the merger agreement and recommends a vote FOR adoption
of the merger agreement.
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RECORD DATE
The record date for determining the Corsair stockholders entitled to vote on
the merger at the special meeting is December 28, 2000. Only holders of record
of Corsair common stock as of the close of business on that date are entitled to
vote at the special meeting. Each share of Corsair common stock entitles the
holder to one vote on each proposal and on all other matters properly brought
before the special meeting. Corsair has no other class of outstanding voting
securities. As of the record date, there were 17,179,408 shares of Corsair
common stock outstanding and eligible to be voted at the special meeting.
QUORUM AND VOTE REQUIRED
In order to conduct business at Corsair's stockholders meeting, a quorum
must be present. A majority of the outstanding shares of Corsair common stock
entitled to vote, whether present in person or represented by proxy, will
constitute a quorum for the transaction of business at the special meeting. If a
quorum is not present at the special meeting, the special meeting will be
adjourned or postponed to solicit additional proxies. No shares voted against
the proposal will be voted in favor of an adjournment or postponement. Corsair's
stockholders will be entitled to one vote for each share of Corsair common stock
held of record at the close of business on the record date. A majority of the
outstanding shares of Corsair's common stock must be voted FOR the proposal to
adopt the merger agreement in order for the proposal to pass.
VOTING OF PROXIES
GENERAL. Shares represented by a proxy will be voted at the special meeting
as specified in the proxy. Materials accompanying this document provide
instructions on voting by telephone or Internet.
PROXIES WITHOUT VOTING INSTRUCTIONS. Proxies that are properly signed and
dated but which do not contain voting instructions will be voted FOR adoption of
the merger agreement.
ABSTENTIONS. Corsair will count a properly executed proxy marked "ABSTAIN"
for purposes of determining whether there is a quorum present, but the shares
represented by that proxy will not be voted at the special meeting. Because the
affirmative vote of a majority of the outstanding shares of Corsair common stock
is required for adoption of the merger agreement, if you mark your proxy
"ABSTAIN" it will have the effect of a vote against adoption of the merger
agreement.
BROKER NON-VOTES. If your shares are held by your broker, your broker will
vote your shares for you only if you provide instructions to your broker on how
to vote your shares. You should follow the directions provided by your broker
regarding how to instruct your broker to vote your shares. Your broker cannot
vote your shares of Corsair common stock without specific instructions from you.
Because the affirmative vote of a majority of the outstanding shares of
Corsair's common stock is required to adopt the merger agreement, if you do not
instruct your broker how to vote, it will have the effect of a vote against
adoption of the merger agreement.
VOTING SHARES IN PERSON THAT ARE HELD THROUGH BROKERS. If you hold Corsair
common stock in the name of a broker or other nominee and wish to vote those
shares in person at the special meeting, you must obtain from the nominee
holding the Corsair common stock in the nominee's name a properly executed legal
proxy, identifying you as a Corsair stockholder, authorizing you to act on
behalf of the nominee at the special meeting and identifying the number of
shares with respect to which the authorization is granted.
OTHER MATTERS. If you sign and return the enclosed proxy card, you grant
authority to the persons named in the proxy to vote in their discretion on any
other matters that may properly come before the special meeting or any
adjournment or postponements thereof. Corsair's management does not presently
know of any other matters to be brought before the special meeting. As to other
matters that may be properly brought before the special meeting, unless
otherwise provided in Corsair's certificate
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of incorporation or by-laws or by statute, the matter will be approved if a
majority of the votes cast are in favor of the matter.
HOW TO REVOKE A PROXY
Signing the enclosed proxy card will not prevent you from voting in person
at the Corsair special meeting or otherwise revoking your proxy. You may revoke
a proxy at any time prior to the special meeting in the following ways:
- filing with Corsair, before the vote at the Corsair stockholders' meeting,
a written notice of revocation bearing a later date than the proxy;
- executing a later dated proxy relating to the same shares and delivering
it to Corsair before the vote at the meeting; or
- attending the meeting and voting in person, although attendance at the
meeting will not in and of itself constitute a revocation of a proxy.
You should send any written notice of revocation or subsequent proxy to
Corsair's Secretary at 3408 Hillview Avenue, Palo Alto, California 94304, or
hand deliver the notice of revocation or subsequent proxy to Corsair's Secretary
before the vote at the Corsair special meeting.
SOLICITATION OF PROXIES AND EXPENSES
This solicitation is made on behalf of the board of directors of Corsair and
its costs, including the cost of mailing this document and the form of proxy
card will be paid by Corsair. Corsair has retained Corporate Investor
Communications, Inc. to assist in the solicitation of proxies by Corsair.
Corsair will pay CIC a fee of $7,000, plus reimbursement of specified
out-of-pocket expenses, and will indemnify CIC against losses arising out of its
proxy soliciting services on behalf of Corsair. In addition to solicitation by
mail, CIC and Corsair may request that Corsair's directors, officers or
employees solicit proxies from stockholders by telephone, in person or by other
means. These persons will not receive additional compensation, although they
will be reimbursed for the reasonable, out-of-pocket expenses they incur in
connection with this solicitation. CIC and Corsair will also make arrangements
with brokerage firms, fiduciaries, and other nominees who hold shares of record
to forward solicitation materials to the beneficial owners of those shares.
Corsair will reimburse those brokerage firms, fiduciaries, and other nominees
for their reasonable out-of-pocket expenses in connection with this
solicitation.
STOCK HELD BY CORSAIR DIRECTORS AND OFFICERS
As of December 28, 2000, the directors and executive officers of Corsair
owned 415,222 shares of Corsair common stock. This figure represents 2.4% of the
outstanding shares of Corsair common stock. CORSAIR'S DIRECTORS AND EXECUTIVE
OFFICERS WHO OWN SHARES OF CORSAIR COMMON STOCK HAVE ENTERED INTO STOCKHOLDER
AGREEMENTS AGREEING TO VOTE THEIR SHARES IN FAVOR OF ADOPTION OF THE MERGER
AGREEMENT AND HAVE EXECUTED PROXIES WITH RESPECT TO THEIR SHARES IN FAVOR OF
LIGHTBRIDGE.
DISSENTERS' RIGHTS
Holders of Corsair common stock are not entitled to dissenters' rights in
connection with the transactions contemplated by the merger agreement.
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THE MERGER
BACKGROUND OF THE MERGER
The wireless communications industry is a dynamic, rapidly evolving and
intensely competitive market. As a result, Lightbridge and Corsair have actively
pursued potential business combinations, corporate acquisition opportunities,
alliances and other strategic transactions as a significant part of their
business strategies in an effort to obtain and develop complementary products
and technologies.
On June 1, 1998, senior executives from Lightbridge and Corsair first met to
discuss the synergies between the companies and possible strategic options. At
that time, the companies executed a non-disclosure agreement to maintain the
confidentiality of their discussions. Discussions continued between the
companies and, on February 28, 2000, Lightbridge and Corsair signed a strategic
marketing agreement to jointly sell each other's products. The parties announced
their alliance at the Wireless 2000 conference in New Orleans.
On July 7, 2000, a Corsair senior executive went to Lightbridge's offices to
introduce himself to a new member of the Lightbridge executive team. The Corsair
executive briefed the Lightbridge executive on Corsair's financial position and
outlook, strategic initiatives, products and other aspects of Corsair's overall
business strategy.
On July 20, 2000, Lightbridge senior executives and a Corsair senior
executive met at Lightbridge's offices and discussed expanding the relationship
between the companies. At this time Lightbridge and Corsair discussed the
possibility of a potential business combination. Both parties agreed to proceed
with further discussions. The confidentiality of these discussions, as well as
all other discussions regarding proposed transactions between the two companies,
was governed by the non-disclosure agreement executed by Lightbridge and Corsair
on June 1, 1998.
On July 31, 2000, senior executives of Corsair and representatives from
Broadview International LLC, Corsair's financial advisor since September 16,
1999, met with Lightbridge representatives to discuss issues pertaining to a
potential business combination, including strategic fit and the economic
rationale for combining the two companies as well as potential synergies that
could result from the transaction. Lightbridge and Corsair also discussed their
respective views on valuation issues associated with a proposed transaction.
On September 6, 2000, at a regular meeting of Corsair's board of directors,
members of management updated the board on their relationship with Lightbridge
and the possibility of a potential business combination between the companies.
The board proceeded to discuss the effects a business combination transaction
would have on Corsair and its stockholders and analyzed in general terms what
benefits would accrue to Corsair as a result of a merger with Lightbridge. The
directors instructed senior management to continue the merger discussions with
Lightbridge.
On September 8, 2000, at a regular meeting of Lightbridge's board of
directors, members of Lightbridge's management informed the board of the status
of the discussions between the two companies. The board proceeded to discuss the
potential synergies of the two companies as well as the other benefits and risks
involved in a merger with Corsair. The directors instructed members of
management to continue the merger discussions with Corsair.
On September 11, 2000, a team of senior executives and board members from
Lightbridge traveled to Corsair's corporate headquarters in Palo Alto,
California. Corsair conducted several presentations on its financial condition,
sales and marketing efforts and engineering efforts. Representatives of
Lightbridge's and Corsair's human resources departments also met at this time.
At this time, Corsair was also considering a potential business combination with
a third party.
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On September 25, 2000, at a special meeting of Lightbridge's board of
directors, a representative from Donaldson, Lufkin & Jenrette Securities
Corporation, Lightbridge's financial advisor for the contemplated transaction,
outlined DLJ's views concerning the proposed merger with Corsair. DLJ commented
on the financial advantages and disadvantages of the proposed merger and the
strategic implications of the merger. The board also reviewed the risks and
opportunities the merger presented.
On September 26, 2000, at a special meeting of Lightbridge's board of
directors, the proposed merger was further discussed. It was also proposed to
the board that Lightbridge send a draft term sheet to Corsair. After
Lightbridge's management updated the board on the status of Lightbridge's due
diligence review, and after further discussion of the merits of the proposed
transaction, the board instructed management to send the proposed term sheet to
Corsair.
On September 27, 2000, at a special meeting of Corsair's board of directors,
members of the management and a representative of Broadview informed the board
of their continuing discussions with Lightbridge, as well as a potential
alternative transaction with a third party. Members of Corsair's management and
the board also discussed other strategic issues regarding the proposed
transaction with Lightbridge.
On October 2, 2000, Corsair received an initial draft of the proposed merger
agreement from Lightbridge. During the period from October 2 to October 6, 2000,
Lightbridge and Corsair, together with their respective counsel, Foley, Hoag &
Eliot LLP and Brobeck, Phleger & Harrison LLP, conducted reciprocal due
diligence and negotiated the terms of the merger agreement. On October 9, 2000,
a Corsair senior executive traveled to Boston to conduct financial due
diligence.
On October 3, 2000, and again on October 6, 2000, at special meetings of
Lightbridge's board of directors, the board discussed the proposed merger
further and management reported on the due diligence activities being conducted
by both Lightbridge and Corsair. Members of Lightbridge's management as well as
representatives of DLJ then discussed initial estimates of Corsair's financial
results for the third quarter of 2000. The board agreed that both management and
DLJ should continue to investigate Corsair's financial performance in the third
quarter and how such performance could impact the timing of signing the merger
agreement and announcing the merger.
On October 5, 2000, Corsair and Lightbridge signed a term sheet containing
basic terms of a proposed merger, excluding price and percentage ownership by
each company's stockholders of the combined company. The term sheet also
contained an exclusivity provision preventing Corsair and Lightbridge from
entering into similar discussions with other companies until October 16, 2000.
At that time, Corsair and its advisors ceased discussions with the third party.
On October 10, 2000, Lightbridge informed Corsair that it wanted to delay
discussions regarding an exchange ratio until each company announced its
earnings for the third quarter of 2000.
During the period from October 10 to October 12, 2000, Lightbridge senior
executives visited Corsair's corporate headquarters to further discuss issues,
other than price, pertaining to the proposed transaction and continue the due
diligence process.
On October 13, 2000, Corsair's board of directors met and engaged in a
lengthy discussion regarding issues related to the proposed merger including the
status of due diligence by the parties, the revised timing of the proposed
transaction and the percentage ownership of Lightbridge that the Corsair
stockholders would hold after closing of the merger.
Lightbridge's board of directors also met on October 13, 2000 to review the
status of the negotiation of the proposed merger and the results of the
continuing due diligence review by management and Lightbridge's advisors. The
board also reviewed financial analyses prepared by DLJ regarding the relative
values of the two companies.
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On October 16, 2000, the exclusivity clause preventing Corsair and
Lightbridge from negotiating with other companies expired. Corsair's financial
advisor then re-initiated contact with the third party, which indicated that it
was unwilling to make a firm proposal at that time.
On October 17, 2000, Corsair announced its earnings for the third quarter of
2000. On October 18, 2000, Lightbridge announced its earnings for the third
quarter of 2000.
On October 20, 2000, Lightbridge's board of directors met to discuss
possible exchange ratios for the merger, as well as other terms of the
transaction. Representatives of DLJ participated in the meeting and provided
further financial analyses of the two companies. Following the meeting,
representatives of Broadview and DLJ discussed percentage ownership of the
combined company and possible exchange ratios for the merger. Lightbridge,
through its financial advisor, proposed a possible exchange ratio of 0.5275 of a
share of Lightbridge common stock for each share of Corsair common stock. That
evening, Corsair's board of directors held a special meeting to discuss the
proposed terms of the merger, including the proposed exchange ratio. The board
concluded that the proposed ratio of 0.5275, which would result in Corsair
stockholders owning 33% of the combined company, was not acceptable. The board
discussed at length alternative exchange ratios and percentage ownership of the
combined company. The board instructed senior management, its financial advisor
and its counsel to continue to negotiate with Lightbridge.
On October 21 and October 22, 2000, a representative of Broadview and a
representative of DLJ continued negotiations over the exchange ratio and
percentage ownership of the combined company. Broadview, on Corsair's behalf,
rejected the proposal received on October 20, 2000 and suggested a transaction
whereby Corsair stockholders would own 40% of the combined company. The parties
were unable to reach an agreement at that time.
On October 22, 2000, Lightbridge's board of directors met and management and
a representative of DLJ reported on the status of discussions regarding the
proposed exchange ratio.
On the evening of October 23, 2000, senior executives from Lightbridge and
Corsair discussed by telephone unresolved terms of the proposed merger,
including valuation and percentage ownership of the combined company. The
executives discussed at length various percentage ownership structures and
alternative exchange ratios. Ultimately, after lengthy discussions with their
financial advisors and other executives at their companies, the senior
executives agreed to discuss a 36.5% ownership of the combined company by
Corsair stockholders, resulting in an exchange ratio of 0.5978, with their
respective boards of directors.
On the evening of October 24, 2000 Corsair's board of directors held a
special meeting to consider and discuss the proposed terms of the merger. At
that meeting, Broadview gave a detailed presentation of the agreed upon
financial terms of the proposed merger and Corsair's counsel discussed the legal
effects of the agreed upon terms of the proposed merger. After full discussion,
the board agreed to further consider the matter and hold a meeting the next
afternoon.
On the afternoon of October 25, 2000 Corsair's board of directors met to
further consider and fully discuss the proposed transaction. At that meeting,
Broadview gave a full description of its financial analyses of the merger and
Corsair's counsel gave the board of directors a full briefing regarding the
board's fiduciary duties, a full description of the legal documents, the legal
effects and ramifications of the proposed transaction and prompt board approval
of the transaction. After a full discussion, the board agreed to further
consider the matter overnight and hold a meeting early the following morning to
render its final decision.
On the evening of October 25, 2000 Lightbridge's board of directors met to
review and discuss the final proposed terms of the merger. DLJ orally provided
its opinion to the board, later confirmed in writing as of October 26, 2000,
that the exchange ratio of 0.5978 was fair to the Company from a financial point
of view. DLJ's presentation included a detailed financial analysis of the merger
and its
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effects. Lightbridge's counsel reviewed in detail the legal implications of the
merger and the board's fiduciary duties. After an extensive discussion, the
Lightbridge board of directors unanimously:
- approved the acquisition of Corsair and execution of the merger agreement;
- approved the issuance of Lightbridge common stock in accordance with the
merger agreement;
- declared the merger agreement, the merger and the issuance of Lightbridge
common stock in accordance with the merger agreement advisable and in the
best interests of Lightbridge and its stockholders; and
- recommended that Lightbridge stockholders approve the issuance of the
Lightbridge common stock to be delivered pursuant to the merger agreement.
On the morning of October 26, 2000, Corsair's board of directors met and
further discussed the terms of the merger. At that meeting, the board of
directors received the oral opinion of Broadview, later confirmed in a writing
as of the same date, that an exchange ratio of 0.5978 was fair, from a financial
point of view, to Corsair's stockholders. After a full discussion, Corsair's
board unanimously:
- approved the merger agreement;
- declared the merger agreement and the merger advisable and in the best
interests of Corsair and its stockholders; and
- recommended that Corsair's stockholders adopt the merger agreement.
Following the meeting of Corsair's board on October 26, 2000 and prior to
the opening of business, Corsair and Lightbridge signed the merger agreement and
issued a press release announcing the signing of the merger agreement and the
principal terms of the proposed transaction.
LIGHTBRIDGE'S REASONS FOR THE MERGER; LIGHTBRIDGE'S BOARD OF DIRECTORS'
RECOMMENDATION
In reaching its decision to approve the merger agreement, Lightbridge's
board consulted with Lightbridge's management, as well as with financial,
accounting and legal advisors, and identified and considered a variety of
factors which, when taken as a whole, supported its decisions, including the
following:
- the complementary nature of each company's product and service offerings
and the potential of the combined products and services to address all
aspects of customer management for wireless telecommunications providers;
- the opportunity to create significant sales and distribution synergies,
particularly in light of Corsair's strong international client base and
established distribution channels;
- the opportunity to capitalize on each company's strong client
relationships and established reputation to provide additional products
and services to each company's existing clients;
- the compatibility of the companies' revenue models and the opportunity to
bring them together to increase the financial resources of a combined
company;
- the anticipated financial impact of the proposed transaction on the
combined company's future financial performance;
- the opportunity for Lightbridge to obtain the services of key members of
Corsair's management team, including the services of Thomas C. Meyer as
President and Chief Operating Officer;
- the ability to enhance the product development and deployment expertise of
both companies in order to bring new products to market in a timely
fashion;
- the strategic and financial alternatives available to Lightbridge in the
intensely competitive wireless telecommunications market;
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- the analysis and presentation of DLJ and the opinion of that firm
delivered orally to Lightbridge's board of directors on October 25, 2000
that, as of that date, and based on and subject to the assumptions,
qualifications and limitations set forth in the opinion, the exchange
ratio of 0.5978 was fair to Lightbridge, from a financial point of view;
- the structure of the merger and the terms of the merger agreement,
including the fact that the fixed exchange ratio provides certainty as to
the number of shares of Lightbridge common stock to be issued in the
merger;
- the right of Lightbridge's board to terminate the merger agreement upon
receipt of a superior proposal, or amend or withdraw its recommendation
under specified circumstances;
- the qualification of the merger as a tax-free transaction, except for tax
resulting from cash received in lieu of fractional shares of Lightbridge
common stock by holders of Corsair common stock, and the expected
treatment of the merger as a pooling of interests for accounting and
financial reporting purposes; and
- the inclusion in the combined company's board of directors of 3 members
who currently serve on Lightbridge's board, who would constitute a
majority of the full board.
In reaching its decision to approve the merger and recommend approval to
Lightbridge's stockholders the Lightbridge board of directors also considered a
number of potentially negative factors, including:
- the risk that the combined company will not be able to successfully
integrate the operations of Lightbridge and Corsair;
- the possibility that Lightbridge may not succeed in retaining the key
employees of Corsair;
- Corsair's dependence on its PrePay product and on Ericsson;
- the volatility of the price of Corsair's common stock, including the risk
that the exchange ratio is fixed and will not decrease in the event that
the price of Corsair's common stock decreases; and
- the other risks described under "Risk Factors."
Members of Lightbridge's board of directors evaluated these factors in light
of their knowledge of Lightbridge's business, the wireless communications and
related industries and their business judgment. In view of the variety of
factors and the amount of information considered, Lightbridge's board of
directors did not find it practicable to, and did not, quantify, rank or
otherwise assign relative weights to the specific factors it considered in
reaching its decision. The determination was made after consideration of all of
the factors taken as a whole. In addition, individual members of Lightbridge's
board of directors may have given different weights to different factors.
LIGHTBRIDGE'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT. LIGHTBRIDGE'S BOARD OF DIRECTORS BELIEVES THAT THE MERGER AGREEMENT
AND THE MERGER ARE ADVISABLE, FAIR TO AND IN THE BEST INTERESTS OF LIGHTBRIDGE
AND ITS STOCKHOLDERS AND RECOMMENDS THAT ITS STOCKHOLDERS VOTE FOR THE ISSUANCE
OF LIGHTBRIDGE COMMON STOCK IN CONNECTION WITH THE MERGER.
If the merger is not completed, Lightbridge intends to continue as an
independent public company and will continue to pursue other strategic
transactions or alternatives to realize value for its stockholders.
OPINION OF LIGHTBRIDGE'S FINANCIAL ADVISOR
Lightbridge asked Donaldson, Lufkin & Jenrette Securities Corporation, in
its role as financial advisor to Lightbridge, to render an opinion to the
Lightbridge board of directors as to the fairness, from a financial point of
view, to Lightbridge of the exchange ratio in the merger. On October 25, 2000,
DLJ delivered to the Lightbridge board of directors its oral opinion,
subsequently confirmed in a written opinion dated October 26, 2000, and a
further written opinion dated December 22, 2000, to the effect that, as of such
dates, based on and subject to the assumptions, limitations and qualifications
set
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<PAGE>
forth in such written opinions, the exchange ratio in the merger was fair to
Lightbridge from a financial point of view. Unless otherwise noted, any
reference herein to DLJ's opinion refers to the written opinion of DLJ dated
October 26, 2000. The DLJ opinion dated December 22, 2000 is substantially the
same as the October 26, 2000 opinion. The full text of DLJ's opinion dated
October 26, 2000 is attached as Annex B to this document.
Lightbridge selected DLJ as its financial advisor because DLJ is an
internationally recognized investment banking firm that has substantial
experience providing strategic advisory services. DLJ, as part of its investment
banking business, is regularly engaged in the valuation of businesses and
securities in connection with mergers, acquisitions, underwritings, sales and
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes.
Lightbridge and Corsair determined the exchange ratio in arm's length
negotiations between Lightbridge and Corsair in which DLJ advised Lightbridge.
In arriving at its opinion, DLJ:
- reviewed the merger agreement dated October 26, 2000 and the exhibits
thereto;
- reviewed financial and other information that was publicly available or
furnished to DLJ by Lightbridge and Corsair, including information
provided during discussions with Lightbridge's management. Included in the
information provided during discussions with Corsair's management were
financial projections of Lightbridge for the period beginning January 1,
2000 and ending December 31, 2000 prepared by the management of Corsair.
Included in the information provided during discussions with the
management of Lightbridge were views on financial projections of Corsair
for the period beginning January 1, 2002 and ending December 31, 2005 and
financial projections of Lightbridge for the period beginning January 1,
2000 and ending December 31, 2005 prepared by the management of
Lightbridge;
- compared financial and securities data of Lightbridge and Corsair with
various other companies whose securities are traded in public markets;
- reviewed the historical stock prices and trading volumes of Lightbridge
common stock and Corsair common stock;
- reviewed prices paid in other business combinations; and
- conducted other financial studies, analyses and investigations as DLJ
deemed appropriate for purposes of rendering its opinion.
In rendering its opinion, DLJ relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
it from public sources, that was provided to it by Lightbridge, Corsair, or
their respective representatives, or that was otherwise reviewed by DLJ and
assumed that Lightbridge was not aware of any information prepared by it or its
other advisors that might be material to DLJ's opinion that had not been made
available to DLJ. With respect to the financial projections supplied to DLJ, DLJ
relied on representations that the projections were reasonably prepared on the
basis reflecting the best currently available estimates and judgments of the
management of Lightbridge and Corsair as to the future operating and financial
performance of Lightbridge and Corsair, respectively. With respect to the views
of the management of Lightbridge with respect to the financial projections
referred to above, DLJ relied on representations that such views reflect the
best currently available estimates and judgments of the management of
Lightbridge and Corsair as to the future operating and financial performance of
Lightbridge and Corsair. DLJ did not assume responsibility for making any
independent evaluation of the assets or liabilities, or for making any
independent verification of the information DLJ reviewed. DLJ assumed that the
merger would be a tax free reorganization under the Internal Revenue Code of
1986, as amended.
DLJ necessarily based its opinion on economic, market, financial and other
conditions as they existed on, and on the information made available to DLJ as
of, the date of its opinion. DLJ states in its opinion that, although subsequent
developments may affect the conclusions reached in its opinion,
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<PAGE>
DLJ does not have any obligation to update, revise or reaffirm its opinion. DLJ
expressed no opinion as to the price at which Lightbridge common stock would
actually trade at any time. With respect to the contingent liabilities of
Corsair related to the litigation and other proceedings in which Corsair is
involved, DLJ had not been requested to and did not express any opinion
regarding the financial impact of these matters on Corsair or Lightbridge and
the effect, if any, of such matters on the fairness to Lightbridge from a
financial point of view of the exchange ratio in the merger. DLJ's opinion did
not address the relative merits of the merger and the other business strategies
considered by the Lightbridge board nor did it address the Lightbridge board's
decision to proceed with the merger. DLJ's opinion did not constitute a
recommendation to any Lightbridge stockholder as to how such stockholder should
vote on the merger.
SUMMARY OF FINANCIAL ANALYSES PERFORMED BY DLJ.
The following is a summary of the financial analyses DLJ presented to the
Lightbridge board of directors on October 25, 2000 in connection with the
preparation of DLJ's opinion. No company or transaction DLJ used in the analyses
described below is directly comparable to Corsair, Lightbridge or the
contemplated transaction. In addition, mathematical analysis such as determining
the mean or median is not in itself a meaningful method of using selected
company or transaction data. The analyses DLJ performed are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than suggested by these analyses. The information summarized
in the tables which follow should be read in conjunction with the accompanying
text.
COMMON STOCK TRADING HISTORY. DLJ examined the historical closing prices of
Corsair common stock from October 22, 1999 to October 25, 2000. During this time
period, Corsair common stock reached a high of $32.25 per share and a low of
$6.50 per share. DLJ also examined the historical closing prices of Lightbridge
common stock from October 25, 1999 to October 25, 2000. During this time period,
Lightbridge common stock reached a high of $33.25 per share and a low of $9.00
per share.
HISTORICAL EXCHANGE RATIO ANALYSIS. DLJ reviewed the historical exchange
ratios implied by the daily closing prices per share of Lightbridge common stock
to those of Corsair common stock for the period beginning on October 22, 1999
and ending on October 25, 2000. This analysis showed that the average historical
exchange ratios during the period ending on October 25, 2000 were as follows:
<TABLE>
<CAPTION>
HISTORICAL EXCHANGE
PERIOD ENDED OCTOBER 25, 2000 RATIO AVERAGE
----------------------------- -------------------
<S> <C>
60 days.................................................... 0.7183x
30 days.................................................... 0.6550x
20 days.................................................... 0.5731x
10 days.................................................... 0.5175x
Proposed exchange ratio.................................... 0.5978x
</TABLE>
COMPARABLE PUBLICLY TRADED COMPANY ANALYSIS. DLJ analyzed the market values
and trading multiples of selected publicly traded companies that provide systems
and software solutions for the global wireless industry that DLJ believed were
reasonably comparable to Corsair. These comparable companies consisted of:
- Amdocs Limited
- Boston Communications Group Inc.
- Convergys Corporation
- CSG Systems International Ltd.
- Daleen Technologies, Inc.
- Illuminet Holdings, Inc.
- Portal Software, Inc.
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DLJ believed Boston Communications Group Inc., based on similar product
offerings, and Daleen Technologies, Inc., based on similar size, were the most
comparable companies to Corsair.
In examining these comparable companies, DLJ calculated the enterprise value
of each company as a multiple of its respective:
- 2000 estimated sales and projected calendar year 2001 sales,
- 2000 expected EBITDA and projected calendar year 2001 EBITDA; and
- 2000 expected EPS and 2001 projected calendar year EPS. The enterprise
value of a company is equal to the value of its fully diluted common
equity plus debt and the liquidation value of outstanding preferred stock,
if any, minus cash and the value of certain other assets, including
minority interests in other entities.
EBITDA means earnings before interest expense, taxes, depreciation and
amortization. EPS means earnings per share. All EPS estimates were as reported
by First Call and all projected data was obtained from Wall Street research
reports and the managements of Corsair and Lightbridge. DLJ's analysis of the
comparable companies yielded the following multiple ranges:
<TABLE>
<CAPTION>
2000E 2001P 2000E 2001P 2000E 2001P
SALES SALES EBITDA EBITDA EPS EPS
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
High............................ 20.6x 12.6x 42.5x 93.8x 66.5x 49.2x
Low............................. 3.0x 2.5x 11.2x 9.4x 25.4x 23.6x
Average......................... 7.8x 5.5x 19.6x 35.7x 42.9x 32.2x
Median.......................... 4.0x 3.3x 13.8x 14.2x 32.3x 26.2x
</TABLE>
Based on an analysis of this data and Corsair's projected results for
comparable periods, DLJ estimated an implied reference range value per share of
Corsair common stock ranging from $13.00 to $19.00. This implied reference range
was calculated by giving more weight to the enterprise values calculated for
Boston Communications Group Inc. and Daleen Technologies, Inc. because, as is
noted above, DLJ believed these two companies to be the most comparable to
Corsair.
DLJ analyzed the market values and trading multiples of selected publicly
traded companies that provide systems and software solutions for fraud
protection and prepaid billing for the global wireless industry that DLJ
believed were reasonably comparable to Lightbridge. The comparable companies
used and the calculations performed in this analysis were the same as are listed
in the table above.
Based on an analysis of this data and Lightbridge's projected results for
comparable periods, DLJ estimated an implied reference range value per share of
Lightbridge common stock ranging from $21.00 to $29.00. Based on these results,
DLJ derived implied exchange ratios ranging from 0.4483 to 0.9048, which were
obtained by comparing the lowest estimated valuation of Corsair common stock to
the highest estimated valuation of Lightbridge common stock and the highest
estimated valuation of Corsair common stock to the lowest estimated valuation of
Lightbridge common stock, compared to the proposed exchange ratio of 0.5978.
DISCOUNTED CASH FLOW ANALYSIS. DLJ performed a DCF analysis of the
projected cash flows of Corsair for the fiscal years ending December 31, 2001
through December 31, 2005, using projections and assumptions provided by the
management of Lightbridge and Corsair. DCF means discounted cash flow. The DCFs
for Corsair were estimated using discount rates ranging from 16.00% to 19.00%,
based on estimates related to the weighted average costs of capital of Corsair,
and terminal multiples of estimated EBITDA for Corsair's fiscal year ending
December 31, 2005 ranging from 6.0x to 8.0x. Based on this analysis, DLJ
estimated an implied value per share of Corsair common stock ranging from $10.50
to $12.50.
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<PAGE>
DLJ performed a DCF analysis of the projected cash flows of Lightbridge for
the fiscal years ending December 31, 2001 through December 31, 2005, using
projections and assumptions provided by the management of Lightbridge. DLJ
estimated the DCFs for Lightbridge using discount rates ranging from 15.00% to
18.00%, based on estimates relating to the weighted average costs of capital of
Lightbridge, and terminal multiples of estimated EBITDA for Lightbridge's fiscal
year ending December 31, 2005 ranging from 6.0x to 8.0x.
Based on this analysis, DLJ estimated an implied reference range value per
share of Lightbridge common stock ranging from $15.00 to $19.00. This analysis
also resulted in implied exchange ratios ranging from 0.5526 to 0.8333, which
were obtained by comparing the lowest estimated valuation of Corsair common
stock to the highest estimated valuation of Lightbridge common stock and the
highest estimated valuation of Corsair common stock to the lowest estimated
valuation of Lightbridge common stock, compared to the proposed exchange ratio
of 0.5978.
CONTRIBUTION ANALYSIS. DLJ analyzed the relative contributions of
Lightbridge and Corsair to the pro forma combined company for the years 2000 and
2001 based on selected financial data, assuming:
- no anticipated cost savings or related expenses,
- that options are exercised if in-the-money; and
- that cash realized from option proceeds would be used to repurchase
treasury shares.
DLJ analyzed the respective contributions of each company's projected
revenues, EBITDA, and net income, for each of 2000 and 2001 based on estimates
provided by the managements of Lightbridge and Corsair. The implied percent of
equity value and implied exchange ratio in the table below denotes each
respective company's share of pro forma equity and the resulting exchange ratio
based on its relative operating contribution, adjusting where applicable for the
debt and the cash contributed by each of Lightbridge and Corsair, respectively:
<TABLE>
<CAPTION>
CORSAIR LIGHTBRIDGE IMPLIED
IMPLIED % OF IMPLIED % OF EXCHANGE
EQUITY VALUE EQUITY VALUE RATIO
------------ ------------ --------
<S> <C> <C> <C>
Revenue
2000E..................................... 41.2% 58.8% 0.7223x
2001P..................................... 41.0% 59.0% 0.7174x
EBITDA
2000E..................................... 41.6% 58.4% 0.7344x
2001P..................................... 41.5% 58.5% 0.7317x
Fully taxed net income
2000E..................................... 44.9% 55.1% 0.8341x
2001P..................................... 44.2% 55.8% 0.8130x
</TABLE>
Based on these results, DLJ derived implied exchange ratios ranging from
0.7200 to 0.8200, compared to the proposed exchange ratio of 0.5978.
PRO FORMA FINANCIAL IMPACT ANALYSIS. Using projections provided by the
management of Lightbridge and Corsair, DLJ compared the projected EPS (fully
taxed) of Lightbridge for 2000 and 2001 on a stand-alone basis to the projected
pro forma EPS (fully taxed) for 2000 and 2001 of the combined company after the
merger. This analysis showed that without synergies the 2000 expected EPS and
the 2001 projected EPS would be accretive by more than 10.0%.
The summary set forth above does not purport to be a complete description of
the analyses performed by DLJ but describes, in summary form, the material
elements of the presentation that DLJ made to the Lightbridge board on
October 25, 2000 in connection with the preparation of DLJ's
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fairness opinion. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. DLJ conducted each of the analyses in order to provide a different
perspective on the transaction and to add to the total mix of information
available. DLJ did not form a conclusion as to whether any individual analysis,
considered in isolation, supported or failed to support an opinion as to
fairness from a financial point of view. Rather, in reaching its conclusion, DLJ
considered the results of the analyses in light of each other and ultimately
reached its opinion based on the results of all analyses taken as a whole. DLJ
did not place any particular reliance or weight on any individual analysis, but
instead concluded that its analyses, taken as a whole, supported its
determination. Accordingly, notwithstanding the separate factors summarized
above, DLJ has indicated to Lightbridge that it believes that its analyses must
be considered as a whole and that selecting portions of its analyses and the
factors considered by it, without considering all analyses and factors, could
create an incomplete view of the evaluation process underlying its opinion. The
analyses DLJ performed are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
these analyses.
ENGAGEMENT LETTER
Pursuant to the terms of an engagement agreement dated October 24, 2000,
Lightbridge has agreed to pay DLJ a transaction fee of approximately
$1.35 million upon the consummation of the merger. Lightbridge has already paid
DLJ a fee of $500,000 in connection with the delivery of DLJ's fairness
opinions, all of which will be credited against the transaction fee. In
addition, Lightbridge agreed to reimburse DLJ, upon DLJ's request from time to
time, for all out-of-pocket expenses, including the reasonable fees and expenses
of counsel, DLJ incurred in connection with its engagement thereunder and to
indemnify DLJ and specified related persons against specified liabilities in
connection with its engagement, including liabilities under U.S. federal
securities laws. DLJ and Lightbridge negotiated the terms of the fee
arrangement.
OTHER RELATIONSHIPS
DLJ has not performed investment banking or other services for either
Lightbridge or Corsair in the past three years.
CORSAIR'S REASONS FOR THE MERGER; CORSAIR'S BOARD OF DIRECTORS' RECOMMENDATION
In reaching its decision to approve the merger agreement, Corsair's board
consulted Corsair's management, legal counsel and financial advisors, and
identified and considered several factors which, when taken as a whole,
supported its decisions, including the following:
- the complementary nature of each company's software product offerings and
the potential of the combined products to address all aspects of customer
management;
- the opportunity to create significant sales and distribution synergies;
- the opportunity to capitalize on each company's strong client
relationships and established reputations to provide additional products
and services to each company's existing customers;
- the ability to leverage pre-existing software interfaces developed by
Lightbridge for independent billing and provisioning systems to increase
marketing opportunities for PhoneFuel;
- the ability to maximize the product development and deployment expertise
of both companies in order to bring new products to market in a timely
fashion;
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- the strategic and financial alternatives available to Corsair in the
intensely competitive wireless telecommunications market;
- the analyses and presentation of Broadview and the opinion of that firm
delivered to Corsair's board of directors on October 26, 2000 that, as of
that date, and subject to the assumptions and limitations set forth in the
opinion, the exchange ratio of 0.5978 was fair, from a financial point of
view, to Corsair's stockholders;
- the right of Corsair's board to terminate the merger agreement upon
receipt of a superior proposal, or amend or withdraw its recommendation
under specified circumstances;
- the qualification of the merger as a tax-free transaction, except for tax
resulting from cash received in lieu of fraction shares of Lightbridge
common stock by holders of Corsair common stock, and the expected
treatment of the merger as a pooling of interests for accounting and
financial reporting purposes; and
- the receipt of 2 seats on the combined company's board of directors.
In reaching its decision to approve the merger and recommend adoption of the
merger agreement to Corsair's stockholders, Corsair's board of directors also
considered a number of factors in favor of staying independent, including the
following:
- the risks described under "Risk Factors," including the risk that
Lightbridge will not successfully integrate Corsair and its operations;
and
- the volatility of the price of Lightbridge's common stock, including the
risk that the exchange ratio is fixed and will not increase in the event
that the price of Lightbridge's common stock decreases.
In addition, Corsair's board of directors considered the interests that
specified officers and directors may have with respect to the merger in addition
to their interests as Corsair stockholders generally. See "The Merger--Interests
of Corsair's management and certain stockholders in the merger" for a more
complete discussion of these interests.
Corsair's board of directors evaluated these factors in light of their
knowledge of Corsair's business, the wireless communications and related
industries and their business judgment. In view of the variety of factors and
the amount of information considered, Corsair's board of directors did not find
it practicable to, and did not, quantify, rank or otherwise assign relative
weights to the specific factors it considered in reaching its decision. The
determination was made after consideration of all of the factors taken as a
whole. In addition, individual members of Corsair's board of directors may have
given different weights to different factors.
CORSAIR'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT,
THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT.
CORSAIR'S BOARD OF DIRECTORS BELIEVES THAT THE MERGER AGREEMENT AND THE MERGER
ARE ADVISABLE, FAIR TO AND IN THE BEST INTERESTS OF CORSAIR AND ITS STOCKHOLDERS
AND RECOMMENDS THAT ITS STOCKHOLDERS VOTE FOR THE ADOPTION OF THE MERGER
AGREEMENT.
If the merger is not completed, Corsair intends to continue as an
independent public company and will continue to pursue other strategic
transactions or alternatives to realize value for its stockholders.
OPINION OF CORSAIR'S FINANCIAL ADVISOR
Pursuant to a letter agreement dated September 16, 1999, Broadview
International LLC was engaged to act as financial advisor to the Corsair board
and to render an opinion to the Corsair board regarding the fairness of the
exchange ratio in the merger, from a financial point of view, to Corsair
stockholders. At the meeting of the Corsair board on October 26, 2000, Broadview
delivered its opinion orally, which was later confirmed in writing, that, as of
October 26, 2000, based on and subject to the
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<PAGE>
various factors and assumptions set forth in the written opinion, the exchange
ratio was fair, from a financial point of view, to Corsair stockholders. On
December 22, 2000, Broadview delivered an updated fairness opinion to Corsair's
board of directors confirming, as of that date, the conclusions reached in its
opinion dated October 26, 2000.
Broadview's opinion dated October 26, 2000, which describes the assumptions
made, matters considered and limitations on the review undertaken by Broadview,
is attached as Annex C to this document. Corsair stockholders are urged to, and
should, read the entire Broadview opinion carefully. The Broadview opinion is
directed to the Corsair board and addresses only the fairness of the exchange
ratio from a financial point of view to the holders of Corsair common stock as
of the date of the opinion. The Broadview opinion does not address any other
aspect of the merger and does not constitute a recommendation to any holder of
Corsair common stock as to how to vote at the Corsair stockholders meeting. The
summary of the Broadview opinion set forth in this proxy statement, although
materially complete, is qualified in its entirety by reference to the full text
of such opinion.
In connection with rendering its opinion, Broadview, among other things:
- reviewed the terms of the merger agreement;
- reviewed some publicly available financial statements and other
information of Corsair and Lightbridge, respectively;
- reviewed financial projections for Corsair prepared and provided to
Broadview by Corsair management;
- participated in discussions with Corsair and Lightbridge management
concerning the operations, business strategy, financial performance and
prospects for Corsair and Lightbridge, respectively;
- discussed the strategic rationale for the merger with Corsair and
Lightbridge management, respectively;
- reviewed the reported closing prices and trading activity for Corsair
common stock and Lightbridge common stock;
- compared aspects of the financial performance of Corsair and Lightbridge
with other comparable public companies;
- analyzed available information, both public and private, concerning other
comparable mergers and acquisitions;
- reviewed recent equity research analyst reports covering Corsair and
Lightbridge;
- analyzed the anticipated effect of the merger on the future financial
performance of Lightbridge;
- assisted in negotiations and discussions related to the merger among
Corsair, Lightbridge and their respective financial and legal advisors;
and
- conducted other financial studies, analyses and investigations as
Broadview deemed appropriate for purposes of its opinion.
In rendering its opinion, Broadview relied, without independent
verification, on the accuracy and completeness of all the financial and other
information, including without limitation the representations and warranties
contained in the merger agreement, that was publicly available or furnished to
Broadview by Corsair or Lightbridge. With respect to the financial projections
examined by Broadview, Broadview assumed that they were reasonably prepared and
reflected the best available estimates and good faith judgments of the
management of Corsair as to the future performance of Corsair. Broadview also
assumed that neither Corsair nor Lightbridge was currently involved in any
material transaction as of the date of Broadview's opinion other than the
merger, other publicly announced
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<PAGE>
transactions and those activities undertaken in the ordinary course of
conducting their respective businesses.
Broadview did not make or obtain any independent appraisal or valuation of
any of Corsair's assets. Broadview's opinion is based on market, economic,
financial and other conditions as they existed and could be evaluated as of
October 26, 2000 and any change in such conditions since that date would require
a reevaluation of Broadview's opinion. The Broadview opinion did not express any
opinion as to the price at which Lightbridge common stock will trade at any
time.
The following is a brief summary of some of the sources of information and
valuation methodologies employed by Broadview in rendering Broadview's opinion.
These analyses were presented to the Corsair board at its meeting on
October 25, 2000, and delivered with the opinion on October 26, 2000. This
summary includes the financial analyses used by Broadview and deemed to be
material, but does not purport to be a complete description of analyses
performed by Broadview in arriving at its opinion. Broadview did not explicitly
assign any relative weights to the various factors of analyses considered. This
summary of financial analyses includes information presented in tabular format.
In order to fully understand the financial analyses used by Broadview, the
tables must be read together with the text of each summary. The tables alone do
not constitute a complete description of the financial analyses.
CORSAIR STOCK PERFORMANCE ANALYSIS. Broadview compared the recent stock
performance of Corsair with that of the NASDAQ composite and the Corsair
comparables index. The Corsair comparables index is comprised of public
companies that Broadview deemed comparable to Corsair. Broadview selected 6
companies in the communications billing, customer care, and OSS software
industry with revenue between $20 million and $150 million and revenue growth
between 0% and 200% for the last reported 12 months.
The Corsair comparables index consists of the following companies:
- Boston Communications Group Inc. (BCGI)
- MetaSolv Software Inc. (MSLV)
- Lightbridge Inc. (LTBG)
- ACE*COMM Corp (ACEC)
- Evolving Systems Inc. (EVOL)
- DSET Corp (DSET)
PUBLIC COMPANY COMPARABLES ANALYSIS. Broadview considered ratios of market
capitalization, adjusted for cash and debt when necessary, to selected
historical and projected operating results in order to derive multiples placed
on a company in a particular market segment. In order to perform this analysis,
Broadview separated Corsair by its 2 primary lines of business--PrePay and
PhonePrint. Broadview compared financial information of Corsair's PrePay
business with publicly available information for the companies comprising the
Corsair comparables index. But since no pure-play public comparables exist for
PhonePrint, a public company comparables analysis was used only to value PrePay.
PrePay financials were generated from historical and projected financials which
were prepared by Broadview and approved by Corsair Management. For this
analysis, as well as other analyses, Broadview examined publicly available
information, as well as a range of estimates based on securities research
analyst reports.
44
<PAGE>
The following table presents the median multiples and the range of multiples
for the Corsair comparables index of total market capitalization, defined as
equity market capitalization plus total debt minus cash and cash equivalents,
and stock price divided by selected operating metrics:
<TABLE>
<CAPTION>
MEDIAN MULTIPLE RANGE OF MULTIPLES
--------------- ------------------
<S> <C> <C>
Total market capitalization to last 12 months revenue....... 1.80x 0.42x - 4.84x
Total market capitalization to projected fiscal year 2000
revenue................................................... 1.69x 0.37x - 3.55x
Total market capitalization to projected fiscal year 2001
revenue................................................... 1.73x 0.29x - 2.96x
Total market capitalization to last 12 months operating
income.................................................... 26.33x 3.08x - 36.62x
Total market capitalization to projected fiscal year 2000
operating income.......................................... 20.68x 12.67x - 70.49x
Total market capitalization to projected fiscal year 2001
operating income.......................................... 10.84x 8.60x - 25.19x
Stock price on October 25, 2000 to last 12 months diluted
earnings per share........................................ 32.74x 8.98x - 51.03x
Stock price on October 25, 2000 to projected fiscal year
2000 diluted earnings per share........................... 25.03x 6.48x - 68.56x
Stock price on October 25, 2000 to projected fiscal year
2001 diluted earnings per share........................... 22.92x 4.67x - 37.09x
</TABLE>
The following table presents the median implied per share values and the
range of implied per share values of Corsair's common stock, calculated by using
the multiples shown above and the appropriate Corsair PrePay business operating
metric:
<TABLE>
<CAPTION>
MEDIAN RANGE OF
IMPLIED VALUE IMPLIED VALUES
------------- ---------------
<S> <C> <C>
Total market capitalization to last 12 months revenue....... $ 8.71 $ 5.51 - $15.76
Total market capitalization to projected fiscal year 2000
revenue................................................... $ 8.67 $ 5.43 - $13.21
Total market capitalization to projected fiscal year 2001
revenue................................................... $10.84 $ 5.58 - $15.30
Total market capitalization to last 12 months operating
income.................................................... $19.32 $ 6.26 - $25.10
Total market capitalization to projected fiscal year 2000
operating income.......................................... $16.46 $11.83 - $45.20
Total market capitalization to projected fiscal year 2001
operating income.......................................... $13.21 $11.42 - $24.71
Stock price on October 25, 2000 to last 12 months diluted
earnings per share........................................ $20.10 $ 6.11 - $30.88
Stock price on October 25, 2000 to projected fiscal year
2000 diluted earnings per share........................... $13.43 $ 4.08 - $35.36
Stock price on October 25, 2000 to projected fiscal year
2001 diluted earnings per share........................... $15.42 $ 3.79 - $24.45
</TABLE>
No company used in the public company comparables analysis as a comparison
is identical to Corsair's PrePay business. In evaluating the comparables,
Broadview made numerous assumptions with respect to the communications billing,
customer care, and OSS software industry's performance and general economic
conditions, many of which are beyond the control of Corsair. Mathematical
analysis, such as determining the median, average, or range, is not in itself a
meaningful method of using comparable company data.
45
<PAGE>
DISCOUNTED CASH FLOW ANALYSIS. While discounted cash flow is a commonly
used valuation methodology, Broadview did not employ this analysis for the
purposes of valuing the PrePay business. Discounted cash flow analysis is most
appropriate for businesses which exhibit relatively steady or somewhat
predictable streams of future cash flow. Since PrePay has relatively
unpredictable revenue growth, the discounted cash flow analysis would be greatly
affected by assumptions about the sustainable long-term growth rate of the
business. Given the uncertainty in estimating both the future cash flows and a
sustainable long-term growth rate for PrePay, Broadview considered a discounted
cash flow analysis inappropriate for valuing the PrePay business.
However, since Corsair's PhonePrint business has predictable streams of
future cash flow and a definable end of product life, Broadview considered a
discounted cash flow analysis appropriate for valuing PhonePrint. Broadview
examined the value of the PhonePrint business based on projected free cash flow
estimates for PhonePrint on a standalone basis. The free cash flow estimates
were generated from financial projections from December 31, 2000, through
December 31, 2005, which were prepared by Broadview and approved by Corsair
management. Broadview calculated a discount rate of 19.39% based on the Capital
Asset Pricing Model, which states that the return on an asset or security is
equal to the risk free return plus a risk premium. Based on this discount rate,
derived from the risk implied by the past stock performance of Corsair for the
period January 1, 1997 to January 1, 1999, when PhonePrint was Corsair's core
product, Broadview calculated an implied total value for PhonePrint of
$14.37 million.
TRANSACTION COMPARABLES ANALYSIS. Broadview considered ratios of equity
purchase price, adjusted for the seller's cash and debt when appropriate, to
selected historical operating results in order to indicate multiples that
strategic and financial acquirers have been willing to pay for companies in a
particular market segment. In order to perform this analysis, Broadview reviewed
a number of transactions that they considered similar to the merger. Broadview
selected these transactions by choosing recent transactions involving sellers in
the communications billing, customer care, and OSS software industry with
revenues between $20 million and $150 million for the last reported 12 months.
For this analysis, as well as other analyses, Broadview examined publicly
available information, as well as information from Broadview's proprietary
database of published and confidential merger and acquisition transactions in
the information technology, communication and media industries.
These transactions consisted of the acquisition of:
- Priority Call Management Inc. by LHS Group Inc.
- Computer Answers International Ltd. by CMG Plc.
- National Telemanagement Corp. by Illuminet Holdings Inc.
- International Telecommunication Data Systems Inc. by Amdocs Ltd.
The following table presents the median multiple and the range of multiples
of the equity price plus total debt minus cash and cash equivalents, or the
adjusted price, divided by the seller's revenue in the last reported 12 months
prior to acquisition for the transactions listed above:
<TABLE>
<CAPTION>
MEDIAN MULTIPLE RANGE OF MULTIPLES
--------------- ------------------
<S> <C> <C>
Adjusted price to last reported 12 months revenue........... 3.42x 1.08x - 5.42x
</TABLE>
The following table presents the median implied per share value and the
range of implied per share values of Corsair's common stock, calculated by
multiplying the multiples shown above by the appropriate Corsair PrePay business
operating metric for the 12 months ended September 30, 2000:
<TABLE>
<CAPTION>
MEDIAN IMPLIED VALUE RANGE OF IMPLIED VALUES
-------------------- -----------------------
<S> <C> <C>
Adjusted price to last reported 12 months revenue..... $11.65 $7.02 - $17.11
</TABLE>
No transaction used as a comparable in the transaction comparables analysis
is identical to the merger. In evaluating the comparables, Broadview made
numerous assumptions with respect to the communications billing, customer care,
and OSS software industry's performance and general economic conditions, many of
which are beyond the control of Corsair or Lightbridge. Mathematical analysis,
46
<PAGE>
such as determining the average, median, or range, is not in itself a meaningful
method of using comparable transaction data.
TRANSACTION PREMIUMS PAID ANALYSIS. Broadview considered the premiums paid
to each seller's share price to determine the additional value strategic and
financial acquirers, compared to public stockholders, are willing to pay for
companies in a particular market segment. In order to perform this analysis,
Broadview reviewed a number of transactions involving publicly-held software
companies from January 1, 1999, to October 26, 2000, with equity consideration
between $50 million and $250 million. Transactions were selected from
Broadview's proprietary database of published and confidential merger and
acquisition transactions in the information technology, communication and media
industries.
The software transactions used are the acquisitions of:
- Marcam Solutions by Invensys Plc;
- Mustang.com Inc. by Quintus Corp.;
- NetMoves Corp by Mail.com Inc.;
- ConnectInc.com by Calico Commerce Inc.;
- Worldtalk Communications Corp. by Tumbleweed Communications Corp;
- Interlink Computer Sciences by Sterling Software Inc.;
- Oshap Technologies Ltd. by SunGard Data Systems Inc.;
- Softworks Inc. by EMC Corp;
- Metrowerks Inc. by Motorola Inc.;
- Interface Systems Inc. by Tumbleweed Communications Corp.;
- OrCAD Inc. by Cadence Design Systems Inc.;
- Wall Data Inc. by NetManage Inc.;
- ULTRADATA Corp. by Concentrex Inc.;
- Brite Voice Systems Inc. by InterVoice Inc.;
- Inference Corp by eGain Communications Corp;
- Caere Corp by ScanSoft Inc.;
- Concentrex Inc. by John H. Harland Co.;
- FDP Corp. by SunGard Data Systems Inc.;
- Information Advantage Inc. by Sterling Software Inc.;
- Elite Information Group Inc. by Solution 6 Holdings Ltd.;
- Oacis Healthcare Holdings Corp. by Science Applications International
Corp.;
- Xionics Document Technologies Inc. by Oak Technology Inc.;
- PC DOCS Group International Inc. by Hummingbird Communications Ltd.;
- Voice Control Systems Inc. by Philips Electronics NV;
- Viasoft Inc. by Allen Systems Group Inc.;
- International Telecommunications Data Systems Inc. by Amdocs Ltd.;
- Mosaix Inc. by Lucent Technologies Inc.; and
- Enterprise Software Inc. by LiveWire Media LLC.
The following table presents the median premium and the range of premiums
for these transactions calculated by dividing,
- the offer price per share minus the closing share price of the seller's
common stock 20 trading days or 1 trading day prior to the public
announcement of the transaction, by
- the closing share price of the seller's common stock 20 trading days or 1
trading day prior to the public announcement of the transaction.
<TABLE>
<CAPTION>
MEDIAN PREMIUM RANGE OF PREMIUMS
-------------- -----------------
<S> <C> <C>
Premium paid to seller's stock price 1
trading day prior to announcement.......... 31.3% -6.3% - 100.0%
Premium paid to seller's stock price 20
trading days prior to announcement......... 64.2% 4.6% - 287.1%
</TABLE>
47
<PAGE>
The following table presents the median implied value and the range of
implied values of Corsair's common stock, calculated by using the premiums shown
above and Corsair's stock price 20 trading days and 1 trading day prior to the
public announcement of the transaction.
<TABLE>
<CAPTION>
MEDIAN IMPLIED VALUE RANGE OF IMPLIED VALUES
-------------------- -----------------------
<S> <C> <C>
Premium paid to seller's stock price 1
trading day prior to announcement... $ 9.11 $6.50 - $13.88
Premium paid to seller's stock price
20 trading days prior to
announcement........................ $13.14 $8.37 - $30.97
</TABLE>
No transaction used as a comparable in the transaction premiums paid
analysis is identical to the merger. In evaluating the comparables, Broadview
made numerous assumptions with respect to the software industry's performance
and general economic conditions, many of which are beyond the control of Corsair
or Lightbridge. Mathematical analysis, such as determining the average, median,
or range is not in itself a meaningful method of using comparable transaction
data.
PRESENT VALUE OF PROJECTED SHARE PRICE ANALYSIS. Broadview calculated the
present value of potential future share prices of Corsair common stock on a
standalone basis using management's projections for Corsair's PrePay business
for the 12 months ending December 31, 2001. The implied share price was
calculated using the median price to last 12 months earnings multiple for the
Corsair comparables index and a discount rate determined by the Capital Asset
Pricing Model with the risk implied by the past stock performance of the Corsair
comparables index. Based on this analysis, the implied share price after adding
back the per share value of PhonePrint, calculated as discussed under
"--discounted cash flow analysis," is $18.59.
In addition, Broadview performed an analysis of the pro forma present value
per share of Corsair common stock using an estimated 12 months ending
December 31, 2001 earnings per share for the combined entity of Corsair's PrePay
business and Lightbridge. This analysis assumes consummation of the merger. The
implied share price was calculated using the median price to last 12 months
earnings multiple for the combined set of Corsair comparables index and
Lightbridge comparables index, which is described below, multiplied by the
exchange ratio of 0.5978. From this, an implied value to Corsair stockholders
was calculated and discounted based on the Capital Asset Pricing Model with the
risk implied by the past stock performance of the combined set of Corsair
comparables index and Lightbridge comparables index. The resulting implied value
after adding back the per share value of PhonePrint, calculated as discussed
under "--discounted cash flow analysis," is $18.58.
RELATIVE CONTRIBUTION ANALYSIS. Broadview examined the relative
contribution of Corsair's PrePay business to Lightbridge for a number of
historical and projected operating metrics. In this analysis, projected figures
for Corsair's PrePay business were prepared by Broadview and approved by Corsair
Management. Lightbridge projected figures are based on selected analyst
estimates.
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<PAGE>
The following table reflects the relative contribution of Lightbridge and
Corsair's PrePay business for each operating metric:
<TABLE>
<CAPTION>
LIGHTBRIDGE PREPAY
----------- --------
<S> <C> <C>
Last 12 months revenue.................................... 72.9% 27.1%
Projected fiscal year 2000 revenue........................ 73.4% 26.6%
Projected fiscal year 2001 revenue........................ 69.2% 30.8%
Last 12 months operating income........................... 65.1% 34.9%
Projected fiscal year 2000 operating income............... 67.3% 32.7%
Projected fiscal year 2001 operating income............... 64.3% 35.7%
Last 12 months net income................................. 55.5% 44.5%
Projected fiscal year 2000 net income..................... 58.8% 41.2%
Projected fiscal year 2001 net income..................... 56.3% 43.7%
</TABLE>
RELATIVE OWNERSHIP ANALYSIS. A relative ownership analysis measures each of
the merging companies' relative equity ownership and relative entity
contribution. Entity contribution compares the relative entity values of the
combining companies. Entity value equals equity value minus cash and cash
equivalents plus total debt. At the exchange ratio of 0.5978, the implied equity
ownership is 36.5% for Corsair and 63.5% for Lightbridge, while the implied
entity contribution is 28.6% for Corsair and 71.4% for Lightbridge. In addition,
Broadview reviewed the relative equity ownership and relative entity
contribution of Corsair's PrePay business standalone and Lightbridge. The
implied equity ownership is 34.4% for PrePay and 65.6% for Lightbridge, while
the implied entity contribution is 25.5% for PrePay and 74.5% for Lightbridge.
EXCHANGE RATIO ANALYSIS. Broadview reviewed the ratios of the closing
prices of Corsair common stock divided by the corresponding prices of
Lightbridge common stock over the period from October 27, 1999, to October 26,
2000, in contrast with the exchange ratio of 0.5978.
The following table presents the range of values for the historical exchange
ratio:
<TABLE>
<CAPTION>
EXCHANGE RATIO
--------------
<S> <C>
1 year low.................................................. 0.2368
1 year high................................................. 1.8832
10 trading day average...................................... 0.5295
20 trading day average...................................... 0.5887
3 month average............................................. 0.7210
6 month average............................................. 0.8914
1 year average.............................................. 0.8167
</TABLE>
LIGHTBRIDGE STOCK PERFORMANCE ANALYSIS. Broadview compared the recent stock
performance of Lightbridge with that of the NASDAQ composite and the Lightbridge
comparables index. The Lightbridge comparables index is comprised of public
companies that Broadview deemed comparable to Lightbridge. Broadview selected 5
public companies in the communications customer care and OSS software industry
with revenue between $20 million and $250 million and revenue growth between 0%
49
<PAGE>
and 100% for the last reported 12 months. The Lightbridge comparables index
consists of the following companies:
- MetaSolv Software Inc. (MSLV)
- ACE*COMM Corp (ACEC)
- Corsair Communications Inc. (CAIR)
- Evolving Systems Inc. (EVOL)
- DSET Corp (DSET)
EVALUATION OF LIGHTBRIDGE EQUITY. Broadview compared financial information
of Lightbridge with publicly available information for companies comprising the
Lightbridge comparables index. For this analysis, as well as other analyses,
Broadview examined publicly available information, as well as a range of
estimates based on securities research analyst reports.
PRO FORMA COMBINATION ANALYSIS. Broadview calculated the pro forma impact
of the merger on the combined entity's projected earnings per share for
Lightbridge's fiscal years ending December 31, 2000, and December 31, 2001,
taking into consideration various financial effects which will result from
consummation of the merger. This analysis relies upon financial and operating
assumptions provided by Corsair's management, equity research analysts and
publicly available data about Lightbridge and Corsair. Broadview assumed that
the merger would be treated as a pooling transaction and that no opportunities
for cost savings or revenue enhancements exist. Based on this analysis, the pro
forma model indicates earnings per share accretion, excluding acquisition
expenses, for the fiscal year ending December 31, 2000, and earnings per share
accretion for the fiscal year ending December 31, 2001. Broadview also examined
the effects of potential cost savings and revenue enhancements, and the
incremental accretion related to those synergies. Finally, Broadview calculated
the pro forma earnings per share accretion impact on Lightbridge, taking into
consideration only PrePay's financial effects resulting from a consummation of
the merger. Based on this scenario, the pro forma pooling model indicates
earnings per share accretion, excluding acquisition expenses, for the fiscal
year ending December 31, 2000, and earnings per share accretion for the fiscal
year ending December 31, 2001.
In connection with the review of the merger by the Corsair board, Broadview
performed a variety of financial and comparative analyses. The summary set forth
above does not purport to be a complete description of the analyses performed by
Broadview in connection with the merger.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In arriving
at its opinion, Broadview considered the results of all of its analyses as a
whole and did not attribute any particular weight to any analysis or factor
considered by it. Furthermore, Broadview believes that selecting any portion of
its analyses, without considering all analyses, would create an incomplete view
of the process underlying its opinion.
In performing its analyses, Broadview made numerous assumptions with respect
to industry performance and general business and economic conditions and other
matters, many of which are beyond the control of Corsair or Lightbridge. The
analyses performed by Broadview are not necessarily indicative of actual values
or actual future results, which may be significantly more or less favorable than
suggested by such analyses. The exchange ratio pursuant to the merger agreement
and other terms of the merger agreement were determined through arm's length
negotiations between Corsair and Lightbridge, and were approved by the Corsair
board. Broadview provided advice to the Corsair board during such negotiations;
however, Broadview did not recommend any specific consideration to the Corsair
board or that any specific consideration constituted the only appropriate
consideration for the merger. In addition, Broadview's opinion and presentation
to the Corsair board was one of many factors taken into consideration by the
Corsair board in making its decision to approve the merger. Consequently, the
Broadview analyses as described above should not be viewed as determinative of
the opinion of the Corsair board with respect to the value of Corsair or of
whether the Corsair board would have been willing to agree to a different
consideration.
50
<PAGE>
Upon consummation of the merger, Corsair will be obligated to pay Broadview
a transaction fee of approximately $2.3 million. Corsair has already paid
Broadview a fee of $300,000 for its fairness opinion dated October 26, 2000, all
of which will be credited against the transaction fee payable by Corsair upon
completion of the merger. Corsair will also pay Broadview a fee of $250,000 for
its updated fairness opinion dated December 22, 2000, and $100,000 of this fee
will be credited against the transaction fee payable by Corsair upon completion
of the merger. In addition, Corsair has agreed to reimburse Broadview for its
reasonable expenses, including fees and expenses of its counsel, and to
indemnify Broadview and its affiliates against liabilities and expenses related
to their engagement, including liabilities under the federal securities laws.
The terms of the fee arrangement with Broadview, which Corsair and Broadview
believe are customary in transactions of this nature, were negotiated at arm's
length between Corsair and Broadview, and Corsair's board of directors was aware
of the nature of the fee arrangement, including the fact that a significant
portion of the fees payable to Broadview is contingent upon completion of the
merger.
INTERESTS OF CORSAIR'S MANAGEMENT AND CERTAIN STOCKHOLDERS IN THE MERGER
In considering the recommendation of Corsair's board of directors with
respect to the proposed merger, Corsair stockholders should note that some of
Corsair's stockholders, directors and officers have interests in the merger that
are different from, or in addition to, their interests solely as Corsair
stockholders. These interests may create potential conflicts of interest. The
boards of directors of Lightbridge and Corsair were aware of these interests and
took these interests into account in approving the proposed merger and the
transactions contemplated by the merger documents.
STOCK HELD BY CORSAIR DIRECTORS AND OFFICERS. Corsair's directors and
executive officers who own Corsair common stock have entered into stockholder
agreements agreeing to vote their shares in favor of adoption of the merger
agreement and have executed proxies with respect to their shares in favor of
Lightbridge.
ELECTION OF DIRECTORS. Under the terms of the merger agreement, two of
Lightbridge's current directors will resign and Lightbridge will elect Thomas C.
Meyer and Rachelle Chong to Lightbridge's board of directors.
LIGHTBRIDGE STOCK OPTIONS. Each Corsair director who is named to the
Lightbridge board of directors will automatically receive an option to purchase
20,000 shares of Lightbridge common stock at the price equal to the closing
price of Lightbridge common stock on the date the merger is completed.
CORSAIR STOCK OPTIONS. The options owned by each of Corsair's directors and
officers will be assumed in the merger and become exercisable, in accordance
with their terms, for shares of Lightbridge common stock.
EMPLOYMENT ARRANGEMENTS. Lightbridge will be required to offer employment
arrangements to Thomas C. Meyer, Carla Schneiderman, Lyle York, Peter Yuan and
Steve Brown following the merger. These employment arrangements will be offered
to these individuals on terms at least as favorable as those under which they
are currently employed at Corsair. Lightbridge also intends to hire other
members of Corsair's management team.
INDEMNIFICATION; INSURANCE. Lightbridge will be required to indemnify all
persons who were officers, directors or employees of Corsair or any of its
subsidiaries prior to the merger to the same extent those persons were
indemnified pursuant to Corsair's certificate of incorporation or by-laws in
effect on the date of the merger agreement.
Lightbridge will be required to indemnify and provide advancement of
expenses to all persons who were officers and directors of Corsair immediately
prior to the merger for all actions, claims, damages, costs, expenses,
liabilities or judgments or settlements arising out of the fact that the person
is or was a director or officer of Corsair.
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<PAGE>
For a period of three years after completing the merger, Lightbridge will
provide officers' and directors' liability insurance for each individual covered
under Corsair's comparable policy. However, if Lightbridge's annual premium
payments for the insurance policy exceeds 200% of its current annual amount,
Lightbridge will not be obligated to continue the policy and may substitute a
policy with the greatest coverage available at a cost not exceeding that amount.
OWNERSHIP OF LIGHTBRIDGE COMMON STOCK FOLLOWING THE MERGER
As a result of the merger, holders of Corsair common stock will become
Lightbridge stockholders. Assuming that no options to purchase Corsair common
stock are exercised before the closing of the merger, Lightbridge will issue
approximately 10,270,000 shares of Lightbridge common stock to Corsair
stockholders in the merger. Following the merger, existing Lightbridge
stockholders will own approximately 63.5%, and former Corsair stockholders will
own approximately 36.5%, of the combined company. Our calculation of the
percentage ownership of Lightbridge common stock following the merger is based
on each company's outstanding common stock as of September 30, 2000. We used the
treasury method of accounting to calculate the effect of options and warrants.
This method assumes the exercise of each company's currently exercisable options
and warrants with an exercise price below the current trading value of that
company's shares on The Nasdaq Stock Market and deducts a number of shares
assumed to be purchased in the open market with the proceeds of the option and
warrant exercises. Lightbridge will reserve up to an additional 1,610,732 shares
of Lightbridge common stock which may be issued upon the exercise of options to
purchase shares of Corsair common stock, which will be assumed by Lightbridge
and converted to options to purchase shares of Lightbridge common stock.
MANAGEMENT OF LIGHTBRIDGE FOLLOWING THE MERGER
BOARD OF DIRECTORS. After the merger, Lightbridge's board of directors will
consist of the individuals named below, who will serve in the classes indicated:
<TABLE>
<CAPTION>
NAME CLASS TERM EXPIRES
---- -------- ------------
<S> <C> <C>
Rachelle B. Chong......................................... II 2001
Torrence C. Harder........................................ III 2002
Thomas C. Meyer........................................... I 2003
Andrew G. Mills........................................... II 2001
Pamela D.A. Reeve......................................... III 2002
</TABLE>
Mr. Harder, Mr. Mills and Ms. Reeve currently serve as directors of
Lightbridge, and Ms. Chong and Mr. Meyer currently serve as directors of
Corsair. If any of these individuals listed above become unavailable to serve on
the Lightbridge board, Lightbridge and Corsair will select another person who
currently serves on the same board of directors to serve in such individual's
place. The Lightbridge board will determine the members of Lightbridge's audit
and compensation committees following the merger.
EXECUTIVE OFFICERS. At the time of the merger, Mr. Meyer will become the
President and Chief Operating Officer of Lightbridge, and Ms. Reeve will remain
Chief Executive Officer. In addition, Steve Brown, Carla Schneiderman, Lyle York
and Peter Yuan will be employed by Lightbridge as senior executives. See "The
merger--Interests of Corsair's management and certain stockholders in the
merger."
Except as discussed above, key staff positions to be held by Lightbridge
management and Corsair management have not yet been finally determined. Before
completion of the merger, final decisions may be made with respect to the
management and operations of Lightbridge, including the selection of executive
officers and other senior management.
Additional information about those individuals listed above and the
directors of Lightbridge and Corsair is contained in Lightbridge's and Corsair's
respective proxy statements which are incorporated by reference into this
document.
Lightbridge's corporate headquarters will remain in Burlington,
Massachusetts.
52
<PAGE>
THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the merger
agreement. You are urged to read the full text of the merger agreement, which is
attached as Annex A to this document.
GENERAL
The merger agreement provides for the acquisition of Corsair by Lightbridge
by way of a merger of Lightning Merger Corporation, a wholly owned subsidiary of
Lightbridge, into Corsair. When the merger is completed, each outstanding share
of Corsair common stock will be converted automatically into 0.5978 shares of
Lightbridge common stock. No fractional shares of Lightbridge common stock will
be issued. In lieu of a fractional share, Lightbridge will pay in cash, rounded
to the nearest whole cent, equal to the product of the fraction, multiplied by
the average closing price of a share of Lightbridge common stock for the 10 most
recent days that Lightbridge common stock has traded, ending on the trading day
immediately prior to the closing, as reported on The Nasdaq Stock Market.
CONVERSION OF CORSAIR COMMON STOCK
Once we complete the merger, the following will occur:
- each share of Corsair common stock owned by Corsair as treasury stock and
each share of Corsair common stock owned by Lightbridge or any wholly
owned subsidiary of Lightbridge, will be cancelled; and
- each share of Corsair common stock issued and outstanding on the day the
merger is closed which has not been cancelled will be converted into the
right to receive 0.5978 shares of Lightbridge common stock and, with
respect to each whole share of Lightbridge common stock to be received,
the right to receive one right under the rights agreement dated
November 14, 1997 between Lightbridge and American Stock Transfer and
Trust Company, as amended.
TREATMENT OF CORSAIR STOCK OPTIONS
Each option to purchase Corsair common stock that is outstanding and
unexercised when the merger is closed will be assumed by Lightbridge. Each
option will continue to be governed by the option plan under which it was
granted. In each case:
- the number of shares of Lightbridge common stock subject to the assumed
option will be equal to the number of shares of Lightbridge common stock
which would have been issued in the merger if the shares of Corsair common
stock subject to that option were outstanding prior to the merger, rounded
down to the next lower full share; and
- the exercise price per share of the assumed option will be equal to the
quotient determined by dividing the exercise price per share of Corsair
common stock at which the option was exercisable immediately prior to the
closing of the merger by 0.5978, rounded down to the nearest whole cent.
For example, if a person holds an unexercised option to purchase 100 shares
of Corsair common stock for $1.00 per share, as of the closing of the merger
that option will automatically be assumed and will be an option to purchase 59
shares of Lightbridge common stock at $1.67 per share. The other terms of the
option, such as its expiration date, will be unchanged.
As soon as practicable after the closing of the merger, Lightbridge will
issue to each holder of assumed Corsair options a document confirming the
assumption described above. However, Lightbridge will not issue any
confirmation, nor will Lightbridge issue any shares of Lightbridge common stock
53
<PAGE>
issuable upon exercise of an assumed option, until the shares of Lightbridge
common stock issuable upon exercise of the options are:
- registered with the SEC on Form S-8 within 30 days after the closing of
the merger;
- approved for inclusion on The Nasdaq Stock Market; and
- authorized for sale by any appropriate state securities regulators, if
necessary.
EXCHANGE OF CORSAIR CERTIFICATES
Promptly after the closing of the merger, Lightbridge will cause the
exchange agent to send to each Corsair stockholder a letter of transmittal and
instructions for use in exchanging Corsair stock certificate(s) for a
certificate representing shares of Lightbridge common stock and, if applicable,
a check for the fractional share amount to which the stockholder is entitled.
Each Corsair stockholder must surrender to the exchange agent all of his
Corsair stock certificates along with a properly executed and completed letter
of transmittal before he or she can receive a certificate representing shares of
Lightbridge common stock and a cash payment for fractional shares, if any. Until
surrendered, outstanding Corsair stock certificates will be treated for all
corporate purposes as evidence of ownership of shares of Lightbridge common
stock into which the shares of Corsair common stock have been automatically
converted. No transfer of shares of Corsair common stock will be made on the
stock transfer books of Corsair on or after the closing of the merger.
Corsair stockholders should not surrender their Corsair stock certificates
for exchange until they receive the letter of transmittal and instructions from
the exchange agent. However, Corsair stockholders are urged to notify EquiServe,
immediately if their Corsair stock certificates are lost, stolen, destroyed or
not properly registered, in order to begin the process of obtaining replacement
Corsair stock certificates. EquiServe can be reached at 150 Royall Street,
Canton Massachusetts 02021, (781) 575-4575.
Neither Lightbridge, the new wholly owned subsidiary, nor the exchange agent
will be liable to any of Corsair's stockholders for any undistributed shares of
Lightbridge common stock or cash that are delivered to a public official under
applicable abandoned property or similar laws.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains Corsair's and Lightbridge's representations
and warranties relating to, among other things:
- corporate organization, authority and qualification;
- obligations with respect to capital stock;
- consents and approvals required for the merger;
- absence of specified changes or events;
- restrictions on business activities;
- intellectual property;
- absence of defaults;
- permits;
- brokers and finders;
- employee benefits plans;
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- pooling of interests;
- information supplied in connection with this document;
- fairness opinion;
- capital structure;
- authority to execute and validity of the agreement;
- SEC filings and financial statements;
- taxes;
- absence of liens and encumbrances;
- agreements, contracts and commitments;
- absence of litigation;
- environmental matters;
- labor matters;
- compliance with laws;
- change of control payments; and
- board approval required for the merger.
The merger agreement provides that the representations and warranties of
both Corsair and Lightbridge will not survive, or continue in effect, after the
closing date of the merger.
COVENANTS
Each of Corsair and Lightbridge agreed that it will generally:
- conduct its business in the ordinary course of business and consistent
with past practice;
- not accelerate, amend or change the period of exercisability of options,
restricted stock or reprice options, or authorize cash payments for
options;
- not enter into partnerships or similar alliances or agreements to create
standards;
- not grant severance or termination pay to employees except as disclosed;
- not transfer or license or otherwise extend, amend or modify any rights to
its intellectual property or enter into grants to future patent rights,
other than specified licenses;
- not commence any litigation other than for the routine collection of
bills, software piracy, or if the failure to commence suit would result in
the material impairment of a valuable aspect of its business;
- not declare or pay any dividends on or make any other distributions in
respect of any of its capital stock, or split, combine or reclassify any
of its capital stock or issue or authorize the issuance of any other
securities for shares of its capital stock;
- not repurchase or otherwise acquire any shares of its capital stock except
in specified circumstances;
- not issue, deliver or sell or authorize or propose the issuance, delivery
or sale of, any shares of its capital stock or any class or securities
convertible into shares of its capital stock, except in specified
circumstances;
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- not amend its organizational documents;
- not acquire or agree to acquire any business or assets which are material,
individually or in the aggregate, to its business, or enter into any joint
ventures, strategic partnerships or alliances or purchase any
distributors;
- not dispose of any rights to its material properties or assets, except in
the ordinary course of business consistent with past practice;
- not incur or guarantee any indebtedness, other than ordinary course trade
payables or pursuant to existing credit facilities in the ordinary course
of business;
- not adopt or amend any employee benefit, stock purchase or option plan, or
enter into any employment contract, pay any special bonus or special
remuneration to any director or employee, or increase the salaries or wage
rates of its employees other than in the ordinary course of business,
consistent with past practice;
- not revalue any of its assets;
- not pay in excess of $100,000, in any one case, or $250,000, in the
aggregate, for any claim, liability or obligation other than the payment
in the ordinary course of business of liabilities of the type reflected or
reserved against in its financials;
- not make any material tax election, change any accounting method for
taxes, file any material tax return or any amendment, settle any tax claim
or assessment or consent to any extension or waiver of the limitation
period applicable to any tax claim or assessment;
- not intentionally take any action reasonably likely to interfere with the
ability to account for the merger as a pooling of interests; and
- not take any action reasonably likely to cause any of the conditions to
the merger not to be satisfied.
NO SOLICITATION OF TRANSACTIONS
Neither Corsair nor Lightbridge will directly or indirectly solicit or
entertain a proposal by a third party to acquire an interest in either Corsair
or Lightbridge, or enter into or participate in any discussions or negotiations
regarding a superior proposal unless their respective boards conclude in good
faith, with the advice of an independent financial advisor, that such proposal
is reasonably likely to be funded, reasonably capable of being consummated, or
more favorable to their respective stockholders and necessary for their
respective boards to fulfill their fiduciary duties.
If either Corsair or Lightbridge receives a superior proposal, they will
immediately notify the other party of the terms and conditions of such proposal
and the identity of the person making it.
CONDITIONS TO THE MERGER
Corsair's and Lightbridge's respective obligation to complete the merger
depend upon the satisfaction or waiver of a number of conditions, including, the
following:
- adoption of the merger agreement by a majority of Corsair's stockholders
and a majority of Lightbridge's stockholders;
- the effectiveness of, and the absence of stop order proceedings with
respect to, the registration statement of which this document forms a
part;
- the absence of government authority or stop orders or injunctions
prohibiting the merger;
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- the receipt by Corsair from Brobeck, Phleger & Harrison LLP and the
receipt by Lightbridge from Foley, Hoag & Eliot LLP of a written opinion
that the merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code;
- the expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976;
- the receipt by Corsair from KPMG LLP and the receipt by Lightbridge from
Deloitte & Touche LLP of a letter regarding those firms' concurrence with
Corsair's and Lightbridge's management's conclusions, respectively, as to
the appropriateness of pooling of interests accounting for the merger; and
- the approval for listing on The Nasdaq Stock Market of the shares of
Lightbridge common stock issuable to Corsair's stockholders and other
shares required to be reserved for issuance in connection with the merger.
Corsair's obligation to complete the merger also depends on the satisfaction
or waiver of the following conditions:
- Lightbridge and its subsidiary's representations and warranties are true
and correct in all material respects;
- Lightbridge and its subsidiary perform and comply in all material respects
with all agreements and covenants under the merger agreement;
- Lightbridge obtains all required consents, approvals and waivers;
- receipt of a legal opinion from Foley, Hoag & Eliot LLP;
- no material adverse change has occurred in Lightbridge;
- receipt of executed affiliate agreements by each of Lightbridge's
affiliates; and
- action is taken so that Lightbridge's board of directors consists of
Pamela Reeve, 2 other persons who served on Lightbridge's board of
directors immediately prior to the merger, Thomas C. Meyer and 1 person
who served on Corsair's board of directors prior to the merger.
Lightbridge and its subsidiary's obligation to complete the merger also
depends on the satisfaction or waiver of the following conditions:
- Corsair's representations and warranties are true and correct in all
material respects;
- Corsair performs or complies in all material respects with all agreements
and covenants under the merger agreement;
- Corsair obtains all required consents, approvals and waivers;
- receipt of a legal opinion from Brobeck, Phleger & Harrison LLP;
- no material adverse change has occurred in Corsair;
- receipt of executed affiliate agreements from each of Corsair's
affiliates;
- Thomas C. Meyer, Carla Schneiderman, Lyle York, Peter Yuan and Steve Brown
have entered into employment arrangements with Lightbridge; and
- action is taken so that Lightbridge's board of directors consists of
Pamela Reeve, 2 other persons who served on Lightbridge's board of
directors immediately prior to the merger, Thomas C. Meyer and 1 person
who served on Corsair's board of directors prior to the merger.
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EXPENSES
If the merger is not completed, all expenses incurred will be paid by the
party incurring the expenses, except that Lightbridge and Corsair will share
equally all fees incurred in connection with the printing and filing of this
document. If the merger is completed, all reasonable fees and expenses incurred
will be paid by Corsair.
If the merger agreement is terminated by either party due to a material
breach by the other party, then the breaching party will pay the non-breaching
party for all of its reasonable out-of-pocket expenses up to a maximum of
$1.5 million.
If either party's board of directors amends, withholds or withdraws its
recommendation to its stockholders to adopt the merger agreement or its
stockholders do not adopt the merger agreement, then, so long as the other party
has not materially breached the merger agreement, the party that adversely
alters its recommendation or fails to adopt the merger agreement will pay the
other party for all its reasonable out-of-pocket expenses, up to a maximum of
$1.5 million. Any amounts paid in this circumstance will be reduced by any
amounts paid as a break up fee as described below.
BREAK UP FEE
If either party's board of directors adversely amends, withholds or
withdraws its recommendation that its stockholders adopt the merger agreement
and its stockholders fail to adopt the merger agreement, then, so long as the
other party has not breached any of its representations, warranties, covenants
or agreements, the party failing to adopt the merger agreement will pay
$3.0 million to the other party as a break up fee.
If either party's board of directors:
- accepts, approves or recommends to its stockholders a superior proposal,
which is an unsolicited acquisition proposal it determines would result in
a transaction more favorable to its stockholders than the merger and for
which financing, to the extent required, is committed or is reasonably
capable of being financed and which is likely to be consummated, or
adversely amends, withholds or withdraws its recommendation of the merger
after receipt of a superior proposal; and
if either;
- the superior proposal is consummated within 6 months of the board of
directors' acceptance or approval of the superior proposal, its
recommendation to the stockholders of the superior proposal or its adverse
amendment, withholding or withdrawal of its recommendation of the merger;
or
- the party enters into a definitive agreement, letter of intent or
confidentiality agreement with respect to a different acquisition proposal
during the 6 month period, which is consummated;
then upon the first to occur of the consummation of the other transaction, or
termination of the merger agreement by the aggrieved party, the party failing to
recommend the merger will pay $3.0 million to the other party as a break up fee.
In no event will any fees paid exceed $3.0 million.
TERMINATION
The merger agreement may be terminated, and the merger may be abandoned, at
any time before Corsair and Lightbridge complete the merger, under the following
circumstances:
- by Corsair's and Lightbridge's mutual written consent;
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- by either party if the other party has materially breached any
representation, warranty, covenant or agreement in the merger agreement
and the breach has not been cured within 5 business days after written
notice by the non-breaching party. The merger agreement may not be
terminated due to another party's breach if the terminating party is in
material breach of the terms of the merger agreement. Also, no cure period
is required for a breach which by its nature cannot be cured;
- by either party if the other party's board of directors amends, withholds
or withdraws its recommendation to adopt the merger agreement. The merger
agreement may not be terminated due to another party's board failing to
recommend adoption of the merger agreement if a final decree, law,
rule regulation, order or injunction prevents the completion of the
merger;
- by either party if there is a final, non-appealable order of a federal or
state court in effect preventing consummation of the merger;
- by either party it there is any final action taken by any governmental
entity which would make consummation of the merger illegal or prohibit
Lightbridge's ownership or operation of Corsair's business;
- by either party if the other party's stockholders do not adopt the merger
agreement, provided that the terminating party is not in material breach
of the merger agreement;
- by either party if the merger is not consummated by February 28, 2001. If
the merger is not consummated solely because the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 has not expired or
terminated, then the date will be extended to March 31, 2001. The right to
terminate the merger agreement in this circumstance is not available to
any party whose willful failure to fulfill any material obligation under
the merger agreement has been the cause of, or resulted in, the failure of
the merger to close on or before that date; and
- by either party if Lightbridge's or Corsair's board of directors accepts
or approves a superior proposal, or recommends a superior proposal to its
stockholders.
AMENDMENT
The parties may amend the merger agreement at any time in writing.
EXTENSION AND WAIVER
Either party may extend or waive the performance of any obligation contained
in the merger agreement prior to the effective time provided such extension or
waiver is in writing and signed on behalf of the party.
CLOSING AND EFFECTIVE TIME
Lightbridge and Corsair have agreed that if all of the conditions of the
merger agreement are satisfied or waived on or before February 7, 2001, unless
Lightbridge and Corsair agree to another date, the closing date for the merger
will be February 7, 2001. Upon the closing of the merger, the parties will
file a certificate of merger with the Secretary of State of the State of
Delaware. The merger will take effect at the time this filing is made.
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RELATED AGREEMENTS
STOCKHOLDER AGREEMENTS
Corsair entered into stockholder agreements with the following Lightbridge
stockholders; Michael A. Perfit, Torrence C. Harder, Brian P. Connolly,
D. Quinn Mills, Richard H. Antell and Pamela D.A. Reeve; and Lightbridge entered
into stockholder agreements with the following Corsair stockholders: David H.
Ring, Rachelle Chong, Kevin Compton, the Compton Family Trust, the Dow Family
Trust, the Silver Family Trust and the Wampler-Byrnes Family Trust. The terms of
the stockholder agreements provide that the stockholders will not transfer,
sell, exchange, pledge or otherwise dispose of any of the shares of common stock
owned by them, including shares of capital stock acquired after the date of the
stockholder agreements. In connection with the stockholder agreements, the
Lightbridge stockholders listed above also executed irrevocable proxies in favor
of Corsair, and the Corsair stockholders listed above executed irrevocable
proxies in favor of Lightbridge. The proxies authorize each company's respective
boards of directors to vote the shares, as follows:
- in favor of adoption of the merger agreement and any matter that could
reasonably be expected to facilitate the merger;
- against any proposal made in opposition to or in competition with the
merger agreement; and
- against a liquidation or winding up of the company to which they relate.
The proxies do not grant any other rights with respect to the shares, and the
stockholders may vote their shares of common stock on all other matters. The
stockholder agreements and irrevocable proxies terminate upon completion of the
merger or termination of the merger agreement.
As of December 28, 2000, the individuals and entities party to stockholder
agreements with Corsair owned an aggregate of 1,716,969 shares of Lightbridge
common stock which represented approximately 9.8% of the outstanding shares of
Lightbridge common stock.
As of December 28, 2000, the individuals and entities party to stockholder
agreements with Lightbridge owned an aggregate of 415,222 shares of Corsair
common stock, which represented approximately 2.4% of the outstanding shares of
Corsair common stock. The stockholders who are party to the stockholder
agreements with Corsair and Lightbridge were not paid additional consideration
in connection with the stockholder agreements.
AFFILIATE AGREEMENTS
The merger agreement provides that Lightbridge and Corsair will use their
respective best efforts to cause specified stockholders to enter into affiliate
agreements that require the stockholder to:
- affirm that they did not sell, exchange, pledge, establish any "short" or
put-equivalent position with respect to, or otherwise enter into a
transaction intended to reduce their risk relative to any securities of
Lightbridge or Corsair owned by them during the 30-day period prior to the
date of the merger agreement; and
- refrain from entering into any risk-reducing transaction from the date of
the merger agreement until the day Lightbridge publicly announces
financial results covering at least 30 days of combined operations of
Lightbridge and Corsair.
As of December 28, 2000, the individuals and entities anticipated to be
party to affiliate agreements with Corsair owned an aggregate of 415,222 shares
of Corsair common stock, or approximately 2.4% of the outstanding shares of
Corsair common stock. As of December 28, 2000, the individuals and entities
anticipated to be party to affiliate agreements with Lightbridge owned an
aggregate of 1,716,969 shares of Lightbridge common stock, or approximately 9.8%
of the outstanding shares of Lightbridge common stock. The stockholders who are
to be party to the affiliate agreements with Corsair and Lightbridge were not
paid, and will not be paid, additional consideration in connection with the
affiliate agreements.
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RESALE OF LIGHTBRIDGE COMMON STOCK AND LISTING OF
LIGHTBRIDGE COMMON STOCK
The Lightbridge common stock issued in connection with the merger will be
freely transferable, except that shares issued to any Corsair stockholder who is
an affiliate of Corsair or who becomes an affiliate of Lightbridge are subject
to restrictions on resale, including those contained in the affiliate
agreements. Lightbridge common stock is traded under the symbol "LTBG."
Lightbridge will cause the shares of Lightbridge common stock issued in
connection with the merger to be listed on The Nasdaq Stock Market.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material United States federal income tax
consequences generally applicable to you, as a stockholder of Corsair, if you
are a "United States person" as defined for United States federal income tax
purposes and you hold your shares of Corsair common stock as a capital asset.
For United States federal income tax purposes, a "United States person" is:
- a United States citizen or resident alien as determined under the Internal
Revenue Code;
- a corporation or partnership, as defined by the Internal Revenue Code,
that is organized under the laws of the United States or any state;
- an estate, the income of which is subject to United States federal income
taxation regardless of its source; and
- a trust if a court within the United States is able to exercise primary
supervision over its administration and at least one United States person
is authorized to control all of its major decisions.
This summary is based on the Internal Revenue Code, existing and proposed
Treasury regulations and judicial and administrative determinations, as each is
in effect as of the date of this document. All of the foregoing are subject to
change at any time, possibly with retroactive effect, and all are subject to
differing interpretation. No advance ruling has been sought or obtained from the
IRS regarding the United States federal income tax consequences of the merger.
The statements in this document and the opinions of counsel that are described
herein are not binding on the IRS or a court. As a result, neither Corsair,
Lightbridge, nor Lightning Merger Corporation can assure you that the tax
considerations or opinions described here will not be challenged by the IRS or
sustained by a court if so challenged.
This summary does not address aspects of United States taxation other than
United States federal income taxation. It does not address all aspects of United
States federal income taxation that may apply to you if you are subject to
special rules for United States federal income tax purposes, including, without
limitation, rules that apply to persons who acquired shares of Corsair common
stock as a result of the exercise of employee stock options, tax-exempt
organizations, financial institutions, broker-dealers, insurance companies,
persons having a "functional currency" other than the United States dollar,
persons who hold their shares of Corsair common stock as part of a straddle,
wash sale, hedging or conversion transaction, and some United States
expatriates. In addition, this summary and the opinions described here do not
address the state, local or foreign tax consequences of the merger.
Each Corsair stockholder is urged to consult and rely on his or her tax
advisors with respect to the United States federal, state and local, and foreign
tax consequences of the merger based upon the stockholder's particular
circumstances.
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It is a condition of the obligations of each of Lightbridge, Lightning
Merger Corporation and Corsair to effect the merger that Lightbridge and Corsair
shall each have received substantially identical written opinions from their
counsel, Foley, Hoag & Eliot LLP and Brobeck, Phleger, & Harrison LLP,
respectively, in form and substance reasonably satisfactory to them, to the
effect that the merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code. Lightbridge, Lightning Merger
Corporation and Corsair have agreed to make reasonable representations as
requested by counsel for the purpose of rendering such opinions.
Lightbridge and Corsair expect and intend the merger to constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. Provided that the merger does qualify as a reorganization, the merger will
generally result in the following United States federal income tax consequences:
- you, as a Corsair stockholder, will recognize no gain or loss upon the
conversion of your shares of Corsair common stock into shares of
Lightbridge common stock, except with respect to cash received in lieu of
a fractional share of Lightbridge common stock;
- your aggregate tax basis of the shares of Lightbridge common stock that
you receive in the merger in exchange for your shares of Corsair common
stock will be the same as the aggregate tax basis of those shares of
Corsair common stock;
- your holding period for the shares of Lightbridge common stock that you
receive in the merger in exchange for your shares of Corsair common stock
will include your holding period for those shares of Corsair common stock;
and
- none of Lightbridge, Lightning Merger Corporation, Corsair, or any
stockholder of Lightbridge, will recognize any gain or loss as a result of
the merger.
If the IRS were to challenge successfully the treatment of the merger as set
forth in the opinions described above, then if you are a Corsair stockholder you
would recognize taxable gain or loss with respect to your shares of Corsair
common stock surrendered in the merger, in an amount equal to the difference
between:
- the fair market value of the shares of Lightbridge common stock that you
receive in the merger; and
- your adjusted tax basis in your shares of Corsair common stock.
In this case, your aggregate tax basis in the shares of Lightbridge common stock
received would equal the fair market value of the shares, and your holding
period for the shares would begin the day after the merger.
ACCOUNTING TREATMENT
Lightbridge and Corsair believe that the merger will qualify as a pooling of
interests for accounting and financial reporting purposes. The unaudited pro
forma financial information contained in this document has been prepared using
the pooling of interests accounting method to account for the merger.
It is a condition to the obligation of Lightbridge to complete the merger
that Lightbridge receive an opinion from its independent auditors, and an
opinion from Corsair's independent auditors, that the merger will qualify for
pooling of interests accounting treatment if completed in accordance with the
merger agreement. Both Lightbridge and Corsair have agreed not to take any
action or fail to take any action that would jeopardize the treatment of the
merger as a pooling of interests.
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REGULATORY COMPLIANCE
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the
related rules, some acquisition transactions, including the merger, may not be
consummated until specified information has been furnished to the Justice
Department and the Federal Trade Commission and specified waiting period
requirements have been satisfied. We are currently preparing the required
information and material for filing with the Department of Justice and the
Federal Trade Commission with respect to the merger agreement.
At any time before or after completion of the merger, the Department of
Justice or the Federal Trade Commission or a private person or entity could seek
under the antitrust laws, among other things, to enjoin the merger or to cause
Lightbridge to divest itself, in whole or in part, of Corsair or of other
businesses conducted by Lightbridge. We cannot assure you that a challenge to
the merger will not be made or that, if such a challenge is made, we will
prevail. Our obligations to consummate the merger are subject to the condition
that there be no preliminary or permanent injunction or other order by any court
or governmental or regulatory authority of competent jurisdiction prohibiting
consummation of the merger.
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AMENDMENT TO LIGHTBRIDGE'S 1996 INCENTIVE AND
NON-QUALIFIED STOCK OPTION PLAN
GENERAL
On November 16, 2000, Lightbridge's board of directors amended its 1996
Incentive and Nonqualified Stock Option Plan, effective upon completion of the
merger, to increase the number of shares available for the grant of options
under the plan from 2,350,000 to 4,350,000, subject to adjustment in the event
of stock splits, stock dividends, recapitalizations and the like. Lightbridge's
board of directors is submitting this amendment to the 1996 stock option plan to
the Lightbridge stockholders for approval. If Lightbridge's stockholders do not
approve this increase, or if the merger is not completed, the total number of
shares that may be issued pursuant to options granted under the plan will remain
at 2,350,000.
Lightbridge believes that the anticipated increase in the number of
employees who may be eligible to receive stock options under the plan as a
result of the merger makes it advisable to increase the number of shares of
Lightbridge common stock issuable under the plan. Options constitute a
significant portion of the overall compensation of Lightbridge's and Corsair's
employees, including their respective executive officers. There are currently
approximately 986,926 shares of Corsair common stock available for issuance
pursuant to Corsair's stock option plans. These shares will no longer be
available for issuance following the merger. Lightbridge's board of directors,
including the members of its compensation committee, believes that Lightbridge
will derive substantial benefits from increasing the aggregate number of options
that it can issue under its 1996 stock option plan, if the merger is completed.
Lightbridge's board of directors believes that the proposed amendment, by
enabling it to issue additional options under the plan, will enable it to
further align the interests of its directors, executive officers and other
employees, including officers and employees of Corsair after the merger, with
the interests of its stockholders. The board also believes that the proposed
amendment is in the best interests of the combined company as it will assist it
to attract and retain key executives by enabling it to offer competitive
compensation packages. The Lightbridge board unanimously recommends that the
Lightbridge stockholders vote FOR the proposed amendment.
BACKGROUND
Lightbridge's board of directors adopted and its stockholders approved the
1996 stock option plan in 1996. From that time to December 28, 2000, Lightbridge
granted options to purchase an aggregate of 2,356,531 shares of common stock and
at December 28, 2000, after taking into account option cancellations, had
793,989 shares of common stock available for the grant of options under the
plan. After examining its overall employee compensation in light of the proposed
merger, Lightbridge's board of directors concluded that it was in its best
interests to make additional shares of common stock available for the grant of
options under the plan. On November 16, 2000, the board adopted an amendment to
the 1996 stock option plan to increase the total number of shares of common
stock that may be issued pursuant to options granted under the plan to
4,350,000, effective upon completion of the merger. Under the terms of the plan,
this amendment will not be effective unless Lightbridge's stockholders approve
the amendment within 12 months of its adoption.
PLAN ADMINISTRATION
Unless otherwise determined by Lightbridge's board of directors, the 1996
stock option plan must be administered by a plan committee consisting of at
least two "outside directors," who may be members of Lightbridge's compensation
committee. For purposes of the plan, an "outside director" is a person who:
- is not an employee of Lightbridge or any affiliate;
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- is not a former employee of Lightbridge or any affiliate who is receiving
compensation for prior services during the taxable year of Lightbridge or
any affiliate;
- has not been an officer of Lightbridge or any affiliate; and
- does not receive remuneration from Lightbridge or any affiliate in any
capacity other than as a director.
Lightbridge's board of directors has appointed the compensation committee, which
currently consists of Mr. Harder and Ms. Wilson, as the plan committee.
Mr. Harder and Ms. Wilson are "non-employee directors" as that term is defined
in the rules of the Securities and Exchange Commission.
The plan committee selects the directors, officers and other employees of
Lightbridge who will receive options and determines the option exercise price
and other terms of each option, subject to the provisions of the plan. The plan
committee also has the power to make changes to outstanding options under the
plan, including the power to reduce the exercise price, accelerate the vesting
schedule and extend the expiration date of any option.
The 1996 stock option plan authorizes the grant of options to purchase
common stock intended to qualify as incentive stock options, as defined in
Section 422 of the Internal Revenue Code, and options that do not so qualify.
Options may be granted under the plan to Lightbridge's directors, officers and
other employees and those of any of its subsidiaries, including, after the
merger, Corsair. As of December 28, 2000, approximately 370 such individuals
were eligible to participate in the plan, of which approximately 340 individuals
had received options under the plan.
The exercise price of incentive options granted under the 1996 stock option
plan must equal or exceed the fair market value of the common stock on the date
of grant. The exercise price of incentive options granted under the plan to a
person who owns more than 10% of the combined voting power of all classes of
Lightbridge's outstanding capital stock or the outstanding capital stock of any
of its subsidiaries must equal or exceed 110% of the fair market value of the
common stock on the date of grant. The exercise price of nonqualified options
granted under the plan must equal or exceed the fair market value of Lightbridge
common stock on the date of grant.
Each option expires no later than ten years after the date of grant or, in
the case of an option granted to a greater-than-ten-percent stockholder, five
years after the date of grant. The aggregate fair market value (at the time of
grant) of shares issuable pursuant to incentive options that are exercisable for
the first time in any calendar year may not exceed $100,000, unless a greater
amount is permitted by law. No person may be granted options under the plan to
purchase more than 500,000 shares of common stock in any calendar year,
including options that are subsequently forfeited, canceled or otherwise
terminated. For this purpose, the repricing of any option is deemed the grant of
a new option.
Options are not transferable except by will or by the laws of descent and
distribution, and during the holder's lifetime are exercisable only by the
holder. Options generally may not be exercised after the earliest of:
- the expiration of the option;
- the employee's termination for cause;
- thirty days after termination of the holder's employment without cause;
and
- one year after the holder's death or permanent and total disability, if
the holder's death or permanent and total disability occurs before the
termination of the holder's employment.
The holder of an option may pay the purchase price for the shares subject to
the option with cash, a check or shares of Lightbridge common stock. In
addition, if so permitted by the instrument
65
<PAGE>
evidencing the option, a holder may pay the purchase price with a personal
recourse note. With the consent of Lightbridge's plan committee, a holder may
also pay the purchase price using any combination of the foregoing.
Lightbridge intends to file, as soon as practicable, a registration
statement covering the additional 2,000,000 shares of common stock that will be
issuable under the 1996 stock option plan if the proposal to increase the plan
is approved by its stockholders. Except in the case of shares issued to
Lightbridge affiliates, the shares of common stock issued under the 1996 stock
option plan will be freely eligible for resale in the public market if they are
issued while a registration statement is effective.
The 1996 stock option plan terminates in October 2006, subject to earlier
termination by Lightbridge's board of directors or the earlier issuance of all
shares issuable under the plan. After the termination of the plan, Lightbridge
may not grant options under the plan but options that are outstanding on the
date of termination are not affected by the termination.
NEW PLAN BENEFITS
Because the grant of options under the plan is discretionary, Lightbridge is
unable to determine the dollar value and number of options that Lightbridge will
grant as a result of the proposed amendment to any person, including any
executive officer or director, or any associate of any executive officer
director. The proposed amendment to the 1996 stock option plan will not affect
the manner in which Lightbridge will determine the number of options that will
be received by or allocated to participants in the plan. If the proposed
amendment had been in effect during 1999, it would not have affected the
determination of the number of options received by or allocated to participants
in 1999.
To date, grants of options under the 1996 stock option plan to Lightbridge's
employees, officers and directors have been as follows:
<TABLE>
<CAPTION>
TOTAL NUMBER
OF OPTIONS
NAME GRANTED
---- ------------
<S> <C>
Pamela D. A. Reeve.......................................... 24,000
Richard H. Antell........................................... --
Douglas E. Blackwell........................................ 25,000
Brian P. Connolly........................................... 44,000
Michael Adam Perfit......................................... --
All non-employee directors as a group....................... 40,000
All executive officers as a group........................... 257,500
All non-executive officer employees as a group.............. 811,830
</TABLE>
As of December 28, 2000, 1,298,362 shares of common stock were subject to
outstanding options granted under the 1996 stock option plan, as amended,
257,649 shares of common stock had been purchased upon exercise of options
granted thereunder and 793,989 shares of common stock remained available for
future grants. As of December 28, 2000, option prices and expiration dates for
outstanding options granted under the 1996 stock option plan ranged from $3.719
to $28.125 per share and from October 2, 2006 to December 12, 2010,
respectively.
FUTURE AMENDMENTS TO THE 1996 STOCK OPTION PLAN
Lightbridge's board of directors may amend or terminate the 1996 stock
option plan at any time and from time to time. If an amendment would increase
the number of shares of common stock that may be issued under the plan or would
change the provisions regarding eligibility to participate in the plan, the
amendment will not be effective unless approved by Lightbridge's stockholders
within 12 months before or after the adoption of the amendment.
66
<PAGE>
FEDERAL INCOME TAX INFORMATION WITH RESPECT TO THE 1996 STOCK OPTION PLAN
The holder of a nonqualified option recognizes no income for federal income
tax purposes on the grant of the option. On the exercise of a nonqualified
option, the difference between the fair market value of the underlying shares of
common stock on the exercise date and the option exercise price is treated as
compensation to the holder of the option taxable as ordinary income in the year
of exercise. Such fair market value becomes the basis for the underlying shares
which will be used in computing any capital gain or loss upon disposition of
such shares.
The holder of an incentive option recognizes no income for federal income
tax purposes on the grant of the option. Except as provided below with respect
to the alternative minimum tax, there is no tax upon exercise of an incentive
option. If the holder does not dispose of the shares acquired upon exercise of
the incentive option within two years from the date of the grant of the
incentive option or within one year after exercise of the incentive option, any
gain realized by the option holder on the subsequent sale of those shares will
be treated for federal income tax purposes as long-term capital gain if the
shares were held for more than 12 months. If the holder sells the shares before
the expiration of such two-year and one-year periods (a "disqualifying
disposition"), the difference between the lesser of the value of the shares at
the date of exercise or at the date of sale and the exercise price of the
incentive option will be treated as compensation to the option holder taxable as
ordinary income and the excess gain, if any, will be treated as capital gain.
That capital gain will be long-term capital gain if the shares were held for
more than 12 months.
The excess of the fair market value of the underlying shares of common stock
over the exercise price at the time of exercise of an incentive option will
constitute an item of tax preference for purposes of the alternative minimum
tax. Taxpayers who incur the alternative minimum tax will be allowed a credit
which may be carried forward indefinitely to be used as a credit against the
taxpayer's regular tax liability in a later year; however, the alternative
minimum tax credit can not reduce the regular tax below the alternative minimum
tax for that carryover year.
Generally, subject to some limitations, Lightbridge may deduct on its
corporate income tax returns, in the year in which an option holder recognizes
ordinary income upon (1) the exercise of a nonqualified option or (2) a
disqualifying disposition of an incentive option, an amount equal to the amount
recognized by the option holder as ordinary income upon the occurrence of such
exercise or disqualifying disposition.
The 1996 stock option plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, nor is the plan qualified under
Section 401(a) of the Internal Revenue Code.
67
<PAGE>
COMPARISON OF THE RIGHTS OF LIGHTBRIDGE STOCKHOLDERS
AND CORSAIR STOCKHOLDERS
The rights of Lightbridge stockholders and Corsair stockholders are
currently governed by Delaware law and their respective certificates of
incorporation and by-laws. After the effective time of the merger, Corsair
stockholders will become Lightbridge stockholders and their rights will be
governed by Delaware law and Lightbridge's certificate of incorporation and
by-laws.
The following summary discusses the material differences between the rights
of Corsair stockholders and the rights of Lightbridge stockholders under the
respective certificates of incorporation and by-laws. This discussion is only a
summary and does not purport to be a complete description of the differences
between the rights of Corsair's and Lightbridge's stockholders. This discussion
is qualified in its entirety by reference to the Delaware General Corporation
Law and the full texts of each company's respective certificates of
incorporation and by-laws.
The rights of Corsair stockholders under Delaware law are identical to those
of Lightbridge stockholders. The rights of Corsair stockholders under Corsair's
certificate of incorporation and by-laws prior to the merger are substantially
similar to the rights of Lightbridge's stockholders under Lightbridge's
certificate of incorporation and by-laws, with the following principal
exceptions:
<TABLE>
<S> <C>
INDEMNIFICATION
CORSAIR LIGHTBRIDGE
- may limit the extent of indemnification it - may supplement the extent of
provides by individual contract with its indemnification it provides by individual
directors and officers contracts with its officers and directors
- a majority of the board, or a majority of - a majority of the disinterested directors,
the disinterested directors, may deny a majority vote of a quorum of capital stock
advancement of expenses if it determines entitled to vote for directors, independent
that the party seeking indemnification legal counsel, or a court of competent
acted in bad faith jurisdiction each may deny advancement of
expenses if it determines that the person
seeking advancement of expenses did not
meet the applicable standard of care
- a person may not seek indemnification in
connection with a proceeding they initiated
unless approved by the board or pursuant to
applicable procedures in the by-laws
- a person requesting indemnification shall
be granted indemnification where the action,
suit or proceeding is disposed of without
the disposition being adverse to the
person, without an adjudication that the
person was liable to the company, without a
plea of guilty or no contest by the person,
without an adjudication that the person
acted in bad faith, or, with respect to a
criminal proceeding, where the person did
not have reasonable cause to believe his or
her actions were unlawful
</TABLE>
68
<PAGE>
<TABLE>
<S> <C>
NUMBER OF DIRECTORS
CORSAIR LIGHTBRIDGE
- the number of directors of the entire board - the number of directors of the entire board
will be between 5 and 7 will be between 2 and 9
- within that range, the number of directors - within that range, the number of directors
constituting the entire board may be constituting the entire board may be
changed by resolution of 66-2/3% of the changed by a majority of the board then in
board or the vote of 66-2/3% of the office
stockholders at an annual meeting
REMOVAL OF DIRECTORS FOR CAUSE
CORSAIR LIGHTBRIDGE
- directors may be removed for cause only by - directors may be removed for cause only by
the vote of a majority of the capital stock the vote of at least 66-2/3% of the capital
entitled to vote at an election of stock entitled to vote at an election of
directors directors
AMENDMENT OF ORGANIZATIONAL DOCUMENTS
CORSAIR LIGHTBRIDGE
- by-laws may be amended by the vote of the - by-laws may be amended by the vote of at
majority of capital stock entitled to vote, least 75% of the capital stock entitled to
except that the vote of 66-2/3% is required vote on the matter
to alter, amend or repeal the by-law - the certificate of incorporation's
sections governing annual and special prohibition of stockholder action by written
stockholder meetings, the prohibition of consent may be amended only by the vote of
stockholder actions by written consent, the at least 75% of the capital stock entitled
class, number, term and qualification of to vote
directors, governing the filling of board
vacancies and the removal of directors
NOTICE OF BOARD MEETING
CORSAIR LIGHTBRIDGE
- regular and special meetings of the board - directors must receive notice of regular
may be called by the chief executive and special meetings 48 hours beforehand if
officer or president on no less than 48 by mail and 24 hours beforehand if
hours' notice delivered in person or by telegram or
telephone
CREDITOR ARRANGEMENTS
CORSAIR LIGHTBRIDGE
- no corresponding provision - a majority in number representing
three-fourths in value of the creditors or
class of creditors and/or stockholders or
class of stockholders of Lightbridge may
agree to any compromise or arrangement with
Lightbridge, including any reorganization
of Lightbridge as a result of the
compromise or arrangement
STOCKHOLDER PROPOSALS AT ANNUAL MEETINGS
CORSAIR LIGHTBRIDGE
- must be received at least 120 days prior to - must be received at least 60 days prior to
the date of the prior years' proxy the date of the annual meeting
statement
</TABLE>
69
<PAGE>
LEGAL MATTERS
The validity of the shares of Lightbridge common stock offered by this
document will be passed upon for Lightbridge by Foley, Hoag & Eliot LLP, Boston,
Massachusetts. As of December 28, 2000, affiliates of Foley, Hoag & Eliot
beneficially owned a total of approximately 8,147 shares of Lightbridge common
stock.
EXPERTS
The financial statements of Lightbridge incorporated in this document by
reference from Lightbridge's annual report on Form 10-K for the year ended
December 31, 1999 and the financial statements of Subscriber Computer, Inc.
incorporated in this document by reference from Corsair's Annual Report on
Form 10-K for the year ended December 31, 1999 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports, which are
incorporated herein by reference and have been so incorporated in reliance upon
the reports of said firm given upon their authority as experts in accounting and
auditing.
The financial statements of Corsair as of December 31, 1998 and 1999 and for
each of the years in the three-year period ended December 31, 1999 have been
incorporated by reference herein in reliance upon the reports of KPMG LLP and
Deloitte & Touche LLP, independent auditors, and upon the authority of said
firms as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Lightbridge has filed with the SEC a registration statement on Form S-4, as
required by the Securities Act, which registers the distribution to Corsair
stockholders of the shares of Lightbridge common stock to be issued in
connection with the merger. The registration statement and the exhibits and
schedules attached to it contain additional relevant information about
Lightbridge and its common stock. The rules and regulations of the SEC allow us
to omit specified information included in the registration statement from this
document.
In addition, both Lightbridge and Corsair file reports, proxy statements and
other information with the SEC as required by the Securities Exchange Act of
1934. You may read and copy this information at the following locations of the
SEC:
<TABLE>
<S> <C> <C>
Public Reference Office New York Regional Office Chicago Regional Office
Room 1024 7 World Trade Center 500 West Madison Street
450 Fifth Street, N.W. 14th Floor Suite 1400
Washington, DC 20549 New York, NY 10048 Chicago, IL 60661
</TABLE>
You may also obtain information about the operation of the SEC's public
reference rooms by calling the SEC at 1-800-SEC-0330. Lightbridge's and
Corsair's SEC filings are also available on the SEC's website at
http://www.sec.gov.
70
<PAGE>
INCORPORATION OF DOCUMENTS FILED WITH THE SEC
The SEC allows Lightbridge and Corsair to "incorporate by reference" in this
document the information each company files with the SEC, which means:
- incorporated documents are considered part of this document;
- Lightbridge and Corsair disclose important information to you by referring
you to those documents; and
- information that Lightbridge and Corsair file with the SEC will
automatically update and supercede the information in this document and
information that was previously incorporated.
Lightbridge incorporates by reference the documents listed below:
- Lightbridge's Annual Report on Form 10-K for the year ended December 31,
1999, filed on March 23, 2000;
- Lightbridge's definitive proxy statement for its annual meeting of
stockholders filed on April 10, 2000;
- Lightbridge's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2000, filed on May 11, 2000; June 30, 2000, filed on August 14,
2000; and September 30, 2000, filed on November 8, 2000;
- Lightbridge's report on Form 8-K filed and amended on October 26, 2000;
and
- the description of Lightbridge's common stock contained in its
registration statement on Form 8-A, filed on September 6, 1996; and the
description of Lightbridge's rights contained in the registration
statement of Form 8-A, filed on November 21, 1997.
Lightbridge also incorporates by reference each of the following documents
that it will file between the date of this document and the date of the
Lightbridge special meeting:
- reports filed under Section 13(a) and (c) of the Exchange Act;
- definitive proxy or information statements filed under Section 14 of the
Exchange Act in connection with any subsequent stockholders meeting; and
- any reports filed under Section 15(d) of the Exchange Act.
Corsair incorporates by reference the documents listed below:
- Corsair's Annual Report on Form 10-K for the year ended December 31, 1999,
filed on March 30, 2000;
- Corsair's definitive revised proxy statement for its annual meeting of
stockholders filed on May 8, 2000;
- Corsair's Quarterly Report on Form 10-Q for the quarters ended March 31,
2000, filed on May 15, 2000 as amended on May 26, 2000; June 30, 2000,
filed on August 14, 2000; and September 30, 2000, filed on November 13,
2000;
- Corsair's report on Form 8-K filed on October 26, 2000; and
- the description of Corsair's common stock contained in its registration
statement on Form 8-A filed on July 22, 1997, and the description of
Corsair's rights contained in its registration statement on Form 8-A filed
on December 3, 1998.
We also incorporate by reference each of the following documents that we may
file between the date of this document and the date of our respective special
meetings:
- reports filed under Section 13(a) and (c) of the Exchange Act;
- definitive proxy or information statements filed under Section 14 of the
Exchange Act in connection with any subsequent stockholders meeting; and
- any reports filed under Section 15(d) of the Exchange Act.
71
<PAGE>
Copies of the documents that are incorporated by reference are available without
charge to any person to whom this document is delivered, upon written or oral
request, with respect to documents that relate to Lightbridge, from Harlan
Plumley, Chief Financial Officer, Lightbridge, Inc., 67 South Bedford Street,
Burlington, Massachusetts 01803, (781) 359-4000, and with respect to documents
that relate to Corsair, from Martin Silver, Chief Financial Officer and
Secretary, Corsair Communications, Inc., 3408 Hillview Avenue, Palo Alto,
California 94304, (650) 846-3300. In order to ensure timely delivery of
requested documents, any request to Lightbridge or Corsair should be made by
January 30, 2001.
72
<PAGE>
INDEX TO PRO FORMA FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Introduction................................................ P-2
Unaudited pro forma condensed combined balance sheet as of
September 30, 2000........................................ P-3
Unaudited pro forma condensed combined statement of
operations for the nine months ended September 30, 2000... P-4
Unaudited pro forma condensed combined statement of
operations for the nine months ended September 30, 1999... P-5
Unaudited pro forma condensed combined statement of
operations for the year ended December 31, 1999........... P-6
Unaudited pro forma condensed combined statement of
operations for the year ended December 31, 1998........... P-7
Unaudited pro forma condensed combined statement of
operations for the year ended December 31, 1997........... P-8
Notes to unaudited pro forma condensed combined financial
statements................................................ P-9
</TABLE>
P-1
<PAGE>
INTRODUCTION
The following unaudited pro forma condensed combined financial statements
give effect to the proposed merger of Lightbridge and Corsair on a pooling of
interests basis. The unaudited pro forma condensed combined statements of
operations assume the merger was consummated as of the beginning of the earliest
period presented and combine Lightbridge's historical consolidated statements of
operations with Corsair's historical consolidated statements of operations for
the nine months ended September 30, 2000 and 1999 and the years ended
December 31, 1999, 1998 and 1997. The unaudited pro forma combined condensed
balance sheet at September 30, 2000, combines the historical consolidated
balance sheet of Lightbridge and the consolidated balance sheet of Corsair as of
September 30, 2000.
These unaudited pro forma condensed combined financial statements, including
the notes thereto, are qualified in their entirety by reference to, and should
be read in conjunction with, the historical consolidated financial statements of
Lightbridge, and the historical consolidated financial statements of Corsair,
including the notes thereto, incorporated herein by reference.
The following unaudited pro forma condensed combined financial statements
are presented for illustrative purposes only and are not necessarily indicative
of the combined financial position or results of operations of future periods or
the results or financial position that actually would have been realized had
Lightbridge and Corsair been a combined company during the specified periods. In
finalization of the integration plans and other factors, the pro forma
adjustments may differ materially from those presented in these pro forma
condensed combined financial statements.
P-2
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PROFORMA
---------------------- --------------------------
LIGHTBRIDGE CORSAIR ADJUSTMENTS COMBINED
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $38,936 $ 7,741 $ -- $ 46,677
Short term investments............................... -- 57,617 57,617
Accounts receivable, net............................. 25,240 6,996 32,236
Inventories.......................................... -- 3,109 3,109
Current portion--notes receivable.................... -- 343 343
Prepaid and other current assets..................... 1,518 3,099 4,617
------- -------- -------- --------
Total current assets............................... 65,694 78,905 144,599
Property and equipment, net............................ 22,226 3,222 25,448
Notes receivable, non current.......................... -- 1,083 1,083
Other assets, net...................................... 1,884 1,151 3,035
Acquired intangible assets, net........................ 1,357 -- 1,357
------- -------- -------- --------
Total assets..................................... $91,161 $ 84,361 $ -- $175,522
======= ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................... $ 6,673 $ 2,984 $ -- $ 9,657
Other accrued liabilities............................ 11,368 11,516 6,100 2(a) 28,984
Deferred revenues.................................... 2,746 7,295 10,041
------- -------- -------- --------
Total current liabilities.......................... 20,787 21,795 6,100 48,682
Other long-term liabilities.......................... 849 -- 849
------- -------- -------- --------
Total liabilities.................................. 21,636 21,795 6,100 49,531
Commitments and contingencies
Stockholders' equity:
Preferred stock...................................... -- -- --
Common stock......................................... 184 18 85 2(e) 287
Additional paid-in capital........................... 61,342 107,577 (85)2(e) 168,834
Warrants............................................. 206 -- 206
Notes receivable from stockholders................... (115) (115)
Deferred compensation................................ (27) (27)
Retained earnings (accumulated deficit).............. 10,537 (34,755) (6,100)2(a) (30,318)
------- -------- -------- --------
Total.............................................. 72,269 72,698 (6,100) 138,867
Less treasury stock, at cost......................... (2,744) (10,132) (12,876)
------- -------- -------- --------
Total stockholders' equity......................... 69,525 62,566 (6,100) 125,991
------- -------- -------- --------
Total liabilities and stockholders' equity....... $91,161 $ 84,361 $ -- $175,522
======= ======== ======== ========
</TABLE>
See notes to the Unaudited Pro Forma Condensed Combined Financial Statements
P-3
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PROFORMA
---------------------- --------------------------
LIGHTBRIDGE CORSAIR ADJUSTMENTS COMBINED
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Transaction.......................................... $65,523 $ -- $ $ 65,523
Software............................................. 10,466 21,441 (5,459)2(f) 26,448
Consulting and services.............................. 9,662 13,425 5,459 2(f) 28,546
Hardware............................................. -- 13,551 13,551
------- ------- ------- --------
Total revenues..................................... 85,651 48,417 -- 134,068
Cost of revenues:
Transaction.......................................... 33,383 -- 33,383
Software............................................. 4,636 840 (4,087)2(f) 1,389
Consulting and services.............................. 5,119 4,042 4,087 2(f) 13,248
Hardware............................................. -- 9,906 9,906
------- ------- ------- --------
Total cost of revenues............................. 43,138 14,788 -- 57,926
------- ------- ------- --------
Gross profit........................................... 42,513 33,629 -- 76,142
Operating expenses:
Development costs.................................... 11,997 9,348 21,345
Sales and marketing.................................. 6,361 9,623 15,984
General and administrative........................... 9,073 4,509 13,582
Amortization of goodwill and acquired workforce...... 502 -- 502
------- ------- ------- --------
Total operating expenses............................... 27,933 23,480 -- 51,413
------- ------- ------- --------
Income from operations................................. 14,580 10,149 -- 24,729
Other income, net...................................... 1,109 2,871 3,980
------- ------- ------- --------
Income before provision for income taxes............... 15,689 13,020 -- 28,709
Provision for income taxes............................. 6,316 4,035 10,351
------- ------- ------- --------
Net income............................................. $ 9,373 $ 8,985 $ -- $ 18,358
======= ======= ======= ========
Basic earnings per share............................... $ 0.55 $ 0.52 $ 0.67
======= ======= ========
Shares used for basic computation...................... 16,935 17,266 27,257
======= ======= ========
Diluted earnings per share............................. $ 0.51 $ 0.49 $ 0.62
======= ======= ========
Shares used for diluted computation.................... 18,501 18,524 29,575
======= ======= ========
</TABLE>
See notes to the Unaudited Pro Forma Condensed Combined Financial Statements
P-4
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PROFORMA
---------------------- --------------------------
LIGHTBRIDGE CORSAIR ADJUSTMENTS COMBINED
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Transaction.................................... $44,045 $ -- $ -- $44,045
Software....................................... 10,324 12,094 (3,983)2(f) 18,435
Consulting and services........................ 11,030 10,317 3,983 2(f) 25,330
Hardware....................................... -- 26,000 26,000
------- ------- ------- -------
Total revenues............................. 65,399 48,411 -- 113,810
Cost of revenues:
Transaction.................................... 21,139 -- 21,139
Software....................................... 3,610 1,006 (2,234)2(f) 2,382
Consulting and services........................ 6,077 4,220 2,234 2(f) 12,531
Hardware....................................... -- 13,341 13,341
------- ------- ------- -------
Total cost of revenues..................... 30,826 18,567 -- 49,393
------- ------- ------- -------
Gross profit..................................... 34,573 29,844 -- 64,417
Operating expenses:
Development costs.............................. 9,049 8,572 17,621
Sales and marketing............................ 5,747 10,339 16,086
General and administrative..................... 8,666 5,034 13,700
Amortization of goodwill and acquired
workforce.................................... 1,044 -- 1,044
Reorganization costs........................... -- 856 856
------- ------- ------- -------
Total operating expenses......................... 24,506 24,801 -- 49,307
------- ------- ------- -------
Income from operations........................... 10,067 5,043 -- 15,110
Loss on sale of assets........................... -- (2,176) (2,176)
Other income, net................................ 903 1,270 2,173
------- ------- ------- -------
Income before provision for income taxes......... 10,970 4,137 -- 15,107
Provision for income taxes....................... 5,376 984 6,360
------- ------- ------- -------
Net income....................................... $ 5,594 $ 3,153 $ -- $ 8,747
======= ======= ======= =======
Basic earnings per share......................... $ 0.35 $ 0.18 $ 0.33
======= ======= =======
Shares used for basic computation................ 15,960 17,702 26,542
======= ======= =======
Diluted earnings per share....................... $ 0.32 $ 0.17 $ 0.30
======= ======= =======
Shares used for diluted computation.............. 17,549 18,677 28,714
======= ======= =======
</TABLE>
See notes to the Unaudited Pro Forma Condensed Combined Financial Statements
P-5
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PROFORMA
---------------------- --------------------------
LIGHTBRIDGE CORSAIR ADJUSTMENTS COMBINED
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Transaction.................................... $63,341 $ -- $ -- $ 63,341
Software....................................... 13,324 20,083 (5,615)2(f) 27,792
Consulting and services........................ 13,051 14,163 5,615 2(f) 32,829
Hardware....................................... -- 31,961 31,961
------- ------- ------- --------
Total revenues............................. 89,716 66,207 -- 155,923
Cost of revenues:
Transaction.................................... 30,259 -- 30,259
Software....................................... 5,038 1,336 (3,338)2(f) 3,036
Consulting and services........................ 7,579 5,854 3,338 2(f) 16,771
Hardware....................................... -- 17,124 17,124
------- ------- ------- --------
Total cost of revenues..................... 42,876 24,314 -- 67,190
------- ------- ------- --------
Gross profit..................................... 46,840 41,893 -- 88,733
Operating expenses:
Development costs.............................. 12,659 11,312 23,971
Sales and marketing............................ 7,482 13,421 20,903
General and administrative..................... 10,877 6,606 17,483
Amortization of goodwill and acquired
workforce.................................... 1,342 -- 1,342
Reorganization costs........................... -- 856 856
------- ------- ------- --------
Total operating expenses......................... 32,360 32,195 -- 64,555
------- ------- ------- --------
Income from operations........................... 14,480 9,698 -- 24,178
Loss on sale of assets........................... -- (2,176) (2,176)
Other income, net................................ 1,233 1,817 3,050
------- ------- ------- --------
Income before provision for income taxes......... 15,713 9,339 -- 25,052
Provision for income taxes....................... 5,568 498 -- 6,066
------- ------- ------- --------
Net income....................................... $10,145 $ 8,841 $ -- $ 18,986
======= ======= ======= ========
Basic earnings per share......................... $ 0.62 $ 0.50 $ 0.71
======= ======= ========
Shares used for basic computation................ 16,235 17,700 26,816
======= ======= ========
Diluted earnings per share....................... $ 0.56 $ 0.48 $ 0.66
======= ======= ========
Shares used for diluted computation.............. 17,991 18,315 28,940
======= ======= ========
</TABLE>
See notes to the Unaudited Pro Forma Condensed Combined Financial Statements
P-6
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PROFORMA
---------------------- --------------------------
LIGHTBRIDGE CORSAIR ADJUSTMENTS COMBINED
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Transaction.................................... $41,683 $ -- $ -- $ 41,683
Software....................................... 11,927 13,717 (3,698)2(f) 21,946
Consulting and services........................ 9,741 17,412 3,698 2(f) 30,851
Hardware....................................... -- 34,089 34,089
------- ------- ------ --------
Total revenues............................... 63,351 65,218 -- 128,569
Cost of revenues:
Transaction.................................... 23,301 -- 23,301
Software....................................... 4,583 1,317 (1,810)2(f) 4,090
Consulting and services........................ 5,223 8,094 1,810 2(f) 15,127
Hardware....................................... -- 17,151 17,151
------- ------- ------ --------
Total cost of revenues....................... 33,107 26,562 -- 59,669
------- ------- ------ --------
Gross profit..................................... 30,244 38,656 -- 68,900
Operating expenses:
Development costs.............................. 9,596 18,289 27,885
Sales and marketing............................ 6,857 16,775 23,632
General and administrative..................... 8,490 8,501 16,991
Amortization of goodwill and acquired
workforce.................................... 2,982 -- 2,982
Intangible asset impairment.................... 7,385 -- 7,385
Merger related costs........................... -- 4,191 4,191
------- ------- ------ --------
Total operating expenses......................... 35,310 47,756 -- 83,066
------- ------- ------ --------
Loss from operations............................. (5,066) (9,100) -- (14,166)
------- ------- ------ --------
Other income, net................................ 682 2,460 3,142
------- ------- ------ --------
Loss before provision for income taxes........... (4,384) (6,640) -- (11,024)
Provision for income taxes....................... 2,513 -- 2,513
------- ------- ------ --------
Loss before extraordinary item................... $(6,897) $(6,640) $ -- $(13,537)
======= ======= ====== ========
Basic loss per share before extraordinary item... $ (0.44) $ (0.38) $ (0.51)
======= ======= ========
Shares used for basic computation................ 15,834 17,749 26,444
======= ======= ========
Diluted loss per share before extraordinary
item........................................... $ (0.44) $ (0.38) $ (0.51)
======= ======= ========
Shares used for diluted computation.............. 15,834 17,749 26,444
======= ======= ========
</TABLE>
See notes to the Unaudited Pro Forma Condensed Combined Financial Statements
P-7
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PROFORMA
---------------------- --------------------------
LIGHTBRIDGE CORSAIR ADJUSTMENTS COMBINED
----------- -------- ----------- --------
<S> <C> <C> <C> <C>
Revenues:
Transaction.................................... $26,881 $ -- $ -- $ 26,881
Software....................................... 6,332 12,303 (1,848)2(f) 16,787
Consulting and services........................ 7,336 10,671 1,848 2(f) 19,855
Hardware....................................... -- 37,882 37,882
------- ------- ------- --------
Total revenues............................... 40,549 60,856 -- 101,405
Cost of revenues:
Transaction.................................... 15,535 -- 15,535
Software....................................... 2,034 1,903 (790)2(f) 3,147
Consulting and services........................ 1,858 7,026 790 2(f) 9,674
Hardware....................................... -- 27,938 27,938
------- ------- ------- --------
Total cost of revenues....................... 19,427 36,867 -- 56,294
------- ------- ------- --------
Gross profit..................................... 21,122 23,989 -- 45,111
Operating expenses:
Development costs.............................. 6,072 12,525 18,597
Sales and marketing............................ 6,041 11,411 17,452
General and administrative..................... 4,732 9,432 14,164
Amortization of goodwill and acquired
workforce.................................... 497 -- 497
Purchased in-process research and
development.................................. 4,000 -- 4,000
------- ------- ------- --------
Total operating expenses......................... 21,342 33,368 54,710
------- ------- ------- --------
Loss from operations............................. (220) (9,379) -- (9,599)
Other income, net................................ 949 1,191 2,140
------- ------- ------- --------
Income (loss) before provision for income
taxes.......................................... 729 (8,188) -- (7,459)
Provision for income taxes....................... 892 8 900
------- ------- ------- --------
Loss before extraordinary item................... $ (163) $(8,196) $ -- $ (8,359)
======= ======= ======= ========
Basic loss per share before extraordinary item... $ (0.01) $ (0.82) $ (0.40)
======= ======= ========
Shares used for basic computation................ 14,802 10,017 20,790
======= ======= ========
Diluted loss per share before extraordinary
item........................................... $ (0.01) $ (0.82) $ (0.40)
======= ======= ========
Shares used for diluted computation.............. 14,802 10,017 20,790
======= ======= ========
</TABLE>
See notes to the Unaudited Pro Forma Condensed Combined Financial Statements
P-8
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. PRO FORMA BASIS OF PRESENTATION
Subject to the conditions set forth in the merger agreement, Corsair will
become a wholly owned subsidiary of Lightbridge. In connection with the merger
agreement, based on the number of shares of Corsair common stock outstanding at
November 1, 2000, Lightbridge will issue approximately 10,267,000 shares of
common stock in exchange for all of the issued and outstanding Corsair common
stock. The unaudited pro forma condensed combined financial statements reflect
the combined operations of the two companies as if the merger was consummated as
of the beginning of the earliest period presented on a pooling of interests
basis.
2. PRO FORMA ADJUSTMENTS
(a) Lightbridge and Corsair estimate they will incur merger-related expenses
of approximately $6.1 million, consisting primarily of investment
banking, legal, accounting, regulatory filing fees, financial printing
and other related charges. This estimate is preliminary and is therefore
subject to change. These non-recurring expenses will be charged to
operations in the fiscal quarter in which the merger is consummated.
(b) It is expected that following the merger, the combined company will
incur additional costs associated with integrating the two companies.
These costs are not currently reasonably estimable and have not been
reflected in the pro forma condensed combined financial statements. There
can be no assurance that the combined company will not incur additional
charges to reflect costs associated with the merger or that management
will be successful in its efforts to integrate the operations of the
companies.
The merger-related costs are reflected in the Pro Forma Condensed
Combined Balance Sheet, but the unaudited Pro Forma Condensed Combined
Statements of Operations do not give effect to such expenses.
(c) 1,566,672 common stock equivalents arising from options to purchase
Lightbridge common stock, and 1,258,059 common stock equivalents arising
from options to purchase Corsair common stock are included in the
calculation of shares used in per share calculations for the nine month
period ended September 30, 2000, as they are dilutive on a pro forma
combined basis.
(d) 254,047 common stock equivalents arising from options to purchase
Lightbridge common stock, and 204,182 common stock equivalents arising
from options to purchase Corsair common stock are excluded from the
calculation of shares used in per share calculations for the nine month
period ended September 30, 2000, as they would be antidilutive on a pro
forma combined basis.
(e) In connection with the merger agreement, based on the number of shares
of Corsair common stock outstanding at November 1, 2000, Lightbridge will
issue approximately 10,267,000 shares of common stock to Corsair with a
par value of approximately $102,670 in exchange for shares of Corsair
common stock with a par value of approximately $18,000.
(f) As a result of the merger and the anticipated change in the combined
company's underlying business structure, management expects to either
separate or combine certain segments. The pro forma adjustments presented
reflect the anticipated changes in how the businesses of the combined
company will be evaluated. Software license revenues will be reported
separately due to its increased significance and maintenance associated
with software contracts will be combined with other services provided to
clients.
P-9
<PAGE>
ANNEX A
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
AMONG
LIGHTBRIDGE, INC.
LIGHTNING MERGER CORPORATION
AND
CORSAIR COMMUNICATIONS, INC.
NOVEMBER 8, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C> <C>
Article I THE MERGER....................................................... A-1
1.1 The Merger.................................................. A-1
1.2 Effective Time.............................................. A-1
1.3 Effect of the Merger........................................ A-1
1.4 Certificate of Incorporation; By-laws....................... A-2
1.5 Directors and Officers...................................... A-2
1.6 Effect on Capital Stock..................................... A-2
1.7 Surrender of Certificates................................... A-3
1.8 No Further Ownership Rights in Company Common Stock......... A-4
1.9 Lost, Stolen or Destroyed Certificates...................... A-4
1.10 Tax and Accounting Consequences............................. A-4
1.11 Taking of Necessary Actions; Further Action................. A-4
Article II REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... A-5
2.1 Organization of the Company................................. A-5
2.2 Company Capital Structure................................... A-5
2.3 Obligations With Respect to Capital Stock................... A-6
2.4 Authority................................................... A-6
2.5 SEC Filings; Company Financial Statements................... A-7
2.6 Absence of Certain Changes or Events........................ A-8
2.7 Taxes....................................................... A-8
2.8 Restrictions on Business Activities......................... A-9
2.9 Absence of Liens and Encumbrances........................... A-9
2.10 Intellectual Property....................................... A-10
2.11 Agreements, Contracts and Commitments....................... A-11
2.12 No Default.................................................. A-12
2.13 Governmental Authorization.................................. A-12
2.14 Litigation.................................................. A-12
2.15 Environmental Matters....................................... A-12
2.16 Brokers' and Finders' Fees.................................. A-13
2.17 Labor Matters............................................... A-13
2.18 Employee Benefit Plans...................................... A-13
2.19 Compliance With Laws........................................ A-15
2.20 Pooling of Interests........................................ A-15
2.21 Change of Control Payments.................................. A-15
2.22 Registration Statement; Proxy Statement/Prospectus.......... A-15
2.23 Board Approval.............................................. A-16
2.24 Fairness Opinion............................................ A-16
Article III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........ A-16
3.1 Organization of Parent and Merger Sub....................... A-16
3.2 Capital Structure........................................... A-16
3.3 Obligations With Respect to Capital Stock................... A-17
3.4 Authority................................................... A-17
3.5 SEC Filings, Parent Financial Statements.................... A-18
3.6 Absence of Certain Changes or Events........................ A-19
3.7 Taxes....................................................... A-19
3.8 Restrictions on Business Activities......................... A-20
3.9 Absence of Liens and Encumbrances........................... A-20
</TABLE>
A-ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C> <C>
3.10 Intellectual Property....................................... A-20
3.11 Agreements, Contracts and Commitments....................... A-22
3.12 No Default.................................................. A-22
3.13 Governmental Authorization.................................. A-23
3.14 Litigation.................................................. A-23
3.15 Environmental Matters....................................... A-23
3.16 Broker's and Finders' Fees.................................. A-23
3.17 Labor Matters............................................... A-23
3.18 Employee Benefit Plans...................................... A-23
3.19 Compliance With Laws........................................ A-25
3.20 Pooling of Interests........................................ A-25
3.21 Change of Control Payments.................................. A-25
3.22 Registration Statement; Proxy Statement/Prospectus.......... A-25
3.23 Board Approval.............................................. A-26
3.24 Fairness Opinion............................................ A-26
Article IV CONDUCT PRIOR TO THE EFFECTIVE TIME............................. A-26
4.1 Conduct of Business of the Company.......................... A-26
4.2 Conduct of Business of Parent............................... A-28
Article V ADDITIONAL AGREEMENTS............................................ A-30
5.1 Proxy Statement/Prospectus; Registration Statement.......... A-30
5.2 Meetings of Stockholders.................................... A-30
5.3 Access to Information, Confidentiality...................... A-30
5.4 No Solicitation............................................. A-31
5.5 Expenses.................................................... A-33
5.6 Break-Up Fee................................................ A-33
5.7 Public Disclosure........................................... A-34
5.8 Pooling Accounting.......................................... A-34
5.9 Auditors' Letters........................................... A-35
5.10 Affiliate Agreements........................................ A-35
5.11 FIRPTA...................................................... A-35
5.12 Legal Requirements.......................................... A-35
5.13 Blue Sky Laws............................................... A-35
5.14 Best Efforts and Further Assurances......................... A-36
5.15 Stock Options............................................... A-36
5.16 Form S-8.................................................... A-36
5.17 Certain Benefit Plans....................................... A-36
5.18 Indemnification............................................. A-36
5.19 Tax-Free Reorganization..................................... A-37
5.20 NMS Listing................................................. A-37
5.21 Board Representation........................................ A-37
5.22 Employment Arrangements..................................... A-37
5.23 Voting Agreements........................................... A-38
5.24 No Solicitation of Employees................................ A-38
Article VI CONDITIONS TO THE MERGER........................................ A-38
Conditions to Obligations of Each Party to Effect the
6.1 Merger...................................................... A-38
6.2 Additional Conditions to Obligations of Company............. A-39
Additional Conditions to the Obligations of Parent and
6.3 Merger Sub.................................................. A-39
Article VII TERMINATION, AMENDMENT AND WAIVER.............................. A-40
7.1 Termination................................................. A-40
7.2 Effect of Termination....................................... A-41
</TABLE>
A-iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C> <C>
7.3 Notice of Termination....................................... A-42
7.4 Amendment................................................... A-42
7.5 Extension; Waiver........................................... A-42
Article VIII GENERAL PROVISIONS............................................ A-42
8.1 Non-Survival of Representations and Warranties.............. A-42
8.2 Notices..................................................... A-42
8.3 Interpretation.............................................. A-43
8.4 Counterparts................................................ A-43
8.5 Entire Agreement............................................ A-43
8.6 Severability................................................ A-43
8.7 Other Remedies.............................................. A-43
8.8 Governing Law............................................... A-43
8.9 Rules of Construction....................................... A-44
8.10 Assignment.................................................. A-44
</TABLE>
A-iv
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
This AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION (the
"Agreement") is made and entered into as of November 8, 2000 among
Lightbridge, Inc., a Delaware corporation ("Parent"), Lightning Merger
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("Merger Sub"), and Corsair Communications, Inc., a Delaware corporation (the
"Company").
RECITALS
A. The boards of directors of each of the Company, Parent and Merger Sub
believe it is in the best interests of each company and their respective
stockholders that the Company and Merger Sub combine into a single company
through the merger of Merger Sub with and into the Company (the "Merger") and,
in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, the outstanding shares of
Common Stock of the Company shall be converted into shares of Common Stock of
Parent at the rate determined herein.
C. The Company, Parent and Merger Sub have entered into an Agreement and
Plan of Reorganization dated as of October 26, 2000 (the "Original Agreement"),
containing certain representations and warranties and other agreements in
connection with the Merger.
D. The Company, Parent and Merger Sub now desire to amend and restate the
Original Agreement in its entirety as set forth in this Agreement.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law ("Delaware Law"),
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation. The Company as the surviving corporation after the Merger
is hereinafter sometimes referred to as the "Surviving Corporation."
1.2 EFFECTIVE TIME. Subject to the provisions of this Agreement, the
parties hereto shall cause the Merger to be consummated by filing a Certificate
of Merger (the "Certificate of Merger") with the Secretary of State of the State
of Delaware, in accordance with the relevant provisions of Delaware Law (the
time of such filing being the "Effective Time") as soon as practicable on or
after the Closing Date (as herein defined). The closing of the Merger (the
"Closing") shall take place at the offices of Foley, Hoag & Eliot LLP 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
(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, and subject thereto, at
the Effective Time, all the property, rights, privileges, powers and franchises
of the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts,
A-1
<PAGE>
liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 CERTIFICATE OF INCORPORATION; BY-LAWS.
(a) Unless otherwise determined by Parent prior to the Effective Time,
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; provided, however,
that Article FIRST of the Certificate of Incorporation of the Surviving
Corporation shall be amended to read as follows: "The name of the
corporation is Corsair Communications, Inc."
(b) The By-laws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended.
1.5 DIRECTORS AND OFFICERS. The directors of Merger Sub shall be the
initial directors of the Surviving Corporation, until their respective
successors are duly elected or appointed and qualified. The officers of Merger
Sub shall be the initial officers of the Surviving Corporation, until their
respective successors are duly elected or appointed and qualified.
1.6 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities:
(a) CONVERSION OF COMPANY COMMON STOCK. Each share of Common Stock,
par value $.001 per share, of the Company (the "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 be converted
automatically into the right to receive (i) 0.5978 (the "Exchange Ratio")
shares of Common Stock, par value $.01 per share, of Parent (the "Parent
Common Stock") upon surrender of the certificate representing such share of
Company Common Stock in the manner provided in Section 1.7 (or in the case
of a lost, stolen or destroyed certificate, upon delivery of an affidavit
(and bond, if required) in the manner provided in Section 1.9), including,
with respect to each whole share of Parent Common Stock to be received, the
right to receive one Right (as defined in the Rights Agreement, dated as of
November 14, 1997, between Parent and American Stock Transfer and Trust
Company, as amended from time to time) and (ii) the amount of cash in lieu
of fractional shares as is determined in accordance with Section 1.6(f).
(b) CANCELLATION OF PARENT-OWNED STOCK. Each share of Company Common
Stock owned by Merger Sub, Parent or any direct or indirect wholly owned
subsidiary of Parent or of the Company 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
the Company's 1997 Stock Incentive Plan and the 1997 Incentive Stock Option,
Nonqualified Stock Option and Restricted Stock Purchase Plan of Subscriber
Computing, Inc. ("SCI") assumed by the Company in connection with its
acquisition of SCI (collectively, the "Company Stock Option Plans") shall be
assumed by Parent in accordance with Section 5.15 hereof. At the Effective
Time, in accordance with the terms of the Company's 1997 Employee Stock
Purchase Plan (the "Company ESPP"), all rights to purchase shares of Company
Common Stock under the Company ESPP shall be exercised and the Company ESPP
shall thereupon terminate.
(d) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock, par value
$.01 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and exchanged for one validly
issued, fully paid and nonassessable share of Common Stock, par
A-2
<PAGE>
value $.01 per share, of the Surviving Corporation. Each stock certificate
of Merger Sub evidencing ownership of any such shares shall continue to
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 fully the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Company Common Stock),
reorganization, recapitalization or other like change with respect to Parent
Common Stock or Company Common Stock occurring after the date hereof and
prior to the Effective Time.
(f) FRACTIONAL SHARES. No fraction of a share of Parent Common Stock
will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to a fraction
of a share of Parent Common Stock (after aggregating all fractional shares
of Parent Common Stock to be received by such holder) shall receive from
Parent an amount of cash (rounded to the nearest whole cent) equal to the
product of (i) such fraction, multiplied by (ii) the average closing price
of a share of Parent Common Stock for the ten most recent days that Parent
Common Stock has traded ending on the trading day immediately prior to the
Effective Time, as reported on the Nasdaq National Market.
1.7 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. American Stock Transfer & Trust Company, or
another similar institution selected by Parent, shall act as the exchange
agent (the "Exchange Agent") in the Merger.
(b) PARENT TO PROVIDE COMMON STOCK. Promptly after the Effective Time,
Parent shall make available to the Exchange Agent for exchange in accordance
with this Article I, through such reasonable procedures as Parent may adopt,
the shares of Parent Common Stock issuable pursuant to Section 1.6 in
exchange for outstanding shares of Company Common Stock, and cash in an
amount sufficient for payment in lieu of fractional shares pursuant to
Section 1.6(f).
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to
the Effective Time represented outstanding shares of Company Common Stock
whose shares were converted into the right to receive shares of Parent
Common Stock pursuant to Section 1.6, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
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 a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by Parent, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto,
the holder of such Certificate shall be entitled to receive in exchange
therefor a certificate representing the number of whole shares of Parent
Common Stock and payment in lieu of fractional shares which such holder has
the right to receive pursuant to Section 1.6, and the Certificate so
surrendered shall forthwith be canceled. Until so surrendered, each
outstanding Certificate that, prior to the Effective Time, represented
shares of Company Common Stock will be deemed from and after the Effective
Time, for all corporate purposes, other than the payment of dividends, to
evidence 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 1.6.
A-3
<PAGE>
(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 holder of any unsurrendered Certificate with respect to
the shares of Parent Common Stock represented thereby until the holder of
record of such Certificate shall surrender such Certificate. Subject to
applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, at the
time of such surrender, the amount of dividends or other distributions with
a record date after the Effective Time payable with respect to such whole
shares of Parent Common Stock.
(e) TRANSFERS OF OWNERSHIP. If any certificate for shares of Parent
Common Stock is to be issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the certificate so surrendered will
be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Parent or any agent
designated by it any transfer or other taxes required by reason of the
issuance of a certificate for shares of Parent Common Stock in any name
other than that of the registered holder of the certificate surrendered, or
established to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable.
(f) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 1.7, none of the Exchange Agent, the Surviving Corporation or 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.
1.8 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Common Stock in accordance with the terms hereof (including any cash paid in
respect thereof) 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 which 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 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any certificates
evidencing shares of Company Common Stock 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, such shares of Parent Common Stock and cash for fractional
shares, if any, as may be required pursuant to Section 1.6; provided, however,
that Parent may, in its discretion and as a condition precedent to the issuance
thereof, 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 or the Exchange Agent with respect to the
certificates alleged to have been lost, stolen or destroyed.
1.10 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties hereto
that the Merger shall (i) constitute a reorganization within the meaning of
Section 368 of the Code and (ii) qualify for accounting treatment as a pooling
of interests.
1.11 TAKING OF NECESSARY ACTIONS; FURTHER ACTION. If, at any time after
the Effective Time, any other action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is consistent with this Agreement.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub, subject to the
exceptions specifically disclosed in writing in the disclosure letter supplied
by the Company to Parent (the "Company Schedules") and dated as of the date
hereof, as follows:
2.1 ORGANIZATION OF THE COMPANY. The Company and each of its material
subsidiaries (which material subsidiaries are set forth in the Company
Schedules) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power to own, lease and operate its property and to carry on its
business as now being conducted and as proposed to be conducted, and is duly
qualified to do business and in good standing as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect (as defined below) on the Company. The Company has delivered to
Parent a true and complete list of all of the Company's subsidiaries, together
with the jurisdiction of incorporation of each subsidiary. The Company owns,
directly or indirectly through one or more subsidiaries, 100% of the capital
stock of each of its subsidiaries. Except as set forth in the Company SEC
Reports (as defined below in Section 2.5), the Company does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for any interest in, any corporation,
partnership, joint venture or other business association or entity other than
the securities of any publicly-traded entity held for investment only and
constituting less than 5% of the outstanding capital stock of any such entity.
The Company has delivered or made available a true and correct copy of the
Certificate of Incorporation and By-laws of the Company and similar governing
instruments of its material subsidiaries, each as amended to date, to counsel
for Parent. For purposes of this Agreement, "Material Adverse Effect" shall mean
a material adverse effect on the business, properties, assets (including
intangible assets), financial condition, or results of operations of a Person
(as defined below), taken as a whole, but shall not include any of the foregoing
related to (i) the economy or financial markets in general, (ii) the industries
in general in which such Person operates and not specifically related to (or
having the effect of specifically relating to or having a materially
disproportionate effect (relative to most other industry participants) on) such
Person, or (iii) any change in the market price or trading volume of such
Person. For purposes of this Agreement, "Person" shall mean any natural person,
corporation, general partnership, limited partnership, limited liability
company, proprietorship or other business organization.
2.2 COMPANY CAPITAL STRUCTURE. The authorized capital stock of the Company
consists of 75,000,000 shares of Common Stock, $.001 par value, of which there
were 16,954,261 shares issued and outstanding as of September 30, 2000, and
10,000,000 shares of Preferred Stock, $.001 par value, all of which are
undesignated and none of which is issued or outstanding. All such shares have
been duly authorized, and all such issued and outstanding shares have been
validly issued, are fully paid and nonassessable and are free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon the
holders thereof. As of September 30, 2000, the Company had reserved
(i) 5,905,946 shares of Common Stock for issuance to employees, directors and
consultants pursuant to the Company Stock Option Plans, under which options are
outstanding for 2,734,135 shares and (ii) 666,667 shares of Common Stock for
issuance pursuant to the Company ESPP. 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, shall be duly
authorized, validly issued, fully paid and nonassessable. The Company Schedules
include a list of all issuances of capital stock by the Company since
January 1, 1998 (other than issuances pursuant to options under the Company
Stock Option Plans and the Company ESPP) and also list for each outstanding
option at October 6, 2000, the name of the holder of such option, the number of
shares subject to such option, the exercise price of such option, the number of
shares as to which such option will have been vested at October 16, 2000 and, if
the exercisability of such option will be accelerated in any way by the
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transactions contemplated by this Agreement or for any other reason, an
indication of the extent of such acceleration. Such list also describes any
repricing of options which has taken place since January 1, 1998. The Company
Schedules also include a list of all the participants in the Company ESPP and
the number of shares of Company Common Stock which will be issuable to the
participants therein for the offering period ending February 28, 2001 if all
current participants continue to contribute at current levels (assuming the
purchase price of such shares to be 85% of the fair market value of the Company
Common Stock on the first day of the current offering period). Since
September 30, 2000, there have been no changes in the capital structure of the
Company other than issuances of Company Common Stock (i) upon the exercise of
options granted under the Company Stock Option Plans and (ii) pursuant to the
Company ESPP. The Company has duly amended the Rights Agreement dated as of
November 18, 1998 between the Company and Bank Boston N.A. to exempt the Merger
from the provisions thereof.
2.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set forth in
Section 2.2, there are no equity securities of any class of the Company, or any
security exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding. Except for securities the Company owns,
directly or indirectly through one or more subsidiaries, there are no equity
securities of any class of any subsidiary of the Company, or any security
exchangeable into or exercisable for such equity securities, issued, reserved
for issuance or outstanding. Except as set forth in Section 2.2, there are no
options, warrants, equity securities, calls, rights, commitments or agreements
of any character to which the Company or any of its subsidiaries is a party or
by which it is bound obligating the Company or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock of the Company or any of its subsidiaries or obligating the
Company or any of its subsidiaries to grant, extend, accelerate the vesting of
or enter into any such option, warrant, equity security, call, right, commitment
or agreement. To the knowledge of the Company, except for the stockholder
agreements to be entered into by certain Company stockholders with Parent in
connection with the Merger (the "Stockholder Agreements"), there are no voting
trusts, proxies or other agreements or understandings with respect to the shares
of capital stock of the Company.
2.4 AUTHORITY. The 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 the Company, subject only to the approval of the
Merger by the vote of the holders of a majority of the Company Common Stock.
This Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company, enforceable in
accordance with its terms, except as enforceability may be limited by bankruptcy
and other similar laws and general principles of equity. The execution and
delivery of this Agreement by the Company does not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (i) any provision of the Certificate
of Incorporation, as amended, or By-laws, as amended, of the Company or similar
governing instruments of any of its subsidiaries or (ii) except as set forth in
the Company Schedules, any mortgage, indenture, lease, contract or other
agreement disclosed in the Company Schedules pursuant to Section 2.11 or of the
type referred to in clause (i) or (ii) of Section 2.12, or any permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or its properties or
assets. The Company is not subject to the provisions of Section 2115 of the
California General Corporation Law.
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 ("Governmental Entity"), is
required by or with respect to the Company in connection with the
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execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of a premerger notification
report under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended ("HSR Act"), if required, (ii) the filing of a Form S-4 Registration
Statement with the Securities and Exchange Commission ("SEC") in accordance with
the Securities Act of 1933, as amended (the "Securities Act"), (iii) the filing
of the Certificate of Merger with the Delaware Secretary of State, (iv) the
filing of the Proxy Statement (as defined in Section 2.22) with the SEC in
accordance with the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (v) the filing of a Form 8-K with the SEC, (vi) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities laws and the laws of any
foreign country and (vii) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not have a
Material Adverse Effect on the Company.
2.5 SEC FILINGS; COMPANY FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports and documents required to
be filed with the SEC since July 29, 1997 and has made available to Parent,
in the form filed with the SEC, (i) its Annual Report on Form 10-K for the
fiscal years ended December 31, 1998 and 1999, (ii) its Quarterly Reports on
Form 10-Q for the periods ended March 31 and June 30, 2000, (iii) all proxy
statements relating to the Company's meetings of stockholders (whether
annual or special) held since July 29, 1997, (iv) all other reports or
registration statements filed by the Company with the SEC since July 29,
1997, and (v) all amendments and supplements to all such reports and
registration statements filed by the Company with the SEC; and the Company
will make available to Parent in the form filed with the SEC, prior to
November 15, 2000, its Quarterly Report on Form 10-Q for the period ended
September 30, 2000. All such required forms, reports and documents
(including those enumerated in clauses (i) through (v) of the preceding
sentence and the Company's September 30, 2000 Form 10-Q, when filed) 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 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. None of the 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 any Company SEC Reports filed after the
date hereof until the Closing, (x) complies as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (y) was prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto) and (z) fairly
presented the consolidated financial position of the Company and its
subsidiaries as at the respective dates thereof and the consolidated results
of its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not, or are not expected to be,
material in amount. The unaudited balance sheet of the Company as of
June 30, 2000 contained in the Company SEC Reports is hereinafter referred
to as the "Company Balance Sheet."
(c) The 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
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to be filed, to agreements, documents or other instruments which previously
had been filed by the Company with the SEC pursuant to the Securities Act or
the Exchange Act.
(d) The Company Schedules contain the unaudited consolidated financial
statements of the Company as of and for the period ended September 30, 2000,
as set forth in the Company's press release dated October 17, 2000 (the
"September Company Financials"). The September Company Financials fairly
present the consolidated financial position of the Company and its
subsidiaries as of September 30, 2000 and the consolidated results of its
operations and cash flow for the three months then ended, subject to normal
and recurring year-end adjustments which are not expected to be material in
amount.
2.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in the
Company Schedules, since the date of the Company Balance Sheet, except with
respect to the actions contemplated by this Agreement, the Company and its
subsidiaries have conducted their businesses only in the ordinary course and in
a manner consistent with past practice and, since such date, there has not been
(i) any Material Adverse Change (as defined below) in the Company, or any
development that reasonably would be expected to cause a Material Adverse Change
in the Company; (ii) any material change by the Company in its accounting
methods, principles or practices; (iii) any material revaluation by the Company
of any of its assets, including, without limitation, writing down the value of
capitalized software or inventory or writing off notes or accounts receivable
other than in the ordinary course of business; or (iv) any other action or event
that would have required the consent of Parent pursuant to Section 4.1 had such
action or event occurred after the date of this Agreement. For purposes of this
Agreement, "Material Adverse Change" shall mean a material adverse change in the
business, assets (including intangible assets), financial condition or results
of operations of a Person, but shall not include any of the foregoing related to
(a) the economy or financial markets in general, (b) the industries in general
in which such Person operates and not specifically related to (or having the
effect of specifically relating to or having a materially disproportionate
effect (relative to most other industry participants) on) such Person, or
(c) any change in the market price or trading volume of such Person.
2.7 TAXES.
(a) DEFINITION OF TAXES. For the purposes of this Agreement, "Tax" or
"Taxes" refers to any and all federal, state, local and foreign taxes,
assessments and other government charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts, net
operating losses, 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 and 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.
(b) TAX RETURNS AND AUDITS.
(i) The Company and each of its subsidiaries has timely filed all
federal, state, local and foreign returns, estimates, information statements
and reports ("Returns") relating to Taxes required to be filed by the
Company and each of its subsidiaries, except such Returns which are not
material to the Company. All such Returns were correct and complete in all
material respects. The Company and each of its subsidiaries has paid all
Taxes shown to be due on such Returns or is contesting them in good faith.
None of the Company and its subsidiaries currently is the beneficiary of any
extension of time within which to file any Return.
(ii) Except as is not material to the Company, the Company and each of
its subsidiaries as of the Effective Time will have withheld with respect to
its employees all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld.
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(iii) The Company Schedules lists all material federal, state, local, and
foreign income tax Returns filed with respect to any of the Company and its
subsidiaries for taxable periods ended on or after December 31, 1997,
indicates those Returns that have been audited, and indicates those Returns
that currently are the subject of audit. The Company has delivered to the
Parent correct and complete copies of all federal income tax Returns,
examination reports, and statements of deficiencies assessed against, or
agreed to by any of the Company and its subsidiaries since December 31,
1997. Except as is not material to the Company, neither the Company nor any
of its subsidiaries has been delinquent in the payment of any Tax nor is
there any Tax deficiency outstanding, proposed or assessed against the
Company or any of its subsidiaries, nor has the Company or any of its
subsidiaries executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax.
(iv) Except as is not material to the Company, no audit or other
examination of any Return of the Company or any of its subsidiaries is
presently in progress, nor has the Company or any of its subsidiaries been
notified of any request for such an audit or other examination.
(v) Neither the Company nor any of its subsidiaries has any liability
for unpaid federal, state, local or foreign Taxes which have 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 the Company.
(vi) None of the Company's assets are treated as "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(vii) There is no contract, agreement, plan or arrangement, including but
not limited to the provisions of this Agreement, covering any employee or
former employee of the Company or any of its subsidiaries that, individually
or collectively, could give rise to the payment of any amount for which a
deduction would be disallowed by reason of Sections 280G, 404 or 162(b)
through (o) of the Code.
(viii) Neither the 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 the
Company.
(ix) The Company is not, and has not been at any time, a "United States
real property holding corporation" within the meaning of Section 897(c)(2)
of the Code.
(x) None of the Company and its subsidiaries is a party to any tax
allocation or sharing agreement. None of the Company and its subsidiaries
(A) has been a member of an Affiliated Group (within the meaning of Code
Section1504(a), or any similar group defined under a similar provision of
state, local, or foreign law) filing a consolidated federal Return (other
than a group the common parent of which was the Company) or (B) has any
liability for the taxes of any person (other than any of the Company and its
subsidiaries) under Reg. Section1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or
otherwise.
2.8 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no material agreement,
judgment, injunction, order or decree binding upon the Company which has or
could reasonably be expected to have the effect of prohibiting or materially
impairing any material current business practice of the Company, any acquisition
of material property by the Company or the conduct of business by the Company as
currently conducted or as proposed to be conducted by the Company.
2.9 ABSENCE OF LIENS AND ENCUMBRANCES. The Company and each of its
subsidiaries has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its material tangible
properties and assets, real, personal and mixed, used in its business, free and
clear of
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any liens or encumbrances except as reflected in the Company Financial
Statements and except for liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the value,
or materially interfere with the present use, of the property subject thereto or
affected thereby.
2.10 INTELLECTUAL PROPERTY.
(a) The Company, directly or indirectly, owns, or is licensed or
otherwise possesses legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, maskworks, net lists, schematics, technology, know-how, computer
software programs or applications (in both source code and object code
form), and tangible or intangible proprietary information or material
(excluding Commercial Software as defined in Paragraph (c) below) that are
material to the business of the Company as currently conducted or as
proposed to be conducted by the Company (the "Company Intellectual Property
Rights").
(b) The Company Schedules set forth a complete list of all patents,
trademarks, registered copyrights, trade names and service marks, and any
applications therefor, included in the Company Intellectual Property Rights
owned by the Company or any of its subsidiaries, and specify, where
applicable, the jurisdictions in which each such Company Intellectual
Property Right has been issued or registered or in which an application for
such issuance and registration has been filed, including the respective
registration or application numbers and the names of all registered owners.
The Company Schedules also set forth a complete list of all material
licenses, sublicenses and other agreements as to which the Company is a
party and pursuant to which the Company or any other person is authorized to
use any Company Intellectual Property Right (excluding object code end-user
licenses granted to end-users in the ordinary course of business that permit
use of software products without a right to modify, distribute or sublicense
the same ("End-User Licenses")) or other trade secret material to the
Company, and includes the identity of all parties thereto. The Company has
furnished true and correct copies of all such licenses, sublicenses and
other agreements to Parent. The Company is not in violation of any license,
sublicense or agreement described on such list except such violations as do
not materially impair the Company's rights under such license, sublicense or
agreement. Except as set forth in the Company Schedules, the execution and
delivery of this Agreement by the Company, and the consummation of the
transactions contemplated hereby, will neither cause the Company to be in
violation or default under any such license, sublicense or agreement, nor
entitle any other party to any such license, sublicense or agreement to
terminate or modify such license, sublicense or agreement. The Company is
the sole and exclusive owner or the valid licensee of, with all right, title
and interest in and to (free and clear of any liens or encumbrances), the
Company Intellectual Property Rights, and has sole and exclusive rights or
valid license rights (and is not contractually obligated to pay any
compensation to any third party in respect thereof) to the use thereof or
the material covered thereby in connection with the services or products in
respect of which the Company Intellectual Property Rights are being used. No
claims with respect to the Company Intellectual Property Rights have been
asserted or, to the knowledge of the Company, are threatened by any person
nor are there any valid grounds for any bona fide claims (i) to the effect
that the manufacture, sale, licensing or use of any of the products of the
Company or any of its subsidiaries as now manufactured, sold, licensed or
used or proposed for manufacture, sale, licensing or use by the Company
infringes on any copyright, patent, trade mark, service mark or trade
secret, (ii) against the use by the Company or any of its subsidiaries of
any trademarks, service marks, trade names, trade secrets, copyrights,
patents, technology, know-how or computer software programs and applications
used in the Company's business as currently conducted or as proposed to be
conducted, or (iii) challenging the ownership by the Company, validity or
effectiveness of any of the Company Intellectual Property Rights. All
material registered trademarks, service marks and copyrights held by the
Company are valid and subsisting. To the knowledge of the Company, there
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is no material unauthorized use, infringement or misappropriation of any of
the Company Intellectual Property Rights by any third party, including any
employee or former employee of the Company. No Company Intellectual Property
Right owned by the Company or any of its subsidiaries or product of the
Company or any of its subsidiaries, or, to the knowledge of the Company,
Intellectual Property Right licensed by the Company or its subsidiaries, is
subject to any outstanding decree, order, judgment, or stipulation
restricting in any manner the licensing thereof by the Company or any of its
subsidiaries. Neither the Company nor any of its subsidiaries has entered
into any agreement (other than exclusive distribution agreements identified
as such in the Company Schedules) under which the Company or its
subsidiaries is restricted from selling, licensing or otherwise distributing
any of its products to any class of customers, in any geographic area,
during any period of time or in any segment of the market. The Company has a
policy requiring each employee to execute a proprietary information and
confidentiality agreement substantially in the Company's standard form.
(c) "Commercial Software" means packaged commercially available software
programs generally available to the public through retail dealers in
computer software which have been licensed to the Company (or, in the case
of Section 3.10, to Parent) pursuant to end-user licenses and which are used
in the Company's business (or in Parent's business in the case of
Section 3.10) but are in no way a component of or incorporated in or
specifically required to develop or support any of the Company's (or of
Parent's in the case of Section 3.10) products and related trademarks,
technology and know-how.
2.11 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth in the
Company Schedules, neither the Company nor any of its subsidiaries has, nor is
it a party to nor is it bound by:
(a) any collective bargaining agreements,
(b) any bonus, deferred compensation, incentive compensation, pension,
profit-sharing or retirement plans, or any other employee benefit plans or
arrangements (except for those plans and arrangements relating solely to
employees of the Company's foreign subsidiaries who earn less than $100,000
annual base salary),
(c) any employment or consulting agreement, contract or commitment with
any officer or director level employee, not terminable by the Company on
thirty days notice without liability, except to the extent general
principles of wrongful termination law may limit the Company's ability to
terminate employees at will and except for those agreements, contracts and
commitments with employees of the Company's foreign subsidiaries who earn
less than $100,000 annual base salary,
(d) any agreement or plan, including, without limitation, 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,
(e) any agreement of indemnification or guaranty not entered into in the
ordinary course of business in excess of $1,000,000 individually or in the
aggregate other than such agreements or guarantees between the Company and
any of its subsidiaries, officers or directors, and other than End-User
Licenses,
(f) any agreement, contract or commitment containing any covenant
limiting the freedom of the Company to engage in any line of business or
compete with any person,
(g) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $200,000,
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(h) any agreement, contract or commitment relating to the disposition or
acquisition of assets not in the ordinary course of business or any
ownership interest in any corporation, partnership, joint venture or other
business enterprise,
(i) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of
money or extension of credit,
(j) any joint marketing or development agreement (excluding agreements
with resellers, value added resellers or independent software vendors
entered into in the ordinary course of business that do not permit such
resellers or vendors to modify the Company's software products),
(k) any distribution agreement (identifying any that contain exclusivity
provisions), or
(l) any other agreement, contract or commitment (excluding real and
personal property leases) which involves payment by the Company of $500,000
or more and is not cancelable without penalty within thirty (30) days.
2.12 NO DEFAULT. Neither the Company nor any of its subsidiaries has
breached, or received in writing any claim or threat that it has breached, any
of the terms or conditions of any (i) agreement, contract or commitment that was
or is required to be filed as an exhibit to the Company SEC Reports or (ii) any
agreement under which the Company or any of its subsidiaries licenses from a
third party any Company Intellectual Property Rights included in the Company's
products in such a manner as would permit any other party to cancel or terminate
the same or would permit any other party to seek material damages from the
Company thereunder. Each of the agreements, contracts and commitments referred
to in clauses (i) and (ii) above that has not expired or been terminated in
accordance with its terms is in full force and effect and, except as otherwise
disclosed, is not subject to any material default thereunder of which the
Company is aware by any party obligated to the Company pursuant thereto.
2.13 GOVERNMENTAL AUTHORIZATION. The Company holds all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities which
are material to the operation of the Company's business as currently conducted
(the "Company Permits"). The Company is in material compliance with the terms of
the Company Permits. Except as disclosed in the Company SEC Reports filed prior
to the date of this Agreement, the business of the Company is not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity, except for violations or possible violations which individually or in
the aggregate are not, and insofar as reasonably can be foreseen, in the future
will not be, material to the Company. As of the date of this Agreement, no
investigation or review by any Governmental Entity with respect to the Company
is pending or, to the knowledge of the Company, threatened, nor, to the
knowledge of the Company, has any Governmental Entity indicated an intention to
conduct the same, other than, in each case, those the outcome of which, as far
as reasonably can be foreseen, will not be material.
2.14 LITIGATION. There is no action, suit proceeding, claim, arbitration
or investigation pending, or as to which the Company or any of its subsidiaries
has received any notice of assertion nor, to the Company's knowledge, is there a
reasonable basis to expect such notice of assertion against the Company or any
of its subsidiaries which, if determined adversely to the Company or any of its
subsidiaries reasonably would have a Material Adverse Effect on the Company, or
which in any manner challenges or seeks to prevent, enjoin, alter or delay any
of the transactions contemplated by this Agreement.
2.15 ENVIRONMENTAL MATTERS.
(a) DEFINITION OF HAZARDOUS MATERIAL. The term "Hazardous Material" as
used in this Agreement shall mean 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,
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urea-formaldehyde and all substances listed as hazardous substances pursuant
to the Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended, 42 U.S.C. SectionSection 9601, ET SEQ., or deemed as a
hazardous waste pursuant to the Solid Waste Disposal Act, as amended,
42 U.S.C. SectionSection 6901, ET SEQ., or deemed as a hazardous material
pursuant to the Massachusetts Oil and Hazardous Material Release Prevention
and Response Act, G.L. c. 21E, SectionSection 1, ET SEQ. or similar laws of
any other state, and the regulations promulgated pursuant to said laws.
(b) DEFINITION OF HAZARDOUS MATERIALS ACTIVITIES. The term "Hazardous
Materials Activities" as used in this Agreement shall mean the
transportation, storage, use, sale, manufacture, disposal, release of any
Hazardous Material or the exposure of any employee or other person to
Hazardous Materials.
(c) PERMITS. The Company currently holds all material environmental
approvals, permits, licenses, registrations, clearances and consents (the
"Environmental Permits") necessary for the conduct of the Company's
Hazardous Material Activities and other businesses of the Company as such
activities and businesses are currently being conducted.
(d) ENVIRONMENTAL LIABILITIES. No material action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim, or
notice of violation is pending, or to the Company's knowledge, threatened
concerning any Environmental Permit, Hazardous Material, or any Hazardous
Materials Activity of the Company or any of its subsidiaries. The Company is
not aware of any fact or circumstance which could involve the Company or any
of its subsidiaries in any material litigation or otherwise impose upon the
Company any material liability relating to any Hazardous Materials
Activities.
2.16 BROKERS' AND FINDERS' FEES. Except for fees payable to Broadview
International pursuant to the engagement letter dated September 16, 1999, a copy
of which has been provided to Parent, the Company has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agent's commissions or any similar charges in connection with this Agreement,
the Merger or any transaction contemplated hereby.
2.17 LABOR MATTERS. There are no pending material claims against the
Company or any of its subsidiaries under any workers' compensation plan or
policy or for long-term disability. The Company and each of its United States
subsidiaries, has complied in all material respects with all applicable
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and has no material obligations with respect to any former employees
or qualifying beneficiaries thereunder. Except as is not material to the
Company's business and operations, neither the Company nor any of its
subsidiaries has given to or received from any current employee of the Company
or any of its subsidiaries notice of termination of employment.
2.18 EMPLOYEE BENEFIT PLANS.
(a) The Company Schedules contain a complete list of all Benefit Plans
(as hereinafter defined) sponsored or maintained by the Company or under
which the Company is obligated. The Company has made available to Parent
(i) accurate and complete copies of all Benefit Plan documents and all other
material documents relating thereto, including (if applicable) all summary
plan descriptions, summary annual reports and insurance contracts,
(ii) accurate and complete detailed summaries of all unwritten Benefit
Plans, (iii) accurate and complete copies of the most recent financial
statements and actuarial reports with respect to all Benefit Plans for which
financial statements or actuarial reports are required or have been prepared
and (iv) accurate and complete copies of all annual reports for all Benefit
Plans (for which annual reports are required) prepared within the last three
years. "Benefit Plans" means all employee benefit plans within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended
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("ERISA"), and any related or separate contracts, plans, trusts, programs,
policies, arrangements, practices, customs and understandings, in each case
whether formal or informal, that provide benefits of economic value to any
present or former employee of the Company (or, in the case of Section 3.18,
Parent) or present or former beneficiary, dependent or assignee of any such
employee or former employee.
(b) All Benefit Plans of the Company conform (and at all times have
conformed) in all material respects to, and are being administered and
operated (and have at all time been administered and operated) in material
compliance with, the requirements of ERISA, the Code and all other
applicable laws or governmental regulations. All returns, reports and
disclosure statements required to be made under ERISA and the Code with
respect to all Benefit Plans have been timely filed or delivered. There have
not been any "prohibited transactions," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA involving any of the
Benefit Plans, that could subject the Company to any material penalty or tax
imposed under the Code or ERISA.
(c) Any Benefit Plan that is intended to be qualified under
Section 401(a) of the Code and exempt from tax under Section 501(a) of the
Code has been determined by the Internal Revenue Service to be so qualified
or an application for such determination is pending. Any such determination
that has been obtained remains in effect and has not been revoked, and with
respect to any application that is pending, the Company has no reason to
suspect that such application for determination will be denied. Nothing has
occurred since the date of any such determination that is reasonably likely
to affect adversely such qualification or exemption, or result in the
imposition of excise taxes or income taxes on unrelated business income
under the Code or ERISA with respect to any Benefit Plan.
(d) The Company does not sponsor a defined benefit plan subject to Title
IV of ERISA, nor does it have a current or contingent obligation to
contribute to any multiemployer plan (as defined in Section 3(37) of ERISA).
The Company does not have any material liability with respect to any
employee benefit plan (as defined in Section 3(3) of ERISA) other than with
respect to the Benefit Plans. For purposes of this Section 2.18, the term
"the Company" shall include any corporation that is a member of any
controlled group of corporations (as defined in Section 414(b) of the Code)
that includes the Company, any trade or business (whether or not
incorporated) that is under common control (as defined in Section 414(c) of
the Code) with the Company, any organization (whether or not incorporated)
that is a member of an affiliated service group (as defined in
Section 414(m) of the Code) that includes the Company and any other entity
required to be aggregated with the Company pursuant to the regulations
issued under Section 414(o) of the Code.
(e) There are no pending or, to the knowledge of the Company, threatened
claims by or on behalf of any Benefit Plans, or by or on behalf of any
individual participants or beneficiaries of any Benefit Plans, alleging any
breach of fiduciary duty on the part of the Company or any of its officers,
directors or employees under ERISA or any other applicable regulations, or
claiming benefit payments (other than those made in the ordinary operation
of such plans), nor is there, to the knowledge of the Company, any basis for
such claim. The Benefit Plans are not the subject of any pending (or to the
knowledge of the Company, any threatened) investigation or audit by the
Internal Revenue Service, the Department of Labor or the Pension Benefit
Guaranty Corporation ("PBGC").
(f) The Company has timely made all required contributions under the
Benefit Plans including the payment of any premiums payable to the PBGC and
other insurance premiums.
(g) With respect to any Benefit Plan that is an employee welfare benefit
plan (within the meaning of Section 3(1) of ERISA) (a "Welfare Plan"),
(i) each Welfare Plan for which contributions are claimed by the Company as
deductions under any provision of the Code is in
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material compliance with all applicable requirements pertaining to such
deduction, (ii) with respect to any welfare benefit fund (within the meaning
of Section 419 of the Code) related to a Welfare Plan, there is no
disqualified benefit (within the meaning of Section 4976(b) of the Code)
that would result in the imposition of a tax under Section 4976(a) of the
Code, (iii) any Benefit Plan that is a group health plan (within the meaning
of Section 4980B(g)(2) of the Code) complies, and in each and every case has
complied, with all of the applicable material requirements of Section 4980B
of the Code, ERISA, Title XXII of the Public Health Service Act and the
Social Security Act, and (iv) all Welfare Plans may be amended or terminated
at any time on or after the Closing Date. No Benefit Plan provides any
health, life or other welfare coverage to employees of the Company beyond
termination of their employment with the Company by reason or retirement or
otherwise, other than coverage as may be required under Section 4980B of the
Code or Part 6 of ERISA, or under the continuation of coverage provisions of
the laws of any state or locality.
2.19 COMPLIANCE WITH LAWS. The Company and each of its subsidiaries has
complied in all material respects with, is not in material violation of, and has
not received any notices of violation with respect to, any federal, state or
local statute, law or regulation with respect to the conduct of its business, or
the ownership or operation of its business, except in any such case as
reasonably would not be expected to have a Material Adverse Effect on the
Company.
2.20 POOLING OF INTERESTS. To the Company's knowledge, based on
consultation with its independent accountants, neither the Company nor any of
its subsidiaries, directors, officers or stockholders has taken any action which
would interfere with (i) Parent's ability to account for the Merger as a pooling
of interests or (ii) Parent's, the Surviving Corporation's or the Company's
ability to continue to account for as a pooling of interests any past
acquisition by the Company currently accounted for as a pooling of interests.
2.21 CHANGE OF CONTROL PAYMENTS. The Company Schedules set forth the terms
pursuant to which all amounts may become payable (whether currently or in the
future) to current or former officers, directors or employees of the Company as
a result of or in connection with the Merger.
2.22 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. The information
supplied by the Company for inclusion in the Registration Statement (as defined
in Section 3.22) 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 not misleading. The information supplied by the Company for inclusion in
the proxy statement/prospectus to be sent to the stockholders of the Company and
stockholders of Parent in connection with the meeting of the Company's
stockholders to consider the Merger (the "Company Stockholders' Meeting") and in
connection with the meeting of Parent's stockholders to consider the Merger (the
"Parent Stockholders' Meeting") (such proxy statement/prospectus as amended or
supplemented is referred to herein as the "Proxy Statement") shall not, on the
date the Proxy Statement is first mailed to the Company's stockholders and
Parent's stockholders, at the time of the Company Stockholders' Meeting or
Parent Stockholders' Meeting and at 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 will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder. If at any time prior to the Effective Time any event relating to the
Company or any of its affiliates, officers or directors should be discovered by
the Company which should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement, the Company shall promptly
inform Parent. Notwithstanding the foregoing, the Company makes no
representation or warranty with
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respect to any information supplied by Parent or Merger Sub which is contained
in any of the foregoing documents.
2.23 BOARD APPROVAL. The board of directors of the Company has, on or
prior to the date hereof, unanimously approved this Agreement and the Merger and
has heretofore adopted the resolutions contained in the Company Schedules.
2.24 FAIRNESS OPINION. The Company has received a written opinion from
Broadview International, dated as of the date hereof, that, subject to the
assumptions, qualifications and limitations set forth therein, the Merger is
fair to the Company's stockholders from a financial point of view, and has
delivered to Parent a copy of such opinion.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company, subject to the
exceptions specifically disclosed in the disclosure letter supplied by Parent to
the Company (the "Parent Schedules") and dated as of the date hereof, as
follows:
3.1 ORGANIZATION OF PARENT AND MERGER SUB. Each of Parent, its material
subsidiaries (which material subsidiaries are set forth in the Parent Schedules)
and Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power to own, lease and operate its property and to carry on its
business as now being conducted and as proposed to be conducted, and is duly
qualified to do business and in good standing as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on Parent. Parent owns, directly or indirectly through one or
more subsidiaries, 100% of the capital stock of each of its subsidiaries. Except
as set forth in the Parent SEC Reports (as defined in Section 3.5), Parent does
not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for any interest in,
any corporation, partnership, joint venture or other business association or
entity other than the securities of any publicly-traded entity held for
investment only and constituting less than 5% of the outstanding capital stock
of any such entity. Parent has delivered or made available a true and correct
copy of the Certificate of Incorporation and By-laws or other charter documents
of Parent, each as amended to date, to counsel for the Company.
3.2 CAPITAL STRUCTURE.
(a) The authorized capital stock of Parent consists of
60,000,000 shares of Common Stock, $.01 par value, of which
17,453,510 shares were issued and outstanding as of September 30, 2000, and
5,000,000 shares of Preferred Stock, of which 600,000 shares have been
designated Series A Preferred Stock and 4,400,000 shares are undesignated.
No shares of Preferred Stock are issued or outstanding. The authorized
capital stock of Merger Sub consists of 1,000 shares of Common Stock,
$.01 par value, 100 shares of which, as of the date hereof, are issued and
outstanding and are held by Parent. All such shares have been duly
authorized, and all such issued and outstanding shares have been validly
issued, are fully paid and nonassessable and are free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon
the holders thereof. As of September 30, 2000, Parent had reserved
(i) 2,350,000 shares of Common Stock for issuance to employees, directors
and consultants pursuant to Parent's 1996 Incentive and Non-Qualified Stock
Option Plan, as amended, under which options were outstanding for
736,519 shares, (ii) 1,000,000 shares of Common Stock for issuance to
employees, directors and consultants pursuant to its 1998 Non-Statutory
Stock Option Plan, as amended, under which options were outstanding for
782,199 shares, (iii) 2,400,000 shares of Common Stock for issuance to
employees, directors and consultants pursuant to its 1990 Incentive and
Nonqualified Stock Option Plan, as amended, under which options were
outstanding for 533,690 shares,
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(iv) 200,000 shares of Common Stock for issuance under its 1996 Employee
Stock Purchase Plan, as amended (the "Parent ESPP"), (v) 22,673 shares of
Common Stock for issuance upon exercise of options assumed in connection
with the acquisitions of Coral Systems, Inc., (vi) 8,455 shares of Common
Stock for issuance upon exercise of outstanding warrants and
(vii) 600,000 shares of Series A Preferred Stock for issuance upon exercise
of rights attached to the Common Stock pursuant to a Rights Agreement dated
as of November 14, 1997 between Parent and American Stock Transfer and Trust
Company. 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, shall be duly authorized, validly
issued, fully paid and nonassessable. The Parent Schedules include a list of
all issuances of capital stock by Parent since January 1, 1998 (other than
issuances pursuant to the option plans and options described in clauses (i),
(ii) and (iv) above (the "Parent Stock Option Plans") and the Parent ESPP)
and also list for each outstanding option at September 30, 2000, the name of
the holder of such option, the number of shares subject to such option, the
exercise price of such option, the number of shares as to which such option
will have been vested at September 30, 2000 and, if the exercisability of
such option will be accelerated in any way by the transactions contemplated
by this Agreement or for any other reason, an indication of the extent of
such acceleration. Such list also describes any repricing of options which
has taken place since January 1, 1998. The Parent Schedules also include a
list of all the participants in the Parent ESPP and the number of shares of
Parent Common Stock which will be issuable to the participants therein for
the offering period ending January 31, 2001 if all current participants
continue to contribute at current levels (assuming the purchase price of
such shares to be 85% of the fair market value of the Parent Common Stock on
the first day of the current offering period). Since September 30, 2000,
there have been no changes in the capital structure of Parent other than
issuances of Parent Common Stock (i) upon the exercise of options granted
under the Parent Stock Option Plans, (ii) pursuant to the Parent ESPP and
(iii) upon the exercise of the warrants described in clause (v) above.
(b) The shares of Parent Common Stock to be issued pursuant to the
Merger will, upon issuance, be duly authorized, validly issued, fully paid
and non-assessable.
3.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set forth in
Section 3.2, there are no equity securities of any class of Parent, or any
security exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding. Except for securities Parent owns,
directly or indirectly through one or more subsidiaries, there are no equity
securities of any class of any subsidiary of Parent, or any security
exchangeable into or exercisable for such equity securities, issued, reserved
for issuance or outstanding. Except as set forth in Section 3.2, there are no
options, warrants, equity securities, calls, 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, additional shares of capital
stock 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
option, warrant, equity security, call, right, commitment or agreement. To the
knowledge of Parent, there are no voting trusts, proxies or other agreements or
understandings with respect to the shares of capital stock of Parent.
3.4 AUTHORITY. Parent and Merger Sub have 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 approval of the Merger by the vote of a majority of the Parent
Common Stock present or represented by proxy at the Parent Stockholders'
Meeting. This Agreement has been duly executed and delivered by Parent and
Merger Sub and constitutes the valid and binding obligations of Parent and
Merger Sub, enforceable in accordance with its terms, except as enforceability
may be limited by
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bankruptcy and other similar laws and general principles of equity. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a benefit under (i) any provision of the Certificate
of Incorporation or By-laws of Parent or Merger Sub or (ii) except as set forth
in the Parent Schedules, any mortgage, indenture, lease, contract or other
agreement disclosed in the Parent Schedules pursuant to Section 3.11 or of the
type referred to in clause (i) or (ii) of Section 3.12, or any permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or its properties or assets.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Parent and Merger Sub in connection with the execution and delivery
of this Agreement by Parent and Merger Sub or the consummation by Parent and
Merger Sub of the transactions contemplated hereby, except for (i) the filing of
a premerger notification report under the HSR Act, if required, (ii) the filing
of the Form S-4 Registration Statement with the SEC in accordance with the
Securities Act, (iii) the filing of the Certificate of Merger with the Delaware
Secretary of State, (iv) the filing of the Proxy Statement with the SEC in
accordance with the Exchange Act, (v) the filing of a Form 8-K with the SEC,
(vi) the listing of Parent Common Stock issuable pursuant to the Merger on the
Nasdaq National Market, (vii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and the laws of any foreign country, and
(viii) such other consents, authorizations, filings, approvals and registrations
which, if not obtained or made, would not have a Material Adverse Effect on
Parent.
3.5 SEC FILINGS, PARENT FINANCIAL STATEMENTS.
(a) Parent has filed all forms, reports and documents required to be
filed with the SEC since September 27, 1996 and has made available to the
Company, in the form filed with the SEC, (i) its Annual Reports on
Form 10-K for the fiscal years ended December 31, 1998 and 1999, (ii) its
Quarterly Reports on Form 10-Q for the periods ended March 31 and June 30,
2000, (iii) all proxy statements relating to Parent's meetings of
stockholders (whether annual or special) held since September 27, 1996,
(iv) all other reports or registration statements filed by Parent with the
SEC since September 27, 1996, and (v) all amendments and supplements to all
such reports and registration statements filed by Parent with the SEC and
Parent will make available to the Company in the form filed with the SEC,
prior to November 15, 2000, its Quarterly Report on Form 10-Q for the period
ended September 30, 2000. All such required forms, reports and documents
(including those enumerated in clauses (i) through (v) of the preceding
sentence and Parent's September 30, 2000 Form 10-Q, when filed) are referred
to herein as the "Parent SEC Reports." As of their respective dates, the
Parent SEC Reports (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 made
the statements therein, in the light of the circumstances under which they
were made, not misleading. None of Parent's subsidiaries is required to file
any form, 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, (x) complies as to form in all material respects
with the published rules and regulations of the SEC with respect thereto,
(y) was prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as
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may be indicated in the notes thereto) and (z) fairly presented the
consolidated financial position of Parent and its subsidiaries as at the
respective dates thereof and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount. The
unaudited balance sheet of Parent as of June 30, 2000 contained in the
Parent SEC Reports is hereinafter referred to as the "Parent Balance Sheet."
(c) Parent has heretofore furnished to the 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.
(d) The Parent Schedules contain the unaudited consolidated financial
statements of Parent as of and for the period ended September 30, 2000, as
set forth in Parent's press release dated October 18, 2000 (the "September
Parent Financials"). The September Parent Financials fairly present the
consolidated financial position of Parent and its subsidiaries as of
September 30, 2000 and the consolidated results of its operations and cash
flow for the three months then ended, subject to normal and recurring
year-end adjustments which are not expected to be material in amount.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the Parent
Balance Sheet, except with respect to the actions contemplated by this
Agreement, Parent and its subsidiaries have conducted their businesses only in
the ordinary course and in a manner consistent with past practice and, since
such date, there has not been (i) any Material Adverse Change in Parent, or any
development that reasonably would be expected to cause a Material Adverse Change
in Parent; (ii) any material change by Parent in its accounting methods,
principles or practices; (iii) any material revaluation by Parent of any of its
assets including, without limitation, writing down the value of capitalized
software or inventory or writing off notes or accounts receivable other than in
the ordinary course of business; or (iv) any other action or event that would
have required the consent of the Company pursuant to Section 4.2 had such action
or event occurred after the date of this Agreement.
3.7 TAXES.
(a) Parent and each of its subsidiaries has timely filed all Returns
relating to Taxes required to be filed by Parent and each of its
subsidiaries, except such Returns which are not material to Parent. All such
Returns were correct and complete in all material respects. The Parent and
each of its subsidiaries has paid all Taxes shown to be due on such Returns,
or is contesting them in good faith. None of the Parent and its subsidiaries
currently is the beneficiary of any extension of time within which to file
any Return.
(b) Except as is not material to Parent, Parent and each of its
subsidiaries as of the Effective Time will have withheld with respect to its
employees all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld.
(c) The Parent Schedules lists all material federal, state, local, and
foreign income tax Returns filed with respect to any of the Parent and its
subsidiaries for taxable periods ended on or after December 31, 1997,
indicates those Returns that have been audited, and indicates those Returns
that currently are the subject of audit. The Parent has delivered to the
Company correct and complete copies of all federal income tax Returns,
examination reports, and statements of deficiencies assessed against, or
agreed to by any of the Parent and its subsidiaries since December 31, 1997.
Except as is not material to Parent, neither Parent nor any of its
subsidiaries has been delinquent in the payment of any Tax nor is there any
Tax deficiency outstanding, proposed or assessed against Parent or any of
its subsidiaries nor has Parent or any of its
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subsidiaries executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax.
(d) Except as is not material to Parent, no audit or other examination
of any Return of Parent or any of its subsidiaries is presently in progress,
nor has Parent or any of its subsidiaries been notified of any request for
such an audit or other examination.
(e) Neither Parent nor any of its subsidiaries has any liability for
unpaid federal, state, local or foreign Taxes which have not been accrued
for or reserved against on the Parent Balance Sheet in accordance with GAAP,
whether asserted or unasserted, contingent or otherwise, which is material
to Parent.
(f) None of Parent's assets are treated as "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
(g) There is no contract, agreement, plan or arrangement, including but
not limited to the provisions of this Agreement, covering any employee or
former employee of Parent or any of its subsidiaries that, individually or
collectively, could give rise to the payment of any amount for which a
deduction would be disallowed by reason of Sections 280G, 404 or 162(b)
through (o) 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) Parent is not, and has not been at any time, a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code.
(j) None of the Parent and its subsidiaries is a party to any tax
allocation or sharing agreement. None of the Parent and its subsidiaries
(A) has been a member of an Affiliated Group (within the meaning of Code
Section1504(a), or any similar group defined under a similar provision of
state, local, or foreign law) filing a consolidated federal Return (other
than a group the common parent of which was the Parent) or (B) has any
liability for the taxes of any person (other than any of the Parent and its
subsidiaries) under Reg. Section1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or
otherwise.
3.8 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no material agreement,
judgment, injunction, order or decree binding upon Parent which has or
reasonably would be expected to have the effect of prohibiting or materially
impairing any material current business practice of Parent, any acquisition of
material property by Parent or the conduct of business by Parent as currently
conducted or as proposed to be conducted by Parent.
3.9 ABSENCE OF LIENS AND ENCUMBRANCES. Parent and each of its subsidiaries
has good and valid title to, or, in the case of leased properties and assets,
valid leasehold interests in, all of its material tangible properties and
assets, real, personal and mixed, used in its business, free and clear of any
liens or encumbrances except as reflected in the Parent Financial Statements and
except for liens for taxes not yet due and payable and such imperfections of
title and encumbrances, if any, which are not material in character, amount or
extent, and which do not materially detract from the value, or materially
interfere with the present use, of the property subject thereto or affected
thereby.
3.10 INTELLECTUAL PROPERTY.
(a) Parent, directly or indirectly, owns, or is licensed or otherwise
possesses legally enforceable rights to use, all patents, trademarks, trade
names, service marks, copyrights, and any applications therefor, maskworks,
net lists, schematics, technology, know-how, computer software programs or
applications (in both source code and object code form), and tangible or
intangible
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proprietary information or material (excluding Commercial Software) that are
material to the business of Parent as currently conducted or as proposed to
be conducted by Parent (the "Parent Intellectual Property Rights").
(b) The Parent Schedules set forth a complete list of all patents,
trademarks, registered copyrights, trade names and service marks, and any
applications therefor, included in the Parent Intellectual Property Rights
owned by Parent or any of its subsidiaries, and specify, where applicable,
the jurisdictions in which each such Parent Intellectual Property Right has
been issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers and the names of all registered owners. The Parent
Schedules also set forth a complete list of all material licenses,
sublicenses and other agreements as to which Parent is a party and pursuant
to which Parent or any other person is authorized to use any Parent
Intellectual Property Right (excluding End-User Licenses) or other trade
secret material to Parent, and includes the identity of all parties thereto.
Parent has furnished true and correct copies of all such licenses,
sublicenses and other agreements to the Company. Parent is not in violation
of any license, sublicense or agreement described on such list except such
violations as do not materially impair Parent's rights under such license,
sublicense or agreement. Except as set forth in the Parent Schedules, the
execution and delivery of this Agreement by Parent, and the consummation of
the transactions contemplated hereby, will neither cause Parent to be in
violation or default under any such license, sublicense or agreement, nor
entitle any other party to any such license, sublicense or agreement to
terminate or modify such license, sublicense or agreement. Parent is the
sole and exclusive owner or the valid licensee of, with all right, title and
interest in and to (free and clear of any liens or encumbrances), Parent
Intellectual Property Rights, and has sole and exclusive rights or valid
license rights (and is not contractually obligated to pay any compensation
to any third party in respect thereof) to the use thereof or the material
covered thereby in connection with the services or products in respect of
which the Parent Intellectual Property Rights are being used. No claims with
respect to Parent Intellectual Property Rights have been asserted or, to the
knowledge of Parent, are threatened by any person, nor, to the knowledge of
Parent, are there any valid grounds for any bona fide claims (i) to the
effect that the manufacture, sale, licensing or use of any of the products
of Parent or any of its subsidiaries as now manufactured, sold, licensed or
used or proposed for manufacture, sale, licensing or use by Parent infringes
on any copyright, patent, trade mark, service mark or trade secret,
(ii) against the use by Parent or any of its subsidiaries of any trademarks,
service marks, trade names, trade secrets, copyrights, patents, technology,
know-how or computer software programs and applications used in Parent's
business as currently conducted or as proposed to be conducted, or
(iii) challenging the ownership by Parent, validity or effectiveness of any
of Parent Intellectual Property Rights. All material registered trademarks,
service marks and copyrights held by Parent are valid and subsisting. To the
knowledge of Parent, there is no material unauthorized use, infringement or
misappropriation of any Parent Intellectual Property Rights by any third
party, including any employee or former employee of Parent. No Parent
Intellectual Property Right owned by Parent or any of its subsidiaries or
product of Parent or any of its subsidiaries, or, to the knowledge of
Parent, Intellectual Property Right licensed by Parent or its subsidiaries,
is subject to any outstanding decree, order, judgment, or stipulation
restricting in any manner the licensing thereof by Parent or any of its
subsidiaries. Neither Parent nor any of its subsidiaries has not entered
into any agreement (other than exclusive distribution agreements identified
as such in the Parent Schedules) under which Parent or its subsidiaries is
restricted from selling, licensing or otherwise distributing any of its
products to any class of customers, in any geographic area, during any
period of time or in any segment of the market. Parent has a policy
requiring each employee to execute a proprietary information and
confidentiality agreement substantially in the Parent's standard form.
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3.11 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth in the
Parent Schedules, neither Parent nor any of its subsidiaries has, nor is it a
party to nor is it bound by:
(a) any collective bargaining agreements,
(b) any bonus, deferred compensation, incentive compensation, pension,
profit-sharing or retirement plans, or any other employee benefit plans or
arrangements (except for those plans and arrangements relating solely to
employees of Parent's foreign subsidiaries who earn less than $100,000
annual base salary),
(c) any employment or consulting agreement, contract or commitment with
any officer or director level employee, not terminable by Parent on thirty
days notice without liability, except to the extent general principles of
wrongful termination law may limit Parent's ability to terminate employees
at will and except for those agreements, contracts and commitments with
employees of Parent's foreign subsidiaries who earn less than $100,000
annual base salary,
(d) any agreement or plan, including, without limitation, 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,
(e) any agreement of indemnification or guaranty not entered into in the
ordinary course of business in excess of $1,000,000 individually or in the
aggregate other than such agreements or guarantees between Parent and any of
its subsidiaries, officers or directors, and other than End-User Licenses,
(f) any agreement, contract or commitment containing any covenant
limiting the freedom of Parent to engage in any line of business or compete
with any person,
(g) any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of $200,000,
(h) any agreement, contract or commitment relating to the disposition or
acquisition of assets not in the ordinary course of business or any
ownership interest in any corporation, partnership, joint venture or other
business enterprise,
(i) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of
money or extension of credit,
(j) any joint marketing or development agreement (excluding agreements
with resellers, value added resellers or independent software vendors
entered into in the ordinary course of business that do not permit such
resellers or vendors to modify Parent's software products),
(k) any distribution agreement (identifying any that contain exclusivity
provisions), or
(l) any other agreement, contract or commitment (excluding real and
personal property leases) which involves payment by Parent of $500,000 or
more and is not cancelable without penalty within thirty (30) days.
3.12 NO DEFAULT. Neither Parent nor any of its subsidiaries has breached,
or received in writing any claim or threat that it has breached, any of the
terms or conditions of any (i) agreement, contract or commitment that was or is
required to be filed as an exhibit to the Parent SEC Reports or (ii) any
agreement under which Parent or any of its subsidiaries licenses from a third
party any Parent Intellectual Property Rights included in Parent's products in
such a manner as would permit any other party to cancel or terminate the same or
would permit any other party to seek material damages from Parent thereunder.
Each of the agreements, contracts and commitments referred to in clauses
(i) and
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(ii) above that has not expired or been terminated in accordance with its terms
is in full force and effect and, except as otherwise disclosed, is not subject
to any material default thereunder of which Parent is aware by any party
obligated to Parent pursuant thereto.
3.13 GOVERNMENTAL AUTHORIZATION. Parent holds all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities which
are material to the operation of Parent's business as currently conducted (the
"Parent Permits"). Parent is in material compliance with the terms of the Parent
Permits. Except as disclosed in the Parent SEC Reports filed prior to the date
of this Agreement, the business of Parent is not being conducted in violation of
any law, ordinance or regulation of any Governmental Entity, except for
violations or possible violations which individually or in the aggregate are
not, and insofar as reasonably can be foreseen, in the future will not be,
material to Parent. As of the date of this Agreement, no investigation or review
by any Governmental Entity with respect to Parent is pending or, to the
knowledge of Parent, threatened, nor, to the knowledge of Parent, has any
Governmental Entity indicated an intention to conduct the same, other than, in
each case, those the outcome of which, as far as reasonably can be foreseen,
will not be material.
3.14 LITIGATION. There is no action, suit, proceeding, claim, arbitration
or investigation pending, or as to which Parent or any of its subsidiaries has
received any notice of assertion nor, to Parent's knowledge, is there a
reasonable basis to expect such notice of assertion against Parent or any of its
subsidiaries which, if determined adversely to Parent or any of its subsidiaries
reasonably would be expected to have a Material Adverse Effect on Parent, or
which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay any of the transactions contemplated by this Agreement.
3.15 ENVIRONMENTAL MATTERS.
(a) PERMITS. Parent currently holds all material Environmental Permits
necessary for the conduct of the Company's Hazardous Material Activities and
other businesses of the Company as such activities and businesses are
currently being conducted.
(b) ENVIRONMENTAL LIABILITIES. No material action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim, or
notice of violation is pending, or to Parent's knowledge, threatened
concerning any Environmental Permit, Hazardous Material, or any Hazardous
Materials Activity of Parent or any of its subsidiaries. Parent is not aware
of any fact or circumstance which could involve Parent or any of its
subsidiaries in any material litigation or otherwise impose upon Parent any
material liability relating to any Hazardous Materials Activities.
3.16 BROKER'S AND FINDERS' FEES. Except for fees payable to Donaldson,
Lufkin & Jenrette pursuant to the engagement letter dated October 24, 2000, a
copy of which has been provided to the Company, Parent has not incurred, and
will not incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with this
Agreement, the Merger or any transaction contemplated hereby.
3.17 LABOR MATTERS. There are no pending material claims against Parent or
any of its subsidiaries under any workers' compensation plan or policy or for
long-term disability. Parent and each of its United States subsidiaries, has
complied in all material respects with all applicable provisions of COBRA and
has no material obligations with respect to any former employees or qualifying
beneficiaries thereunder. Except as is not material to Parent's business and
operations, neither Parent nor any of its subsidiaries has given to or received
from any current employee of Parent or any of its subsidiaries notice of
termination of employment.
3.18 EMPLOYEE BENEFIT PLANS.
(a) The Parent Schedules contain a complete list of all Benefit Plans
sponsored or maintained by Parent or under which Parent is obligated. Parent
has made available to the Company (i) accurate and complete copies of all
Benefit Plan documents and all other material
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documents relating thereto, including (if applicable) all summary plan
descriptions, summary annual reports and insurance contracts, (ii) accurate
and complete detailed summaries of all unwritten Benefit Plans,
(iii) accurate and complete copies of the most recent financial statements
and actuarial reports with respect to all Benefit Plans for which financial
statements or actuarial reports are required or have been prepared and
(iv) accurate and complete copies of all annual reports for all Benefit
Plans (for which annual reports are required) prepared within the last three
years.
(b) All Benefit Plans of Parent conform (and at all times have
conformed) in all material respects to, and are being administered and
operated (and have at all time been administered and operated) in material
compliance with, the requirements of ERISA, the Code and all other
applicable laws or governmental regulations. All returns, reports and
disclosure statements required to be made under ERISA and the Code with
respect to all Benefit Plans have been timely filed or delivered. There have
not been any "prohibited transactions," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA involving any of the
Benefit Plans, that could subject Parent to any material penalty or tax
imposed under the Code or ERISA.
(c) Any Benefit Plan that is intended to be qualified under
Section 401(a) of the Code and exempt from tax under Section 501(a) of the
Code has been determined by the Internal Revenue Service to be so qualified
or an application for such determination is pending. Any such determination
that has been obtained remains in effect and has not been revoked, and with
respect to any application that is pending, Parent has no reason to suspect
that such application for determination will be denied. Nothing has occurred
since the date of any such determination that is reasonably likely to affect
adversely such qualification or exemption, or result in the imposition of
excise taxes or income taxes on unrelated business income under the Code or
ERISA with respect to any Benefit Plan.
(d) Parent does not sponsor a defined benefit plan subject to Title IV
of ERISA, nor does it have a current or contingent obligation to contribute
to any multiemployer plan (as defined in Section 3(37) of ERISA). Parent
does not have any material liability with respect to any employee benefit
plan (as defined in Section 3(3) of ERISA) other than with respect to the
Benefit Plans. For purposes of this Section 3.18, the term "Parent" shall
include any corporation that is a member of any controlled group of
corporations (as defined in Section 414(b) of the Code) that includes
Parent, any trade or business (whether or not incorporated) that is under
common control (as defined in Section 414(c) of the Code) with Parent, any
organization (whether or not incorporated) that is a member of an affiliated
service group (as defined in Section 414(m) of the Code) that includes
Parent and any other entity required to be aggregated with Parent pursuant
to the regulations issued under Section 414(o) of the Code.
(e) There are no pending or, to the knowledge of Parent, threatened
claims by or on behalf of any Benefit Plans, or by or on behalf of any
individual participants or beneficiaries of any Benefit Plans, alleging any
breach of fiduciary duty on the part of Parent or any of its officers,
directors or employees under ERISA or any other applicable regulations, or
claiming benefit payments (other than those made in the ordinary operation
of such plans), nor is there, to the knowledge of Parent, any basis for such
claim. The Benefit Plans are not the subject of any pending (or to the
knowledge of Parent, any threatened) investigation or audit by the Internal
Revenue Service, the Department of Labor or the PBGC.
(f) Parent has timely made all required contributions under the Benefit
Plans including the payment of any premiums payable to the PBGC and other
insurance premiums.
(g) With respect to any Benefit Plan that is a Welfare Plan, (i) each
Welfare Plan for which contributions are claimed by Parent as deductions
under any provision of the Code is in material compliance with all
applicable requirements pertaining to such deduction, (ii) with respect to
any
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welfare benefit fund (within the meaning of Section 419 of the Code) related
to a Welfare Plan, there is no disqualified benefit (within the meaning of
Section 4976(b) of the Code) that would result in the imposition of a tax
under Section 4976(a) of the Code, (iii) any Benefit Plan that is a group
health plan (within the meaning of Section 4980B(g)(2) of the Code)
complies, and in each and every case has complied, with all of the
applicable material requirements of Section 4980B of the Code, ERISA,
Title XXII of the Public Health Service Act and the Social Security Act, and
(iv) all Welfare Plans may be amended or terminated at any time on or after
the Closing Date. No Benefit Plan provides any health, life or other welfare
coverage to employees of the Company beyond termination of their employment
with the Company by reason or retirement or otherwise, other than coverage
as may be required under Section 4980B of the Code or Part 6 of ERISA, or
under the continuation of coverage provisions of the laws of any state or
locality.
3.19 COMPLIANCE WITH LAWS. Parent and each of its subsidiaries has
complied in all material respects with, is not in material violation of, and has
not received any notices of violation with respect to, any federal, state or
local statute, law or regulation with respect to the conduct of its business, or
the ownership or operation of its business, except in any such case as
reasonably would not be expected to have a Material Adverse Effect on Parent.
3.20 POOLING OF INTERESTS. To Parent's knowledge, based on consultation
with its independent accountants, neither Parent nor any of its subsidiaries,
directors, officers or stockholders has taken any action which would interfere
with (i) Parent's ability to account for the Merger as a pooling of interests or
(ii) Parent's ability to continue to account for as a pooling of interests any
past acquisition by Parent currently accounted for as a pooling of interests.
3.21 CHANGE OF CONTROL PAYMENTS. The Parent Schedules set forth the terms
pursuant to which all amounts may become payable (whether currently or in the
future) to current or former officers, directors or employees of Parent as a
result of or in connection with the Merger.
3.22 REGISTRATION STATEMENT; PROXY STATEMENT/PROSPECTUS. Subject to the
accuracy of the representations of the Company made in Section 2.21, the
registration statement on Form S-4 (or such other or successor form as shall be
appropriate), (including any amendments or supplements thereto, the
"Registration Statement"), pursuant to which the shares of Parent Common Stock
to be issued in the Merger will be registered with the SEC 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 necessary in order to make the
statements included therein not misleading. The information supplied by Parent
for inclusion in the Proxy Statement shall not, on the date the Proxy Statement
is first mailed to stockholders, at the time of the Company Stockholders'
Meeting or Parent Stockholders' Meeting and at 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 will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder. If at any time prior to the Effective Time any event relating to
Parent, Merger Sub or any of their respective affiliates, officers or directors
should be discovered by Parent or Merger Sub which should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy Statement,
Parent or Merger Sub will promptly inform the Company. Notwithstanding the
foregoing, Parent and Merger Sub make no representation or warranty with respect
to any information supplied by the Company which is contained in any of the
foregoing documents.
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3.23 BOARD APPROVAL. The boards of directors of Parent and Merger Sub
have, on or prior to the date hereof, unanimously approved this Agreement and
the Merger and have heretofore adopted the resolutions contained in the Parent
Schedules.
3.24 FAIRNESS OPINION. Parent has received a written opinion from
Donaldson, Lufkin & Jenrette, dated as of the date hereof, that, subject to the
assumptions, qualifications and limitations set forth therein, the Exchange
Ratio in the Merger is fair to Parent from a financial point of view, and has
delivered to the Company a copy of such opinion.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF THE 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 and the Effective Time, the Company (which for
the purposes of this Section 4.1 shall include the Company and each of its
subsidiaries) agrees, except to the extent that Parent shall otherwise consent
in writing, to carry on its business in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted, to pay its debts and
taxes when due subject to good faith disputes over such debts or taxes, to pay
or perform other material obligations when due, and to use all reasonable
efforts consistent with past practices and policies to preserve intact the
Company's present business organizations, keep available the services of its
present officers and employees and preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with the Company, to the end that the Company's goodwill and ongoing
businesses shall not be impaired in any material respect at the Effective Time.
The Company shall promptly notify Parent of any event or occurrence not in the
ordinary course of business of the Company, and will not enter into or amend any
agreement or take any action which reasonably would be expected to have a
Material Adverse Effect on the Company. Except as expressly contemplated by this
Agreement, the Company shall not prior to the Effective Time or earlier
termination of this Agreement pursuant to its terms, without the prior written
consent of Parent:
(a) Accelerate, amend or change the period of exercisability of options
or restricted stock, or reprice options granted under the employee stock
plans of the Company or authorize cash payments in exchange for any options
granted under any of such plans, unless otherwise expressly required
pursuant to the terms of the Company Option Plans;
(b) Enter into partnership arrangements, joint development agreements or
strategic alliances, agreements to create standards or agreements with
"Standards" bodies;
(c) Grant any severance or termination pay (i) to any executive officer
or (ii) to any other employee except payments made in connection with the
termination of employees who are not executive officers in amounts
consistent with the Company's policies and past practices or pursuant to
written agreements outstanding, or policies existing, on the date hereof and
as previously disclosed in writing to Parent or pursuant to written
agreements consistent with the Company's past agreements under similar
circumstances;
(d) Transfer or license to any person or entity or otherwise extend,
amend or modify any rights to the Company's Intellectual Property Rights or
enter into grants to future patent rights, other than licenses in connection
with the sale of goods or services entered into in the ordinary course of
business consistent with past practices;
(e) Commence any litigation other than (i) for the routine collection of
bills, (ii) for software piracy, or (iii) in such cases where the Company in
good faith determines that failure to commence suit would result in the
material impairment of a valuable aspect of the Company's business, provided
that the Company consults with Parent prior to the filing of such a suit;
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(f) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock,
or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of the Company;
(g) Repurchase or otherwise acquire, directly or indirectly, any shares
of its capital stock except from former employees, directors and consultants
in accordance with agreements existing as of the date hereof requiring the
repurchase of shares in connection with any termination of service to the
Company;
(h) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock of any class or
securities convertible into, or subscriptions, rights, warrants or options
to acquire, or enter into other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities,
other than (i) the issuance of shares of Company Common Stock pursuant to
the exercise of Company stock options or warrants therefor outstanding as of
the date of this Agreement, (ii) options to purchase shares of Company
Common Stock granted to new employees in the ordinary course of business,
consistent with past practice, subject to Section 4.1(q), (iii) shares of
Company Common Stock issuable upon the exercise of the options referred to
in clause (ii), and (iv) shares of Company Common Stock issuable to
participants in the Company ESPP consistent with the terms of that plan;
(i) Cause, permit or propose any amendments to the Company's Certificate
of Incorporation or By-laws;
(j) Except as set forth on the Company Schedules, acquire or agree to
acquire by merging or consolidating with, or by purchasing any equity
interest in or a material portion of the assets of, or by any other manner,
any business or any corporation, partnership interest, 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 the Company, or enter into any joint ventures, strategic
partnerships or alliances or purchase any distributors;
(k) Sell, lease, license, encumber or otherwise dispose of any of the
Company's properties or assets which are material, individually or in the
aggregate, to the business of the Company, except in the ordinary course of
business consistent with past practice;
(l) Incur any indebtedness for borrowed money (other than ordinary
course trade payables or pursuant to existing credit facilities in the
ordinary course of business) or guarantee any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire debt securities of
the Company or guarantee any debt securities of others;
(m) Adopt or amend any employee benefit or stock purchase or option
plan, or enter into any employment contract, pay any special bonus or
special remuneration to any director or employee, or increase the salaries
or wage rates of its employees other than in the ordinary course of
business, consistent with past practice;
(n) Revalue any of the Company's assets, including without limitation
writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business consistent with
past practice;
(o) Pay, discharge or satisfy in an amount in excess of $100,000 (in any
one case) or $250,000 (in the aggregate), any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business of liabilities of the type reflected or reserved against in the
Company Financials (or the notes thereto);
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(p) Make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, file any material Return
or any amendment to a material Return, enter into any closing agreement,
settle any claim or assessment in respect of Taxes (except settlements
effected solely through payment of immaterial sums of money), or consent to
any extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(q) Intentionally take any action, including the acceleration of vesting
of any options, warrants, restricted stock or other rights to acquire shares
of the Company's capital stock, which would be reasonably likely to
interfere with Parent's ability to account for the Merger as a pooling of
interests; or
(r) Take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.l(a) through (q) above, or any action which would
cause or would be reasonably likely to cause any of the conditions to the
Merger set forth in Sections 6.1 or 6.3 not to be satisfied.
4.2 CONDUCT OF BUSINESS 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 and the Effective Time, Parent (which for the purposes of
this Section 4.2 shall include Parent and each of its subsidiaries) agrees,
except to the extent that the Company shall otherwise consent in writing, to
carry on its business in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted, to pay its debts and taxes when due
subject to good faith disputes over such debts or taxes, to pay or perform other
material obligations when due, and to use all reasonable efforts consistent with
past practices and policies to preserve intact Parent's present business
organizations, keep available the services of its present officers and employees
and preserve its relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with Parent, to the
end that Parent's goodwill and ongoing businesses shall not be impaired in any
material respect at the Effective Time. Parent shall promptly notify the Company
of any event or occurrence not in the ordinary course of business of Parent, and
will not enter into or amend any agreement or take any action which reasonably
would be expected to have a Material Adverse Effect on Parent. Except as
expressly contemplated by this Agreement, Parent shall not prior to the
Effective Time or earlier termination of this Agreement pursuant to its terms,
without the prior written consent of the Company:
(a) Accelerate, amend or change the period of exercisability of options
or restricted stock granted under the employee stock plans of Parent or
authorize cash payments in exchange for any options granted under any of
such plans;
(b) Enter into partnership arrangements, joint development agreements or
strategic alliances, agreements to create standards or agreements with
"Standards" bodies;
(c) Grant any severance or termination pay (i) to any executive officer
or (ii) to any other employee except payments made in connection with the
termination of employees who are not executive officers in amounts
consistent with Parent's policies and past practices or pursuant to written
agreements outstanding, or policies existing, on the date hereof and as
previously disclosed in writing to the Company or pursuant to written
agreements consistent with Parent's prior agreements under similar
circumstances;
(d) Transfer or license to any person or entity or otherwise extend,
amend or modify any rights to Parent's Intellectual Property Rights or enter
into grants to future patent rights, other than licenses in connection with
the sale of goods or services entered into in the ordinary course of
business consistent with past practices;
(e) Commence any litigation other than (i) for the routine collection of
bills, (ii) for software piracy, or (iii) in such cases where Parent in good
faith determines that failure to commence suit would result in the material
impairment of a valuable aspect of Parent's business, provided that Parent
consults with the Company prior to the filing of such a suit;
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(f) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock,
or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of Parent;
(g) Repurchase or otherwise acquire, directly or indirectly, any shares
of its capital stock except from former employees, directors and consultants
in accordance with agreements existing as of the date hereof requiring the
repurchase of shares in connection with any termination of service to
Parent;
(h) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of any shares of its capital stock of any class or
securities convertible into, or subscriptions, rights, warrants or options
to acquire, or enter into other agreements or commitments of any character
obligating it to issue any such shares or other convertible securities,
other than (i) the issuance of shares of Parent Common Stock pursuant to the
exercise of Parent stock options or warrants therefor outstanding as of the
date of this Agreement, (ii) options to purchase shares of Parent Common
Stock granted to new employees in the ordinary course of business,
consistent with past practice, subject to Section 4.2(q), (iii) shares of
Parent Common Stock issuable upon the exercise of the options referred to in
clause (ii), and (iv) shares of Parent Common Stock issuable to participants
in the Parent ESPP consistent with the terms of that plan;
(i) Cause, permit or propose any amendments to Parent's Certificate of
Incorporation or By-laws;
(j) Except as set forth on the Parent Schedules, acquire or agree to
acquire by merging or consolidating with, or by purchasing any equity
interest in or a material portion of the assets of, or by any other manner,
any business or any corporation, partnership interest, 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 joint ventures, strategic
partnerships or alliances or purchase any distributors;
(k) Sell, lease, license, encumber or otherwise dispose of any of
Parent's properties or assets which are material, individually or in the
aggregate, to the business of Parent, except in the ordinary course of
business consistent with past practice;
(l) Incur any indebtedness for borrowed money (other than ordinary
course trade payables or pursuant to existing credit facilities in the
ordinary course of business) or guarantee any such indebtedness or issue or
sell any debt securities or warrants or rights to acquire debt securities of
Parent or guarantee any debt securities of others;
(m) Adopt or amend any employee benefit or stock purchase or option
plan, or enter into any employment contract, pay any special bonus or
special remuneration to any director or employee, or increase the salaries
or wage rates of its employees other than in the ordinary course of
business, consistent with past practice;
(n) Revalue any of Parent's assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business consistent with past practice;
(o) Pay, discharge or satisfy in an amount in excess of $100,000 (in any
one case) or $250,000 (in the aggregate), any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business of liabilities of the type reflected or reserved against in the
Parent Financials (or the notes thereto);
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(p) Make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, file any material Return
or any amendment to a material Return, enter into any closing agreement,
settle any claim or assessment in respect of Taxes (except settlements
effected solely through payment of immaterial sums of money), or consent to
any extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(q) Intentionally take any action, including the acceleration of vesting
of any options, warrants, restricted stock or other rights to acquire shares
of the Parents capital stock, which would be reasonably likely to interfere
with Parent's ability to account for the Merger as a pooling of interests;
or
(r) Take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.2(a) through (q) above, or any action which would
cause or would be reasonably likely to cause any of the conditions to the
Merger set forth in Sections 6.1 or 6.2 not to be satisfied.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. As promptly as
practicable after the execution of this Agreement, Parent and the Company shall
prepare and file with the SEC the Proxy Statement and Parent shall prepare and
file with the SEC the Registration Statement in which the Proxy Statement will
be included as a prospectus. Each of Parent and Company shall use its best
efforts to have the Registration Statement declared effective as soon thereafter
as practicable; provided, however, that Parent shall have no obligation to agree
to account for the Merger as a "purchase" in order to cause the Registration
Statement to become effective. The Proxy Statement shall include the fairness
opinions of Broadview International and Donaldson, Lufkin & Jenrette referred to
in Sections 2.24 and 3.24, respectively, each updated to within five
(5) business days prior to the effective date of the Registration Statement (it
being understood that the failure of Broadview International or Donaldson,
Lufkin & Jenrette to deliver to the Company or Parent, as the case may be, such
an opinion for inclusion in the Proxy Statement shall not be considered, in and
of itself, a breach of this Agreement). The Proxy Statement shall also include
the recommendations of (i) the board of directors of the Company in favor of the
Merger which shall not be withdrawn, modified or withheld except in compliance
with the fiduciary duties of the Company's Board under applicable law and
(ii) the board of directors of Parent in favor of the Merger which shall not be
withdrawn, modified or withheld except in compliance with the fiduciary duties
of Parent's Board under applicable law.
5.2 MEETINGS OF STOCKHOLDERS. Promptly after the date hereof, the Company
shall take all action necessary in accordance with Delaware Law and its
Certificate of Incorporation and By-laws to convene the Company Stockholders'
Meeting to be held as promptly as practicable for the purpose of voting upon
this Agreement and the Merger. The Company shall consult with Parent and use all
reasonable efforts to hold the Company Stockholders' Meeting on the same day as
the Parent Stockholders' Meeting. Promptly after the date hereof, Parent shall
take all action necessary in accordance with Delaware Law and its Certificate of
Incorporation and By-laws to convene the Parent Stockholders' Meeting to be held
as promptly as practicable for the purpose of voting upon this Agreement and the
Merger. Parent shall consult with the Company and shall use all reasonable
efforts to hold the Parent Stockholders' Meeting on the same day as the Company
Stockholders' Meeting.
5.3 ACCESS TO INFORMATION, CONFIDENTIALITY.
(a) Each party shall afford the other party and its accountants, counsel
and other representatives reasonable access during normal business hours
during the period prior to the Effective Time to all information concerning
the business, including the status of product development efforts,
properties and personnel of such party as the other party may reasonably
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request. No information or knowledge obtained in any investigation pursuant
to this Section 5.3 shall 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.
(b) The parties acknowledge that Parent and the Company have previously
executed a Non-Disclosure Agreement dated June 1, 1998 (the "Confidentiality
Agreement"), which Confidentiality Agreement shall continue in full force
and effect in accordance with its terms.
5.4 NO SOLICITATION.
(a) From and after the date of this Agreement until the Effective Time,
the Company and its subsidiaries will not, and will cause their respective
directors, officers, employees, representatives, investment bankers, agents
and affiliates not to, directly or indirectly, (i) solicit or encourage
submission of any inquiries, proposals or offers by any person, entity or
group (other than Parent, Merger Sub and their affiliates, agents and
representatives), or (ii) participate in any discussions or negotiations
with, or disclose any information concerning the Company or any of its
subsidiaries to, or afford any access to the properties, books or records of
the Company or any of its subsidiaries to, or otherwise assist, facilitate
or encourage, or enter into any agreement or understanding with, any person,
entity or group (other than Parent, Merger Sub and their affiliates, agents
and representatives), in connection with any Acquisition Proposal with
respect to the Company. From and after the date of this Agreement until the
Effective Time, Parent and its subsidiaries will not, and will cause their
respective directors, officers, employees, representatives, investment
bankers, agents and affiliates not to, directly or indirectly, (i) solicit
or encourage submission of any inquiries, proposals or offers by any person,
entity or group (other than the Company and its affiliates, agents and
representatives), or (ii) participate in any discussions or negotiations
with, or disclose any information concerning Parent or any of its
subsidiaries to, or afford any access to the properties, books or records of
Parent or any of its subsidiaries to, or otherwise assist, facilitate or
encourage, or enter into any agreement or understanding with, any person,
entity or group (other than the Company and its affiliates, agents and
representatives), in connection with any Acquisition Proposal with respect
to Parent. For the purposes of this Agreement, an "Acquisition Proposal"
shall mean any proposal relating to the possible acquisition of the Company
or Parent, whether by way of merger, purchase of at least 50% of the capital
stock of the Company or Parent, purchase of all or substantially all of the
assets of the Company or Parent, or otherwise. In addition, subject to the
other provisions of this Section 5.4, from and after the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, the Company and its subsidiaries will not, and will cause their
respective directors, officers, employees, representatives, investment
bankers, agents and affiliates not to, directly or indirectly, make or
authorize any statement, recommendation or solicitation in support of any
Acquisition Proposal with respect to the Company made by any person, entity
or group (other than Parent and/or Merger Sub). The Company will immediately
cease any and all existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing. Subject
to the other provisions of this Section 5.4, from and after the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, Parent and its subsidiaries will not, and will cause their
respective directors, officers, employees, representatives, investment
bankers, agents and affiliates not to, directly or indirectly, make or
authorize any statement, recommendation or solicitation in support of any
Acquisition Proposal with respect to Parent made by any person, entity or
group (other than the Company). Parent will immediately cease any and all
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing.
(b) Notwithstanding the provisions of paragraph (a) above, prior to the
approval of this Agreement and the Merger by the stockholders of the Company
at the Company Stockholders' Meeting, (i) the Company may, to the extent the
board of directors of the Company determines, in good faith, after
consultation with outside legal counsel, that the Board's fiduciary duties
under
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applicable law require it to do so, participate in discussions or
negotiations with, and, subject to the requirements of paragraph (c), below,
furnish information to any person, entity or group after such person, entity
or group shall have delivered to the Company in writing, a Superior Proposal
with respect to the Company, and (ii) Parent may, to the extent the board of
directors of Parent determines, in good faith, after consultation with
outside legal counsel, that the Board's fiduciary duties under applicable
law require it to do so, participate in discussions or negotiations with,
and, subject to the requirements of paragraph (c), below, furnish
information to any person, entity or group after such person, entity or
group shall have delivered to Parent in writing, a Superior Proposal with
respect to Parent. For purposes of this Agreement, a "Superior Proposal"
means an unsolicited bona fide Acquisition Proposal which the board of
directors of the Company or Parent, as the case may be, in its good faith
reasonable judgment determines, after consultation with its independent
financial advisors, would result in a transaction more favorable to the
stockholders of the Company or Parent, as the case may be, from a financial
point of view than the Merger and for which financing, to the extent
required, is then committed or which, in the good faith reasonable judgment
of the board of directors (based upon the advice of independent financial
advisors), is reasonably capable of being financed by such person, entity or
group and which is likely to be consummated.
(c) The Company may furnish information to a Person who has made a
Superior Proposal only if the Company (i) first notifies Parent of the
information proposed to be disclosed, (ii) first complies with the
provisions of paragraph (e) below and (iii) provides such information
pursuant to a confidentiality agreement at least as restrictive as the
Confidentiality Agreement. Parent may furnish information to a Person who
has made a Superior Proposal only if Parent (i) first notifies the Company
of the information proposed to be disclosed, (ii) first complies with the
provisions of paragraph (e) below and (iii) provides such information
pursuant to a confidentiality agreement at least as restrictive as the
Confidentiality Agreement.
(d) In the event the Company receives a Superior Proposal, nothing
contained in this Agreement shall prevent the board of directors of the
Company from approving such Superior Proposal or recommending such Superior
Proposal to the Company's stockholders, if the Board determines in good
faith, after consultation with outside legal counsel, that such action is
required by its fiduciary duties under applicable law; in such case, the
Board may amend or withdraw its recommendation of the Merger. Subject to the
right of termination set forth in Section 7.1(f), except to the extent
expressly set forth in this Section 5.4, nothing shall relieve the Company
from complying with all other terms of this Agreement. In the event Parent
receives a Superior Proposal, nothing contained in this Agreement shall
prevent the board of directors of Parent from approving such Superior
Proposal or recommending such Superior Proposal to Parent's stockholders, if
the Board determines in good faith, after consultation with outside legal
counsel, that such action is required by its fiduciary duties under
applicable law; in such case, the Board may amend or withdraw its
recommendation of the Merger. Subject to the right of termination set forth
in Section 7.1(g), except to the extent expressly set forth in this
Section 5.4, nothing shall relieve Parent from complying with all other
terms of this Agreement.
(e) The Company will (i) notify Parent immediately if any inquiry or
proposal is made or any information or access is requested in connection
with an Acquisition Proposal or potential Acquisition Proposal and
(ii) immediately communicate to Parent the terms and conditions of any such
Acquisition Proposal or potential Acquisition Proposal or inquiry and the
identity of the offeror or potential offeror. Parent will (i) notify the
Company immediately if any inquiry or proposal is made or any information or
access is requested in connection with an Acquisition Proposal or potential
Acquisition Proposal and (ii) immediately communicate to the Company the
terms and conditions of any such Acquisition Proposal or potential
Acquisition Proposal or inquiry and the identity of the offeror or potential
offeror.
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(f) Nothing contained in this Section 5.4 shall prevent the Company,
Parent or their respective boards of directors from complying with the
provisions of Rule 14e-2(a) and 14d-9 promulgated under the Exchange Act.
5.5 EXPENSES.
(a) Except as set forth in this Section 5.5, if the Merger is not
consummated, all fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses, provided that Parent and the Company shall
share equally all fees and expenses, other than attorneys, accountants and
financial advisor's fees, incurred in connection with the printing and
filing of the Registration Statement (including financial statements and
exhibits) and any amendments or supplements thereto. If the Merger is
consummated, all reasonable fees and expenses, including attorneys,
accountants and financial advisor's fees (but excluding the printing and
filing fees referenced in the preceding sentence) incurred by or for the
benefit of the Company or its stockholders shall be paid by the Surviving
Corporation.
(b) If this Agreement is terminated by Parent pursuant to
Section 7.1(b)(i), then the Company shall pay Parent for all of its
reasonable out-of-pocket expenses, including but not limited to attorney's
fees, accounting fees, financial printer expenses, filing fees and fees and
expenses of financial advisors incurred in connection with this Agreement
and the Merger ("Out of Pocket Expenses"), not to exceed $1,500,000. If this
Agreement is terminated pursuant to Section 7. l(c)(i), then Parent shall
pay the Company's Out-of-Pocket Expenses, not to exceed $1,500,000. If
(i) the Company's board of directors amends, withholds or withdraws its
recommendation of the Merger or (ii) the Company's stockholders do not
approve the Merger at the Company Stockholders' Meeting, then, provided that
Parent is not then in material breach of the terms of this Agreement, the
Company shall pay Parent's Out-of-Pocket Expenses, not to exceed $1,500,000
upon written request therefor; provided, however, that any amounts paid to
Parent in the event of clause (i) or (ii) shall reduce, on a
dollar-for-dollar basis, the amount, if any, payable by the Company to
Parent pursuant to Section 5.6(a) hereof. If (i) Parent's board of directors
amends, withholds or withdraws its recommendation of the Merger or
(ii) Parent's stockholders do not approve the Merger at the Parent
Stockholder's Meeting, then, provided that the Company is not then in
material breach of the terms of this Agreement, Parent shall pay the
Company's Out-of-Pocket Expenses, not to exceed $1,500,000 upon written
request therefor, provided, however, that any amounts paid to the Company in
the event of clause (i) or (ii) shall reduce, on a dollar-for-dollar basis,
the amount, if any, payable by Parent to the Company pursuant to
Section 5.6(a) hereof. Notwithstanding the foregoing, nothing contained
herein shall relieve any parry from liability for any breach of this
Agreement.
5.6 BREAK-UP FEE.
(a) If for any reason (i) the board of directors of the Company
adversely amends, withholds or withdraws its recommendation that the
Company's stockholders approve the Merger and (ii) the stockholders of the
Company fail to approve the Merger at the Company Stockholders' Meeting in
accordance with applicable law, then, provided that Parent shall not have
breached any of the representations, warranties, covenants or agreements
made on its part such that either of the conditions set forth in Sections
6.2(a) or 6.2(b) will not be satisfied, the Company shall pay to Parent,
within five (5) business days following Parent's written request therefor,
the sum of $3,000,000 by wire transfer of immediately available funds to an
account designated by Parent. If for any reason (i) the board of directors
of Parent adversely amends, withholds or withdraws its recommendation that
Parent's stockholders approve the Merger and (ii) the stockholders of Parent
fail to approve the Merger at the Parent Stockholders' Meeting in accordance
with applicable law, then, provided that the Company shall not have breached
any of the representations, warranties,
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covenants or agreements made on its part such that either of the conditions
set forth in Sections 6.3(a) or 6.3(b) will not be satisfied, Parent shall
pay to the Company, within five (5) business days following the Company's
written request therefor, the sum of $3,000,000 by wire transfer of
immediately available funds to an account designated by the Company.
(b) In the event the board of directors of the Company accepts or
approves a Superior Proposal, or recommends to the stockholders of the
Company a Superior Proposal, or adversely amends, withholds or withdraws its
recommendation of the Merger after receipt by the Company of a Superior
Proposal, and if either (i) such Superior Proposal is consummated within six
months of the board of directors' acceptance or approval of such Superior
Proposal, its recommendation to the stockholders of such Superior Proposal
or its adverse amendment, withholding or withdrawal of its recommendation of
the Merger (whichever occurs first), or (ii) if the Company shall enter into
a definitive agreement, letter of intent or confidentiality agreement with
respect to an Acquisition Proposal during the foregoing six-month period,
which Acquisition Proposal is thereafter consummated, then upon such
consummation the Company shall pay to Parent immediately upon request, the
sum of $3,000,000 by wire transfer of immediately available funds to an
account designated by Parent; provided however that if the Company shall
terminate this Agreement pursuant to Section 7.1(f) hereof, the Company
shall concurrently upon such termination pay to Parent the sum of $3,000,000
by wire transfer of immediately available funds to an account designated by
Parent; and, provided further, however, that any amount payable to Parent
pursuant to this clause 5.6(b) shall be reduced, on a dollar-for-dollar
basis, by any amount theretofore paid to Parent pursuant to clause 5.6(a)
above.
(c) In the event the board of directors of Parent accepts or approves a
Superior Proposal, or recommends to the stockholders of Parent a Superior
Proposal, or adversely amends, withholds or withdraws its recommendation of
the Merger after receipt by Parent of a Superior Proposal, and if either
(i) such Superior Proposal is consummated within six months of the board of
directors' acceptance or approval of such Superior Proposal, its
recommendation to the stockholders of such Superior Proposal or its adverse
amendment, withholding or withdrawal of its recommendation of the Merger
(whichever occurs first), or (ii) if Parent shall enter into a definitive
agreement, letter of intent or confidentiality agreement with respect to an
Acquisition Proposal during the foregoing six-month period, which
Acquisition Proposal is thereafter consummated, then upon such consummation
Parent shall pay to the Company immediately upon request, the sum of
$3,000,000 by wire transfer of immediately available funds to an account
designated by the Company; provided however that if Parent shall terminate
this Agreement pursuant to Section 7.1(g) hereof, Parent shall concurrently
upon such termination pay to the Company the sum of $3,000,000 by wire
transfer of immediately available funds to an account designated by the
Company; and, provided further, however, that any amount payable to the
Company pursuant to this clause 5.6(c) shall be reduced, on a
dollar-for-dollar basis, by any amount theretofore paid to the Company
pursuant to clause 5.6(a) above.
5.7 PUBLIC DISCLOSURE. Parent and the Company shall consult with each
other before issuing any press release or otherwise making any public statement
with respect to the Merger or this Agreement and shall 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 or the Nasdaq National Market, and in any event in accordance with the
terms of the Confidentiality Agreement.
5.8 POOLING ACCOUNTING. Parent and the Company shall each use its best
efforts to cause the business combination to be effected by the Merger to be
accounted for as a pooling of interests. Each of Parent and the Company shall
use its best efforts to cause its Affiliates (as defined in Section 5.10) not to
take any action that would adversely affect the ability of Parent to account for
the business combination to be effected by the Merger as a pooling of interests.
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5.9 AUDITORS' LETTERS. The Company shall use its best efforts to cause to
be delivered to Parent a letter of KPMG LLP, independent auditors to the
Company, dated a date within two business days before the date on which the
Registration Statement becomes effective, and addressed to Parent, in form and
substance reasonably satisfactory to Parent and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement. The Parent shall
use its best efforts to be delivered to the Company a letter of Deloitte &
Touche LLP, independent auditors to the Parent, dated a date within two business
days before the date on which the Registration Statement becomes effective, and
addressed to the Company, in form and substance reasonably satisfactory to the
Company and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.
5.10 AFFILIATE AGREEMENTS. Set forth respectively in Parent Schedules and
the Company Schedules is a list of those persons who are, in Parent's or the
Company's reasonable judgment, as the case may be, "affiliates" of Parent or the
Company, as the case may be, within the meaning of Rule 145 (each such person
who is an "affiliate" of Parent or the Company within the meaning of Rule 145 is
referred to as an "Affiliate") promulgated under the Securities Act
("Rule 145"). Each of Parent and the Company shall provide the other such
information and documents as the other shall reasonably request for purposes of
reviewing such list. The Company shall use its best efforts to deliver or cause
to be delivered to Parent prior to the Closing Date from each of the Affiliates
of the Company, an executed Affiliate Agreement in the form attached hereto as
EXHIBIT A (each, a "Company Affiliate Agreement"; collectively, the "Company
Affiliate Agreements"). Parent shall use its best efforts to deliver or cause to
be delivered to the Company prior to the Closing Date from each of the
Affiliates of Parent, an executed Affiliate Agreement in the form attached
hereto as EXHIBIT B (each a "Parent Affiliate Agreement"; collectively, the
"Parent Affiliate Agreements"). Parent and Merger Sub shall be entitled to place
appropriate legends on the certificates evidencing any Parent Common Stock to be
received by such Affiliates of the Company pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for Parent Common Stock, consistent with the terms of the Company
Affiliate Agreements.
5.11 FIRPTA. The Company shall deliver to the Internal Revenue Service a
notice that the Company Common Stock is not a "U.S. Real Property Interest" as
defined in and in accordance with the requirements of Treasury Regulation
Section 1.897-2(h)(2).
5.12 LEGAL REQUIREMENTS. Each of Parent, Merger Sub and the Company will
take all reasonable actions necessary or desirable to comply promptly with all
legal requirements which may be imposed on them with respect to the consummation
of the transactions contemplated by this Agreement (including furnishing all
information required in connection with approvals of or filings with any
Governmental Entity, and prompt resolution of any litigation prompted hereby)
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such requirements imposed upon any of them or
their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement, and will take all reasonable
actions necessary to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any Governmental Entity or other
public or private third party required to be obtained or made in connection with
the Merger or taking of any action contemplated by this Agreement.
5.13 BLUE SKY LAWS. Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of Parent Common Stock pursuant hereto. The Company
shall use its best efforts to assist Parent as may be necessary to comply with
the securities and blue sky laws of all jurisdictions which are applicable in
connection with the issuance of Parent Common Stock pursuant hereto.
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5.14 BEST EFFORTS AND FURTHER ASSURANCES. Each of the parties to this
Agreement shall each use its best efforts to effectuate the transactions
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
closing under this Agreement (including resolution of any litigation prompted
hereby). Each party hereto, at the reasonable request of another party hereto,
shall execute and deliver such other instruments and do and perform such other
acts and things as may be necessary or desirable for effecting completely the
consummation of the transactions contemplated hereby.
5.15 STOCK OPTIONS.
(a) At the Effective Time, each outstanding option to purchase shares of
Company Common Stock (each a "Company Stock Option") under the Company Stock
Option Plans, whether vested or unvested, will be assumed by Parent. Each
Company Stock Option so assumed by Parent under this Agreement shall
continue to have, and be subject to, the same terms and conditions set forth
in the applicable Company Stock Option Plan immediately prior to the
Effective Time, except that (i) such Company Stock Option shall be
exercisable (when vested) 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 Stock 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 Stock Option shall be equal to the quotient
determined by dividing the exercise price per share of Company Common Stock
at which such Company Stock Option was exercisable immediately prior to the
Effective Time by the Exchange Ratio, rounded down to the nearest whole
cent.
(b) Promptly after the Effective Time, Parent or the Surviving
Corporation shall issue to each holder of an outstanding Company Stock
Option a document evidencing the foregoing assumption of such Company Stock
Option by Parent.
(c) It is the intention of the parties that the Company Stock Options
assumed by Parent qualify following the Effective Time as incentive stock
options as defined in Section 422 of the Code to the extent the Company
Stock Options qualified as incentive stock options immediately prior to the
Effective Time.
5.16 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
Stock Options and with respect to the Company ESPP no later than 30 days after
the Closing Date.
5.17 CERTAIN BENEFIT PLANS. Subject to compliance with pooling of
interests accounting treatment of the Merger, Parent shall take such reasonable
actions as are necessary to allow eligible employees of the Company to
participate in the benefit programs of Parent, or alternative benefit programs
substantially comparable to those applicable to employees of Parent on similar
terms, as soon as practicable after the Effective Time in accordance with the
terms of such programs. To the extent reasonably possible, eligible employees of
the Company shall receive credit under any new benefit program for the duration
of their service with the Company.
5.18 INDEMNIFICATION.
(a) After the Effective Time, Parent and the Surviving Corporation shall
indemnify and hold harmless each person who has at any time prior to the
Effective Time been an officer, director or employee of the Company or any
of its subsidiaries or other person entitled to be indemnified by the
Company or any of its subsidiaries pursuant to their respective Certificates
of Incorporation and By-laws as they are currently in effect on the date
hereof to the same extent as provided in such Certificates of Incorporation
and By-laws; provided that it is understood that the foregoing undertaking
shall not grant to any such officers, directors or employees or other person
rights of
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indemnity against either Parent or Surviving Corporation more extensive than
those such persons may currently have against the Company.
(b) After the Effective Time, Parent and the Surviving Corporation shall
indemnify the persons who immediately prior to the Effective Time were
directors or officers of the Company against (i) all actions, claims,
damages, costs, expenses, liabilities or judgments or amounts that are paid
in settlement with the approval of the indemnifying party of or in
connection with any claim, action, suit, proceeding or investigation based
in whole or in part on or arising in whole or in part out of the fact that
such person is or was a director or officer of the Company, in each case to
the full extent a corporation is permitted under Delaware Law to indemnify
its own directors and officers (and Parent and the Surviving Corporation, as
the case may be, will pay expenses in advance of the final disposition of
any such actual proceeding to each indemnified party to the full extent
permitted by law upon receipt of any undertaking contemplated by
Section 145 of the Delaware General Corporation Law). In connection with
such indemnification, (x) any counsel retained by the indemnified parties
for any period after the Effective Time shall be reasonably satisfactory to
the Parent and Surviving Corporation, (y) after the Effective Time, the
Surviving Corporation and Parent shall pay the reasonable fees and expenses
of such counsel, promptly after statements therefor are received and
(z) the Surviving Corporation and Parent will cooperate in the defense of
any such matter; provided, that neither the Surviving Corporation nor Parent
shall be liable for any settlement effected without its prior written
consent, which consent shall not be unreasonably withheld. The indemnified
parties as a group may retain only one law firm to represent them with
respect to any single action unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the
positions of any two or more indemnified parties.
(c) For a period of three years after the Effective Time, Parent shall
cause the Surviving Corporation to use its best efforts to maintain in
effect, if available, directors' and officers' liability insurance covering
those persons who are currently covered by the Company's directors' and
officers' liability insurance policy (a copy of which has been heretofore
delivered to Parent) on terms comparable to those applicable to the then
current directors and officers of Parent; provided, that in no event shall
Parent or the Surviving Corporation be required to expend in excess of 200%
of the annual premium currently paid by the Company for such coverage or
such coverage as is available for such 200% of the annual premium.
(d) This Section shall survive the consummation of the Merger, is
intended to benefit and the indemnified parties, and shall be binding on all
successors and assigns of the Parent and Surviving Corporation.
5.19 TAX-FREE REORGANIZATION. Parent and the Company shall each use all
reasonable efforts to cause the Merger to be treated as a reorganization within
the meaning of Section 368 of the Code.
5.20 NMS LISTING. Parent shall authorize for listing on the Nasdaq
National Market the shares of Parent Common Stock issuable, and those required
to be reserved for issuance, in connection with the Merger, upon official notice
of issuance.
5.21 BOARD REPRESENTATION. Immediately prior to the Effective Time of the
Merger, the board of directors of Parent shall take appropriate action to cause
the number of directors comprising the full board of directors of Parent to be 5
persons, and to cause the board of directors of Parent to consist of (i) Pamela
Reeve, (ii) two other persons who are currently members of the board of
directors of Parent, (iii) Thomas Meyer and (iv) one other person who is
currently a member of the board of directors of the Company.
5.22 EMPLOYMENT ARRANGEMENTS. Prior to the Effective Date, Parent shall
offer to enter into employment arrangements with each of the persons set forth
in the Parent Schedules (the "Named
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Company Employeees"). Such employment arrangements shall provide for employment
of each Named Company Employee by Parent upon terms no less favorable to such
Named Company Employee than the terms under which such person is employed by the
Company on the date of this Agreement.
5.23 VOTING AGREEMENTS. Concurrently with the execution and delivery of
this Agreement, (i) each executive officer and director of the Company who holds
Company Common Stock is executing and delivering to Parent a Stockholders
Agreement and an irrevocable proxy pursuant to which such officer or director
agrees to vote all of his shares of Company Common Stock to approve this
Agreement and the Merger and against any other Acquisition Proposal, and grants
Parent an irrevocable proxy to so vote such officer's or director's shares of
Company Common Stock, in the form attached hereto as Exhibit C, and (ii) each
executive officer and director of Parent who holds Parent Common Stock is
executing and delivering to the Company a Stockholders Agreement and an
irrevocable proxy pursuant to which such officer or director agrees to vote all
of his shares of Parent Common Stock to approve this Agreement and the Merger
and against any other Acquisition Proposal, and grants the Company an
irrevocable proxy to so vote such officer's or director's shares of Parent
Common Stock, in the form attached hereto as EXHIBIT D.
5.24 NO SOLICITATION OF EMPLOYEES. Each party agrees that for a period of
12 months following termination, if any, of this Agreement pursuant to the
provisions of Article VIII hereof, neither party shall solicit, induce or
recruit any of the other party's employees to leave their employment.
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 Effective Time of the
following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger shall have
been approved and adopted by the requisite vote under applicable law of the
stockholders of each of the Company, Merger Sub and Parent.
(b) REGISTRATION STATEMENT EFFECTIVE. 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, shall have been initiated or threatened in writing by the
SEC; and all requests for additional information on the part of the SEC
shall have been complied with to the reasonable satisfaction of the parties
hereto.
(c) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect.
(d) TAX OPINIONS. Parent and the Company shall each have received
substantially identical written opinions from their counsel, Foley, Hoag &
Eliot LLP and Brobeck, Phleger, & Harrison LLP, respectively, in form and
substance reasonably satisfactory to them, to the effect that the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Code. The parties to this Agreement agree to make reasonable representations
as requested by such counsel for the purpose of rendering such opinions.
(e) HSR ACT. Any applicable waiting period under the HSR Act shall
have expired or been terminated.
(f) OPINION OF ACCOUNTANTS. Each of the parties to this Agreement
shall have received letters from Deloitte & Touche LLP and KPMG LLP
regarding those firms' concurrence with
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Parent management's and Company management's conclusions, respectively, as
to the appropriateness of pooling of interests accounting for the Merger
under Accounting Principles Board Opinion No. 16 if closed and consummated
in accordance with this Agreement; provided, however, that a party to this
Agreement shall not be relieved of its obligation to effect the Merger if
such party has breached its obligations under Section 5.8.
(g) NASDAQ LISTING. The shares of Parent Common Stock issuable to
stockholders of the Company pursuant to this Agreement and such other shares
required to be reserved for issuance in connection with the Merger shall
have been authorized for listing on the Nasdaq National Market upon official
notice of issuance.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY. The obligations of
the Company to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, exclusively by the Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Parent and Merger Sub contained in this Agreement shall be true and
correct in all material respects on and as of the Effective Time, except for
changes contemplated by this Agreement and except for those representations
and warranties which address matters only as of a particular date (which
shall remain true and correct as of such date), with the same force and
effect as if made on and as of the Effective Time, except, in all such
cases, for such breaches, inaccuracies or omissions of such representations
and warranties which have neither had nor reasonably would be expected to
have a Material Adverse Effect on Parent; and the Company shall have
received a certificate to such effect signed on behalf of Parent by the
President and 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 Effective Time, and the Company shall have received
a certificate to such effect signed by the President and Chief Financial
Officer of Parent.
(c) THIRD PARTY CONSENTS. The Company shall have been furnished with
evidence satisfactory to it that Parent has obtained the consents, approvals
and waivers set forth in Section 3.4 of the Parent Schedules.
(d) LEGAL OPINION. The Company shall have received a legal opinion
from Foley, Hoag & Eliot LLP, counsel to Parent, in substantially the form
attached hereto as Exhibit E.
(e) MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there
shall not have occurred any Material Adverse Change in Parent.
(f) AFFILIATE AGREEMENTS. Each of the parties identified by Parent
pursuant to Section 5.10 hereof as being an Affiliate of Parent shall have
delivered to the Company an executed Parent Affiliate Agreement which shall
be in full force and effect.
(g) ELECTION OF DIRECTORS. The persons named in Section 5.21 shall
have been elected to the board of directors of Parent.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to consummate and effect this Agreement and
the transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time 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 the Company contained in this Agreement shall be true and correct in all
material respects on and as of the
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Effective Time, except for changes contemplated by this Agreement and except
for those representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such date), with
the same force and effect as if made on and as of the Effective Time,
except, in all such cases, for such breaches, inaccuracies or omissions of
such representations and warranties which have neither had nor reasonably
would be expected to have a Material Adverse Effect on the Company; and
Parent and Merger Sub shall have received a certificate to such effect
signed on behalf of the Company by the President and Chief Financial Officer
of the Company.
(b) AGREEMENTS AND COVENANTS. The 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 on or prior to the
Effective Time, and the Parent and Merger Sub shall have received a
certificate to such effect signed by the President and Chief Financial
Officer of the Company.
(c) THIRD PARTY CONSENTS. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Section 2.4 of the Company Schedules.
(d) LEGAL OPINION. Parent shall have received a legal opinion from
Brobeck, Phleger, & Harrison LLP, legal counsel to the Company, in
substantially the form attached hereto as Exhibit F.
(e) ADVERSE CHANGE. Since the date of this Agreement, there shall not
have occurred any Material Adverse Change in the Company.
(f) AFFILIATE AGREEMENTS. Each of the parties identified by the
Company pursuant to Section 5.10 hereof as being an Affiliate of the Company
shall have delivered to Parent an executed Company Affiliate Agreement which
shall be in full force and effect.
(g) EMPLOYMENT ARRANGEMENTS. Each Named Company Employee shall have
entered into an employment arrangement with Parent as contemplated by
Section 5.22, and no Named Company Employee shall have terminated such
employment arrangement, or provided notice of his intention to do so.
(h) ELECTION OF DIRECTORS. The persons named in Section 5.21 shall
have been elected to the board of directors of Parent.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated and the Merger abandoned
at any time prior to the Effective Time:
(a) by mutual written consent of the Company and Parent;
(b) by Parent if:
(i) there has been a material breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of the Company
and such breach has not been cured within five business days after written
notice to the Company (provided, that Parent is not in material breach of
the terms of this Agreement; and provided further, that no cure period shall
be required for a breach which by its nature cannot be cured) such that the
conditions set forth in Section 6.3(a) or Section 6.3(b), as the case may
be, will not be satisfied, or
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(ii) the board of directors of the Company amends, withholds or
withdraws its recommendation of the Merger (provided that Parent is not in
material breach of the terms of this Agreement);
(c) by the Company if:
(i) there has been a material breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of Parent or
Merger Sub and such breach has not been cured within five days after written
notice to Parent (provided, that the Company is not in material breach of
the terms of this Agreement; and provided further, that no cure period shall
be required for a breach which by its nature cannot be cured) such that the
conditions set forth in Section 6.2(a) or Section 6.2(b), as the case may
be, will not be satisfied, or
(ii) the board of directors of Parent amends, withholds or withdraws its
recommendation of the Merger (provided the Company is not in material breach
of the terms of this Agreement);
(d) by any party hereto if (i) there shall be a final, non-appealable order
of a federal or state court in effect preventing consummation of the Merger;
(ii) there shall be any final action taken, or any statute, rule, regulation or
order enacted, promulgated or issued or deemed applicable to the Merger by any
Governmental Entity which would make consummation of the Merger illegal or which
would prohibit Parent's ownership or operation of all or a material portion of
the business of the Company, or compel Parent to dispose of or hold separate all
or a material portion of the business or assets of the Company or Parent as a
result of the Merger; (iii) if the Company's stockholders do not approve the
Merger and this Agreement at the Company Stockholders' Meeting (provided that
the Company may not terminate in these circumstances if it is in material breach
of the term of this Agreement); or (iv) if Parent's stockholders do not approve
the Merger and this Agreement at the Parent Stockholders' Meeting (provided that
Parent may not terminate in these circumstances if it is in material breach of
the terms of this Agreement);
(e) by any party hereto if the Merger shall not have been consummated by
February 28, 2001 (provided that if the Merger shall not have been consummated
solely due to the waiting period (or any extension thereof) under the HSR Act,
if applicable, not having expired or been terminated, then such date shall be
extended to March 31, 2001); provided, further, that the right to terminate this
Agreement under this Section 7.1(e) shall not be available to any party whose
willful failure to fulfill any material obligation under this Agreement has been
the cause of, or resulted in, the failure of the Effective Time to occur on or
before such date;
(f) by any party hereto if the board of directors of the Company accepts or
approves a Superior Proposal, or recommends a Superior Proposal to the
stockholders of the Company.
(g) by any party hereto if the board of directors of Parent accepts or
approves a Superior Proposal, or recommends a Superior Proposal to the
stockholders of Parent.
Where action is taken to terminate this Agreement pursuant to this
Section 7.1, it shall be sufficient for such action to be authorized by the
board of directors (as applicable) of the party taking such action.
7.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement as provided in
Section 7.1, this Agreement shall forthwith become void and there shall be
no liability or obligation on the part of Parent, Merger Sub, the Company or
their respective officers, directors, stockholders or affiliates, except to
the extent that such termination results from the breach by a party hereto
of any of its representations, warranties, covenants or agreements set forth
in this Agreement, and, provided that the provisions of Sections 5.3(b),
5.5, and 5.6 and Article VII of this Agreement shall remain in full force
and effect and survive any termination of this Agreement.
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(b) Any termination of this Agreement by the Company pursuant to
Section 7.1(f) hereof shall be of no force or effect unless prior to such
termination the Company shall have paid to Parent the sum of $3,000,000 as
prescribed by Section 5.6(b). Any termination of this Agreement by Parent
pursuant to Section 7.1(g) hereof shall be of no force or effect unless
prior to such termination Parent shall have paid to the Company the sum of
$3,000,000 as prescribed by Section 5.6(c).
7.3 NOTICE OF TERMINATION. Subject to Section 7.2(b), any 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.
7.4 AMENDMENT. 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 the
parties hereto.
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 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.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the 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 if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Lightbridge, Inc.
67 South Bedford Street
Burlington, Massachusetts 01803
Attention: Chief Executive Officer
Telecopy No.: (781) 359-4171
with a copy to:
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: John D. Patterson, Jr., Esq.
Telecopy No.: (617) 832-7000
(b) if to the Company, to:
Corsair Communications, Inc.
3408 Hillview Avenue
Palo Alto, California 94304
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Attention: Chief Executive Officer
Telecopy No.: (650) 842-1426
with a copy to:
Brobeck, Phleger, & Harrison LLP
12390 El Camino Real
San Diego, California 92130
Attention: Michael S. Kagnoff, Esq.
Telecopy No.: (858) 720-2555
8.3 INTERPRETATION. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to 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.
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. This Agreement and the documents and instruments and
other agreements among the parties hereto as contemplated by or referred to
herein, including the Company Schedules and the Parent Schedules (a) constitute
the entire agreement among the parties with respect to the subject matter hereof
and supersede the Original Agreement and all other 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 set forth in
Section 5.18.
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. 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. 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 parry of any one remedy will not preclude the
exercise of any other remedy.
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.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
any state or federal court within the State of Delaware, in connection with any
matter based upon or arising out of this Agreement or the matters contemplated
herein, agrees that process may be served upon them in any manner authorized by
the laws of the State of Delaware for such persons and waives and covenants not
to assert or plead any objection which they might otherwise have to such
jurisdiction and such process.
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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 approval
of the other parties.
IN WITNESS WHEREOF, Parent, Merger Sub, the Company have caused this
Agreement to be signed by themselves or their duly authorized respective
officers, all as of the date first written above.
<TABLE>
<S> <C> <C> <C>
CORSAIR COMMUNICATIONS, INC. LIGHTBRIDGE, INC.
By: /s/ THOMAS C. MEYER By: /s/ PAMELA D.A. REEVE
--------------------------------------- ---------------------------------------
LIGHTNING MERGER CORPORATION
By: /s/ PAMELA D.A. REEVE
---------------------------------------
</TABLE>
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ANNEX B
October 26, 2000
Board of Directors
Lightbridge, Inc.
67 South Bedford Street
Burlington, Massachusetts 01803
Members of the Board:
You have requested our opinion as to the fairness from a financial point of
view to Lightbridge, Inc. (the "Company") of the Exchange Ratio (as defined
below) pursuant to the terms of the Agreement and Plan of Reorganization dated
as of October 26, 2000 (the "Agreement"), by and among the Company, Corsair
Communications, Inc ("Target") and Lightning Merger Corporation, a wholly owned
subsidiary of the Company ("Merger Sub") pursuant to which Merger Sub will be
merged (the "Merger") with and into Target.
Pursuant to the Agreement, each share of common stock, par value $.001 per
share ("Target Common Stock"), of Target will be converted into the right to
receive 0.5978 (the "Exchange Ratio") shares of common stock, par value $.01 per
share ("Company Common Stock"), of the Company.
In arriving at our opinion, we have reviewed the Agreement and the exhibits
thereto. We also have reviewed financial and other information that was publicly
available or furnished to us by the Company and Target, including information
provided during discussions with the Company's management. Included in the
information provided during discussions with the management of the Target were
financial projections of the Target for the period beginning January 1, 2000 and
ending December 31, 2001 prepared by management of the Target. Included in the
information provided during discussions with the management of the Company were
management's views on certain financial projections of the Target for the period
beginning January 1, 2002 and ending December 31, 2005 and certain financial
projections of the Company for the period beginning January 1, 2000 and ending
December 31, 2005 prepared by management of the Company. In addition, we have
compared certain financial and securities data of the Company and Target with
various other companies whose securities are traded in public markets, reviewed
the historical stock prices and trading Company Common Stock and Target Common
Stock, reviewed prices paid in certain other business combinations and conducted
such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon, and assumed the accuracy and
completeness of, all of the financial and other information that was available
to us from public sources, that was provided to us by the Company, Target or
their respective representatives, or that was otherwise reviewed by us and have
assumed that the Company is not aware of any information prepared by it or its
other advisors that might be material to our opinion that has not been made
available to us. With respect to the financial projections supplied to us, we
have relied on representations that they have been reasonably prepared on the
basis reflecting the best currently available estimates and judgments of the
management of the Company and Target as to the future operating and financial
performance of the Company and Target, respectively. With respect to the views
of management of the Company with respect to the financial projection of Target
referred to above, we have relied on representations that such views reflect the
best currently available estimates and judgements of the management of the
Company as to the future operating and financial performance of the Target over
such period. We have not assumed any responsibility for making any independent
evaluation of any assets or liabilities or for making any independent
verification of any of the information reviewed by us. We have assumed that the
Merger will be a tax free reorganization under the Internal Revenue Code of
1986, as amended.
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Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
prices at which Company Common Stock will actually trade at any time. With
respect to the contingent liabilities of Target related to the litigation and
other proceedings in which Target is involved, we have not been requested to and
do not express any opinion regarding the financial impact of these matters on
Target or the Company and the effect, if any, of such matters on the fairness to
the Company from financial point of view of the Exchange Ratio in the proposed
Merger. Our opinion does not address the relative merits of the Merger and the
other business strategies being considered by the Company's board of directors,
nor does it address the board's decision to proceed with the Merger. Our opinion
does not constitute a recommendation to any stockholder as to how such
stockholder should vote on the proposed transaction.
Donaldson, Lufkin & Jenrette ("DLJ"), as part of its investment banking
services, is regularly engaged in the valuation of businesses and securities in
connection with mergers, acquisitions, underwritings, sales and distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. DLJ has not performed investment banking or other services
for either the Company or Target in the past three (3) years.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Exchange Ratio is fair to the Company from a financial
point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
/S/ ADAM PARTEN
______________________________________
Adam Parten
MANAGING DIRECTOR
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<PAGE>
ANNEX C
October 26, 2000
CONFIDENTIAL
Board of Directors
Corsair Communications, Inc.
3408 Hillview Avenue
Palo Alto, CA 94304
Dear Members of the Board:
We understand that Corsair Communications, Inc. ("Corsair" or the
"Company"), Lightbridge, Inc. ("Lightbridge" or "Parent") and Lightning Merger
Corporation, a Delaware corporation and a wholly-owned subsidiary of Parent
("Merger Sub"), propose to enter into an Agreement and Plan of Reorganization
(the "Agreement") pursuant to which, through the merger of Merger Sub with and
into the Company (the "Merger"), each outstanding share of common stock of the
Company (the "Company Common Stock") will be converted into the right to receive
0.5978 (the "Exchange Ratio") shares of common stock of Parent (the "Parent
Common Stock"). The Merger is intended to qualify as a reorganization within the
meaning of Section 368 of the United States Internal Revenue Code of 1986, as
amended, and as a pooling of interests for accounting purposes. The terms and
conditions of the above described Merger are more fully detailed in the
Agreement.
You have requested our opinion as to whether the Exchange Ratio is fair,
from a financial point of view, to Corsair stockholders.
Broadview International LLC ("Broadview") focuses on providing merger and
acquisition advisory services to information technology ("IT"), communications
and media companies. In this capacity, we are continually engaged in valuing
such businesses, and we maintain an extensive database of IT, communications and
media mergers and acquisitions for comparative purposes. We are currently acting
as financial advisor to Corsair's board of directors and will receive a fee from
Corsair upon the successful conclusion of the Merger.
In rendering our opinion, we have, among other things:
1.) reviewed the terms of the Agreement dated October 26, 2000, furnished
to us by Foley, Hoag & Eliot LLP;
2.) reviewed Corsair's financial press release dated October 17, 2000, for
the period ended September 30, 2000, including the unaudited financial
statements included therein, and reviewed Corsair's annual report on
Form 10-K, for the fiscal year ended December 31, 1999, including the
audited financial statements included therein;
3.) reviewed certain internal financial and operating information
concerning Corsair, including quarterly projections through
December 31, 2001, relating to Corsair, prepared and furnished to us by
Corsair management;
4.) participated in discussions with Corsair management concerning the
operations, business strategy, current financial performance and
prospects for Corsair;
5.) discussed with Corsair management its view of the strategic rationale
for the Merger;
6.) reviewed the recent reported closing prices and trading activity for
Corsair Common Stock;
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7.) compared certain aspects of the financial performance of Corsair with
public companies we deemed comparable;
8.) analyzed available information, both public and private, concerning
other mergers and acquisitions we believe to be comparable in whole or
in part to the Merger;
9.) reviewed recent equity research analyst reports covering Corsair;
10.) reviewed Lightbridge's financial press release dated October 18, 2000,
for the period ended September 30, 2000, including the unaudited
financial statements included therein, and reviewed Lightbridge's
annual report on Form 10-K405 for the fiscal year ended December 31,
1999, including the audited financial statements included therein;
11.) participated in discussions with Lightbridge management concerning the
operations, business strategy, financial performance and prospects for
Lightbridge;
12.) discussed with Lightbridge management its view of the strategic
rationale for the Merger;
13.) reviewed the recent reported closing prices and trading activity for
Lightbridge Common Stock;
14.) considered the total number of shares of Lightbridge Common Stock
outstanding and the average weekly trading volume of Lightbridge Common
Stock;
15.) compared certain aspects of the financial performance of Lightbridge
with public companies we deemed comparable;
16.) reviewed recent equity analyst reports covering Lightbridge;
17.) analyzed the anticipated effect of the Merger on the future financial
performance of the combined entity;
18.) participated in discussions related to the Merger with Corsair,
Lightbridge and their respective advisors; and
19.) conducted other financial studies, analyses and investigations as we
deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied, without independent verification, on
the accuracy and completeness of all the financial and other information
(including without limitation the representations and warranties contained in
the Agreement) that was publicly available or furnished to us by Corsair or
Lightbridge. With respect to the financial projections examined by us, we have
assumed that they were reasonably prepared and reflected the best available
estimates and good faith judgments of the management of Corsair as to the future
performance of Corsair. We have neither made nor obtained an independent
appraisal or valuation of any of Corsair's assets.
Based upon and subject to the foregoing, we are of the opinion that the Exchange
Ratio is fair, from a financial point of view, to Corsair stockholders.
For purposes of this opinion, we have assumed that neither Corsair nor
Lightbridge is currently involved in any material transaction other than the
Merger, other publicly announced transactions, other preliminarily discussed
transactions confidentially disclosed to us, and those activities undertaken in
the ordinary course of conducting their respective businesses. Our opinion is
necessarily based upon market, economic, financial and other conditions as they
exist and can be evaluated as of the date of this opinion, and any change in
such conditions would require a reevaluation of this opinion. We express no
opinion as to the price at which Lightbridge Common Stock will trade at any
time.
This opinion speaks only as of the date hereof. It is understood that this
opinion is for the information of the board of directors of Corsair in
connection with its consideration of the Merger and does not
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constitute a recommendation to any Corsair stockholder as to how such
stockholder should vote on the Merger. This opinion may not be published or
referred to, in whole or part, without our prior written permission, which shall
not be unreasonably withheld. Broadview hereby consents to references to and the
inclusion of this opinion in its entirety in the Prospectus/Proxy Statement to
be distributed to Corsair stockholders in connection with the Merger.
Sincerely,
/s/ BROADVIEW INTERNATIONAL LLC
______________________________________
Broadview International LLC
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